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# Introduction: Brunei Darussalam's Economy-Transition towards Development

Bruno Jetin, Ahmed Khalid

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Bruno Jetin, Ahmed Khalid. Introduction: Brunei Darussalam's Economy-Transition towards Development. Brunei Darussalam's Economic Transition in a Shifting Global Asia, 23, Springer Nature Singapore, pp.1-17, 2025, Asia in Transition, 978-981-97-6926-1. 10.1007/978-981-97-6926-1_1.halshs-04965807

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Chapter 1

# Introduction: Brunei Darussalam's Economy—Transition towards Development

Ahmed M. Khalid and Bruno Jetin

**Abstract** The global economy is experiencing a major transformation which requires countries, specifically developing countries, to adopt new policies for economic development. Many developing economies need policies to cope with the emerging challenges of environmental change, technological revolution, the high volume of globalised trade and financial flows, cross-border labour movement, rising inequality, and frequent occurrences of economic crises and natural disasters. The United Nation's 2030 Agenda for Sustainable Development Goals (SDGs) suggests that economic development should have a multidimensional context that includes economic, social and environmental aspects and not just income. Given the recent trends of globalisation, such development is also linked to regional and global factors. Although the development experience of some emerging economies since the 1990s suggests that the fast pace of economic reforms has led to high gross domestic product (GDP) growth, the benefits are not equally distributed. As a consequence, the notion of 'development in transition' (DiT) requires not only a mix of well-designed policies but also timely implementation, enforcement and monitoring of such policies, as well as international cooperation to ensure sustainable development and distribution of benefits on an equitable basis. This introductory chapter discusses the evolution of development models suggested in the literature and practised by developing countries. It then provides an overview of Brunei Darussalam's transitions towards development. Finally, it presents a summary of all the chapters in this volume. The deliberations suggest that more commitments towards policy implementation would help the country achieve the targets set out in its Wawasan Brunei 2035 development blueprint.

UBD School of Business and Economics, Universiti Brunei Darussalam, Gadong, Brunei
Darussalam

<footnote>A.M. Khalid (✉)
Department of Economics, Lahore University of Management Sciences, Lahore, Pakistan
e-mail: ahmed.khalid@lums.edu.pk</footnote>

<footnote>B. Jetin
Faculty of Law, Politics and Social Sciences, Université Sorbonne Paris Nord, Paris, France
e-mail: bruno.jetin@univ-paris13.fr</footnote>
**Keywords** Brunei Darussalam · Global transformation · Sustainable Development Goals · Models of development · Policy implementation · Wawasan Brunei 2035 · Chapter summaries

**1.1 Introduction**

The Association of Southeast Asian Nations (ASEAN) is among the world's most successful economic blocs. Established in 1967 with only five members from the Southeast Asian region, the group now has 10 member states (Weatherbee 2019). Having multiple objectives, the main focus of ASEAN in the context of economic integration between member states is to achieve sustainable economic growth (Jetin and Mikić 2016). Despite a huge disparity between ASEAN states in terms of size— with Indonesia at 1.9 million km² and Singapore at only 734 km²—and population— with Indonesia again at 275 million and Brunei Darussalam at only 445,000—as well as differences in income levels, culture, locally spoken languages and religious affiliations (Kingsbury 2007), the region has been able to make significant progress over more than five decades. The success of ASEAN has been well acknowledged by developed nations, with the region's policies being followed by other emerging economies and economic blocs to collaborate in achieving certain goals, particularly the facilitation of cross-border movements of labour and goods. An effort is made in this introductory chapter to provide a theoretical discussion of development models, an overview of ASEAN's transition towards development and a summary of the chapters in this book. The introduction is organised in the following manner. Section 1.2 provides a brief overview of the theoretical and empirical literature on the economics of transition. Section 1.3 details the socioeconomic development of Brunei and its long-term plan to achieve economic diversification. A summary of chapters is provided in Sect. 1.4, while some concluding remarks are presented in Sect. 1.5.

**1.2 Economic Transition: Moving towards Development**

The global economy is experiencing a major transformation which requires countries, specifically developing countries, to adopt new policies for economic development. Many developing economies need policies to cope with the emerging challenges of environmental change, technological revolution, the high volume of globalised trade and financial flows, cross-border labour movement, rising inequality and frequent occurrences of economic crises and natural disasters. The United Nations' (n.d.) 2030 Agenda for Sustainable Development Goals (SDGs) suggests that economic development should have a multidimensional context which includes economic, social and environmental aspects and not just income. Given the recent trends of globalisation,
such development is also linked to regional and global factors. Although the devel-
opment experience of some emerging economies since the 1990s suggests that the
fast pace of economic reforms has led to high gross domestic product (GDP) growth,
the benefits are not equally distributed (IMF 2000). As a consequence, the notion of
‘development in transition’ (DiT) requires not only a mix of well-designed policies
but also timely implementation, enforcement and monitoring of such policies, as
well as international cooperation to ensure sustainable development and distribution
of benefits on an equitable basis.

