RESTRICTED  WORLD  TRADE  
ORGANIZATION  WT/TPR/S/196 
21 January 2008  
 
(08-0236) 
Trade Policy Review Body  
   
 
  
 
TRADE POLICY REVIEW 
 
Report by the Secretariat 
 
BRUNEI DARUSSALAM 
 
  
 
This report, prepared for the second Tr ade Policy Review of Brunei Darussalam, 
has been drawn up by the WTO Secretariat on its own responsibility.  The 
Secretariat has, as required by the Agreement establishing the Trade Policy 
Review Mechanism (Annex 3 of the Ma rrakesh Agreement Establishing the 
World Trade Organization), sought clarification from Brunei Darussalam on its 
trade policies and practices. 
 
Any technical questions arising from this report may be addressed to 
Mario Kakabadse (tel:  022 739 5172). 
 
Document WT/TPR/G/196 contains the policy statement submitted by Brunei 
Darussalam. 
 
 
 
Note: This report is subject to restricted ci rculation and press embargo until the end of the 
first session of the meeting of the Trade Policy Review Body on Brunei Darussalam. Brunei Darussalam WT/TPR/S/196 
 Page iii 
 
 
CONTENTS 
 
    Page 
SUMMARY OBSERVATIONS vii 
 (1) E CONOMIC ENVIRONMENT  vii 
 (2) T RADE AND INVESTMENT POLICY FRAMEWORK  vii 
 (3) T RADE POLICIES AND PRACTICES  ix 
 (4) S ECTORAL POLICIES  x 
 (5) O UTLOOK  xii 
I. ECONOMIC ENVIRONMENT 1 
 (1) I NTRODUCTION  1 
 (2) R ECENT ECONOMIC DEVELOPMENTS  3 
 (i) Macroeconomic performance 3  (ii) Macroeconomic policies 6 
 (iii) Balance of payments 10 
 (iv) Structural policies:  diversification of the economy 11 
 (3) D
EVELOPMENTS IN TRADE  12 
 (i) Composition of trade 12 
 (ii) Direction of trade 12 
 (4) D EVELOPMENTS IN FOREIGN DIRECT INVESTMENT  15 
 (5) O UTLOOK  16 
II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES 18 
 (1) G ENERAL CONSTITUTIONAL AND LEGAL FRAMEWORK  18 
 (i) Introduction 18 
 (ii) Executive authority 19  (iii) Legislative process 19 
 (iv) Judiciary 20 
 (2) T
RADE POLICY OBJECTIVES AND ADMINISTRATION  20 
 (i) Objectives 20 
 (ii) Policy implementation 21 
 (iii) Policy evaluation 22 
 (iv) Main trade-related laws 22 
 (3) T RADE AGREEMENTS AND ARRANGEMENTS  24 
 (i) Multilateral agreements 24 
 (ii) Regional agreements 24 
 (iii) Bilateral agreements 29 
 (4) F OREIGN INVESTMENT REGIME  29 
 (i) Legislative and institutional framework and investment procedures 29 
 (ii) Incentives 31  (iii) Bilateral investment treatie s and double taxation agreements 32 
 (5) A
ID FOR TRADE  32 
 
