# Demographic Trends, Employment and Diversification in Brunei Darussalam: An International Perspective

Bruno Jetin

► To cite this version:

Bruno Jetin. Demographic Trends, Employment and Diversification in Brunei Darussalam: An International Perspective. Brunei Darussalam's Economic Transition in a Shifting Global Asia, 23, Springer Nature Singapore, pp.69-94, 2025, Asia in Transition, 978-981-97-6926-1. 10.1007/978-981-97-6926-1_4. halshs-04965740

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Chapter 4
Demographic Trends, Employment
and Diversification in Brunei
Darussalam: An International
Perspective

Bruno Jetin

**Abstract** This chapter looks at the growing mismatch between the labour force and employment in Brunei Darussalam and the policies that could lead to a better fit. The discussion is conducted from an international perspective to better understand the problems common to countries abundant in natural resources and the specificities of Brunei. Section 4.2 starts with an analysis of the demographic trends which shows that the labour force will peak around 2030 and decline slowly afterwards. Unemployment will get less severe in the long term. However, the total dependency rate will become more acute, which raises the issue of financing the social cost of an ageing population. In Sect. 4.3, we describe the highly segmented job structure that has been shaped by the Bruneian growth regime and the social context it has created. We look at unemployment and underutilisation of the labour force and show that labour market segmentation is one of their root causes. Section 4.4 is dedicated to a second driver of unemployment: the lack of diversification of the economy, despite the long-standing efforts of the Brunei government. We conclude with a discussion of the policies that could be adopted to contribute to better diversification of the economy that turns its small size into the basis for a new sustainable growth regime.

**Keywords** Brunei Darussalam · Demography · Unemployment · Labour market segmentation · Gender · Migrants · Diversification

<footnote>B. Jetin (✉)</footnote>

<footnote>Faculty of Law, Politics and Social Sciences, Université Sorbonne Paris Nord, Villetaneuse,
France</footnote>

<footnote>e-mail: bruno.jetin@univ-paris13.fr</footnote>
## 4.1 Introduction

Brunei Darussalam combines several specificities. It has an area of 5,765 km², a population of 445,400 in 2022 and a gross domestic product (GDP) per capita of USD37,152 in 2022. This places Brunei near the bottom at 163rd out of 202 countries and territories in terms of area, 168th in terms of population and 41st in terms of GDP per capita in current US dollars (DEPS 2021a; World Bank n.d.a). Brunei can be considered a small state, according to the pragmatic definition given by Dag Anckar (2020: 53). A small state has limited political, economic and administrative capacities, and finds itself in the weaker part of international asymmetric relations. Limited does not mean insignificant. Brunei has one of the highest per capita military expenditures in Asia, wields noteworthy diplomatic influence through its role in the Association of Southeast Asian Nations (ASEAN) and boasts a high living standard that ranks second in Southeast Asia after Singapore. However, in economic terms, small states face some disadvantages. Competition tends to be limited and monopolistic or oligopolistic structures play a greater role. Above all, small states cannot expect to follow the classical path to development: a large pool of abundant and underemployed workers in agriculture move to cities where they become industrial and service workers. When labour becomes scarce, wages rise and growth accelerates. Nor can small states take advantage of economies of scale that play a decisive role in manufacturing to lower costs and be competitive. Brunei has not experienced this kind of structural change because of its size and resource abundance, which have propelled its living standard to the level of high-income countries.<fnref n="1" /> Oil and gas have made Brunei prosper since 1929 and have reinforced its specificity. Oil revenues are both a boon and an added difficulty. The oil industry tends spontaneously to dominate the whole economy, encourage the development of low-productivity sectors and discourage innovation in new sectors. The structure of employment becomes distorted in favour of public employment at the expense of the private sector. Only state intervention through sensible public policies can correct these growing distortions and recalibrate the growth trajectory in a new direction, combining innovation, productivity and high qualifications.

This chapter looks at the growing mismatch between the labour force and employment and the policies that could lead to a better fit. Section 4.2 starts with an analysis of demographic trends, which shows that the labour force will peak around 2030 and decline slowly thereafter. Unemployment will get less severe in the long term. However, the total dependency rate will become more acute, raising the issue of financing the social cost of an ageing population. In Sect. 4.3, we describe the highly segmented job structure that has been shaped by the Bruneian growth regime and the social context it has created. We look at unemployment and underutilisation of the labour force and show that labour market segmentation is one of their root causes.

<footnote n="1">¹ In 2020, Brunei's gross national income (GNI) per capita, purchasing power parity (PPP) (constant 2017 international $) was USD64,037, and the average in high-income countries was USD47,844 (World Bank n.d.a).</footnote>
<figure><img src="image_3.png" /><figcaption>**Fig. 4.1** Brunei Darussalam: Total population, 1950–2100. *Source* DESA (2022)</figcaption></figure>

Section 4.4 is dedicated to a second driver of unemployment: the lack of diversification in the economy, despite long-standing efforts by the Brunei government. We conclude with a discussion of the policies that could be adopted to better diversify the Bruneian economy and turn its small size into the basis for a new sustainable growth regime.

## 4.2 Demographic Evolution

According to the United Nations *World population prospects 2022*,<fnref n="2" /> Brunei's population will peak in 2050 at 493,000 and will later decline to 392,000 in 2100, close to its level in 2010 (Fig. 4.1).