A number of models have been developed in economic theory detailing what is needed for countries to achieve economic development. The Harrod-Domar growth model is considered the first such paradigm to initiate the debate on factors determining economic growth. The model places emphasis on a strong saving-investment relationship as a precondition for economic growth. Accordingly, higher investment can exert two effects—an income-generating effect and a productivity effect by creating capacity, thereby leading to higher growth. W.W. Rostow’s (1959) seminal work on the ‘five stages of growth/development’ further extends this debate on how less-developed countries could pursue economic development (for more details on Rostow, see PennState 2015). Again, the model focuses on a saving-investment relationship, and it suggests that economic development requires substantial investment in capital. The deep-rooted financial sector reforms adopted by some Asian countries during the late 1980s and early 1990s were partly the result of policies intended to provide incentives for savers and investors. However, the Harrod-Domar portfolio of policies did not work in some countries due to: (1) low saving rates; (2) a lack of markets that could channel savings into the most productive applications (investment); and (3) the poor quality of investments.<fnref n="1" /> Some developing countries were thus trapped in a vicious circle with low saving rates to low capital formations resulting in low productivity and income.

The 1990s also witnessed the rapid growth of some countries in Asia and Latin America, along with the transformation of the so-called ‘command economies’ to ‘market economies’. The assessment of reforms during the transition period was important to determine the pace of reforms. Martin L. Weitzman (1993) describes two different models of economic transition or transformation. The first is called the ‘revolutionary’ model (or the East European model), requiring transition at a fast pace through establishing well-defined property rights as a precondition to the ‘proper functioning of a capitalist market economy’, enabling the privatisation of state-owned enterprises. The second is called the ‘evolutionary’ model (or the Chinese model), based on a gradualist approach towards economic transition, ‘allowing market oriented competitive enterprises to develop from within’. Although, both models emphasise privatisation, the Chinese model focuses more on establishing competition. David Lipton and Jeffrey Sachs (1990) also propose a ‘big bang’

<footnote n="1">¹ Rostow’s five stages of development have received considerable criticism in the academic literature. Some critics believe that it focuses only on the Westernised path to economic development. Many countries do not follow the steps Rostow lists, while others simply have a different goal than mass production. For instance, many countries shifted from agriculture and minerals to industry plus services. See Gerald Meier (1989).</footnote>
approach to transition, suggesting all reform policies be implemented quickly and as a package. The same approach is also advocated in Oliver Blanchard et al. (1993). Consistent with the Washington Consensus, this policy model advocates a reform package consisting of liberalisation, privatisation and fiscal discipline (Berglöf and Roland 2007). Jan Svejnar (2002) suggests two types of reforms that transitional economies should follow. Type I requires macroeconomic stabilisation, price liberalisation and institutional changes. Type II reforms call for regulatory restructuring and enforcement to establish a market-driven mechanism. This includes the privatisation of state-owned enterprises, labour market regulation and a prudential regulatory structure.

However, the successful experience of the emerging and developing economies in the late 1980s and early 1990s suggests that a gradualist approach works better to achieve sustainable growth. The risks associated with rapid development were also exposed during the 1997 Asian financial crisis. Indonesia is a good example. Despite accomplishing high growth through fast-paced reforms, without establishing a regulatory structure to ensure the safety of private investment and rights of ownership, it paid a huge price with economic growth declining from a positive 10% growth at the beginning of 1997 to a negative 13% growth during the crisis (Ariff and Khalid 2005). Accordingly, institutional building and regulatory reforms were strongly emphasised during the transition period.

Marcin Piatkowski (2002) emphasises the role of information and communication technologies (ICT) during the transition process. He constructed a 'new economy indicator' (NEI) and used a sample of Eastern European countries to measure the capacity of transitional economies in exploiting the potential of innovation and technology diffusion to help economies in transition catch up with developed countries. Kenneth L. Kraemer and Jason Dedrick (2001) suggest that due to a lack of investment in complementary investment in infrastructure, human capital and research and development (R&D), developing countries have not been able to adapt to high-tech, innovative and efficient production models.