 
 WT/TPR/S/196 Trade Policy Review 
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    Page 
III. TRADE POLICIES AND PRACTICES BY MEASURE 33 
 (1) O VERVIEW  33 
 (2) M EASURES DIRECTLY AFFECTING IMPORTS  34 
 (i) Customs procedures 34 
 (ii) Customs valuation and rules of origin 36 
 (iii) Applied tariff 37  (iv) Tariff bindings 41 
 (v) Other charges affecting imports 43 
 (vi) Contingency measures 44  (vii) Import prohibitions, restrictions, and licensing 44 
 (viii) Standards and sanitary and phytosanitary measures 46 
 (ix) Government procurement 50  (x) Import-related operations of state enterprises 52 
 (3) M
EASURES DIRECTLY AFFECTING EXPORTS  52 
 (i) Procedures 52  (ii) Export prohibitions, restrictions, and licensing 53 
 (iii) Export taxes, charges, and levies 53 
 (iv) Duty and tax concessions 53 
 (v) Export operations of state enterprises 54 
 (4) M
EASURES AFFECTING PRODUCTION AND TRADE  54 
 (i) Legal framework for businesses 54 
 (ii) Corporate governance 55 
 (iii) Incentives 55  (iv) Other assistance 56 
 (v) The public sector and private investment 58 
 (vi) Competition policy 60  (vii) Intellectual property rights 60 
IV. TRADE POLICIES BY SECTOR 67 
 (1) I
NTRODUCTION  67 
 (2) A GRICULTURE , FORESTRY , AND FISHING  68 
 (i) Agriculture 68 
 (ii) Forestry 70  (iii) Fishing 71 
 (3) O
IL AND GAS SECTOR  71 
 (i) Production and trade 71  (ii) Oil and gas industry 73 
 (iii) Policy 75 
 (4) N
ON-OIL AND GAS INDUSTRY  75 
 (i) Manufacturing 75 
 (ii) Construction 77  (iii) Electricity 77 
 (5) S
ERVICES  78 
 (i) Overview 78  (ii) Financial services 79 
 (iii) Telecommunications 83 
 (iv) Transport 87  (v) Tourism 90 
REFERENCES     93 
APPENDIX TABLES   95 Brunei Darussalam WT/TPR/S/196 
 Page v 
 
 
    Page 
CHARTS 
 
I. ECONOMIC ENVIRONMENT  
I.1 Product composition of merchandise trade, 2002 and 2006 13 
I.2 Direction of merchandise trade, 2002 and 2006 14  
 
III. TRADE POLICIES AND PRACTICES BY MEASURE  
III.1 Distribution of MFN tariff rates, 2007  39 
III.2 Tariff escalation by 2-digit ISIC industry, 2007  40 III.3 Distribution of CEPT tariff rates, 2006  42 
III.4 MFN and CEPT tariff averages by HS section, 2006 42 
III.5 Share of bound tariff lines by HS section, 2007  43 III.6 Overview of standards and conformity assessment activities in the Ministry of Development, 
 September 2007   47 
 
TABLES 
 
I. ECONOMIC ENVIRONMENT 
 
I.1 Basic economic and soci al indicators, 2002-06 1 
I.2 Selected macroeconomi c indicators, 2002-06 3 
I.3 Brunei labour statistics, 2001-06 5 
I.4 Inflows of foreign direct investment by sector, 2002-06 15 I.5 Inflows of foreign direct investment by country, 2002-06 16 
 
II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES  
II.1 Ministerial/Departmental responsibility for trade-related issues, 2007 21 
II.2 Main trade-related laws in Brunei, 2007 23  
III. TRADE POLICIES AND PRACTICES BY MEASURE 
 III.1 Main APEC guidelines on customs procedures and actions taken by Brunei since 2001 35 
III.2 Brunei Darussalam's tari ff structure, selected years 39 
III.3 Prohibited imports, 2007  44 
III.4 Restricted imports, 2007  45 
III.5 Government procurement expenditures, 2002-06 51 III.6 Prohibited and restricted exports, 2007 53 
III.7 Trade mark registrations, 2000-07 62 
 IV. TRADE POLICIES BY SECTOR 
 
IV.1 Agriculture and fisheries production, 2001-07 69 IV.2 Petroleum and natural gas production, export and domestic consumption, 2001-07 72 
IV.3 Oil and gas exports by destination (% share), 2002-06 73 
IV.4 Overview of Brunei Shell Petroleum, 2006 74 IV.5 Selected financial soundness indicators of commercial banks, 2001-07 80 
IV.6 ICT indicators, 2006 84 
IV.7 Maritime services at Muara Port, 2002-07 88 IV.8 Brunei tourism trade, 2002-07 and estimates for 2010 and 2020 90 
 