This future decline can be explained by the fact that Brunei will have achieved its demographic transition. Around 2050 the crude death rate will exceed the crude birth rate (Fig. 4.2). The number of children per woman has decreased sharply in Brunei

<footnote n="2">² In this section, unless otherwise specified, all statistical data come from the United Nations, Population Division of the Department of Economic and Social Affairs (DESA 2022). Projections are based on the median projected trajectory.</footnote>
<figure><img src="image_4.png" /><figcaption>**Fig. 4.2** Brunei Darussalam: Crude birth rate and crude death rate, 1950–2100. *Source* DESA (2022)</figcaption></figure>

from 6.9 in 1950–1955 to 1.88 in 2005–2010, which is below the reproduction rate. Fertility is even projected to stay slightly below average in high-income countries until the end of the century. According to Norainie Ahmad (2023: 69), in the absence of an official population and family policy from the government, ‘development has indeed functioned as “the best form of contraceptive”’ and is the driving force of the demographic transition. Women participate more actively in the labour force because they can rely on their parents and on employed foreign workers to care for their children and do domestic work. Their share in the labour force has doubled and reached 39% in 2020 from 16.8% in 1971 (DEPS 2022a).

Because of the fast demographic transition, the working-age population (15 years and above) will increase until 2055 and then decline (Fig. 4.3).

Since most Bruneians retire between the ages of 55 and 60, the latter being the mandatory retirement age in the country, we can limit the working-age population to the 15–64 category.<fnref n="3" /> The labour force will start to decline in 2030 and reach around 200,000 in 2100, 100,000 less than the population aged 15 years and above (Fig. 4.3). It will alleviate the pressure to create jobs to some extent if Brunei finds a way to

<footnote n="3">³ In 2019–2020 only 1.5% of workers in Brunei were 65 years old and over. They were mostly employers and self-employed workers (DEPS 2022a: Table 1).</footnote>
<figure><img src="image_5.png" /><figcaption>**Fig. 4.3** Brunei Darussalam: Population and working-age population, 1950–2100. *Source* Author's computation with data from DESA (2022)</figcaption></figure>

adapt to the ageing of its population. Because the median age will double from 20.2 in 1980 to 40.9 in 2040 and then continue to rise at a slower pace, old age dependency will be multiplied by 10, from a trough of 5% in 2000 to 51% in 2060, equal to the child dependency ratio (Fig. 4.4). It is projected to reach 70% in 2100. Of course, the youth dependency ratio will decline sharply from a peak of 169% in 1980 to around 50% in 2040, but then it will remain at that level. In other terms, after 2055, the rise of the old age dependency ratio will not be offset by an equivalent decline in the child dependency ratio.

As a consequence, total dependency will increase from its minimum of 39% in 2015–2020 to exceed 50% in 2045 and 80% by the end of the century, which places Brunei above the average of high-income countries (Fig. 4.5).

These observations show that the coming decades will be critical. Enough jobs must be created for the young generations to maintain unemployment at a low level. These jobs must have high productivity to justify the high salaries needed to maintain the current living standards and to finance, in some ways, the cost of an ageing population (Md Hasnol Alwee and Roslee 2020; Siddiqui 2014). In any case, the decline of the labour force will be slow, and one cannot solely count on demographic evolution to resolve one of the most pressing issues in Brunei: creating enough skilled jobs for an ever more educated young labour force.
<figure><img src="image_6.png" /><figcaption>**Fig. 4.4** Brunei Darussalam: Child and old dependency ratios, 1950–2100. *Source* Author's computation with data from DESA (2022). *Note* Old age dependency is a ratio of the population aged 65 and over per 100 population aged 25–64, expressed in percentage. Youth dependency is a ratio of the population aged 0–24 per 100 population aged 25–64, expressed in percentage</figcaption></figure>

<figure><img src="image_7.png" /><figcaption>**Fig. 4.5** Brunei Darussalam: Total dependency ratio and income level groups, 1950–2100. *Source* Author's computation with data from DESA (2022). *Note* Total dependency is a ratio of the population aged 0–24 plus the population aged 65 and over per 100 population aged 25–64, expressed in percentage</figcaption></figure>
<figure><img src="image_8.png" /><figcaption>**Fig. 4.6** Unemployment rate in selected ASEAN countries, 2000–2022. *Source* Author's computation with data from ILOSTAT (2024a)</figcaption></figure>

**4.3 Unemployment and the Segmentation of the Labour Market**

Currently, Brunei has the highest unemployment rate in ASEAN (Fig. 4.6). It has risen steadily since 2000 and remained around or above 7% since 2010, while it has decreased below 5% in all other ASEAN countries.

The unemployment issue is even worse for young Bruneians. It was constantly above 20% since 2008 and peaked at 31% in 2018, while it decreased or stayed at a lower level in all other ASEAN countries (Fig. 4.7).

Unemployment gives only a partial view of the dimension of the employment problem. It is a good indicator of how many people in the labour force do not have a job, although they are ready to work and looking for a job. In many developing countries, however, the incentive for the unemployed to declare themselves at relevant institutions is weak in the absence of an unemployment allowance.

In the Brunei case, Shamim Ahmad Siddiqui (2012: 407) mentions additional problems, among them the fact that all the unemployed counted at the numerator are Bruneians while the denominator of the labour force includes foreign workers, which undermines the rate of unemployment.<fnref n="4" /> Moreover, the unemployment rate says nothing about the quality of jobs of those employed or why discouragement and various kinds of inequalities lead some people to stay out of the labour force. The

<footnote n="4">⁴ Foreign workers who do not have jobs cannot stay in the country.</footnote>
<figure><img src="image_9.png" /><figcaption>**Fig. 4.7** Unemployment of young people in selected ASEAN countries, 2000–2022. *Source*
Author's computation with data from ILOSTAT (2024a)</figcaption></figure>

International Labour Organisation (ILO) has developed a composite rate of labour underutilisation to remedy this situation.<fnref n="5" /> It includes those who work an insufficient time, the unemployed and the potential labour force who are not in the labour force for different reasons but express an interest in it.

