Background Note: Brunei

Background Note: Brunei

PROFILE

OFFICIAL NAME:

Brunei Darussalam

Geography

Area: 5,765 sq. km. (2,226 sq. mi.), slightly larger than Delaware.
Cities: Capital--Bandar Seri Begawan.
Terrain: East--flat coastal plain rises to mountains; west--hilly lowland with a few mountain ridges.
Climate: Equatorial; high temperatures, humidity, and rainfall.

People

Nationality: Noun and adjective--Bruneian(s).
Population (2008 est.): 398,000.
Annual growth rate (2007 est., Government of Brunei): 2.1%.
Ethnic groups: Malay, Chinese, other indigenous groups.
Religion: Islam.
Languages: Malay, English, Chinese; Iban and other indigenous dialects.
Education: Years compulsory--9. Literacy (2006)--94.7%.
Health: Life expectancy--men 76.6 years, women 79.8 years. Infant mortality rate (2008, Government of Brunei)--7.0/1,000.

Government

Type: Sultanate (Malay Islamic Monarchy).
Independence: January 1, 1984.
Constitution: 1959.
Branches: Executive--Sultan is both head of state and Prime Minister, presiding over a fourteen-member cabinet. Legislative--a Legislative Council has been reactivated after a 20-year suspension to play an advisory role for the Sultan. Judicial (based on Indian penal code and English common law)--magistrate's courts, High Court, Court of Appeals, Judicial Committee of the Privy Council (sits in London).
Subdivisions: Four districts--Brunei-Muara, Belait, Tutong, and Temburong.

Economy

GDP (2008, Government of Brunei): U.S. $14.780 billion (BND 20.397 billion; 2008 Brunei Darussalam Statistical Yearbook--BDSY).
Growth rate (2008, Government of Brunei): -1.9%.
Natural resources: Oil and natural gas.
Trade: Exports--oil, liquefied natural gas, petroleum products, garments. Major markets--Japan, Indonesia, Korea, Australia, India. Imports--machinery and transport equipment, manufactured goods. Major suppliers--ASEAN, United States, Japan, China.

PEOPLE

Many cultural and linguistic differences make Brunei Malays distinct from the larger Malay populations in nearby Malaysia and Indonesia, even though they are ethnically related and share the Muslim religion.

Brunei has hereditary nobility, carrying the title Pengiran. The Sultan can award to commoners the title Pehin, the equivalent of a life peerage awarded in the United Kingdom. The Sultan also can award his subjects the Dato, the equivalent of a knighthood in the United Kingdom, and Datin, the equivalent of damehood.

Bruneians adhere to the practice of using complete full names with all titles, including the title Haji (for men) or Hajah (for women) for those who have made the Haj pilgrimage to Mecca. Many Brunei Malay women wear the tudong, a traditional head covering. Men wear the songkok, a traditional Malay cap. Men who have completed the Haj can wear a white songkok.

The requirements to attain Brunei citizenship include passing tests in Malay culture, customs, and language as well as the national Malay Islamic Monarchy (MIB) philosophy. Stateless permanent residents of Brunei are given International Certificates of Identity, which allow them to travel overseas. The majority of ethnic Chinese in Brunei are permanent residents, and many are stateless. An amendment to the National Registration and Immigration Act of 2002 allowed female Bruneian citizens to transfer their nationality to their children. In May 2006, the law changed to allow citizenship to permanent residents who have contributed to the country's economic growth, to women married to a citizen for two years, to women married to permanent residents for five years, and to children of permanent resident fathers after the age of two years and six months. According to unofficial sources there are approximately 20,000 "stateless" persons in the country, including persons born and raised in the country who were not automatically accorded citizenship and its attendant rights but were granted permanent resident status. In July 2009, the Land Code Strata Act, which allows permanent residents to own units of multistory property for a maximum of 99 years, came into force.

Oil wealth allows the Brunei Government to provide the population with one of Asia's finest health care systems. Malaria has been eradicated, and cholera is virtually nonexistent. There are five general hospitals--in Bandar Seri Begawan, Tutong, Kuala Belait, Bangar, and Seria--and there are numerous health clinics throughout the country.