 WT/TPR/S/196 Trade Policy Review 
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      Page 
APPENDIX TABLES 
 
I. ECONOMIC ENVIRONMENT  
AI.1 Composition of government revenue, 2000-07 97 
AI.2 Composition of government expenditure and budget balance, 2000-07 98 AI.3 Merchandise exports by group of products, selected years 99 
AI.4 Merchandise imports by group of products, selected years 100 
AI.5 Merchandise exports by destination, selected years 102 AI.6 Merchandise imports by origin, selected years 103 
 
II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES  
AII.1 Status of selected notification requirements to the WTO, June 2001 to June 2007 104 
AII.2 Preferred industries, activities,  and products for investment 106 
 
III. TRADE POLICIES AND PRACTICES BY MEASURE 
 
AIII.1 MFN applied and bound tariff data, 2007 108 
AIII.2 Imports subject to licensing, 2007 109 AIII.3 Tax exemptions, 2007 110 
 
 
 Brunei Darussalam WT/TPR/S/196 
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SUMMARY OBSERVATIONS 
(1) ECONOMIC ENVIRONMENT  
1. Brunei Darussalam is a small, 
relatively open economy in which trade and foreign direct investment play vital roles.  With one of Asia's highest per capita incomes, of US$30,000, Brunei owes its prosperity mainly to its abundant petroleum (oil and 
natural gas) resources, whose share of GDP 
grew from 53% in 2002 to 69% in 2006, and whose share of exports rose from 88% to 96% during the same period, largely due to the sharp rise in oil and gas prices.  Nonetheless, 
between 2002 and 2006, the economy grew at 
a rather modest annual average real rate of 
2.5%, which is insufficient to generate enough jobs for Brunei's growing labour force.  As a result, official estimates put unemployment at 
some 4% in 2006, a cause for concern among 
Bruneians.  Overall, inflation has remained subdued at around 1%, generally moving in line with price trends in Singapore because of the currency peg to the Singapore dollar. Inflation is somewhat repressed, however, by 
the price controls and subsidies with respect to 
essential food items and petrol. 
2. The oil and gas sector's large share of 
GDP and exports leaves Brunei vulnerable to external shocks, particularly given the prospect of an eventual depletion of these resources.  Estimates of how long Brunei's proven 
petroleum reserves will last at current rates of 
extraction vary from 10 to 25 years;  gas reserves are widely estimated to last for up to another four decades.  Consequently, the Government has been encouraging economic 
diversification, mainly into manufacturing 
and services, especially financial services, tourism, and transport.  The private sector is being encouraged to participate, although government salaries and be nefits have made it 
difficult for it to compete with the public 
sector;  it is estimated that around 25% of the 
workforce is employed by the Government but that over 90% of Bruneians in the labour force are employed by the public sector, including state-owned enterprises.  The "Bruneization" 
policy, which encourages companies to give 
preference to  Bruneians in their employment policies, has been successful mainly in the 
government and petroleum sectors. 
3. Petroleum also continues to be the 
main source of revenue for the Government.  Corporate taxes and royalties paid by oil and natural gas companies now account for some 
94% of all government revenue, up from 86% 
at the start of the review period in 2002.  By contrast, Brunei levies virtually no tax on personal incomes or on goods and services.  Tax revenue therefore fluctuates with oil and 
gas production, changing petroleum prices, 
and the profitability of the oil and gas industry.  For most of the period under review, the saving of windfall revenues associated with high energy prices has placed the Government in a strong fiscal position and thus helped stabilize the economic cycle. 
(2) T
RADE AND INVESTMENT POLICY 
FRAMEWORK  
4. Under Brunei's Constitution, the 
Sultan is the Head of State and the Executive. After many years without a legislature, the Legislative Council was reconvened as a wholly appointed legislature in 2004;  no date has yet been set for a partial direct Legislative 
Council election.  New legislation in Brunei 
has continued to be promulgated by the Sultan as "Emergency Orders", which carry the force of law.  International agreements, including WTO Agreements, once ratified by the Sultan, 
must be adopted through national legislation to 
be enforceable in Brunei.  A number of changes and revisions, partly relating to WTO provisions, have been made to national laws with respect to intellectual property rights, 
customs and excise as well as to recent 