The composite rate of labour underutilisation for ASEAN countries is shown in Table 4.1. This broader indicator confirms that Brunei is by far the ASEAN country with the highest labour underutilisation, greater than members with a lower living standard and far above Singapore which has a higher living standard. With an average of 20.4% in 2017–2019, unmet employment needs in Brunei are around 2.5 times higher than the unemployment rate suggests. Time-related underemployment (38.5%) counts as much as unemployment (38.9%) in the composite rate, and the potential labour force amounts to 22.6%, revealing significant discouragement or job search difficulties.

How can we explain this disappointing employment performance? Two inter-
twined factors contribute to unemployment and labour underutilisation: the highly
segmented nature of employment and the lack of economic diversification, which is
analysed in the next section.

Labour market segmentation is always an institutional, economic, cultural, gender and ethnic construct (Reich et al. 1973; Hudson 2007; Piore 2018). Each country combines a different set of segmentation according to its historical legacy, social norms and values, state intervention and growth pattern. In Brunei, the state has always played a central role in determining the rules and regulations that shape the labour market. The state is also the main employer. Table 4.2 shows the share of

<footnote n="5">⁵ LU4 – Composite measure of labour underutilisation = (time-related underemployment + unemployment + potential labour force) × 100/(labour force + potential labour force).</footnote>
<table><caption>**Table 4.1** Composite labour underutilisation (LU4) in ASEAN, 2017–2019 (%)</caption><thead><tr><th></th><th>2017</th><th>2018</th><th>2019</th><th>Average</th></tr></thead><tbody><tr><td>Brunei Darussalam</td><td>23.2</td><td>19.6</td><td>18.5</td><td>20.4</td></tr><tr><td>Indonesia</td><td>12.6</td><td>13.0</td><td>11.0</td><td>12.2</td></tr><tr><td>Cambodia</td><td>2.2</td><td>2.2</td><td>2.2</td><td>2.2</td></tr><tr><td>Lao PDR</td><td>12.6</td><td>12.5</td><td>12.5</td><td>12.5</td></tr><tr><td>Malaysia</td><td>8.6</td><td>8.2</td><td>8.2</td><td>8.3</td></tr><tr><td>Philippines</td><td>16.8</td><td>16.4</td><td>16.1</td><td>16.5</td></tr><tr><td>Singapore</td><td>9.0</td><td>8.6</td><td>8.1</td><td>8.5</td></tr><tr><td>Thailand</td><td>2.2</td><td>2.1</td><td>1.9</td><td>2.1</td></tr><tr><td>Vietnam</td><td>2.2</td><td>2.1</td><td>1.9</td><td>2.1</td></tr></tbody></table>

Source ILOSTAT (2024a)

public employment in 22 countries whose rents are greater than or equal to 10% of GDP. None of the Southeast Asian countries registers such a high level of rents, and most of the countries that qualify are large oil and gas exporters. Brunei ranks third in public employment despite only being the tenth country in terms of rents. This proves that Brunei redistributes a large share of its rents in the form of public employment, far more than the average for other resource-rich countries.

Brunei has also set up its own brand of ‘Islamic welfare state regime’ (Wood and Gough 2006; Cheung 2017; Yuda 2019). It differs from the East Asian ‘productivist welfare regimes’ based on the Confucian ethical code that tends to attach welfare to work and prioritise economic development (Holliday 2000). Inspired by Islamic welfare ethics, Islamic welfare state regimes emphasise universal and inclusive social policies. According to Tauchid Komara Yuda (2019), the state in Brunei plays a greater role in the Islamic welfare regime than in Malaysia and Indonesia, where civil society also contributes significantly. In Brunei, the welfare state is generous and gives free access to health care and education up to university level, and a universal pension system allows people to retire between the ages of 55 and 60 (Md Hasnol Alwee and Roslee 2020).<fnref n="6" /> Moreover, there is no personal income tax or sales tax. Petrol, electricity, water and some foods are subsidised. This explains how Brunei achieves a very high human development index score.

<footnote n="6">⁶ From 1959 to 1993 civil servants were eligible for the Government Pension Scheme (GPS), which was a very generous non-contributory defined benefit retirement scheme. Civil servants received a maximum amount of three-quarters of their final paid salary, and the mandatory retirement age was 55. The system became too onerous and after 1993 only uniformed civil servants stayed eligible. An Employees Trust Fund (ETF) replaced the GPS. It is a defined contribution retirement that applies to the private sector. Both employees and employers contribute 5% of employees’ monthly salaries to the fund, and employees receive the total amount of their contributions at the end of their working life. The mandatory retirement age was amended to 60 years old in 2010, and a supplemental contributory pension fund was introduced on a voluntary basis. Finally, an old age pension was created in 1959 to provide a ‘minimum living subsistence to all citizens and permanent residents aged 60 and above’ with BND250 monthly. In 2021 it was restricted to Bruneian citizens and stateless permanent residents, while permanent residents with foreign citizenship were excluded.</footnote>
<table><caption>**Table 4.2** High rents and public employment in selected countries</caption><thead><tr><td>Country</td><td>Share of public employment (last year available)</td><td>Total rents, 2010–2019 (% of GDP)</td></tr></thead><tbody><tr><td>Iraq</td><td>38.3</td><td>41.8</td></tr><tr><td>Algeria</td><td>36.9</td><td>21.6</td></tr><tr><td>Brunei Darussalam</td><td>34.1</td><td>22.4</td></tr><tr><td>Saudi Arabia</td><td>30.5</td><td>35.1</td></tr><tr><td>Mongolia</td><td>25.0</td><td>21.0</td></tr><tr><td>Azerbaijan</td><td>23.4</td><td>25.5</td></tr><tr><td>Kazakhstan</td><td>23.3</td><td>18.8</td></tr><tr><td>Timor Leste</td><td>22.8</td><td>57.6</td></tr><tr><td>Venezuela</td><td>20.1</td><td>16.4</td></tr><tr><td>Yemen</td><td>19.4</td><td>10.8</td></tr><tr><td>Kuwait</td><td>18.6</td><td>46.0</td></tr><tr><td>Iran</td><td>15.8</td><td>22.3</td></tr><tr><td>Angola</td><td>14.6</td><td>26.4</td></tr><tr><td>Zambia</td><td>11.9</td><td>12.6</td></tr><tr><td>Oman</td><td>10.5</td><td>34.3</td></tr><tr><td>United Arab Emirates</td><td>10.3</td><td>20.7</td></tr><tr><td>Qatar</td><td>9.3</td><td>27.4</td></tr><tr><td>Congo, Democratic Republic</td><td>8.7</td><td>22.6</td></tr><tr><td>Nigeria</td><td>8.6</td><td>11.4</td></tr><tr><td>Papua New Guinea</td><td>7.5</td><td>12.8</td></tr><tr><td>Mozambique</td><td>4.4</td><td>13.8</td></tr><tr><td>Chad</td><td>3.4</td><td>21.9</td></tr></tbody></table>