Education starts with preschool, followed by 6 years of primary education and up to 7 years of secondary education. Nine years of education are mandatory. Most of Brunei's college students attend universities and other institutions abroad, but approximately 3,669 (2008) study at the University of Brunei Darussalam. Opened in 1985, the university has a faculty of more than 300 instructors and is located on a sprawling campus overlooking the South China Sea. A second university, Sultan Sharif Ali Islamic University, was established in 2007 and offers programs such as Islamic Finance and Law. As of December 2009, the university had about 300 students.

The official language is Malay, but English is widely understood and used in business. Other languages spoken are several Chinese dialects, Iban, and a number of native dialects. Islam is the official religion. While religious freedom is guaranteed under Brunei’s constitution, non-Islamic faiths face a variety of restrictions, including confiscation of religious materials and prohibitions on religious teachings in private non-Islamic schools. Christmas and other non-Islamic holidays are widely recognized in Brunei and many faiths are permitted to be practiced in private.

HISTORY

Historians believe there was a forerunner to the present Brunei Sultanate, which the Chinese called Po-ni. Chinese and Arabic records indicate that this ancient trading kingdom existed at the mouth of the Brunei River as early as the seventh or eighth century A.D. This early kingdom was apparently conquered by the Sumatran Hindu Empire of Srivijaya in the early ninth century, which later controlled northern Borneo and the Philippines. It was subjugated briefly by the Java-based Majapahit Empire but soon regained its independence and once again rose to prominence.

The Brunei Empire had its golden age from the 15th to the 17th centuries, when its control extended over the entire island of Borneo and north into the Philippines. Brunei was particularly powerful under the fifth sultan, Bolkiah (1473-1521), who was famed for his sea exploits and even briefly captured Manila; and under the ninth sultan, Hassan (1605-19), who fully developed an elaborate Royal Court structure, elements of which remain today.

After Sultan Hassan, Brunei entered a period of decline due to internal battles over royal succession as well as the rising influences of European colonial powers in the region that, among other things, disrupted traditional trading patterns, destroying the economic base of Brunei and many other Southeast Asian sultanates. In 1839, the English adventurer James Brooke arrived in Borneo and helped the Sultan put down a rebellion. As a reward, he became governor and later "Rajah" of Sarawak in northwest Borneo and gradually expanded the territory under his control.

Meanwhile, the British North Borneo Company was expanding its control over territory in northeast Borneo. In 1888, Brunei became a protectorate of the British Government, retaining internal independence but with British control over external affairs. In 1906, Brunei accepted a further measure of British control when executive power was transferred to a British resident, who advised the ruler on all matters except those concerning local custom and religion.

In 1959, a new constitution was written declaring Brunei a self-governing state, while its foreign affairs, security, and defense remained the responsibility of the United Kingdom. An attempt in 1962 to introduce a partially elected legislative body with limited powers was abandoned after the opposition political party, Parti Rakyat Brunei, launched an armed uprising, which the government put down with the help of British forces In the late 1950s and early 1960s, the government also resisted pressures to join neighboring Sabah and Sarawak in the newly formed Malaysia. The Sultan eventually decided that Brunei would remain an independent state.

In 1967, Sultan Omar abdicated in favor of his eldest son, Hassanal Bolkiah, who became the 29th ruler. The former Sultan remained as Defense Minister and assumed the royal title Seri Begawan. In 1970, the national capital, Brunei Town, was renamed Bandar Seri Begawan in his honor. The Seri Begawan died in 1986.

On January 4, 1979, Brunei and the United Kingdom signed a new treaty of friendship and cooperation. On January 1, 1984, Brunei Darussalam became a fully independent state.

GOVERNMENT AND POLITICAL CONDITIONS

Under Brunei's 1959 constitution, the Sultan is the head of state with full executive authority, including emergency powers since 1962. The Sultan is assisted and advised by five councils, which he appoints. A Council of Ministers, or cabinet, which currently consists of 14 members (including the Sultan himself), assists in the administration of the government. The Sultan presides over the cabinet as Prime Minister and also holds the positions of Minister of Defense and Minister of Finance. His son, the Crown Prince, serves as Senior Minister. One of the Sultan's brothers, Prince Mohamed, serves as Minister of Foreign Affairs.