regional and bilateral agreements and investment, including foreign direct 
investment.    
5. In 2005, trade policy formulation and 
implementation was transferred from the Ministry of Industry and Primary Resources to the Ministry of Foreign Affairs and Trade, 
which works in cooperation with other 
agencies, notably the Ministry of Finance. Apart from the Auditor General, who may, under the Constitution, present an annual audit WT/TPR/S/196 Trade Policy Review 
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of the Government's financial statements to the 
Sultan,  Brunei's institutional framework is characterized by a lack of transparency with 
respect to trade and trad e-related policies, to 
the detriment of government accountability.  
In particular, there is no independent body to evaluate government policy and, as a consequence, provide an impetus for reform of policies that are found to be ineffective.  The 
lack of data in several key areas and activities 
(including national accounts, government finance, balance of payments, the financial system, assessments of national development plans, and activities of government-linked companies) continue to be an impediment to 
both the formulation and effective evaluation 
of trade and trade-related policies and 
measures.   
6. Brunei has intensified its participation 
in regional and, for the first time, bilateral trade agreements.  It is particularly active in ASEAN, the East Asia Growth Area, APEC, 
and the four-member Trans-Pacific Strategic 
Economic Partnership (SEP) Agreement (with Chile, New Zealand, and Singapore).  In ASEAN, Brunei has reduced tariffs on 93% of tariff lines to 5% or zero for products of 
ASEAN origin.  The Brunei Darussalam, 
Indonesia, Malaysia, Philippines–East ASEAN Economic Growth Area (BIMP–EAGA) aims to pool complementary resources in the region to develop selected sectors, including air and maritime linkages, construction, fisheries, and 
tourism.  The Trans-Pacific SEP aims to 
liberalize and facilitate trade in goods (by removing all tariffs on traded goods over time) and a broad range of services as well as to improve the business environment among the four participating countries.  
7. Brunei has also increased activity on 
the bilateral front.  In 2002, Brunei and the 
United States signed a Trade and Investment Framework Agreement (TIFA) to enhance liberalization of trade and investment, and cooperation in such areas as intellectual 
property, information and communication 
technology, biotechnology and eco-tourism, aquaculture and halal products;  it also includes consultations on the elements of a possible free-trade agreement.  In 2007, Brunei 
and Japan signed the Brunei-Japan Economic Partnership Agreement to facilitate the free flow of goods, services, and investments as 
well as enhance cooperation in energy, human 
resource development and science and 
technology. 
8. In seeking to promote private sector 
development in non-oil and gas industries, Brunei overhauled its investment laws, and established the Brunei Economic Development 
Board (BEDB) in 2001 to promote Brunei as 
an investment destination.  The BEDB adopted a new approach to attracting FDI, focusing on a few large projects, including a global mega port hub and downstream manufacturing industries using natural gas.  The Government 
expects these large-scale investment projects 
to improve the international image of Brunei, kick-start economic diversification, and provide significant employment opportunities for the local labour force.  According to early 
indications, this approach appears to be 
working.  Foreign investment, including up to 100% foreign equity in vestment, is permitted 
in all sectors except those involving local natural resources (notably agriculture and 
fisheries) and those relating to national food 
security, for which minimum local 
participation of 30% is required.   
9. To encourage foreign investment, 
Brunei provides tax incentives, particularly under the pioneer status programme.  This exempts companies from corporate tax (normally 30% for non-petroleum companies), 
up to a maximum of 11 years, and from 
customs duty on imports of plant, machinery, and equipment as well as inputs of raw materials not available in Brunei.  Given that around 95% of corporate tax revenue in 2006 
was raised from petroleum and natural gas 
companies, it would appear that most companies operating in the non-oil sector are beneficiaries of such programmes.  The Brunei Investment Agency (BIA) manages the 
investment of Brunei's considerable fiscal 
surpluses.  While the bulk of these funds is thought to be invested abroad, no information was provided to the Secretariat concerning the Brunei Darussalam WT/TPR/S/196 
 Page ix 
 
