Invest in ASEAN: Countries Analysis and Treaties

Country Profiles

© Springer Nature Singapore Pte Ltd. 2020

L. Riccardi, G. RiccardiInvest in ASEAN https://doi.org/10.1007/978-981-15-5378-3_1

Country Profiles—Members

Lorenzo Riccardi¹  and Giorgio Riccardi²

(1)

Shanghai University, Shanghai, China

(2)

RsA Asia, Shanghai, China

Brunei

Country Introduction

Population, Location, Geography, Climate

The Sultanate of Brunei (officially referred to as Negara Brunei Darussalam, i.e. the State of Brunei, Abode of Peace) or simply Brunei, is a state located on the island of Borneo, in Southeast Asia. Brunei is only, and completely, bordered by Malaysia, with the exception of the coast overlooking the South China Sea.

The country counts 440,000 inhabitants, with an average density of 69 inhabitants per km² and an urbanization rate of 73%.

The country is constituted of very humid, coastal plateaus (55% of the territory). The rest is rather mountainous; especially in the east, where it reaches 1850 m with Mount Bukit Pagon. The territory is essentially forest (85% of the surface), crossed by two major rivers: the Tembrong and especially the Sungai Belait, along 206 km.

The official state religion is Sunni Islam, practiced by 67% of the population, whose summit is the Sultan. The practice of other religions is subject to many limitations and restrictions. The rest of the population is Buddhist; Christian (primarily Catholic, and Anglican and Protestant); and animist.

The main ethnic group is Malay (66%); followed by Chinese (11%); and the rest is to be shared between white Anglo-Saxon, Indian, Indonesian, small indigenous groups of Borneo and mestizos.

The national language is Malay, but English is also used.

Internal Policy

The Islamic Sultanate of Brunei was founded in the late fourteenth century. In the first three centuries of existence, the Sultanate was a sort of constitutional monarchy. In fact, the Sultan did not exert direct legislative power, which was reserved exclusively for the Council of Princes—It only possessed executive duties. The golden age of this period can be placed during the reign of the fifth sultan, Bolkiah (1485–1521). He managed to develop most of the commercial activities by maturing Brunei as a sorting center in goods between China, India, and European countries. He also was able to extend its domain in the entire northern Borneo, even in the Philippines. In the sixteenth century, it began to make relations with Portugal and Britain, which gradually became the main trading partners of the country. On the contrary, there were bad relations with Spain, with whom the Sultanate fought long for dominion over the Philippines; unfortunately, the Sultanate lost at the end of the sixteenth century.

Meanwhile, in the seventeenth century, the Sultanate of Brunei developed into a more absolutist governance while also increasing the Islamic religious connotation. In fact, the Sultan was able to take a direct legislative power at the expense of the principles of the Council. In the eighteenth century, the Sultans developed important pacts with the British, certainly opting for their protection. This ultimately forged alliance with the Dutch East Indies. Significantly, in the nineteenth century there are the excellent relations with the nearby Maharaja White Sarawak James Brooke and all the British Governors Malaysians. The Sultanate envied their autonomy and in the nineteenth and twentieth centuries was always careful not to be overly inclusive Malays in business, particularly its Muslim outpost in Asia. In 1941, during the Second World War, Brunei was occupied by Japan. The town was used as a Japanese naval base and suffered because of the shortage of food and medicine, until the surrender of the Japanese garrison on September 10, in 1945. The Protectorate was endowed in 1959 with a constitution that proclaimed the internal autonomy was accomplished. In 1962, the Sultan witnessed the unsuccessful attempt to establish the constitutional monarchy through parliamentary elections. The majority of the population opted clearly for the absolute monarchy. Parallel, during the sixties, he refused to join the newly formed Federation of Malaysia and upheld the Protectorate. In 1967, the Sultan abdicated in favor of the eldest son, Hassanal Bolkiah, the 29th Sultan as of today since the founding Sultanate. In 1984, he proclaimed full independence from the British Empire.