Brunei's legal system is based on English common law, with an independent judiciary, a body of written common law judgments and statutes, and legislation enacted by the Sultan. The local magistrates' courts try most cases. More serious cases go before the High Court, which sits for about 2 weeks every few months. Brunei has an arrangement with the United Kingdom whereby United Kingdom judges are appointed as the judges for Brunei's High Court and Court of Appeal. Final appeal can be made to the Judicial Committee of the Privy Council in London in civil but not criminal cases. Brunei also has a separate system of Islamic courts that apply Sharia law in family and other matters involving Muslims.

The Government of Brunei assures continuing public support for the current form of government by providing economic benefits such as subsidized food, fuel, and housing; free education and medical care; and low-interest loans for government employees. In 2004 the Sultan issued amendments to the constitution and re-introduced an appointed Legislative Council with minimal powers. Currently, four of the 29 seats on the Council are indirectly elected by village leaders.

Brunei's economy is almost totally supported by exports of crude oil and natural gas. The government uses its earnings in part to build up its foreign reserves. The Brunei Investment Agency manages the bulk of the nation's foreign investments, which are reported to have reached more than $30 billion. The country's wealth, coupled with its membership in the United Nations, Association of Southeast Asian Nations (ASEAN), the Asia Pacific Economic Cooperation (APEC) forum, and the Organization of the Islamic Conference give it an influence in the world disproportionate to its size.

Principal Government Officials

Sultan and Yang di-Pertuan, Prime Minister, Minister of Defense, and Minister of Finance--Sultan Hassanal Bolkiah
Senior Minister--Crown Prince Billah
Minister of Foreign Affairs--Prince Mohamed Bolkiah
Ambassador to the United States--Yusoff Hamid
Ambassador to the United Nations--Latif Tuah

Brunei Darussalam maintains an embassy in the United States at 3520 International Court, NW, Washington, DC 20008; tel. 202-237-1838.

ECONOMY

Brunei's economy enjoyed moderate growth in the mid-2000s, primarily due to high world oil and gas prices. Recently, Brunei's growth has fallen sharply. The government estimated a growth rate of -1.9% for 2008. Brunei continues to have one of the lowest GDP growth rates of any ASEAN nation; however, Brunei is also ranked as having one of the highest rates of macroeconomic stability in the world and the highest in Asia. Brunei’s conservative economic policies insulated it from much of the global financial crisis in 2008-2009.

Brunei is the third-largest oil producer in Southeast Asia, averaging about 175,000 barrels a day in 2008. It also is the ninth-largest exporter of liquefied natural gas in the world. Like many oil producing countries, Brunei's economy has followed the swings of the world oil market. Economic growth has averaged around 2.8% in the 2000s, heavily dependent on oil and gas production. Liquefied natural gas output averages 895 million cubit feet/day. Overall oil production has declined in recent years, and growth rates have fallen significantly. Brunei’s oil reserves are expected to last 25 years, and natural gas reserves 40 years.

Brunei Shell Petroleum (BSP), a joint venture owned in equal shares by the Brunei Government and the Royal Dutch/Shell group of companies, is the chief oil and gas production company in Brunei. It also operates the country's only refinery. BSP and four sister companies--including the liquefied natural gas producing firm BLNG--constitute the largest employer in Brunei after the government. BSP's small refinery has a distillation capacity of 10,000 barrels per day. This satisfies domestic demand for most petroleum products.

The French oil company Total (formerly ELF Aquitaine) became active in petroleum exploration in Brunei in the 1980s. The joint venture Total E&P Borneo BV currently produces approximately 35,000 barrels per day and 13% of Brunei's natural gas.

In 2003, Malaysia disputed Brunei-awarded oil exploration concessions for offshore blocks J and K (Total and Shell respectively), which led to the Brunei licensees ceasing exploration activities. The two countries have stated they have reached a resolution to the conflict. Two on-shore blocks are being explored following awards to two consortia--one Canadian-led and the other an Australian-led operating consortium. Australia, Indonesia, and Korea were the largest customers for Brunei's oil exports, consuming more than 70% of Brunei's total crude exports. Other countries, including Japan and New Zealand, each purchased approximately 7% of Brunei’s total crude exports (2008 Brunei Darussalam Key Indicators--BDKI).