 
BIA's total stock of foreign assets or its 
portfolio of investments.  
(3) TRADE POLICIES AND PRACTICES  
10. Brunei Darussalam is committed to 
applying MFN treatment to products coming from all WTO Members.  Brunei's applied MFN tariffs are low, averaging 4.8% in 2007, zero for agriculture and 5.4% for 
non-agricultural products, ranging from 0% to 
30%.  Almost 99% of tariffs are subject to ad valorem  rates, while 131 carry specific 
rates of duty, which apply mainly to matches, cigarettes, coffee, tea, and petroleum oils and 
lubricants.  As they tend to conceal relatively 
high ad valorem  equivalents, estimates of 
which were not available, it is likely the inclusion of these specific duties in the calculation of the average applied MFN tariff 
rate would raise Brunei's overall level of tariff 
protection.  Brunei has bound nearly 93% of its tariff lines at the WTO;  while the average applied tariff rate is low, the average bound rate is 25.8%, leaving a large gap between the applied and bound MFN rates.  This gap can 
bring about uncertainty for traders and other 
economic agents as it provides scope for the authorities to raise applied tariffs within the higher rates. However, Brunei has not made use of this scope during the period under review.   
11. Brunei has continued to reduce its 
already low tariff rates under ASEAN as well 
as more recent preferential agreements, although imports of a few products are still subject to non-tariff restrictions. As a member of the ASEAN Common Effective Preferential 
Tariff (CEPT) scheme, Brunei has continued 
to reduce its preferential tariff rate, currently at 2.4%, half of the average applied MFN rate.  Differences between the CEPT and MFN tariffs exist mainly in plastic and rubber products, machinery, transport equipment, and 
precision instruments.  As a result of the 
Trans-Pacific SEP Agreement,  Brunei will bind its current MFN applied zero rates at zero and eliminate all the tariffs that it applies to other products by 2015, except for a short list 
of items, such as alcohol, tobacco, and 
firearms that it intends to exempt on moral, human health, and security grounds.  Under 
the Brunei-Japan EPA, which entered into force in 2007, Brunei is committed to eliminating tariffs on a range of products, 
including Japanese automobiles and auto parts, 
whose rates are currently set at 20%. 
12. Although Brunei's tariff barriers are 
relatively low, a number of import prohibitions, restrictions, and licensing requirements on various products for health, 
security, and moral reasons have remained 
generally unchanged during the review period.  
In addition, a few products (e.g. rice, sugar) are still subject to export restrictions, mainly to attain security of domestic supplies.  Currently, there are no mandatory standards (technical regulations) in Brunei, only 
42 voluntary standards that relate to 
construction and one in the food sector.  There is no national body for setting standards in Brunei;  the Construction Planning and Research Unit, based in the Ministry of 
Development, is the coordinator for standards 
and conformity assessment activities.   
13. As the Government is the largest 
operator in the economy, its policies on procurement and competition also have an impact on trade.  Government procurement remains an important instrument of economic 
policy, and government construction activities, 
in particular, play a major part not only in the construction industry, but in the economy as a whole.  Brunei is not a signatory to the WTO Government Procurement Agreement.  There is no specific legislation pertaining to 
competition policy, although Brunei is 
exploring the possibility of introducing such legislation in line with APEC principles;  also, steps have been taken to increase competition through deregulation and corporatization in 
certain sectors, such as telecommunications.  
Brunei does not have its own tradeable stock exchange, and as such there is no specialized 
corporate governance code or takeover code.  
14. In order to encourage investment in 
priority sectors and production for export, Brunei continues to use extensive tax and 
other incentives.  In the absence of personal 
and value-added taxes, the corporate tax has WT/TPR/S/196 Trade Policy Review 