Nowadays, the country is ruled as a monarchy based on heredity. It is ruled by a Sultan, who is head of state and prime minister. Therefore, all powers are concentrated in one, supported by 4 Tips: religious and private (both advisory), ministers (assisting the sultan in the exercise of executive power) and inheritance (which decides, in case of need, the succession to the throne). Legislative power is exercised by means of the Legislative Council. Prior to its elimination by the king in 2005, the constitution (1959), amended in 1965 and 2004, brought the number of Legislative Council Members to 45. The judicial system in each country is based on British law and Islam and divided into three levels of courts: courts of magistrates and religious courts (lower level); the Courts of Appeal (second degree); and the High Court (upper level) which has unlimited civil and criminal skills. The death penalty is formally in force. The armed forces are divided into the three conventional branches (army, air force, navy) and military service is carried out on a voluntary basis. The State, engaged for decades in improving the school system, has undertaken several measures to support education in the country; it includes the building of schools in remote areas and the cover of a range of expenses such as, transportation costs and housing for students who live far from the school within a specified range and part of the costs incurred by students living abroad. Thanks to these measures, the illiteracy rate in Brunei is low.

International Relations

The international relations of Brunei are the following:

Brunei became a member state of the United Kingdom Commonwealth in 1984;

Brunei joined ASEAN on 7 January 1984, one week after resuming full independence, and gives its ASEAN membership the highest priority in its foreign relations;

Brunei joined the United Nations in September 1984;

it also is a member of the Organization of Islamic Cooperation (OIC), the Asia-Pacific Economic Cooperation (APEC) forum and the Commonwealth of Nations;

founding member of the World Trade Organization (WTO) in 1995;

Brunei hosted the APEC Economic Leaders’ Meeting in November 2000. In 2005 it attended the inaugural East Asia Summit;

since 2009 Brunei and the Philippines signed a Memorandum of Understanding (MOU) that seeks to strengthen the bilateral cooperation between the two countries in the fields of agriculture and farm-related trade and investments.

Brunei has a number of diplomatic missions abroad and close relations with Singapore, sharing an interchangeable currency regime as well as close military relations with the latter island-state. Aside from relations with other ASEAN states, of which the Philippines, Indonesia, and Malaysia are key partners, Brunei also has extensive relations with the Islamic and Arab world outside its region.

The country has bilateral relations with a number of countries including Australia, Bangladesh, Burma, Cambodia, Canada, China, France, Germany, India, Indonesia, Japan, Laos, Malaysia, New Zealand, North Korea, Oman, Pakistan, Philippines, Qatar, Russia, Singapore, South Korea, Thailand, United Kingdom, United States, and Vietnam.

Economy

Macroeconomic Overview

Source IMF Outlook (2019)

In 1970, the Government was able to create foreign currency reserves and invest all around the world for the benefit of their posterity. This was possible due to increased revenues from oil exports and the effort to maintain low public spending. The gains arising from oil export revenues were also utilized to finance the annual government deficit. However, in 1986, oil exports decreased and consequently, public spending started to increase. As a result, Brunei’s government was constantly running a deficit. The disappearance of a public surplus made Brunei’s economy more vulnerable to fluctuations in oil prices. Brunei’s gross domestic product (GDP) soared with the increase of the petroleum price in the 1970s, to a peak of $5.7 billion in 1980. It declined slightly in the next five years, then fell by almost 30% in 1986. This drop was the result of a combination of sharply lower petroleum prices in world markets and voluntary production cuts in Brunei. The GDP recovered somewhat since 1986, growing by 12% in 1987, 1% in 1988, and 9% in 1989. In recent years, GDP growth was 3.5% in 1996, 4.0% in 1997, 1.0% in 1998, and an estimated 2.5% in 1999. However, the 1999 GDP was still only about $4.5 billion, well below 1980’s peak. The Asian financial crises in 1997 and 1998, coupled with fluctuations in the price of oil have created uncertainty and instability in Brunei’s economy. In addition, the 1998 collapse of Amedeo Development Corporation, Brunei’s largest construction firm whose projects helped fuel the domestic economy, caused the country to slip into a mild recession.