Source Author's computation. Rents: World Bank (2024). Public employment: ILOSTAT (2024b)

Getting a government job is the dream of many Bruneians. In addition to the higher salary and guarantee of employment, it makes it possible to obtain a set of material advantages (rent subsidy, low-interest housing, car loans, various allowances) amounting to about 70% of salary (IMF 1999: 8), and, above all, a high social status. Having a government job is a symbol of success. Many young Bruneian graduates prefer to wait until they get a public job (Koh 2020: 53) or else consider it temporary when they work in the private sector to make a living. These traits are not specific to Brunei but are found in all high-rent countries (Hertog 2017). Soon after independence in 1984, the government adopted a 'Bruneisation policy' that gave employment priority to local people to help absorb new graduates into the labour force (Abu Bakar 1989). In the 1990s it was largely achieved in the government, oil and gas, and financial sectors. The problem is that the government cannot provide public sector jobs to all Bruneians because it would not be fiscally sustainable and is not desirable from a long-term growth perspective. In 2014, when Brunei was hit by the fall of oil
prices and unemployment surged, the government created more temporary jobs in the government sector and the state's workforce peaked at around 50,000 in 2015. In 2021 this number was reduced to 46,591 (DEPS 2022a). The scarcity of jobs led the government to adopt a series of measures to increase the share of Bruneians in the private sector. 'In 2014, work permits for the employment of foreigners for the posts of cashier, driver, supervisor, sales clerk, shop staff, butcher and baker were suspended' (Koh 2020: 20). Additional levies were imposed on the recruitment of foreigners in the service sector. In 2018 a new directive imposed hiring a minimum of 90% of Bruneians in the oil and gas sector. In 2019 it was extended to eight non-oil and gas industries (Wardi 2019), and certain government contracts are now reserved for Bruneian Malay contractors (Koh 2020: 20).

These measures were very effective. Up until 2018 more Bruneians were working in the public sector than in the private sector (Fig. 4.8). However, in 2021 the situation changed significantly. Compared to 2014, the public sector lost 21,725 workers because public companies cut jobs drastically during the COVID-19 pandemic. In the same period, the private sector created 44,535 jobs that primarily benefited local people. A closer look reveals that the private sectors that recruited Bruneians the most were wholesale and retail trade (+12,500), professional, technical, administrative and support services (+4,042), manufacturing (+2,196), accommodation and food service activities (+3,319), and agriculture, forestry and fishery (+1,405) (DES 2014; DEPS 2017, 2018, 2019, 2020, 2021a, b).

<figure><img src="image_10.png" /><figcaption>**Fig. 4.8** Brunei Darussalam: Breakdown of local employment in the public and private sector, 2014–2021. *Source* Author's computation with data from DES (2014), DEPS (2014, 2017, 2018, 2019, 2020, 2021a, b)</figcaption></figure>
<figure><img src="image_11.png" /><figcaption>**Fig. 4.9** Brunei Darussalam: Share of foreign workers in selected sectors, 2003–2020 (%). *Source* DEPS (2017, 2018, 2019, 2020, 2021b, 2022a, b)</figcaption></figure>

However, the wage and prestige gap between the public and private sectors remains, and so the appeal is to work for the government. According to our estimations, in 2017–2021, the average salary in the public sector (BND2,237) was 30% higher than the average income for Bruneians for the whole economy (BND1,735).<fnref n="7" /> This must be compared with a median income of around BND1,000 for Bruneians and BND600 for foreign workers.

The segmentation between the public and private sectors is redoubled by a segmentation within the private sector between Bruneian and foreign workers and a division between skilled and unskilled workers among the latter. Private sector companies producing goods and services for the domestic market find it more profitable to recruit foreign workers from neighbouring countries or South Asia because they can pay them much less than local workers. Therefore, most of these companies have specialised in domestic non-tradeable goods, which are both profitable and less risky than export markets. In the industry, accommodation, food service and commerce, the share of foreign workers has declined markedly to below 40%, but they are still the vast majority in the construction sector (Fig. 4.9).

Foreign workers, mostly from South Asian countries, have built most of the infrastructure and buildings in Brunei. Construction relies on unskilled or semi-skilled hard

<footnote n="7">⁷ We divided the government salary bill reported in IMF Annex IV reports by the number of employees in the public sector that we compare with the monthly income for locals reported in the Department of Economic Planning and Statistics *Labour force surveys*. We estimated the average for 2017–2021.</footnote>
manual labour. Most foreign workers still do manual labour, like craft and related trade work, plant and machine operations or elementary occupations that include female domestic workers (Table 4.3). Foreign workers' earnings are very polarised (Table 4.4). While foreign technicians, professionals and managers earn 10–50% more than their local counterparts, the opposite is true for semi- or low-skilled foreign workers. In 2014–2019 the latter earned 20–40% less than a local person for the same occupation.