Later, policies of openness, use of information technology and innovative business models would change the whole scenario. As a result, investment was differentiated between public, private and foreign investment. Southeast Asian countries adopted policies to attract foreign investment and encourage domestic investment. The sectoral developmental approach moved from being agriculturally based to manufacturing and services. Diversification became a buzzword in national economic planning. The quality of public sector investment was emphasised. Public-private partnership was now considered an important element of public sector projects. The governance system was reshaped where the government role was seen more as a facilitator through market reforms instead of market controls. The successful experience of East and Southeast Asian economies or what the World Bank (1993) called the 'East Asian miracle' was based on sound principles of competition, decontrol and decentralisation, and restructuring to ensure the efficient use of resources and meeting the market demand for goods and services (Ariff and Khalid 2005). Based on this successful experience, the literature suggests four main ingredients of the transition process towards development: (1) liberalisation in the real and financial
sectors; (2) macroeconomic stabilisation, including both monetary and fiscal sectors to achieve sustainable current account and balance of payments; (3) restructuring of the private sector (to increase its role) and public-private partnership; and (4) legal and institutional reforms and strict standards of prudential and financial management (IMF 2000; Ariff and Khalid 2005). Although there is no one-size-fits-all solution for the sequencing of such reforms, the International Monetary Fund (IMF 2000) suggested that liberalisation, macroeconomic stabilisation and privatisation of small-scale enterprises be initiated first, followed by privatisation of large-scale enterprises and legal and institutional reforms.

In the wake of fast-paced innovation and technological development, new challenges are being faced by businesses and stakeholders. To accommodate these emerging challenges, Nadeem Ul Haque (PIDE 2020) proposed a new framework: a new growth process (Fig. 1.1). According to this process, the quantity and quality of investment are enhanced through market reforms and public sector investment while productivity is improved through innovative practices, entrepreneurial skills and technical knowledge. In this framework, innovations, markets and entrepreneurship work as key instruments, whereas vital interventions include policy, procedural and institutional reforms to create an enabling environment.

In sum, this overview of the literature provides interesting details on how economies should transition towards economic development. The experiences of Eastern European countries and socialist economies in East and Central Asia show that there is no single model or formula for transitional economies to follow. Each country needs to devise a strategy based on its own socioeconomic and geopolitical environment. However, it is very clear through this debate that reforms must look at changing market conditions. Further, sound macroeconomic planning, friendly business environments, and regulatory and institutional restructuring are key to the success of reforms. From a theoretical perspective, policymakers need to think beyond economic theory and make use of the development of contract theory, political economy, law and economics, regulation theory, corporate finance and other areas in applied economic theory (Arrow 2000). Finally, reforms should have a dynamic focus and a regular assessment of gains and losses.

<figure><img src="image_4.png" /><figcaption>**Fig. 1.1** New processes of economic growth. *Source* Adapted from PIDE (2020)</figcaption></figure>
In the context of the above discussion, the next section considers some interesting features of Brunei's economy and its aspirations towards economic development.

## 1.3 Brunei Darussalam: Transition towards Economic Development

On the basis of GDP per capita derived from purchasing power parity (PPP), Brunei is the second richest country after Singapore in ASEAN and ranks ninth in the world (World Population Review 2023; IMF 2023) (Table 1.1). However, Brunei's economy is heavily dependent on oil and gas resources. Given the depleting oil reserves and high volatility of oil prices, this has led to significant uncertainty in the sustainability of Brunei's economic growth. It is therefore imperative for the country to diversify its economy, reduce dependence on oil and gas, and expand its sources of income to other sectors.

The call for diversification was first made in the Second National Development Plan (NDP) (1962–1966), long before Brunei gained full independence in 1984. The need for diversification was further reiterated in the mid-1970s in the Third NDP with a clear stated objective: ‘Diversify the economy through accelerated development of agriculture and industry’. This was broadened in 1996 with the Seventh NDP with ‘economic development through economic diversification’ as the main objective (Mohd Rozan and Milojević 2016) (Fig. 1.2).

In 2007 the government announced Wawasan Brunei 2035 (Brunei Vision 2035) as a national vision and long-term development plan for the country. It outlined three specific goals to be achieved by 2035 through the use of eight strategies (Brunei Darussalam 2019). The three goals are:

<table><caption>**Table 1.1** Per capita GDP of ASEAN (PPP-based)</caption><thead><tr><th rowspan="2">Country</th><th colspan="6">PPP, constant 2011 international USD</th><th rowspan="2">IMF</th></tr><tr><th>1990</th><th>1995</th><th>2000</th><th>2005</th><th>2010</th><th>2015</th><th>2023</th></tr></thead><tbody><tr><td>Singapore</td><td>34,298</td><td>44,860</td><td>51,636</td><td>61,890</td><td>72,018</td><td>80,192</td><td>140,280</td></tr><tr><td>Brunei Darussalam</td><td>85,281</td><td>86,753</td><td>82,717</td><td>83,717</td><td>79,603</td><td>73,605</td><td>79,408</td></tr><tr><td>Malaysia</td><td>10,451</td><td>14,439</td><td>16,146</td><td>18,479</td><td>21,102</td><td>25,312</td><td>33,353</td></tr><tr><td>Thailand</td><td>6,651</td><td>9,417</td><td>9,228</td><td>11,449</td><td>13,584</td><td>15,347</td><td>22,644</td></tr><tr><td>Indonesia</td><td>4,477</td><td>6,023</td><td>5,806</td><td>6,838</td><td>8,465</td><td>10,385</td><td>15,766</td></tr><tr><td>Philippines</td><td>4,010</td><td>3,960</td><td>4,227</td><td>4,786</td><td>5,638</td><td>6,938</td><td>11,106</td></tr><tr><td>Vietnam</td><td>1,501</td><td>2,042</td><td>2,650</td><td>3,485</td><td>4,486</td><td>5,667</td><td>14,248</td></tr><tr><td>Laos</td><td>1,617</td><td>1,908</td><td>2,340</td><td>2,946</td><td>3,974</td><td>5,345</td><td>9,658</td></tr><tr><td>Myanmar</td><td>719</td><td>896</td><td>1,263</td><td>2,207</td><td>3,608</td><td>4,931</td><td>5,137</td></tr><tr><td>Cambodia</td><td>-</td><td>1,099</td><td>1,371</td><td>1,962</td><td>2,513</td><td>3,278</td><td>6,081</td></tr></tbody></table>