Source Asian Development Bank (ADB, 2019)

Recent trends show an acceleration of Brunei economy and, in general, the following elements characterize the recent period:

pickup in oil and gas production (conversely, activity in the non-energy sector slowed, dragged down by declining government spending);

Brunei’s government is struggling to diversify the hydrocarbon-dependent economy and improve its business environment;

the government is also immersed in an austerity drive, seeking to reduce public spending;

the effects of low oil prices on the economy are still being felt.

Source Asian Development Bank (ADB, 2019)

Economic Policy

Foreign Trade Policy

Brunei Darussalam’s foreign trade policy objectives:

to promote an external environment conducive to research and for trade and investments in Brunei Darussalam;

to explore and identify the market opportunities for companies in Brunei;

to increase the economic activities and contribute significantly to economic diversification (i.e. away from oil and gas);

to optimize the benefits of international outlook and regional prominence.

Main Pillars of Brunei Darussalam’s foreign trade policy:

The World Trade Organization (WTO) provides the stable framework of multilateral trade rules that ensure the free flow of goods and services.

Participation in regional economic forums is based on the concept of open regionalism.

Free Trade Agreements (FTAs) with key trading partners can help to facilitate trade liberalization and strengthen trade links.

Guiding principles of Brunei Darussalam’s foreign trade policy:

exercise of free trade and open in the context of multilateral trade rules;

support for a multilateral open trading system based on non-discriminatory rules;

use of open regionalism recognition as a building block towards multilateral trade liberalization.

Brunei Darussalam’s FTA Policy

Brunei Darussalam sees Free Trade Agreements (FTA) as an essential part of its foreign trade policy to maximize the potential of free and open trade for its people in an ever more globalized world. With a relatively free and open trading system and a small but highly educated workforce, Brunei Darussalam sees the commitment of Free Trade Agreements as a fundamental step to make sure that people, services, and investments have continued access to open markets worldwide.

Brunei Darussalam, widely viewed in the international community as an important oil and gas producer, is currently engaged in a series of projects attempting to further diversify its economy. The Government of Brunei Darussalam believes strongly that the active commitment to free trade agreements with many partners will open the strategic markets for exports. In addition, it is hopeful that Brunei services will also facilitate the flow of foreign direct investments in Brunei Darussalam.

Industrial Policies

Industrial policies, including labor, property, government’s support, and facilities remain open and flexible to all categories of industrial activities. Brunei Darussalam maintains a realistic approach in which a variety of arrangements are feasible. Property policies allow for full, majority, or minority foreign ownership according to the type of industry and location. Only activities related to the national food safety and those based on local resources require a certain degree of local participation. Industries for the local market (not related to national food security) and industries for total exporting can entirely be under foreign property.

Brunei Darussalam, in its vast territory, offers a variety of services in all four districts of the country. Most of 12 currently developed industrial sites are available and ready for occupation. Moreover, large spaces for agroforestry and aquaculture are available. Terms of rental and lease agreements are competitive, and the sites offer a range of services, infrastructures and resources. Brunei Darussalam gives priority to ensuring the Natural Environment Stability.

All sites are free from pollution and are environmentally balanced. The philosophy of the Government is linked to sustainable development. Therefore, all polluting industries are prohibited and the criteria will continue to consider each participant’s impact on the environment.

The Ministry of Industry and Primary Resources coordinates the Industrial Development Activities. The Ministry is the one-stop agency coordinates for Investments in Brunei Darussalam. It is very easy to start a sector in Brunei Darussalam. A private development does not require government structures and only needs an approval to begin. Those who require government assistance and facilities can just deal with the Ministry, who will liaise with other agencies and accelerate applications.

The Ministry realizes the importance of time frames and clear decision-making processes to businesses. The entire procedure has four stages:

approval of the concept;

approval of firm proposal;

approval of physical plans;

approval to operate.

In all four stages, the Ministry of Industry and Primary Resources act as one-stop agency.