The wage gap between public and private jobs and between local and non-local occupations in the private sector is an additional difficulty for strengthening a productive private sector and creating highly skilled, well-paid jobs. Private companies are

<table><caption>**Table 4.3** Brunei Darussalam: Share of foreign workers by occupation, 2014–2021 (%)</caption><thead><tr><th>Share of foreign workers</th><th>2014</th><th>2017</th><th>2018</th><th>2019</th><th>2020</th><th>2021</th></tr></thead><tbody><tr><td>Employed population by occupation</td><td>27.5</td><td>25.4</td><td>28.0</td><td>33.5</td><td>28.8</td><td>29.0</td></tr><tr><td>Managers and senior officials</td><td>23.4</td><td>20.7</td><td>22.8</td><td>25.6</td><td>23.1</td><td>18.1</td></tr><tr><td>Professionals</td><td>14.0</td><td>12.2</td><td>13.7</td><td>15.0</td><td>11.2</td><td>11.2</td></tr><tr><td>Technicians and associate professionals</td><td>18.1</td><td>18.4</td><td>14.0</td><td>26.3</td><td>20.1</td><td>19.6</td></tr><tr><td>Clerical support workers</td><td>5.2</td><td>3.9</td><td>1.9</td><td>5.8</td><td>4.9</td><td>7.1</td></tr><tr><td>Service and sales workers</td><td>25.0</td><td>18.6</td><td>22.8</td><td>23.2</td><td>14.8</td><td>13.7</td></tr><tr><td>Skilled agricultural, forestry and fishery workers</td><td>17.8</td><td>22.7</td><td>11.2</td><td>3.2</td><td>32.2</td><td>20.2</td></tr><tr><td>Craft and related trades workers</td><td>61.4</td><td>48.7</td><td>53.8</td><td>66.4</td><td>57.3</td><td>46.9</td></tr><tr><td>Plant and machine operators and assemblers</td><td>33.1</td><td>27.5</td><td>42.1</td><td>37.2</td><td>42.7</td><td>66.8</td></tr><tr><td>Elementary occupations</td><td>56.0</td><td>59.3</td><td>64.3</td><td>72.4</td><td>66.1</td><td>64.2</td></tr></tbody></table>

*Source* Author's computation with data from DES (2014); DEPS (2017, 2018, 2019, 2020, 2021b)

<table><caption>**Table 4.4** Brunei Darussalam: Occupation earning gap: Foreign workers earning/local workers earning, 2014–2019 (%)</caption><thead><tr><th>Occupations</th><th>2014</th><th>2017</th><th>2018</th><th>2019</th><th>2014–2019</th></tr></thead><tbody><tr><td>Managers</td><td>84</td><td>143</td><td>115</td><td>103</td><td>111</td></tr><tr><td>Professionals</td><td>145</td><td>151</td><td>152</td><td>153</td><td>150</td></tr><tr><td>Technicians and associate professionals</td><td>109</td><td>93</td><td>151</td><td>101</td><td>113</td></tr><tr><td>Clerical support workers</td><td>68</td><td>93</td><td>100</td><td>73</td><td>84</td></tr><tr><td>Service and sales workers</td><td>69</td><td>56</td><td>56</td><td>70</td><td>63</td></tr><tr><td>Skilled agricultural, forestry and fishery workers</td><td>111</td><td>56</td><td>86</td><td>50</td><td>76</td></tr><tr><td>Craft and related trades workers</td><td>73</td><td>90</td><td>49</td><td>69</td><td>70</td></tr><tr><td>Plant and machine operators and assemblers</td><td>61</td><td>123</td><td>57</td><td>83</td><td>81</td></tr><tr><td>Elementary occupations</td><td>54</td><td>64</td><td>64</td><td>76</td><td>64</td></tr><tr><td>Total</td><td>68</td><td>75</td><td>69</td><td>70</td><td>71</td></tr></tbody></table>

*Source* Author's computation with data from DES (2014); DEPS (2017, 2018, 2019, 2020, 2021b)
<figure><img src="image_12.png" /><figcaption>**Fig. 4.10** Brunei Darussalam: Employment to population ratio by sex, 1971–2021. *Source* Author's computation with data from DEPS (2022a)</figcaption></figure>

not induced to invest in technology upgrading and training, which are more expensive and riskier than hiring cheap labour. Foreign workers cannot move to another company without the consent of their present employer (Koh 2020: 52), which limits the possibility of market mechanisms leading to higher wages and reducing the wage gap.

Female labour is another segment of the labour market in Brunei. Although the female labour force doubled between 1971 and 2001, it has plateaued in recent years at 50% (Fig. 4.10).<fnref n="8" /> This means that half the female working-age population is not employed, while around 70% of men are employed. Table 4.5 shows that the participation of female workers in employment is at the same level in Malaysia, Indonesia and some Arab Gulf countries, all far below the level reached in Singapore and Thailand.