*Sources* World Population Review (2023), IMF (2023)
<figure><img src="image_5.png" /><figcaption>**Fig. 1.2** Chronology of Brunei's National Development Plans, 1953–2035. *Source* Adapted from Mohd Rozan and Milojević (2016)</figcaption></figure>

1. The accomplishment of its well-educated and highly skilled people, measured by the highest international standards

2. A high quality of life that is among the top 10 nations in the world

3. A dynamic and sustainable economy with income per capita within the top 10 countries in the world

The eight strategies identified to achieve these goals are:

1. Education

2. Economical

3. Security

4. Institutional development

5. Local business development

6. Infrastructure development

7. Social security

8. Environmental

Data suggest that the process towards economic diversification could not attain the planned momentum, restraining the economy's heavy dependence on natural resources such as oil and gas.<fnref n="2" /> Table 1.2 presents the movement of the basic economic indicators since 2000 and confirms the same volatile pattern.<fnref n="3" /> Continuing volatility in global oil prices impacted on the growth pattern over the years with positive and negative growth correlated to global oil prices rising and falling respectively.

Although several initiatives were taken to accelerate economic diversification, the implementation process was a bit slow. These initiatives focus on improving productivity by taking advantage of innovative technology and the creative industry, as well as creating a friendly business environment. For instance, Darussalam Enterprise (DARe) was established in 2016 as a statutory body to monitor and nurture the development of small- and medium-sized enterprises (SMEs) in an effort to diversify the economy. The *halal* industry aimed to become a hub for *halal* products and services in the region. At the same time, attention was given to the Islamic finance industry, including Islamic bonds and Islamic insurance (*takaful*) as another area of focus. Plans were also put in place for establishing the securities exchange and for

<footnote n="2">² See Chaps. 2–4 and 6 for more on diversification.</footnote>

<footnote n="3">³ We have restricted this table to 2019 to avoid the negative impact of COVID-19.</footnote>
<table><caption>**Table 1.2** Brunei Darussalam: Basic economic indicators, 2000–2019 (% of GDP)</caption><thead><tr><th></th><th>2000</th><th>2005</th><th>2010</th><th>2011</th><th>2012</th><th>2013</th><th>2014</th><th>2015</th><th>2016</th><th>2017</th><th>2018</th><th>2019</th></tr></thead><tbody><tr><td>Real GDP growth (%)</td><td>2.85</td><td>0.39</td><td>2.6</td><td>3.75</td><td>0.91</td><td>-2.13</td><td>-2.51</td><td>-0.39</td><td>-2.48</td><td>1.33</td><td>0.05</td><td>3.87</td></tr><tr><td>Inflation (%)</td><td>1.56</td><td>1.24</td><td>0.36</td><td>0.14</td><td>0.11</td><td>0.39</td><td>-0.21</td><td>-0.49</td><td>-0.28</td><td>-1.26</td><td>1.03</td><td>-0.39</td></tr><tr><td>Gross fixed capital formation</td><td>13.1</td><td>11.4</td><td>23.7</td><td>34.6</td><td>0.1</td><td>0</td><td>0.2</td><td>0.3</td><td>34.4</td><td>34.6</td><td>40.9</td><td>38.5</td></tr><tr><td>Foreign direct investment (net)</td><td>1.0</td><td>1.8</td><td>3.5</td><td>3.7</td><td>4.5</td><td>4.3</td><td>3.3</td><td>1.3</td><td>-1.3</td><td>3.9</td><td>3.8</td><td>2.7</td></tr><tr><td>Government expenditure</td><td>24.8</td><td>22.5</td><td>14.7</td><td>21.2</td><td>25.8</td><td>18.4</td><td>22.2</td><td>26.2</td><td>39.35</td><td>37.58</td><td>32.15</td><td>32.44</td></tr><tr><td>Trade</td><td>83.5</td><td>80.7</td><td>83.3</td><td>86.7</td><td>86.9</td><td>83.2</td><td>83.0</td><td>74.0</td><td>66.2</td><td>85.2</td><td>93.9</td><td>108.5</td></tr><tr><td>Current account balance</td><td>51.5</td><td>47.3</td><td>36.5</td><td>34.8</td><td>29.8</td><td>20.9</td><td>30.6</td><td>15.9</td><td>12.9</td><td>16.4</td><td>6.9</td><td>6.6</td></tr><tr><td>Fiscal balance</td><td>10.9</td><td>21.1</td><td>15.6</td><td>25.6</td><td>15.7</td><td>10.1</td><td>-0.7</td><td>-14.0</td><td>2.9</td><td>-13.2</td><td>0.15</td><td>-1.58</td></tr></tbody></table>