Banking System

The evolution of financial institutions in Brunei has marked rapid growth over the last decade. This is demonstrated by the presence of financial institutions’ numbers of international standing and reputation (e.g. Bank of China has received permission to open a branch in Brunei in April 2016), the advent of new financial instruments, the development of securities, the extensive nature of the financial transactions that are entered into and the numerous financial services that are now provided. Citibank, which entered Brunei Darussalam’s financial system consists of a dual financial system comprising Islamic and conventional financial institutions. The banking system represents the core of the financial system.

The Banking System in Brunei Darussalam comprises of commercial banks, which play an important role in Brunei financial sector. Nine banks presently licensed to conduct businesses within the country, six are foreign owned and represented by branch operations. The only banking institution which provides Islamic banking services is the Islamic Bank of Brunei Berhad. It was officially launched on 13 January 1993, giving opportunities and fair options for the public to choose. This also helps to enhance the financial sector by creating fair competition among the other conventional financial institutions.

All banks are required to submit the following financial returns:

direction of lending for all banking operations in Brunei Darussalam (quarterly);

consolidated monthly statement of Assets and Liabilities for all banking operations in Brunei Darussalam (monthly);

SSS Appendix II. a Schedule (Reserve requirement—monthly);

SSS Appendix III Schedule (Statement of Assets and Liabilities—monthly);

capital adequacy computation monthly.

Regulation and supervision are continuously being strengthened to ensure that financial stability prevails in the financial system, in line with international best regulatory practice. Authority Monetary Brunei Darussalam (AMBD) will remain vigilant of risks and external factors that may affect the domestic financial sector and economy. AMBD, through the banking supervision unit, is responsible for licensing, regulating, and supervising the banks and finance companies. The primary objective of AMBD’s banking supervision unit is to ensure safety and soundness of banks and finance companies, as well as protecting the interests of consumers and public.

During recent years, the overall key financial soundness indicators in the banking sector continued to be at healthy levels:

aggregate capital adequacy ratio of 18.4% in 2018;

the banks are highly liquid, having a liquid assets to total assets ratio in 2018 of 51.6%;

the financing to deposit ratio (excluding government deposits) was 40.9% in 2018;

the assets and deposits of the banking system have declined by 8.9% from $18.7 billion in 2014 to $17 billion in 2015, and 11% from $16.0 billion in 2014 to $14.2 billion in 2015 respectively (the fall in assets is mainly due to the decrease in placements with banks and financial institutions abroad by 24%).

According to the statistics directly from Brunei Ministry of Energy and Industry, [The] decline in deposits is mainly due to decrease in institutional deposits. Asset quality continued to improve with a net non-performing loans financing ratio (NPLF) of 4.8% in 2018. Brunei’s household debt accounted for 15.9% of the country’s Nominal GDP in Dec 2018, compared with the ratio of 17.7% in the previous year. As part of AMBD’s aspiration to encourage lending/financing of the banks to the productive sector, credit growth was evident in the corporate sector with a steady growth starting by. Mainly the manufacturing and services sectors contributed to the increase. Total deposits of the finance companies have increased marginally from 2014. Finance companies, whose main activities are hire purchase transactions, faced significant falls in total assets and total financing by 7.7% from $2.3 billion to $2.2 billion and by 10.7% from $2.0 billion to $1.8 billion respectively. (Brunei Ministry of Energy and Industry).

It is worth mentioning the role of the Brunei Currency Board (BCB). BCB was established in 1967 by the Currency Act. Under Section 9(1) in Chapter 32 of the Laws of Brunei, and it has the sole right to manage and issue currency notes and coins in Brunei Darussalam. Its main mission is to ensure the integrity of the currency issue and that the public’s interest is safeguarded. At the same time, Brunei Currency Board also seeks to provide the highest standard of service to both the banks and the public. The objectives of Brunei Currency Board are:

to maintain strict control over the amount of currency in circulation whereby the external and liquid assets must exceed the statutory limits of 70% and 30% respectively;

to ensure that the demand for currency notes and coins is adequately and sufficiently met by coordinating its activities with the banks;

to assist other departments within the Ministry of Finance in implementing the nation’s monetary policy;

to ensure the highest degree of protection for the Board’s assets and custody items held by it;

to ensure prudent management of the Currency Fund and the Currency Reserve Fund.