It remains to be seen whether the increase in female employment observed in 2021 heralds a convergence towards these latter countries or is a temporary effect of COVID-19. Women in Brunei mostly work in the private sector, and this includes foreign women. In the government sector, where nearly 100% of workers are Bruneian, women have been the most numerous since 2011. In 2021 they accounted for 56% of government employees, up from 47% in 2003 (Author's calculations

<footnote n="8">⁸ The employment-to-population ratio is the number of persons employed as a percentage of the total working-age population.</footnote>
<table><caption>**Table 4.5** Employment to population ratio of women, selected countries (2019–2020), except Kuwait (2015–2016) (%)</caption><thead><tr><td>ASEAN</td><td>%</td><td>GCC</td><td>%</td></tr></thead><tbody><tr><td>Brunei</td><td>54.2</td><td>Kuwait</td><td>52.5</td></tr><tr><td>Indonesia</td><td>53.7</td><td>Oman</td><td>34.9</td></tr><tr><td>Malaysia</td><td>53.2</td><td>Qatar</td><td>58.0</td></tr><tr><td>Singapore</td><td>66.5</td><td>Saudi Arabia</td><td>22.0</td></tr><tr><td>Thailand</td><td>66.2</td><td>United Arab Emirates</td><td>57.3</td></tr></tbody></table>

Source ILOSTAT (2024b)

with data from the Public Services Department, Prime Minister’s Office). The second sector where Bruneian women dominate is the education sector, where they accounted for 72% of teachers in 2021, followed by human health and social work activities (68%) (DEPS 2021b). In short, Bruneian women are employed mostly by the central government and public services, where they can get promotions and occupy management positions. According to ILOSTAT (2023) data, 32.3% of female workers in Brunei are in senior and middle management positions, which is comparable to the Philippines or Thailand and much higher than Indonesia (19.4%) and the United Arab Emirates (15.7%). In the government sector in 2021, Bruneian women accounted for 41% of heads of departments and sections (division 1), 67% of senior officers (division 2) and 62% of supervisors (level 3).<fnref n="9" /> Working for the government provides stability and opportunities, and is more compatible with family duties. The large presence of foreign female domestic workers (around 9,000 in 2021) also makes it possible for Bruneian women to reconcile a job with family responsibilities (DEPS 2021b).<fnref n="10" />

Foreign female workers represented 22% of female employment in Brunei in 2020 but occupied 65% of low-skill jobs and less than 20% of medium- and high-skill jobs (Fig. 4.11). Bruneian female workers accounted for 78% of female employment and around 85% of medium- and high-skill jobs, but only 35% of low-skill jobs. In 2020, female workers—mostly foreign domestic workers—in elementary occupations earned BND490 per month, which is around 50% of the median income of BND975 for the whole economy that year (DEPS 2020, 2024). This shows how much foreign workers, particularly women, contribute to lowering the labour cost.

National accounts data support the view that the Bruneian growth regime results in a highly profitable corporate sector. As a share of GDP, the net operating surplus (including mixed income) was on average 75% for 2010–2014, 66.7% for 2015–2018 and 65.5% for 2019–2021, when the COVID-19 pandemic hit Brunei’s economy.<fnref n="11" />

<footnote n="9">⁹ There is a total of five levels.</footnote>

<footnote n="10">¹⁰ The ‘Activities of households as employers of domestic personnel’ registers 9,051 females. Among them, there are almost no Bruneian women (DEPS 2021b: 16).</footnote>

<footnote n="11">¹¹ The net operating surplus plus mixed income published in the national accounts of Brunei is, in fact, very close to the concept of gross operating profit because taxes are very small and own account workers are around 5% of employment. The mixed income is therefore marginal and the net operating surplus plus mixed income can be readily compared to the adjusted capital share that</footnote>
<figure><img src="image_13.png" /><figcaption>**Fig. 4.11** Brunei Darussalam: Total female jobs by skill level and nationality, 2020 (%). *Source* Author's computation with data from ILOSTAT (2023), Employment by sex, occupation and citizenship</figcaption></figure>

This capital share places Brunei at the high end of the spectrum.<fnref n="12" /> Tim Callen et al. (2014: 24) report that the Gulf Cooperation Council's (GCC) capital share (gross operating surplus + mixed income) was around 75% in the first half of 2010, the same very high level found in Brunei at the time. The issue is that this high profitability is only realised in the non-tradeable sectors (construction, wholesale and retail trade, accommodation and food services) where productivity is traditionally low. An economy is sustainable when high profits and wages are based on high productivity in the tradeable sectors. This requires a diversification of the economy into new economic activities.

<footnote>can be calculated with the AMECO database (https://economy-finance.ec.europa.eu/economic-resarch-and-databases/economic-databases/ameco-database_en).</footnote>

<footnote n="12">¹² For instance, in the euro area (20 countries), the adjusted capital share is 43.6% (2010–2014), 44.2% (2015–2018) and 43.3% (2019–2021), and for the US it is 43.7% (2010–2014), 43.2% (2015–2018) and 42.4% (2019–2021), based on the author's calculations with the AMECO database.</footnote>
## 4.4 The Quest for Economic Diversification

The second reason for unemployment is the lack of diversification in the economy. The oil and gas industry is a highly capital-intensive industry that does not create many jobs. Downstream oil-related industries, which are basically petrochemical industries, share the same characteristic. Diversifying the economy into more labour-intensive industries and services is therefore necessary to create jobs. The economic literature shows that diversifying the economy is required at the early stage of development when labour is abundant and underutilised. It is only after a rather high-income threshold that economies tend to specialise again in goods for which they are competitive (Imbs and Wacziarg 2003). Dani Rodrik (2005) demonstrates that the most successful countries of the last few decades, such as China, India, South Korea, Malaysia, Hong Kong and Singapore, are those that engaged in producing and then exporting a set of goods that are typical of countries much richer than they were at the time. These high-quality goods are technology intensive. They have boosted productivity which has spread to the rest of the economy with long-lasting positive effects on growth and employment (UNCTAD 2018). This export diversification is not explained by factor endowments and comparative advantages so dear to neoclassical theory but by idiosyncratic elements, most of all, suitable public policies.