Almost all of Brunei's natural gas is liquefied at Brunei Shell's Liquefied Natural Gas (BLNG) plant, which opened in 1972 and is one of the largest LNG plants in the world. Some 90% of Brunei's LNG produced is sold to Japan under a long-term agreement renewed in 1993. According to BLNG, the agreement calls for Brunei to provide over 6 million tons of LNG per year to three Japanese utilities, namely to TEPCo, Tokyo Electric Power Co. (J.TER or 5001), Tokyo Gas Co. (J.TYG or 9531) and Osaka Gas Co. (J.OSG or 9532). The Japanese company, Mitsubishi, is a joint venture partner with Shell and the Brunei Government in Brunei LNG, Brunei Coldgas, and Brunei Shell Tankers, which together produce the LNG and supply it to Japan. Since 1995, Brunei has supplied 700,000 tons of LNG annually to the Korea Gas Corporation (KOGAS) as well. In the second quarter of 2008, total natural gas production reached 0.855 billion cubic feet per day. A small amount of natural gas is used for domestic power generation. Since 2001, Japan remains the dominant export market for natural gas. Brunei is the fourth-largest exporter of LNG in the world (according to the Brunei Economic Development Board) behind Indonesia, Malaysia, and Australia.

The government sought in the past decade to diversify the economy with limited success. Oil and gas and government spending still account for most of Brunei's economic activity. Brunei's non-petroleum industries include agriculture, forestry, fishing, aquaculture, and banking. The garment-for-export industry has been shrinking since the United States eliminated its garment quota system at the end of 2004. However, with 75% of total garment exports valued at U.S. $66 million, the Unites States remains the largest export market for garments. The Brunei Economic Development Board (BEDB) announced plans in 2003 to use proven gas reserves to establish downstream industrial projects. In 2006, the Brunei Methanol Company, a joint venture between Petroleum Brunei, Mitsubishi, and Itochu, was established. Initial construction on a $400 million methanol plant, fed by natural gas, was started in 2007 and the plant is expected to come on line in 2010. The government has plans to build a power plant in the Sungai Liang region to power a proposed aluminum smelting plant that will depend on foreign investors. A second major project depending on foreign investment is in the planning stage: a giant container hub at the Muara Port facilities. BEDB appointed a port operator, International Container Terminal Services Inc. (ICTSI) from the Philippines.

The government regulates the immigration of foreign labor out of concern it might disrupt Brunei's society. Work permits for foreigners are issued only for short periods and must be continually renewed. Despite these restrictions, the estimated 100,000 foreign temporary residents of Brunei make up a significant portion of the work force. The government reported a work force of 188,800 in 2008, with a derived unemployment rate of 3.7% (BDSY).

Oil and natural gas account for almost all exports. Since only a few products other than petroleum are produced locally, a wide variety of items must be imported. Nonetheless, Brunei has had a significant trade surplus throughout the past decade. Official statistics show Singapore, Malaysia, the United States, and China as the leading suppliers of imports in 2008. The United States was the third-largest supplier of imports to Brunei in 2008.

Brunei's substantial foreign reserves are managed by the Brunei Investment Agency (BIA), an arm of the Ministry of Finance. BIA's guiding principle is to increase the real value of Brunei's foreign reserves while pursuing a diverse investment strategy, with holdings in the United States, Japan, Western Europe, and the Association of Southeast Asian Nations (ASEAN) countries.

The government encourages foreign investment in Brunei. New enterprises that meet certain criteria can receive pioneer status, exempting profits from income tax for up to 5 years, depending on the amount of capital invested. The normal corporate income tax rate is 30%. There is no personal income tax or capital gains tax. However, foreign direct investment (FDI) outside the oil and gas industry remains limited.