Source Asian Development Bank (ADB, 2019)

Investment Area

Despite many advantages promoted by the Sultanate, the Foreign Direct Investments (FDI) is discouraged due to the reduced size of the domestic market. Those advantages include tax incentives and customs duties exemptions on certain sectors, especially non-oil investments and freedom of investment in all sectors, with the exception of certain fields in which local participation is required. Since 2011, foreign invest has been growing. However, a study of the APEC Business Advisory Council (ABAC) provided that there were many weaknesses among many sectors within the business climate. The Company Act was amended in January 2015, with the overall objective to increase transparency and strengthen corporate governance. The new version aims to simplify the business climate. The Government of His Majesty the Sultan of Brunei, through its Wawasan 2035, has set out the directions for its economic goals with a growing emphasis on attracting FDI as an important driver of growth, focusing mainly on economic activities that bring new knowledge, new industries, new technologies, new markets as well as new business and employment opportunities for its people. The Economic Strategy that has been established calls for, among others, the following policy directions:

ensuring continued macroeconomic stability;

ensuring high rates of economic growth;

promoting national economic competitiveness through policies that encourage productivity, economic openness and competition;

investing in downstream oil and gas industries and other economic clusters;

investing in the world class infrastructure that is required to attract foreign and domestic investment in new export industries.

The Brunei Economic Development Board (BEDB) has identified several key industry clusters within the export-oriented manufacturing and services sectors that have the potential to bring value added activities to Brunei and create spin-off opportunities. Furthermore, the readily available industry cluster-specific sites throughout the country make Brunei as an ideal location for the establishment of the following industry clusters: manufacturing (Pharmaceuticals and Food and Food Ingredients; Petrochemicals, Integrated Petrochemical Refinery and Renewable Energy); services (Information and Communications Technology; Supporting Industries); emerging new technologies.

Manufacturing

Within the manufacturing sector, Brunei focuses on many different industries. According to the food and food industry, it is obvious to see a multiplicity of opportunity. From sourcing, to manufacture, to distribution, the size of the market within the region of Brunei is perfect. With the utilization of authentic foods and ingredients, Brunei has the potential to capitalize on the establishment of research and development centers to expand successfully and globally. In addition to its well-established guidelines and standards for the handling and manufacturing of halal food products, Brunei has also launched its very own Brunei Halal Brand with the objective to make Brunei as one of the major players of the global trade in Halal food production and certification. With its strong Islamic background, the global market can be assured that Brunei’s Halal Certification is both stringent and credible for businesses to penetrate the Muslim markets. In addition to the food industry, the pharmaceutical industry is growing just as rapidly. Many Pharmaceutical’s companies established in Brunei, giving rise to a surge of research and development opportunities that provide a source of innovation. Brunei promotes international investments from well-established companies to utilize its location, strategically for expansion.

Services

Among the service industry, Brunei wishes to expand and capitalize on the growing economy, domestically and globally, through utilizing its highly-skilled workforce and readily available infrastructure. In doing so, Brunei capitalizes on the establishment of ICT-related activities to introduce itself as a regional hub for ICT.

In an effort to make Brunei as a regional hub for ICT, the Sultan has identified ICT as one of the key catalysts for sustainable socio-economic development and thus the development of ICT industry continues to be a top priority. Brunei is safe and perfectly centralized in accessibility to neighboring markets, making it ideal for data centers, disaster recovery centers, software development, wireless communication, and multimedia. Furthermore, Brunei’s utility rates are amongst the lowest in the region. Brunei is also very competitive when it comes to the data center industry as it offers one of the most competitively priced utilities in the region. In addition, Brunei has an abundant bandwidth capacity through its web of international submarine cables and state-of-the art telecommunications infrastructure which enables efficient connectivity with the rest of the world. Finally, the BEDB has identified several logistic activities that can be further exploited through the utilization of Brunei’s readily available infrastructure in order to sustain the growth of supporting industries. They include aviation support services, air and sea logistics, marine support services as well as oil field support services.