Brunei's challenge is of a different nature. It does not belong to the category of low-income countries, which must embark on the diversification journey, but to the category of resource-rich countries with a high income level. Resource-rich countries must diversify their economies to reduce the dependence of their development on natural resources, reduce the volatility of their growth due to the fluctuations in the price of raw commodities, and create employment. They have an advantage because their wealth enables them to finance the diversification process. Nonetheless, they suffer from some specific disadvantages. The higher the dependence, the more the country is exposed to dependence challenges, such as the risks of shock and instability and the difficulty of diversifying to escape the dependence trap (UNCTAD 2021; Nkurunziza 2021).

Among the high-income resource-rich countries, Brunei stands as a unique case. It is the smallest country in terms of population and market size. This means it cannot attract foreign direct investment (FDI) that would come to exploit the local market or use the abundance of cheap labour to export with a competitive advantage like Southeast Asian new industrialised countries did in the past. It must therefore rely on diversified activities related to its expertise in oil and gas, and use its wealth to invest in completely new activities in which it can get a niche in export markets. Nicola D. Coniglio et al. (2021) analyse the specialisation patterns of over 200 countries in 1995–2015 to determine if their specialisation had been characterised by a strong level of path dependence from their initial comparative advantage. They find a large number of new specialisation products that defy their initial comparative advantage. They also conclude that ‘path-dependent new entries in a country’s export basket are associated with a lower growth performance’ and that ‘long jumps are more likely
associated with a high growth rate and are far more common than the academic debate suggests'. In practice, there is no reason to oppose 'comparative-advantage conforming' and 'comparative-advantage defying' specialisation, and Brunei should do both to diversify its economy.

Brunei has recognised the necessity of diversifying the economy since the Second National Development Plan (NDP, 1962–1966), well before its independence in 1984 (CSPS 2024: 35). However, progress has been slow and very recent, and diversification has remained a crucial issue of public policy (Gunn 1993; Siddiqui 2012; see Chaps. 2, 3 and 6 in this volume). One reason is that, along with Saudi Arabia and Kuwait, Brunei consistently counts among the top countries that display both a high level of resource abundance and dependence (Lebdioui 2021: 6).

To illustrate this, we use Amir Lebdioui's (ibid.) data that we have updated to calculate his Multidimensional Indicator of Extractives-based Development (MINDEX). The MINDEX is based on a clear distinction between being resource rich and being resource dependent, and combines six relative and absolute measures on a scale of 0 to 1 that 'reflect the different steps of the resource revenue management policy chain to translate extracted commodities into developmental assets' (ibid.: 6).<fnref n="13" /> Figures 4.12, 4.13 and 4.14 present the Indonesian, Malaysian and Bruneian cases for the years 1997, 2010 and 2016. The two years of low commodity prices were 1997 and 2016, while 2010 registered a sharp increase. The variation in prices illustrates the potential vulnerability of countries dependent on extractive resources.

In per capita terms, Indonesia is not particularly well endowed in extractive resources,<fnref n="14" /> from which it gets low rents (Fig. 4.12). Fortunately, Indonesia is not dependent on minerals, oil and gas. Its scores in export and government revenues do not exceed 0.3 and 0.2 respectively. It is also very small in level per capita. Commodity prices have a clear impact. In 2016 the share of extractives in government revenues fell to a very low level.

Malaysia enjoys much higher resource abundance than Indonesia and gets high rents from its exports (Fig. 4.13). However, Malaysia's economy is not dependent on extractives. Even when commodity prices are high (such as in 2010), its share in exports remains low (0.2 EXP%). Still, price variation has a significant but limited impact on government revenues.

In comparison, Brunei epitomises the case of countries that are both extremely resource rich and dependent on resources (Fig. 4.14). Brunei has very large reserves per capita and manages to get the highest possible rents from them (with a score of 1). The flip side is that 90% of its export revenues are highly dependent on oil and gas (with scores between 0.9 and 1). Their price volatility impacts on government revenues with a score of 0.7 in low-price years (1997 and 2016) and up to 0.9 in

<footnote n="13">¹³ There are four measures of resource abundance (all in constant 2010 USD per capita): (1) extractive exports (EXPPC); (2) extractives rents (RENTS); (3) extractives reserves (RESRV); and (4) government revenues from extractives (REVPC). Two measures of resource dependence are: (1) the share of extractives in government revenues (REV%); and (2) the share of extractives in total exports (EXP%). See Lebdioui (2021) for justification and detail of the methodology and sources.</footnote>

<footnote n="14">¹⁴ Indonesia has a RESRV per capita indicator of 0.3–0.4. This does not mean that Indonesia does not possess high levels of mineral reserves, but that their value has to be shared with a large population.</footnote>
<figure><img src="image_14.png" /><figcaption>**Fig. 4.13** Malaysia
MINDEX, 1997–2010–2016.
*Source* Author's computation
with data from Amir
Lebdioui (2021)</figcaption></figure>

<figure><img src="image_15.png" /></figure>
<figure><img src="image_16.png" /><figcaption>**Fig. 4.14** Brunei
Darussalam MINDEX,
1997–2010–2016. Source
Author’s computation with
data from Amir Lebdioui
(2021)</figcaption></figure>

boom years (2010). The good news is that the high revenues Brunei gets from its resources mean that it can fund the needed economic diversification.

