Falling global oil prices have had an effect on Brunei’s economy and the government has acknowledged that the current international economic climate surrounding the oil and gas industry is expected to further feed into Brunei’s financial deficit, should the trend continue
From a $213 million shortage in government spending for the year 2014/2015, it can spiral to $2.3 billion by the end of the current fiscal year if global oil prices continue to fall.
This was said in a speech delivered by Pehin Orang Kaya Laila Setia Dato Seri Setia Awang Haji Abdul Rahman bin Haji Ibrahim, Minister at the Prime Minister’s Office and Minister of Finance II, during the launching of the Enterprise Open Day at the Design and Technology Building in Anggerek Desa in January this year.
He pointed to the “reality” that the shortfall in income that accounts for more than half of the country’s GDP, “has implications on the government’s ability to spend at present and in the future, especially if the situation is prolonged.”
Chart shows the massive crash in the price of crude oil (WTI in this case) beginning in mid-2014
He cited the short-term energy outlook report published by the US Energy Information Administration, which states that the international benchmark for oil prices, Brent Crude, is predicted to be at US$40 per barrel for the year 2016, increasing next year to US$50 per barrel, which is about half of what was in 2014.
The minister also went on to point out that over the past few weeks, a number of oil-producing countries introduced measures to offset the lowered price of international oil, including the introduction of Goods and Services Tax as well as reducing subsidies for certain oil-related products.
“Brunei Darussalam is not exempted from experiencing the negative impact brought about by this phenomenon,” he said, stating that current global oil price has significantly affected the country, whose government is heavily financially dependent on the oil and gas sector, which makes up roughly 90 per cent of the nation’s total revenues.
In his reaction to these concerns, the minister stressed on the need to practise prudency in spending to ensure economic sustainability. He noted, however, that national spending is not limited to just the government, and urged the people to also “accept the fact that the government’s ability to spend will be limited.”
The public sector, he said, will be required to diversify the economy beyond the volatile oil and gas sector, referring to strategies that include attracting Foreign Direct Investments (FDIs) and strengthening Small and Medium Enterprises (SMEs), in keeping with several titahs made by His Majesty Sultan Haji Hassanal Bolkiah Mu’izzaddin Waddaulah ibni Al-Marhum Sultan Haji Omar ‘Ali Saifuddien Sa’adul Khairi Waddien, Sultan and Yang Di-Pertuan of Brunei Darussalam.
“We need to change the ‘business as usual’ practice as a means to overcome our current challenges. The government, the public sector and the public must change their mindset and the way they work to one which is more positive in order to play a more significant role in being proactive and efficient in any effort, especially in terms of reducing their respective operational costs,” said the minister.
The minister also noted that initiatives taken by the government to encourage private businesses have proved successful, with the number of businesses registered in 2015 higher compared to the previous year.
He said that 568 companies have registered online in 2015 compared to 474 in 2014. The growth, he said, is due to measures introduced to help business start-ups which satisfy the ‘Starting a Business’ guidelines begin operations within a day.
The Doing Business 2016 report ranks Brunei 94 out of 189 economies – up 17 places from 101 in 2015. “This is an indication that government agencies are currently working towards reducing gaps in regulatory quality and the speed of implementation and process,” the minister said, adding that encouraging a more pro-business environment requires a ‘whole-of-nation approach’ that includes further strengthening of current processes and procedures to ones that are more in line with international standards.
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