Emerging New Technologies

Brunei is in the position to grow as a new technology developer within the next 20–30 years. The BEDB is currently promoting new frontiers of science and technologies to develop in Brunei, to create economic activities that are driven by accelerated technology developments. Subject to further research and dialogue with experts, the potential new technologies may be found within the identified sectors of healthcare, food security, advanced manufacturing processes, material sciences, electronics.

Domestic Markets

Brunei derives its massive wealth from the abundance of oil and gas resources. As the source of his wealth is its massive hydrocarbon resources, the industrial sector dominates the structure of the economy with 74%. The service sector follows with 25%, while the agricultural sector is negligible with 1%. Other numbers that highlight domination of economy by the oil and gas sector are the following: hydrocarbon production represents about 50% of GDP and 90% of exports and government revenues. The government plans to diversify into Islamic banking and IT-sector. Furthermore, its investment in the development of the two sectors will greatly improve the prospects of the country, since the labor force is very small. Currently, the public sector employs the majority of the population. The government is also seeking to privatize many public-sector enterprises. However, progress is slow in terms of economic diversification and privatization as the government has a slow approach. If there are no new oil and gas fields locations, the country will run out of oil in 20–30 years. It is quite advisable that they accelerate diversification to prevent an economic collapse.

The current account surplus has always been significant in Brunei, entirely due to the trade balance. In 2019, the trade surplus was BND 281.4 million, lower than the BND 283.1 million recorded in 2018. The value of exports is BND 687 million, it fell by 9.9% in 2019. The value of imports is BND 405 million, it shrinks to 15.4%. Brunei imports come mostly from ASEAN. The smaller import partners are the United States and the EU. The country’s major export partners are Japan and South Korea, with which Brunei has long-term supply agreements.

The large current account surpluses mean that any external funding is required. However, the sustainability of these surpluses is based on the availability of hydrocarbon resources.

Source Asian Development Bank (ADB, 2019)

Source Asian Development Bank (ADB, 2019)

Finance and Taxation

Tax

In Brunei there are no Personal Income tax, Sales Tax, Payroll Tax, Export Tax, Manufacturing Tax, and no Capital Gains Tax. An individual person is categorized as a resident if he/she resides in Brunei and is physically present or exercises an employment (other than as a director of a company) in Brunei for 183 days or more in the preceding year of assessment.

Corporate Income Tax

The corporate income tax standard rate is 18.5%. In the long-term, the Brunei Corporate Tax Rate is projected to trend around 19% in 2020.

Any company that resides in Brunei is considered a resident of Brunei and is subject to tax. A company is resident in Brunei if it is managed and controlled in Brunei. Any income accrued within Brunei, domestic or foreign, is subject to income tax. Trade, business, investment, interest, and royalty income are all forms of taxable income with few exceptions, such as nonprofit organizations and some governmental positions. Companies with revenue that does not exceed BND 1 million are exempt from corporate tax. Furthermore, capital gain is not taxed. There is also a limited tax credit available to foreign-source income; it is assessed at half rate. Tax credits are also available to specific salaries and training. Instead of a corporate tax, approved export companies can pay a fixed rate of 1%.

Withholding Taxes

Dividends—Brunei does not levy withholding tax on dividends that have been assessed to tax, regardless of whether paid to a resident or a non-resident;

Interest—Interest paid to a non-resident is subject to a 2.5% withholding tax;

Royalties—Royalties paid to a non-resident are subject to a 10% withholding tax;

Technical service fees—Technical service fees are subject to a 10% withholding tax. Fees paid for the use of scientific, technical, industrial, or commercial knowledge or information are subject to a 10% withholding tax.