Source World Bank (2020)
capital market to start operating in 2017–2018. However, this has been delayed in part due to the COVID-19 pandemic.

To further accelerate the diversification process, the government issued an Economic Blueprint in January 2021 with specific goals of achieving macroeconomic stability, low unemployment and sustainable growth (MoFE 2020: vii–viii). The blueprint highlighted six aspirations:

1. Productive and vibrant businesses

2. Skilled, adaptive and innovative people

3. Open and globally connected economy

4. Sustainable environment

5. High quality and competitive economic infrastructure, and

6. Good governance and public service excellence

In sum, Brunei has made some progress but more needs to be done since economic conditions are changing at a much faster pace. The slow process of policy implementation could risk the country's strategic and competitive advantages. For instance, to establish Brunei as a hub for the *halal* industry the country faces tough competition within the region with much larger markets and population base. There also needs to be a change of attitude away from a preference for government jobs. This obviously requires policies for a more efficient public sector as well as incentives for the private sector to grow in the market and increase competition. The data from 2019 show that micro and small enterprises comprise 41.8% and 40.9% respectively, while 14.5% consist of medium enterprises. This means that micro, small and medium enterprises (MSMEs) constitute 97.2% of the total (MoFE 2019: 5). There are huge potential gains to be had through policies encouraging the engagement of MSMEs in national productivity. Production and efficiency can be enhanced through entrepreneurial skills development, the use of technology and resource availability to finance SMEs' initiatives. SMEs should also look at the global market by expanding cross-border business activities.

With this background, the contributing chapters in this book highlight the progress made in different sectors of the Brunei economy, challenges faced and suggestions to accelerate the reform process to ensure that the goals of Wawasan Brunei 2035 are achieved. The next section provides an overview of the chapters.

## 1.4 Summary of Chapters

In addition to this introduction, the book consists of 16 substantive chapters split into three parts plus a conclusion. Part I discusses Brunei's economic growth in a shifting Asia. Part II deliberates on the transition of Brunei's economy. Part III focuses on managing the public sector.

The analysis in Chap. 2 by Hafiizh Hashim, Stephen Druce and Abdul Hai Julay on Brunei's economic diversification drive looks at socioeconomic and geopolitical issues. It provides a historical perspective on Brunei's independence and the
challenges faced by the country with a predominantly oil-dependent economy. An interesting element of this chapter is the detailed examination of the importance of institutional reforms and how institutional changes can help achieve economic diversification. The chapter then focuses on the unique religious and cultural identity which manifests in its *Melayu Islam Beraja* (MIB, Malay Islamic monarchy) philosophy. Brunei's political and economic relations within the region, including China, are also addressed.

This topic is further explored by Ly Slesman in Chap. 3. It provides a detailed deliberation of Brunei's economic development using socioeconomic indicators and the country's historical dependence on the oil and gas sector. The discussion considers if such dependency could be understood as a 'resource curse' or 'resource blessing'. This is linked to the theoretical debate on the natural resource curve which argues 'that countries endowed with abundant natural resources tend to grow slower than countries without such resources'. The author extends this debate through new empirical evidence using data from Brunei. The results support a 'resource blessing' view where oil and gas positively contribute to economic growth. However, the empirical investigation finds economic growth to be sensitive to variations in oil and gas prices or rents. These results obviously support a move towards economic diversification and further development of the non-oil and gas sector of the economy.