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remained a leading instrument of industrial 
policy, offering tax incentives for companies investing in a broad range of activities under the pioneer status programme.  These 
incentives are aimed at developing small and 
medium-sized enterprises (SMEs), which make up nearly 95% of enterprises in Brunei.  Various national development plans, including the 8
th covering the period 2001-05, have 
attempted to diversify the economy, the key to 
Brunei's medium-term growth prospects.  However, despite the use of tax and non-tax incentives (whose cost-effectiveness is questionable), the non-oil, SME-dominated private sector remains embryonic and largely 
dependent on government spending on 
construction and services.  In addition to investment incentives, the Government's holding company, Semaun Holdings, which is answerable to the Minister of Industry and 
Primary Resources, invests directly in certain 
sectors and still dominates the manufacturing sector.  Relatively limited information is available on Semaun's contribution to GDP or its annual accounts, underlining a certain lack of transparency and public accountability in government policies. 
15. Brunei has strengthened its legal 
framework for the protection of intellectual property rights (IPRs) and is considering accession to the WIPO Copyright Treaty and the WIPO Performances and Phonograms Treaty, which address copyrighted works in a 
digital environment.  However, it still needs to 
implement its Patent Order (that dates from 1999) to provide patent protection for, inter alia,  pharmaceutical and agricultural 
products and processes.  Brunei does not have 
a strong track record in IPR enforcement, 
partly due to a lack of institutional capacity, and could therefore benefit from targeted 
technical assistance in this area. 
(4) S
ECTORAL POLICIES  
16. Through successive development 
plans,  the Government has sought to diversify 
Brunei's economy and create sustainable employment in the non-oil private sector.  The 
8th Plan emphasized the need to move the 
economy away from oil and gas as the primary source of economic activity (and revenue) 
through the expansion of agriculture and industry and the development of certain services  with the potential to achieve growth, 
namely:  business services;  financial services;  
hospitality and tourism;  and transport and logistics.  However, Brunei's economy has become even more heavily dependent on the oil and gas sector.  The non-oil and gas 
manufacturing sector remains weak and 
underdeveloped and has shrunk from 3% to 1% of GDP since 2002, indicating that Brunei's diversification policy has met with 
little overall success. 
17. In several key sectors of the economy, 
such as oil and gas, telecommunications, transport and energy generation and 
distribution, there continues to be a strong 
government presence, often in the form of state-owned monopolies, which can act unencumbered by any competition law.  The resulting lack of competition may have 
adversely affected prices and the cost of doing 
business in Brunei, although relevant data were not available.  The very small size of the domestic market discourages local and foreign participation in the economy and hampers the 
ability of non-oil and gas industries to achieve 
economies of scale, and thus to compete against imports as well as in export markets.  The only other major source of export revenue has been the garment industry, which was established to take advantage of the 
international quota system under the ATC 
(Agreement on Textiles and Clothing), but following the ATC's expiry at the beginning of 
January 2005, exports have seriously declined.   
18. The export of oil and gas continues to 
dominate Brunei's economy.  Brunei is the fourth-largest oil producer in South East Asia 
and is also the ninth-largest exporter of 
liquefied natural gas in the world.  The Government encourages diversification, including downstream activities related to the petroleum and natural gas sector.  At present, 
around 93% of Brunei's petroleum and 90% of 
its natural gas output is exported as crude oil and LNG, respectively.  The remaining crude oil output is refined for domestic use.  The Brunei Darussalam WT/TPR/S/196 
 Page xi 
 