To assess progress regarding diversification from an international perspective, a widely used approach is utilised to observe the variety of the export basket. The United Nations Trade and Development (UNCTAD) provides an export diversification index ($S_j$) which is computed by ‘measuring the absolute deviation of the trade structure of a country from world structure’ using the following calculation where $h_{ij} = \text{share of product i in total exports or imports of country or country group j}$, and $h_i = \text{share of product i in total world exports or imports}$:

$$S_j = \frac{\sum_{i}^{n} |h_{ij} - h_i|}{2}$$

The diversification index takes values between 0 and 1. A higher value indicates greater divergence from the world pattern, which is equal to 0.<fnref n="15" />

Brunei's economy is one of the least diversified economies in the world, much less compared to ASEAN, the Organization of the Petroleum Exporting Countries (OPEC) and high-income economies (Fig. 4.15). While ASEAN and OPEC countries' exports have become more diversified in 1995–2021, Brunei's export basket has remained basically the same, with a slight improvement in 2021. Compared to the GCC countries, Brunei shares the same low level of export diversification as Saudi Arabia and Qatar (Fig. 4.16). The diversification of the United Arab Emirates exports

<footnote n="15">¹⁵ This index is a modified Finger–Kreinin measure of similarity in trade. See Finger and Kreinin (1979).</footnote>
shows that there is no fatality for oil-rich countries and that they can successfully diversify their economies.

<figure><img src="image_17.png" /><figcaption>**Fig. 4.15** Export diversification index of Brunei Darussalam and selected regions, 1995–2021.
*Source* Author's computation with data from UNCTAD (2023)</figcaption></figure>

<figure><img src="image_18.png" /><figcaption>**Fig. 4.16** Export diversification index of Brunei Darussalam and the Gulf countries, 1995–2021.
*Source* Author's computation with data from UNCTAD (2023)</figcaption></figure>
## 4.5 Conclusion

The first conclusion of our work is that the slow progress in economic diversification in Brunei cannot be explained by a single factor but by a combination of factors. Clearly, the state of the labour market, the private sector and the limited diversification of the economy are related phenomena. A second conclusion is that the success of diversification requires an overall policy that modifies the structure of incentives and unifies the various measures already adopted to attract foreign investment and local entrepreneurship.

Changing incentives must make working in the private sector as attractive as working in the public sector. For this, the income and benefits in the private sector must be as high as in the public sector. Several proposals have been made in this sense to increase labour mobility and flexibility and close the income gap (Koh 2020: 64–68; Hertog 2017: 6–14). The most innovative proposal addresses citizens’ income: an unconditional cash grant to all citizens that would fill the wage gap between the public and private sector and serve as a basic income security during unemployment. This could be modulated to optimise a set of incentives. For instance, young entrepreneurs could receive a higher citizen income to reward their innovation efforts and secure their projects. This would encourage the creation of innovative small- and medium-sized enterprises (SMEs) in the private sector.

These changes in the labour market could be complemented by a comprehensive research and innovation policy to stimulate endogenous innovation. Developing a national innovation system would establish clear research clusters based on local research capacities in close collaboration with all institutions and entrepreneurs, particularly local SMEs (Jetin 2010). A proposal for implementing the concept of a national innovation system in the Bruneian context has already been made (Amirul et al. 2022). This would help the implementation of the long-term NDP called Wawasan Brunei 2035 (Brunei Vision 2035) that was adopted in 2007 with mixed success (CSPS 2024: 35).<fnref n="16" /> A national innovation system also has the potential to foster other clusters.

One such research cluster would be to make the most of natural resources (apart from oil and gas), such as biodiversity and the existence of unique plant and animal species. By becoming a sanctuary for animal and plant species often endangered in the rest of the world, Brunei could develop a set of innovations in the field of environmental protection, develop medicinal and health applications, and attract foreign investment in the green economy and ecological tourism aimed at quality rather than quantity, like Bhutan does. This has an additional advantage of promoting a positive image of Brunei at the global level and strengthening Brunei’s soft power.

Another research cluster could be energy transition. Several oil and gas-rich countries and oil companies are preparing the net-zero emission target and its impact

<footnote n="16">¹⁶ Wawasan Brunei 2035 has selected the following clusters: energy and downstream activities; high technology and information and communication technology (ICT); tourism and hospitality; agrifood and *halal*; logistics and transport; and business and financial services. Recently, biotechnology, pharmaceuticals and the creative industries have been added.</footnote>
on fossil fuel production and demand by investing heavily in renewable energy. Like other ASEAN member states, Brunei has signed the Paris Agreement and is committed to reaching the target. Brunei could make a virtue of necessity and become a leader in energy transition by investing massively in renewable energies, particularly solar energy, for individual and collective dwellings. There is a whole set of niche markets for producing, storing and delivering decentralised electricity. The use of the electric battery to store energy and develop local electrical circuits is one of the niches that correspond to real needs in Southeast Asia.

Brunei could also make the most of its small size by becoming a leading country in autonomous electric vehicles. The electric car is becoming a mass market in connection with the Paris Agreement and the energy transition (Jetin 2020). Brunei has one of the highest automobile densities in the world, which causes transport congestion and high levels of pollution. At the same time, car traffic is very regular, predictable and much safer than in many countries. These are ideal characteristics to make Brunei a pioneer in the field of autonomous electric vehicles, not only for private cars but also for autonomous low-speed public transport. As for the previous clusters, the activities related to mobility require a strong intensity in research and development, not only in engineering but also in social sciences. This could mobilise the universities of Brunei in partnership with foreign universities and likely attract numerous investments from foreign companies.

Ultimately, Brunei is well positioned to become a place where Southeast Asian students at primary, secondary and tertiary levels can become fluent in English and learn in the region's best international schools and universities. Brunei is obviously much closer to other countries in the region than Australia and New Zealand, not to mention Britain or the United States, and can be a cheaper alternative to Singapore for Asian students who want to learn in an English-speaking environment. English is one of the languages spoken in Brunei and teaching is one of the most preferred occupations of Bruneian female workers. By joining forces with Bruneian universities and the best international schools, Brunei has a vast potential to become a centre of excellence for learning in English in a safe environment. This would create many qualified and well-paid jobs with spillover effects on other services, from food to telecommunications.

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**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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