Brunei needs clear rules to lure FDI

POLICYMAKERS are urged to set clear regulations that will help to attract foreign direct investments (FDI), the lack of which has been identified as among key reasons for the failure of Brunei Darussalam to speed up efforts at diversifying its economic base.

"Brunei has not succeeded in any material way to attract foreign direct investments outside the energy sector. FDI (or capital from overseas companies invested in projects located in the country) is important because it provides a short cut to growth," said policy analyst Manu Bhaskaran from Centennial Asia Advisors Ltd.

"Instead of taking years for a country to grow its own companies which have the management, technology, markets and production processes to gain market share in the world market, the country is able to short-circuit the process by inviting multinational corporations into its economy," he said.

He presented the findings of his study at a recent roundtable to discuss Brunei's shortcomings towards economic diversification last week. It was organised by the Centre for Strategic and Policy Studies and Asia Inc Forum, with support from HSBC, Total and Alcoa.

Among the main reasons for the failure to attract substantial FDI, based on Bhaskaran's study, was the lack of confidence in Brunei as a project destination. The lack of clarity on foreign ownership rules and the small domestic market were also identified as contributing factors. Bureaucratic delays and inconsistencies were also seen to stifle efforts to attract foreign businesses.

In an interview with The Brunei Times, Tareq Muhmood, chief executive officer of HSBC Brunei, said the country can be a base for multinational corporations aiming for Asean markets.

"Identifying large corporations and trying to get them to be based in Brunei to cater for the Asean region ... can be done. If you look at where Brunei is located, it is in the heart of Asean with 600 million people. It is a matter of focus in getting it done," he said, highlighting the presence of Brunei Methanol Company at the Sungai Liang Industrial Park as an achievement.

He said clear processes and system need to be in place to attract foreign businesses.

"Whether it's to do with labour requirements, registration, approvals required, it has to be clear," he said.

He also cited as examples oil-rich states where governments nurture their own local businesses turning them into 'local (industry) champions'.

"These are private companies supported by the government to get them going."

Emaar, a real estate firm from Dubai, and the Global Investment Fund Managers from Kuwait are two examples of companies supported by the Arab government.

Allen Lai, chief executive of the Asia Inc Forum, said the presence of multinational corporations creates employment.

"It ... (also) reduces the dependency on the government and also it facilitates technology transfer and international best practices." The Brunei Times