 
Petroleum Unit, established in 1982,  is the 
principal regulator of the petroleum and gas sector in Brunei.  It reports to the Minister of Energy, whose portfolio was created in 
May 2005.  The Petroleum Unit's 
responsibilities include:  overseeing the exploitation of Brunei's petroleum and gas reserves, and promoting the development of downstream industries;  fixing crude oil prices;  
and ensuring that internationally acceptable 
standards on technical, accounting, health and safety, and the environment are complied with.  A plan to merge Petroleum Brunei with the Petroleum Unit was scrapped.  
19. Farming has become a part-time 
business for most rural families, owing to the 
availability of more lucrative forms of employment.  Brunei's agriculture sector is very small, accounting for under 1% of nominal GDP in 2006, and Brunei imports 
more than 80% of its food requirements.  To 
reduce Brunei's dependence on food imports and to attain a greater degree of self-sufficiency in agriculture, government policy has sought to:  boost domestic production of rice, vegetables, poultry, and 
livestock;  develop the agri-food industry;  
produce high-value-added products using new techniques;  and conserve and protect the country's biological diversity. 
20. Apart from the energy and 
construction sectors, Brunei's industrial base 
remains limited.  The main industries are cement production, garment making, production of pre-cast concrete structures, mineral water, canned fo od, dairy products and 
publishing and printing.  The small domestic 
market, a poorly developed local private sector, high wage costs, a shortage of skilled labour, slow bureaucratic procedures and a lack of transparency, and the ban on foreigners owning land have all de terred foreign capital 
and technology from non-oil and gas industries 
in Brunei.  However, the manufacturing sector accounted for 13% of employment in 2005 (latest available figure), indicating that labour productivity in manufacturing is less than one 
tenth of that in the rest of the economy;  
statistics pertaining to productivity trends in the manufacturing (indeed in any) sector were 
not available from the Brunei authorities.   
21. The share of services (excluding 
construction) in Brunei's GDP has fallen from 
23% in 2001 to under 17% in 2006.  The 
leading services sectors are finance and business services, the wholesale and retail trade, and transport and communications. In recognition of the importance of the services 
sector for economic growth, the Government 
has aimed to transform Brunei into a "Service Hub for Trade and Tourism" by promoting trade, travel, business, and communications in and through Brunei and by developing Brunei's infrastructure including:  upgrading 
facilities at Brunei International Airport;  
expanding Muara Port, Brunei's main port;  and increasing capacity in the telecommunications services network to increase penetration rates;  as well as 
expanding coverage by the domestic and 
international postal services.  These efforts have met with some success.  
22. During the review period, there has 
been considerable stre ngthening of financial 
sector supervision and regulation, including 
efforts to enhance monitoring of financial 
soundness indicators.  In particular, the enactment of the new Banking, Finance Company, Insurance  and Securities 
Amendment Orders  brings the regulatory 
framework more in line with international 
standards.  The legislation has paved the way for on-site inspection, increased capital requirements for local Brunei incorporated banks, and tightened provisions affecting 
financial leasing and other financial services,  
money transmission services, means of payment such as credit cards, guarantees, and foreign exchange.  The Government has continued to encourage Islamic banking (which in mid 2007, accounted for 38% share 
of commercial banks' assets) on the basis of  
legislation to support banks operating under Islamic principles, including taking a share of profits from the firms it funds rather than charging them interest.  To establish Brunei as 
an off-shore banking and trading centre for the 
region, the Government has continued to WT/TPR/S/196 Trade Policy Review 
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develop the Brunei Inte rnational Financial 
Centre (BIFC);  legislation, enacted to accompany the formation of the BIFC, has sought to introduce measures against money 
laundering activities and to bring Brunei's 
standards up to international standards, thereby attracting companies to the BIFC. 
23. Telecommunications throughout 
Brunei are of a high standard and it ranks well 
in Asia in terms of penetration and 
infrastructure.  Brunei has a telephone household penetration rate  of 100% and there 