One of the government's priorities is to encourage the development of Brunei Malays as leaders of industry and commerce. There are no specific restrictions of foreign equity ownership, but local participation, both shared capital and management, is encouraged. Such participation helps when tendering for contracts with the government or Brunei Shell Petroleum.

Companies in Brunei must either be incorporated locally or registered as a branch of a foreign company and must be registered with the Registrar of Companies. Public companies must have a minimum of seven shareholders. Private companies must have a minimum of two but not more than 50 shareholders. At least half of the directors in a company must be residents of Brunei.

The government owns a cattle farm in Australia through which the country's beef supplies are processed. At 2,262 square miles, this ranch is larger than Brunei itself. Eggs and chickens are largely produced locally, but most of Brunei's other food needs must be imported. Agriculture, aquaculture, and fisheries are among the industrial sectors that the government has selected for highest priority in its efforts to diversify the economy. The Philippines and China are currently involved with the largest joint projects with the Government of Brunei to increase agriculture and fisheries production. American firms are consulting on aquaculture projects.

Since 2002, the government has worked to develop Brunei as an international offshore financial center as well as a center for Islamic banking. Brunei is serviced by a large number of banks given its size. Islamic banking is growing, primarily in the Islamic bond (sukok) market. Offshore banking and business incorporation remains a small sector in the overall financial services market. Brunei is keen on the development of small and medium enterprises and has established a technology incubator to encourage the development of an information technology industry. Brunei has also promoted ecotourism to take advantage of the over 70% of Brunei's territory that remains primal tropical rainforest. Brunei is a participant and seeks to take a leadership role in the trilateral Heart of Borneo conservation initiative. While ecotourism is growing, the overall impact for economic diversification is limited.

DEFENSE

The Sultan is both Minister of Defense and Supreme Commander of the Armed Forces (RBAF). All infantry, navy, and air combat units are made up of volunteers. There are three infantry battalions equipped with armored reconnaissance vehicles and armored personnel carriers and supported by Rapier air defense missiles and a flotilla of coastal patrol vessels armed with surface-to-surface missiles. Brunei ordered three offshore patrol vessels from the U.K. but is reportedly seeking to sell these to a third country. The Royal Brunei Navy has ordered several ‘Itjihad’ class patrol boats from German ship manufacturer Lurssen Werft.

Brunei has a defense agreement with the United Kingdom, under which a British Armed Forces Ghurka battalion (1,500 men) is permanently stationed in Seria, near the center of Brunei's oil industry. The Royal Brunei Armed Forces (RBAF) has joint exercises, training programs, and other military cooperation with the United Kingdom and many other countries, including the United States. The United States and Brunei signed a memorandum of understanding (MOU) on defense cooperation in November 1994. The two countries conduct the annual military exercise Cooperation Afloat Readiness and Training (CARAT). RBAF joined a peacekeeping mission in Lebanon under the United Nations Interim Force (UNIFIL) and has been sending troops to the International Monitoring Team (IMT) in Mindanao to help safeguard the ceasefire between the Philippines Government and the Moro Islamic Liberation Front (MILF). Brunei’s growing commitment to peacekeeping missions is in line with its defense white paper.

FOREIGN RELATIONS

Brunei joined the Association of Southeast Asian Nations (ASEAN) on January 7, 1984--one week after resuming full independence--and gives its ASEAN membership the highest priority in its foreign relations. The chairmanship of ASEAN will rotate to Brunei in 2011. Brunei joined the UN in September 1984. It also is a member of the Organization of the Islamic Conference (OIC) and of the Asia-Pacific Economic Cooperation (APEC) forum Brunei hosted the APEC Economic Leaders' Meeting in November 2000 and the ASEAN Regional Forum (ARF) in July 2002.

U.S.-BRUNEI RELATIONS

Relations between the United States and Brunei date from the 1800s. On April 6, 1845, the USS Constitution visited Brunei. The two countries concluded a Treaty of Peace, Friendship, Commerce and Navigation in 1850, which remains in force today. The United States maintained a consulate in Brunei from 1865 to 1867.