This is followed by a discussion on demographic trends and labour market conditions in Brunei in Chap. 4 by Bruno Jetin. This looks at long-term demographic trends and points to a predicted decline in the working-age population which is forecast to begin from the middle of the century (around 2050). A declining younger age dependency ratio will be superseded by a growing old age dependency ratio after 2055. This trend will clearly have implications for the labour market and social care, particularly for a country that already has the highest unemployment rate in ASEAN (Global Economy 2022).<fnref n="4" /> The author argues that the people's preference for working for the government and a lack of private sector alternatives have created a segmented labour market. One reason for the preference for public jobs are the much higher salaries the public sector offers compared to the private sector, a phenomenon that is different to what prevails in most other countries. Jetin then discusses resource abundance and the dependence on natural resources that he compares with similar countries in order to assess Brunei's slow progress. He shows that, among the countries receiving high rents from their natural resources, Brunei is one of the top three in terms of the share of public employment. He concludes that more active efforts towards diversifying the economy and building a stronger private sector would be the way to address the challenges the country could face moving forward.

The debate on economic growth dynamics is not complete without an exploration of financial sector development. Seminal works by Ronald I. McKinnon (1973) and Edward Stone Shaw (1973), which argue for the importance of financial sector

<footnote n="4">⁴ The Global Economy ranking places Brunei at the top in terms of the unemployment rate in ASEAN in 2021. However, *ASEAN statistical yearbook 2022* ranks Brunei as third highest in 2021 after the Philippines and Indonesia (no data are reported for Cambodia, Laos and Myanmar) (ASEAN 2022).</footnote>
development and liberalisation, led to an extensive theoretical and empirical study. Although the finance-growth nexus is still inconclusive, a majority of empirical research suggests that the development of financial institutions, financial instruments and financial innovations can impact on economic growth in a positive manner.

Chapter 5 by Biswa Nath Bhattacharyay focuses on the evolution of Brunei's financial sector over the last few decades. Although the Brunei Currency Board was established in 1967—renamed the Brunei Currency and Monetary Board in 2004—a formal central bank/monetary authority was only formed in 2011, namely the Monetary Authority of Brunei Darussalam (Autoriti Monetari Brunei Darussalam). The chapter also examines the 2016 release of the Financial Sector Blueprint (FSBP) (2016-2025), thus providing a roadmap to transform the financial sector into a dynamic and diversified one. The objective is to 'guide the development of Brunei Darussalam's financial sector during the next decade' and sets out the strategic framework within which the Central Bank will be working with other ministries and stakeholders to reach the objectives of Wawasan Brunei 2035 (Autoriti Monetari Brunei Darussalam 2016). Besides a comprehensive review of the literature on the issue of financial sector development in the region and beyond, this chapter also details Brunei's financial sector development from 2014 to 2018. It focuses on the banking sector and highlights major prospects and challenges. Bhattacharyay observes a below target performance (relative to the region) of the banking sector in Brunei during the study period. For instance, the reported statistics suggest that 67% of bank deposits (domestic savings) are invested offshore while the yield for domestic loans/financing is much higher than that of offshore placement and offshore investment. Brunei needs to focus on Islamic fintech to attract Islamic finance and investment from the region. At the same time, Brunei should develop its non-banking financial sector and accelerate the process of developing an active and efficient capital market.

The following three chapters deal with Brunei's external trade and main foreign partners. Global value chains (GVCs) are considered a growing trend for developing countries to increase their participation in global trade and diversify exports in business and economic development globally. In Chap. 6 Angelo Jose Lumba, Mahinthan Mariasingham and Arushi Gupta contribute to an interesting debate on how Brunei can benefit through GVCs. They argue that, given Brunei's goal of economic diversification, GVCs can serve as an opportunity to build much-needed infrastructure to enhance trade beyond the traditional oil and gas industry. Using the Multiregional Input-Output (MRIO) database and a comprehensive input-output analysis, the empirical findings of this chapter suggest that, besides existing GVC participation of the downstream oil and gas industries, the country should also expand investment in other priority areas such as the *halal* industry, aquaculture and ICT.

As noted, the issue of economic diversification is centre stage in Brunei. Many policies have been formulated and measures taken towards achieving the goal of less dependency on oil and gas. The export-led growth experience of many East Asian countries can be taken as a good example of how high and sustainable growth can be achieved. The recent development of the Regional Comprehensive Economic Partnership (RCEP), in which Brunei is a signatory member, also focuses on ways
to enhance regional trade. Chapter 7 by Pang Wei Loon looks into Brunei's potential to expand its export partnerships, specifically with China. This chapter explores the prospect of increasing trade and investment partnerships with ASEAN Plus Three (APT), that is ASEAN plus China, Japan and South Korea. Moreover, it provides a detailed analysis using descriptive data and by measuring interindustry and intra-industry trade (for products and sectors) to identify Brunei's trade linkages with members of APT. The findings suggest that Brunei is mostly engaged in inter-industry trade (trade in different products) although some diversification has been observed recently. Even though Brunei started its campaign to diversify the economy in the mid-1990s, the country is still heavily dependent on oil and gas. The results of some recent initiatives to encourage foreign investment account for an increase in China's funding of important industries in the country. Recent numbers show an increase intra-industry trade in crude oil as Brunei started production of processed petroleum. The country needs to accelerate its diversification policy to achieve the goals stipulated in Wawasan Brunei 2035.