Source Trading Economics (2019)

Audit and Accounting

Brunei Darussalam Accounting is under the Brunei Darussalam Accounting Standards Council (BDASC). Under the International Accounting Standards Board, BDASC has applied the International Financial Reporting Standards (IFRS) to public accountable companies within Brunei. The full adoption of the IFRS took place on 1st of January 2014, applying to all public accountable companies. Following the adoption is a push for the full adoption of IFRS. Several large multinational corporations have started using IFRS for their foreign subsidiaries/branches. All public accountable companies such as banks, financial institutions, and insurance companies are required to adopt full IFRS. Until BDASC changes the principles, companies that do not have public accountability will apply generally accounting principles. Furthermore, companies that have no public accountability are although encouraged to adopt IFRS.

Risk Assessment

The largest risk to sustainable growth is the oil dependency of the country. Yet despite the potential short-term impact on oil exporters’ margins and tax revenues, what really worries the government is the long-term picture: namely, how the economy will support itself when the sultanate’s hydrocarbon reserves run out. The government has developed its long-term national development plan, Wawasan Brunei 2035 (Vision Brunei 2035). Wawasan directly addresses the concern of Brunei’s dependency on gas, as Brunei’s oil reserves are projected to be depleted within twenty years and thirty years, the country will run out of natural-gas. If the country does not turn to success within non-energy-based industries and services, it may fall into an economic collapse. Wawasan Brunei 2035 focuses on the development of a non-energy-industry based economy. Furthermore, Wawasan Brunei 2035 also encourages the production of administration whom plan to aid in the sustainability of the sultanate, in a long-term. With the encouragement of small businesses and investment in other industries other than oil production, there is a hope for sustainability. Currently, the major focus is the development of tourism. The government is targeting to increase tourism by 50%. In its development of the non-energy sector, Alcoa, a large United States based aluminum producer, has extended studies to open an aluminum-smelting plant within the sultanate.

This is ultimately an extremely difficult challenge for the sultanate. Cultural values may clash with the controversial behavior that comes along with worldwide tourism. Although Brunei has a great potential for ecotourism, it is a predominantly conservative Muslim country. There are strict laws on alcohol, which may inhibit its potential for growth in the ecotourism sector. Success of the plan is not completely secured. With the development of the Sungai Industrial Park, there has been much investment in construction of a methanol plant, in addition to many other investments. To create many jobs and the development of transshipment hubs, the government has embedded large investment in the Pulau Muara Besar port. This development with hopefully allow the financial sector to grow, although it will not be enough to keep the economy afloat. It is also projected that there will be differences in the current tax system as the development within a non-energy-based economy incurs. Successfully implementing this will pose a larger challenge to the Sultanate, than attracting investors. In addition to transferring the economy off energy-based industries, the country is a large promoter of sustainability in energy and energy conservation. There is governmental cap of oil production at 200,000 barrels a day. As retail fuel prices are subsidized by the government, it is quite difficult to shift all of these challenges among the citizens of Brunei.

Political Risks

The economics of Brunei has also played a major role in the politics surrounding its dependency. Currently, political activity is negligible. Brunei does not have a democratic elected legislature and to reiterate, power is held by the Sultan. He is not under pressure from the body of his citizens to speed up political reform among the tensions of potential economic collapse. With the living standard being quite high and the government’s dependency on the political quiescence of the population is probably further explained by the fact that Brunei’s neighbors are mainly less prosperous South-East Asian economies. However, in the long-term, depletion of oil and gas reserves will make it more difficult for the government to provide the large range of benefits that Bruneians have come to expect. This may increase popular demand for a more accountable government, and thus for democratization. It is rare that political advocacy breaks out among the populous, yet when they do it is quite peaceful. Furthermore, there have recently been many anti-western demonstrations that have been triggered by international influence.

External Risks

Brunei Darussalam’s banks and financial institutions do not have any significant cross border exposures, so external risks such as the Greek debt crisis or possible slowdown of the global economy are not significant risks to the bank’s loan/financing books.