The United States welcomed Brunei Darussalam's full independence from the United Kingdom on January 1, 1984, and opened an Embassy in Bandar Seri Begawan on that date. Brunei opened its embassy in Washington in March 1984. Brunei's armed forces engage in joint exercises, training programs, and other military cooperation with the United States. A memorandum of understanding on defense cooperation was signed on November 29, 1994. The Sultan visited Washington in December 2002 and visited the Pacific Command in Hawaii with Ambassador William E. Todd in November 2008.

Principal U.S. Embassy Officials
Ambassador--William (Bill) Todd
Deputy Chief of Mission--John McIntyre
Management Officer--Michael Lampel

The U.S. Embassy in Bandar Seri Begawan is located on the third and fourth floors of the Teck Guan Plaza, at the corner of Jalan Sultan and Jalan MacArthur; tel: 673-2229670; fax: 673-2225293; e-mail: amembassy_bsb@state.gov. A new U.S. Embassy is under construction in the diplomatic enclave at Jalan Kebangsaan and is expected to be completed by fall 2010.

TRAVEL AND BUSINESS INFORMATION

The U.S. Department of State's Consular Information Program advises Americans traveling and residing abroad through Country Specific Information, Travel Alerts, and Travel Warnings. Country Specific Information exists for all countries and includes information on entry and exit requirements, currency regulations, health conditions, safety and security, crime, political disturbances, and the addresses of the U.S. embassies and consulates abroad. Travel Alerts are issued to disseminate information quickly about terrorist threats and other relatively short-term conditions overseas that pose significant risks to the security of American travelers. Travel Warnings are issued when the State Department recommends that Americans avoid travel to a certain country because the situation is dangerous or unstable.
For the latest security information, Americans living and traveling abroad should regularly monitor the Department's Bureau of Consular Affairs Internet web site at http://www.travel.state.gov, where the current Worldwide Caution, Travel Alerts, and Travel Warnings can be found. Consular Affairs Publications, which contain information on obtaining passports and planning a safe trip abroad, are also available at http://www.travel.state.gov. For additional information on international travel, see http://www.usa.gov/Citizen/Topics/Travel/International.shtml.
The Department of State encourages all U.S. citizens traveling or residing abroad to register via the State Department's travel registration website or at the nearest U.S. embassy or consulate abroad. Registration will make your presence and whereabouts known in case it is necessary to contact you in an emergency and will enable you to receive up-to-date information on security conditions.
Emergency information concerning Americans traveling abroad may be obtained by calling 1-888-407-4747 toll free in the U.S. and Canada or the regular toll line 1-202-501-4444 for callers outside the U.S. and Canada.
The National Passport Information Center (NPIC) is the U.S. Department of State's single, centralized public contact center for U.S. passport information. Telephone: 1-877-4-USA-PPT (1-877-487-2778); TDD/TTY: 1-888-874-7793. Passport information is available 24 hours, 7 days a week. You may speak with a representative Monday-Friday, 8 a.m. to 10 p.m., Eastern Time, excluding federal holidays.
Travelers can check the latest health information with the U.S. Centers for Disease Control and Prevention in Atlanta, Georgia. A hotline at 800-CDC-INFO (800-232-4636) and a web site at http://wwwn.cdc.gov/travel/default.aspx give the most recent health advisories, immunization recommendations or requirements, and advice on food and drinking water safety for regions and countries. The CDC publication "Health Information for International Travel" can be found at http://wwwn.cdc.gov/travel/contentYellowBook.aspx.
Further Electronic Information

Department of State Web Site. Available on the Internet at http://www.state.gov, the Department of State web site provides timely, global access to official U.S. foreign policy information, including Background Notes and daily press briefings along with the directory of key officers of Foreign Service posts and more. The Overseas Security Advisory Council (OSAC) provides security information and regional news that impact U.S. companies working abroad through its website http://www.osac.gov
Export.gov provides a portal to all export-related assistance and market information offered by the federal government and provides trade leads, free export counseling, help with the export process, and more.
STAT-USA/Internet, a service of the U.S. Department of Commerce, provides authoritative economic, business, and international trade information from the Federal government. The site includes current and historical trade-related releases, international market research, trade opportunities, and country analysis and provides access to the National Trade Data Bank.

ENDS

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