Part II emphasises the policies and initiatives undertaken by the government of Brunei to facilitate the transition towards development and diversification also brings about changes in the skill levels of the workforce. This impacts on the employability of workers (especially young people) and could result in high employment rates as recently experienced by Brunei. In Chap. 8 Adilah Hisa, M. Muzamil Naqshbandi and Fadzliwati Mohiddin focus on the changing conditions in Brunei's labour market and skill mismatch issues. Using survey data, they highlight the skills needed in this changing environment. The findings identify listening, oral communication, learning, leadership and interpersonal skills as the top five abilities demanded by employers. More communication between tertiary institutions and stakeholders (potential employers) is needed to restructure the present curriculum to meet market demand.

Wei Lee Chin and Siti Fatimahwati Musa's Chap. 9 is devoted to agritourism as a means of diversifying economic activities. Agritourism is a popular concept not only in developed countries but also in emerging economies, especially in Southeast Asia. The chapter admits that the agricultural sector in Brunei does not make any significant contribution to the economy. However, the potential for agritourism is discussed in detail. Brunei's advantage is its natural environment; it is an asset that could be used to promote tourism. The study uses semi-structured interviews from communities in three selected farming areas to perform a strengths, weaknesses, opportunities and threats (SWOT) analysis. It suggests that 'the number of strengths outweighs the weaknesses of agritourism'. One of the main issues identified in this chapter is the lack of institutional support. This is not limited to agritourism. There is a need to provide institutional support and improve communication among major stakeholders. Tourism should also be promoted as a package, including the travel industry, hotel industry, hospitality and communication development. There is no doubt that Brunei has good potential to use its tourism industry as an important sector and source of income for the country.

Chapter 10 by Wei Lee Chin covers a related topic, cross-border tourism between Brunei and East Malaysia. The chapter finds that during 2018–2019 a total of 2.4
million Brunei residents travelled to Miri in Sarawak, Malaysia, basically for shopping. This is a significant number, and one factor that is highlighted as the main reason for this high cross-border tourism is the low cost of goods (cheaper in Miri than Brunei). This could also be due to differences in the value of the currencies of the two countries. The findings could serve as a lesson for planners. It is important to note that cross-border travel restrictions during COVID-19 increased domestic tourism and domestic spending in Brunei, though since the pandemic cross-border tourism has resumed its previous pattern. Perhaps it is time to develop a more state-of-the-art shopping mall in Brunei and promote local competition. This could add value to the domestic economy while also attracting tourists.

Hairul Azrin Besar in Chap. 11 discusses the state of the financial services industry in Brunei and its growth potentials. It can be observed from the discussion that Brunei aimed to make itself an Islamic financial hub in the region. Although efforts were made to revamp the financial system by establishing financial institutions, restructuring the regulatory framework and introducing financial instruments in compliance with syariah laws, the transformation process has been slow. The main constraint identified is the absence of a capital market to attract both local and foreign investors. The government has recently implemented important policies through the Central Bank and the Ministry of Finance and Economy, along with other relevant entities, to accelerate development and the restructuring of the financial sector. It is expected that these efforts will help develop Brunei's Islamic financial market as an emerging and competitive market in the region.

The wave of globalisation at the beginning of the twenty-first century called for an infrastructure necessary to facilitate digital trade and business. The inception of platforms such as the ASEAN Economic Community (AEC) and the RCEP include the promotion of digital economic activities as one of the main agendas of their future plans (Jetin and Mikić 2016). The COVID-19 pandemic further increased the importance of digital transactions, not by choice but by necessity. It is therefore not only important but opportune to investigate where Brunei stands vis-à-vis neighbouring countries. In this context, Chap. 12 by Mohammad Nabil Almunawar and Mohammad Alif Azizi Abdullah takes up the important issue of digital marketplaces in Brunei. The chapter provides a detailed analysis of challenges faced in developing a digital marketplace, especially in a small population-based economy such as that of Brunei. The chapter then investigates the state of the existing digital marketplace through interviews with selected digital businesses. It reveals that the current digital marketplace is new (with the first one established in 2015) and only caters to local market demand. Transaction costs (such as delivery time) from offshore markets increased during the pandemic, thus giving a boost to the local digital marketplace. Domestic consumers also prefer transactions through this market so as to mitigate issues surrounding refunds or delays. Perhaps it is a good opportunity for local digital businesses to expand their dealings both horizontally and vertically.

