BANDAR SERI BEGAWAN – The Ministry of Finance and Economy (MoFE) on Saturday tabled a government budget of $5.86 billion for the 2019/2020 financial year, stressing the urgent need for more investment into Brunei as sluggish growth continues to dog the country’s troubled economy.
Speaking on the second day of the Legislative Council meeting — the sultanate’s annual parliamentary session — the second MoFE minister, YB Dato Seri Paduka Dr Hj Mohd Amin Liew Abdullah, said despite the uptick in global oil prices last year, the government is expected to maintain a deficit of $1.5 billion for the upcoming fiscal year.
Addressing parliament, the minister said the latest data from the Department of Economic Planning and Development shows that Brunei’s GDP posted just 0.1 percent growth in 2018 due to a contraction in the oil and gas sector, slashing previous IMF estimates of 2.3 percent GDP growth.
The recovery in global oil prices from 2016 to 2018 helped nudge the country’s economy forward after a protracted four-year slump. But a downturn in the energy market in the fourth quarter of 2018 saw oil lose more than a third of its value, slashing Brunei’s modest growth forecast.
“There are some risks that may adversely affect the global economic growth and ASEAN regional growth, such as the impact of political and trade tensions; technological developments such as the Fourth Industrial Revolution; and the monetary policies of developed nations,” YB Dato Dr Hj Mohd Amin said.
“These risks can also affect the climate for foreign direct investment (FDI) into the country.”
With geopolitical factors — from trade tensions between the US and China, Iran sanctions, and political crisis in Venezuela — weighing heavily on oil prices for 2019, it may be more difficult for the oil market to reach equilibrium and investors may have to prepare for more volatility, analysts say.
Is diversification paying off?
During the budget readout at LegCo, the minister said the domestic oil and gas sector saw negative growth of 0.1 percent in 2018.
However non-oil and gas sectors saw positive growth of 0.5 percent — the agriculture industry expanded by 2.7 percent; livestock sub-sector grew by 1.7 percent; and the wholesale and retail sector increased by 1.4 percent.
Despite diversification efforts in recent years, Brunei’s economy is still heavily reliant on oil and gas, accounting for 65 percent of the GDP and over 90 percent of exports.
The oil and gas sector is expected to generate $3.18 billion in revenue for the government in 2019/20, while the non-oil and gas sector is estimated to pull in $1.18 billion.
Total state revenue for 2019/20 is projected at $4.36 billion, compared to an expenditure of $5.86 billion — a shortfall $1.5 billion.
YB Dato Dr Hj Mohd Amin said to improve GDP the government needs to intensify efforts to attract investment and focus on key growth sectors: downstream oil and gas; food manufacturing; tourism; services; and ICT.
He highlighted a number of FDI projects that are gaining traction in the fisheries, halal food and industrial sectors, adding that the completion of the Hengyi oil refinery and Brunei Fertilizer Industries plant will bring significant boosts to the economy.
The minister outlined the five thrusts of the 2019/20 budget, which are increasing investment activity; facilitating business; generating competent and employable human capital; and preserving public welfare.
Some of the key allocations highlighted in the budget readout:
• $21.7 million for tourism development and marketing, as well as maintenance of Brunei International Airport’s assets, from a total planning cost of $66.2 million
• $91 million for agriculture and fisheries development, including development of livestock industry
• $91.4 million to enhance ICT infrastructure
Employment and capacity-building
• $36.6 million for the Centre for Capacity Building
• $17 million for the i-Ready apprenticeship scheme
• $48.7 million to increase the capacity of officers and staff in all ministries
• $1.75 million for the National Service Programme (PKBN)
• $14.2 million for simulator training at the CAE Brunei’s Multi Purpose Training Centre
• $1.2 million to aid youth development programmes and NGOs
• $49.2 million for scholarships under Ministry of Education, Ministry of Defence and Ministry of Religious Affairs. $52 million in student allowances under the education and religious affairs ministries.
• $10.8 million to bring in experts and skilled teachers for the Literacy and Numeracy Coaching Programme
• $2.3 million for the addition of 168 teaching staff under the Ministry of Religious Affairs
• $16.7 million for food expenditure for students under the education and religious affairs ministries
• $16.9 million for the construction and improvements to government school buildings, from a total planning cost of $66.9 million
Public welfare & infrastructure
• $95.4 million to increase power generation
• $61.5 million to strengthen and upgrade electrical systems, from a total planning cost of $217.7 million
• $19.1 million for road management, from a total planning cost of $99.5 million
• $10.5 million to improve public transport, from a total planning cost of $21 million
• $294.3 million for the Temburong Bridge project, from a total planning cost of $1.04 billion
• $18.7 million to build 1,500 houses for the National Housing Scheme in Kg Lugu, from a total planning cost of $150 million
• $27 million for maintenance of health centres and medical equipment
• $100 million for health services and supplies, which includes adding positions for 85 new doctors and dentists and 129 nurses
• $15.7 million to address natural disasters and disease outbreak
• $33.1 million for water management and coastal protection, from a total planning cost of $113 million
• $3.9 million to repair the Bukit Barun water treatment plant
• $9.5 million for mosques construction, from a total planning cost of $30 million
The specific budget allocations for each government ministry will be announced in turn during the two-week parliamentary session.