While boom and bust cycles have frequently ravaged Southeast Asia’s economies, the small sultanate of Brunei has been mostly insulated from financial fallout. But a sustained slump in global energy prices has taken a heavy toll on the fuel-exporting nation, raising hard questions about its economic and political future.
The strict Islamic sultanate, whose half a million residents enjoy one of the highest purchasing power parity rates in the world, has traditionally looked to the Middle East or the wider Muslim world for economic deals and linkages. As the oil price slump has hit those traditional patrons, Brunei finds itself on an economic island.
For decades Brunei rode the riches of its substantial oil and gas wealth. More than 60% of the tiny nation’s GDP is derived from oil and gas, which has recently accounted for 95% of its total exports and as much as 90% of government revenue, according to official statistics. It is regarded on many metrics as Southeast Asia’s second wealthiest nation, after Singapore, and has achieved “developed world” status.
When global oil prices first started their descent in 2015, Brunei’s exported-geared economy and oil-dependent finances faltered. Last year Brunei’s fiscal deficit hit a 16% of GDP, a sharp break from past balanced budgets. In 2011, the International Monetary Fund (IMF) recognized Brunei as one of only two countries in the world with public debt equal to 0% of GDP. (Libya was the other).
Even before the oil price slump, certain economic cracks were emerging. Government projections of 6% or higher GDP growth have fallen short of the mark in recent years, raising questions about the government’s economic diversification schemes. In 2010, independent experts started to warn that Brunei’s hydrocarbon resources could run dry as early as 2025.
Brunei’s Sultan, Hassanal Bolkiah, has ruled the small nation in absolutist fashion since his father’s abdication in 1967. The 70-year-old became prime minister when Brunei gained independence from the United Kingdom in 1984 and now concurrently serves as minister of finance and defense over an appointed legislature. Only one election has ever been held in Brunei, in 1962, the result of which was rejected.
Forbes estimated Hassanal’s peak net worth at over US$20 billion in 2008. It is unclear how the oil price slump has impacted on his personal wealth. He resides in what has been characterized as the largest private residence in the world.
Hassanal is pursuing a long-term plan, known as ‘Vision Brunei 2035’, to transform the country into an “Islamic-Singapore” and reduce its reliance on energy exports. Certain gains have been made. Higher domestic food production has eased dependence on imports, while a new framework designed to attract foreign investment has shown signs of traction. In the World Bank’s latest ease of doing business survey, Brunei moved up 25 places year on year in the global ranking.
At the same time, it’s not clear that Hassanal’s master plan will have done enough to sustain the sultanate’s high standard of living when its energy resources are depleted. When that might happen is an open question. While limits were placed on annual extraction amounts in the late-2000s, recent years have seen an increase in production that some experts warn could cause wells to run dry even earlier than 2025.
Those concerns are reflected in fiscal belt-tightening. The state’s 2017 budget was recently slashed by more than US$100 million, while the government has frozen new staff hires for the bureaucracy. Certain civil servant benefits, traditionally among the world’s richest with generous housing, electricity and petroleum subsidies, have been cut, according to local media reports. The state is the sultanate’s largest employer.
Belt-tightening and a slipping standard of living have elicited rare ripples of political dissent, according to political analysts.
“In the past, very few of its citizens have had any real issue with the largely one-party system as the Sultan and his government were largely benign in their management of the day-to-day affairs of their people,” Christopher Roberts, director of the National Asian Security Studies Program at the University of New South Wales, told Asia Times.
In Brunei’s authoritarian context, where freedom of speech is highly restricted and public protests strictly forbidden, it can be difficult to detect dissent. Social media has provided new space to critique the government, and Bruneians have done so in greater numbers as the economy has weakened. One anonymity-fueled platform, Chrends, was knocked offline by authorities for undisclosed reasons in 2015.
Hassanal’s controversial announcement in 2013 that Brunei would become the first East Asian country to introduce Sharia law at the national level is also believed to be fueling quiet discontent. The first of three phased implementations came into force in 2014 which introduced custodial punishments for indecent behavior, failure to attend Friday prayers and sexual matters.
Sharia “is just being exploited as a tool of the state to control the masses in the longer term, particularly if the government’s performance legitimacy continues to decline,” said Roberts. Journalists and academics have said in press accounts that they self-censor themselves more since the introduction of the law.
The publishing license of the popular English-language Brunei Times was revoked in November, reportedly after the newspaper published an article that alleged the fall in global oil prices was somehow related to Saudi Arabia’s plan to hike visa fees for the annual hajj pilgrimage. The newspaper wrote in its final issue that the closure was “due to business issues.”
But when international media reported that the newspaper’s shutdown was due to the Saudi visa story, it “caused a social media firestorm in the sultanate,” noted Ahmed Mansoor, a local journalist writing under a pseudonym in the Asian Nikkei Review.
“Only time will tell in which direction Brunei will lean – toward greater transparency or stricter censorship,” he wrote. “For now, all signs point to the latter.”