Chapter 13 by Pg Md Hasnol Alwee Pg Hj Md Salleh and Roslee Baha advances the interesting topic of financial literacy and the importance of financial planning for retirement. Based on data from Brunei, the analysis reveals that there is no discrimination in terms of education when it comes to individuals lacking formal financial
planning; even some educated individuals do not have any financial plans for retire-
ment. Given that Brunei is going to face the issue of an ageing population soon
(similar to many other countries in the region), it is important for policymakers to
improve financial literacy and financial planning for the public, especially senior
citizens. Perhaps the Central Bank, financial institutions and higher education insti-
tutions can play an important role in educating the public and improving social
awareness of financial planning.

As detailed in Chap. 4, the public sector is the main employer in Brunei. This makes public sector management the main policy focus of the economic plan. In this context, Part III is devoted to measures and policies to improve productivity through a more efficient public sector. Four chapters take up this important area of concern. Chapter 14 by Thuraya Farhana Said looks into the performance management policies (PMPs) designed and implemented by the government of Brunei to achieve its goals under Wawasan Brunei 2035. Though this chapter uses data based on interviews conducted in 2012, so that any assessment may not reflect current practices, it does help to understand the evaluation of improvement in PMPs. The much-debated issue of slow progress in economic diversification can be partly attributed to inefficiencies in management performance and decision-making.

In Chap. 15 Mahani Hamdan focuses on operational excellence, which means ‘the execution of the business or management strategy in an excellent way’. Besides detailing the historical background of this topic, the chapter also collects some interview-based data to make an assessment and highlight issues in Brunei’s public sector inefficiencies. The findings suggest improvement in the areas of transparency, human capacity development, technology tools, quality management approaches, monitoring and control, systematic evaluation procedures, policies for human development and not least a sense of ownership.

In Chap. 16 Wardah Azimah Sumardi emphasises the management issue in
Brunei's public sector, particularly employee involvement and participation (EIP).
The evaluation is based on interview-based surveys of different levels of management
teams. However, prior to data analysis, a detailed and interesting literature review
is provided to improve the understanding of EIP. The main point highlighted is that
EIP should be viewed from the context of a country's environment. The chapter
observes that a number of initiatives have been taken by the government to improve
public sector efficiency and delivery. Nevertheless, more actions are needed to fill
gaps in capability, competency and expertise, and to provide an effective public
service delivery system as targeted under Wawasan Brunei 2035 (see Chap. 2). The
chapter suggests operational excellence—a process-based approach combined with
an integrated management system, including human intelligence, innovation and
technology—as a way to move forward.
## 1.5 Concluding Remarks

The deliberations and discussion provided in this book consider Brunei's transition towards development. The observations and evidence of the authors suggest the great potential the country has to transform itself from a developing to emerging economy. It is interesting and encouraging to note that all the contributions show that Brunei is changing and modernising to better adapt to a globalised world in constant evolution. The changes taking place are not brutal or dramatic, but they are nonetheless real. Accumulated over several decades, these changes profoundly transform a country that attaches particular importance to stability. We hope that the recommendations gathered in this book will be useful in pursuing this change.

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**Ahmed M. Khalid** is Visiting Professor at the Department of Economics, Lahore University of Management Sciences, Pakistan. He is also an Adjunct Professor and former Dean of UBD School of Business and Economics, Universiti Brunei Darussalam. He holds a PhD in economics from Johns Hopkins University, USA. He previously worked at Bond Business School, Bond University, Australia, and the National University of Singapore. He has considerable experience of
working as a consultant with the World Bank and as an adviser to the Ministry of Planning Devel-
opment and Special Initiatives, Pakistan, as well as visiting appointments at various academic and
research institutions. He is the editor-in-chief of *Journal of Business and Economic Analysis* and
associate editor of *The Singapore Economic Review* and member of the editorial boards of several
regional and international journals. His publications include four books, several refereed journal
articles, chapters in books and numerous consultancy/project reports, technical reports, working
papers and conference papers. His most recent publication, as coeditor, is *Economic integration
among D-8 Muslim countries* (2023).

Bruno Jetin is currently an Associate Professor at the Faculty of Law, Politics and Social Sciences, Université Sorbonne Paris Nord, France, and he holds a PhD in economics from the same university. He was previously an Associate Professor and former Director of the Institute of Asian Studies, Universiti Brunei Darussalam. His current work focuses on the geopolitics of electric batteries, corruption and foreign direct investment, income distribution and growth in Asia, and the Belt and Road Initiative. His recent publications include: Wage-led demand as a rebalancing strategy for economic growth in China. *Journal of Post Keynesian Economics* 43(3) (2020, with Luis Reyes-Ortiz); Electric batteries and critical materials dependency: A geopolitical analysis of the USA and the European Union. *International Journal of Automotive Technology and Management* 23(4) (2023); and, The effect of corruption on foreign direct investment at the regional level: Positive or negative relationship? In *Corruption and illegality in Asian investment arbitration*, ed. Nobumichi Teramura, Luke Nottage and Bruno Jetin (2024, with Jamel Saadaoui and Haingo Ratiarison).

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