has been significant growth of cellular subscribers;  mobile penetration, which stood at a healthy 32% by end 2001, continued to 
grow strongly and reached 74% by 2006.  
There has also been significant investment in a rural telecoms network, which permits all rural and remote areas to have access to the telephone and Internet.  Telecommunications 
used to be dominated by the public sector, 
with the Government department Jabatan Telekom Brunei (JTB) providing all fixed line telecommunications services, and DSTCom, also owned by the Government, providing mobile services.  Following lengthy delays, 
JTB was corporatized in 2006 with its duties 
shared between Telekom Brunei (TelBru), responsible for the supply of telecom services, and the Authority for Info-Communications Technology Industry (AiTi), established as an 
independent statutory body to regulate the 
local ICT industry.  Brunei's  
telecommunications industry has recently shifted from a monopoly situation in fixed-line and mobile telephony to a state of oligopoly 
with the eventual goal of creating a 
competitive environment where home-grown companies would be challenged to rise to global standards and even break into international markets.  Currently, TelBru, the successor to the Government Telecoms 
Department that operated the fixed-line 
network, has a monopoly over the fixed-line network;  B-mobile has a monopoly over the provision of 3G telephony, and the DST Group has a monopoly over the provision of GSM 
telephony.  According to the authorities, there 
is some competition in mobile telephony with 
the entry of B-mobile into the market in 2005, and in the dial-up internet access segment with 
both TelBru and DST Group in competition.   
24. Tourism has been identified as a major 
contributor to exports with the potential to 
play an important role in Brunei's economic 
diversification plans.  However, the tourism industry in Brunei remains relatively undeveloped, with around 200,000 foreign tourists in 2007.  Around 70% of tourists come 
from other ASEAN and Asian countries, in 
particular Malaysia, Singapore, and China.  In addition, a much larger number of same-day visitors from Malaysia enter Brunei through land-entry points.  The Government's objective is to increase international tourist arrivals as 
well as increase the average length of stay and 
expenditure by developing activities such as eco-tourism, adventure and culture tourism, theme parks, and cruising.  In order to reach a target of 250,000 touris ts by 2010, additional 
facilities, including accommodation, transport 
and communication, and banking services, need to be developed.  
(5) O
UTLOOK  
25. The major challenge to Brunei's 
economy stems from its continuing high 
dependence on oil and natural gas.  The 
authorities have to deal with volatile government revenue caused by energy prices and prepare for the depletion of oil and gas resources in the coming decades, by creating 
sustained growth in the non-oil private sector, 
while reducing the role of the Government.  According to growth estimates by the Brunei authorities based on the first six months of 2007, however, it appears unlikely that growth 
would reach 2% in 2007.  In the longer run, 
the Government recognizes the need for diversification away from petroleum and energy-based industries, but to date, Brunei's diversification policies seem to have met with little success.   
26. A key, internal, long-term risk 
therefore continues to be the lack of progress concerning  the Government's diversification programme.  Despite the provision of investment incentives, the private sector in Brunei Darussalam WT/TPR/S/196 
 Page xiii 
 
 
Brunei remains small and weak, a point noted 
by the Brunei Darussalam Economic Council eight years ago, in part because the public sector remains pervasive and provides 
attractive salaries with which very few private 
companies can compete.   
27. A related factor is the lack of 
transparency in government policies and the manner in which they are administered.  
Foreign investment policies, while 
encouraging investment in all sectors, are unclear about limits on foreign equity holdings and the sectors in which investment is restricted, thereby providing scope for  discretion in government decision-making.  As 
the IMF has pointed out, the financial and statistical database in Brunei is considered weak with regard to coverage, quality, 
timeliness, and frequency.  Lack of reliable 
and timely data on, inter alia,  investment 
income, balance of payments, monetary statistics, the labour market, and the national accounts, as well as scant or non-existent 
information about the progress made under the 
latest national development plan, highlight the general lack of transparency, and thus public accountability, in the management of the economy.