Production can be improved, says German expert

BRUNEI's production process in 2005 required a high percentage of value-added input to create the final products, much higher than its neighbours, particularly since much of the Sultanate's product components were not sourced from the various industries within the domestic economy.

The German consultancy firm involved in the completion of Brunei's Input-Output system, which was announced on January 23, presented an analysis of the degree of autonomy of the Sultanate's economic production for that "benchmark" year.

Senior Research Associate of DIW econ GmbH, Professor Dr Jorg Beutel said the share of local input, or domestic intermediates, in Brunei's production in 2005 was at 20.6 per cent of total output, while intermediates from abroad represented 5.1 per cent.

"So it's still a rather autonomous, not very sophisticated production because the value added is so high (74.3 per cent), much higher than in the other neighbouring nations like (in) Indonesia (51.8 per cent) (and) Malaysia (32.8 per cent)," he said.

"The inter-dependency in production in Brunei is still not very high (but) it is very likely that it will increase rapidly in the foreseeable future," he added.

Since the share of intermediates in production from total output was "relatively low", Beutel said that large results were not expected for forward linkages (dependency on the supply side) and backward linkages (dependency on the demand side) in the production.

He explained as an example, that typically, the electricity sector would have very strong forward linkages since every industry and household required electricity.

"While on the input side, you need a lot of capital, machinery, a power plant, a little bit of labour and very few inputs mainly fossil fuels in Brunei Darussalam, gas and some oil... (therefore, the electricity sector) does not have very large backward linkages but strong forward linkages," he said.

Meanwhile, Beutel said the construction sector would be "just the opposite" with very sophisticated infrastructure required a lot of intermediate inputs from various industries such as in constructing a building "but it delivers to only one client to capital formation".

"So this is why the forward linkages are low for the construction sector but the backward linkages are strong."

However, "a little bit contrary to expectations", Brunei's electricity sector had strong backward linkages, while civil engineering and manufacturing of other non-metallic products had the largest multi-clients.

"We believe that a key sector has both strong forward and backward linkages," he said.

The Brunei Times