Terrorism and Crime

Generally, the threat of terrorism in Brunei is relatively low. But foreigners are still anxious due to the more world-wide fear of terrorism aimed specifically at the western community. Crime is relatively low in Brunei; other than petty crimes such as pick pocketing. There have been few reports of drug smuggling across Asia and Brunei being used as a transit. Anyone caught bringing drugs into the country are faced with the death penalty. Alcohol sales are prohibited; while non-Muslims over seventeen years old may import duty free, two bottles of wine/spirits and twelve cans of beer upon entry (must declare at customs). Furthermore, any alcohol brought within the country must also be consumed in private. There also must be a 48-h delay between imports.

Cambodia

Country Introduction

Population, Location, Geography, Climate

The Kingdom of Cambodia was a former French territory, gaining its independence in 1953. Located at the Southern Region of the Indochina Peninsula in South East Asia, Cambodia ranks as the 69th most populous country in the world, consisting of a population of 16.5 million. Cambodia contains 0.21% of the world’s entire population, making one in every 487 people in the world, a citizen of Cambodia. The majority of the country’s population age from 15 to 64 years. However, the country also has a large and rising younger population—under the age of 15 years. The smallest percentage of the population are those who are 65+ years.

Cambodia’s ethnic demographic is made up of Khmer’s, Cham’s, Khmer Loeu’s, Chinese and Vietnamese. 90% of the population is of Khmer origin, the other 5% Vietnamese, 1% Chinese and the other demographics make up the other 4%. The main languages spoken in Cambodia are Khmer with 96% of the population speaking the language. French and English are also spoken throughout the country. Religion in Cambodia plays an important part in the local way of life; 95% of Cambodians practice the official religion, Theravada Buddhism. The two Islamic communities in Cambodia consist of the Chams and Chveas. There are also a number of indigenous hill tribes who live in the remote north-east of Cambodia.

The capital of Cambodia is Phnom Penh, which has over 1 million people in residence. Phnom Penh is also the political center of Cambodia, which is considered a Constitutional Monarchy. It is also home to its Ceremonial head of state. Cambodia is well known for its rich heritage and ancient traditions. The capital city embraces cultural influences from a number of different Asian countries, including China in which merchants usually play the middleman in many economic cycles. Cultural influence in the capital is also taken from France and the United States. Unfortunately, the disastrous cultural impact of the Vietnam War (1975–77) and the Khmer Rouge genocide (1975–79), in which approximately two million people died, is still lingering over the country.

As a largely rural country, Cambodia covers 176,515 km² of land and 4520 km² of water, making it the 90th largest nation in the world with a total area of 181,035 km². This is about half the size of Germany and slightly smaller than the US state of Oklahoma. 20% of Cambodia is agricultural land and about 61% is covered by flat forested land. Cambodia is considered a part of the tropics as its most southern extension is 10° above the equator. Cambodia consists of 24 provinces, with Phnom Penh having both the highest population and the highest population density. It is, however, the second smallest province in terms of land area. In contrast, Mondulkiri, which is the largest province by area also has the lowest population density. The smallest province is Kep, which is also the least populated.

Cambodia shares its borders with three other South East Asian economies. This includes Thailand to the North and West, Laos to the North, Vietnam to the East and Siam Gulf to the South-West. Its main landscape features include the Tonle Sap Great Lake, which is one of the most productive freshwater ecosystems in the world. Nevertheless, the surroundings of the Lake are among the poorest in Asia. The Lake connects to the Mekong River, that is the 9th largest river in the world running throughout South East Asia, which is an important river trade route linking China to India and the rest of South East Asia. Remarkably the current of the mighty Mekong River expands until it pushes the Tonle Sap to reverse its direction, pushing upstream from the ancient capital. This reversal of the river is celebrated throughout the country with a Water Festival in November every year.

Cambodia has two main seasons. The wet season ranges from May to October and the dry season ranges from November to April. The wet and dry seasons are similar in length and the average temperature is around 27 °C. The climate is usually humid throughout the year as well as monsoonal, which is typical of the rest of the South East Asian countries.

A majority of Cambodian citizens makeup the rural areas and engage in agricultural production. Most villages are settled along major bodies of water within Tonle Sap Basin-Mekong Lowlands region. Cham origin is usually what makes up most the Cham villages. But there are large Chinese