Mark your dates this weekend and plan your travels 😀

[Edited]: Is Brunei going through a recession? It’s still early days to say for that but I know that some of my friends’ businesses are feeling the pinch(es). These are just from my observations as well as business environment shared by my peers. Let’s not forget some of the outside factors as well as policies that can influence the Brunei economy.

Let’s lay down some scenarios here from my knowledge. I know there could be more (factors) but I will just based them on my findings. First is the falling of oil prices. I remember once a top senior official said that such fluctuating prices won’t affect the Brunei economy earlier this year. However, I’m pretty sure it did (affect) in a long run as oil prices hasn’t been encouraging and it has a detrimental effect on the Brunei economy. Furthermore, at some point, Brunei’s export on crude and oil hasn’t been blossoming like the old days. Have the oil prices affected oil production in Brunei? Earlier this year, it was reported that Brunei’s exports went down by 39% (source: Department of Economic Planning and Development (JPKE).

It’s no big surprise that oil prices is a big factor here (weaker demand, higher supply). Imagine the previous year that the price of oil was at least USD $113 per barrel and now it’s averaging at USD $50 per barrel. It was also reported in Reuters that despite the improvement in prices, worldwide production won’t be producing last much as it’s “uneconomical” if oil prices are at USD $50 or below.

With low demand for export and also lower oil prices, this will mean that money flowing into the Sultanate will be lower than usual. This would also mean less activities or projects coming from Brunei Shell Joint Ventures or any companies relating to Brunei Shell.

Early in March 2015 during the Legislative Council, the Ministry of Finance that Brunei will be in the deficit in terms of spending (BND 1.58 billion) and this is related to the fall in oil prices. Did you know that 90% of the export of Brunei is oil and gas? So this is what we always mean when we say that we are relying too much on oil and gas.

Now I have touched on oil prices. How about other factors? One thing that has affected Brunei is the recent policy introduced by Authoriti Monetari Brunei Darussalam (AMBD) – the total debt service ratio or loan cap (at 60 per cent for those earning a minimum net salary of $1,750). So who will be affected because of this policy? Not the consumers but the car dealers as sales has seen a drop of at least 15% and it keeps dropping every month ever since the introduction of the loan cap in June 2015.

If the car dealers are affected, this would also affect the finance companies such as Baiduri Bank and BIBD At-tamwil who finance the hire purchase of the cars. NBT (Toyota) used to sell an average of 300 units every month but recently the figures have gone below 200 units. Back in 2012, at one stage, cars sold in a month would break the 1,500 mark but recently it has lesser numbers (1,137 cars in July 2015 and 1,005 cars in August 2015). Last weekend, I even bumped into an NBT roadshow at The Mall (which is quite rare) and one of the representatives said that business wasn’t good so they needed to do more roadshow and promotion.

Yes, the business side of the automotive industry is feeling the pinch but the idea of the policy by AMBD is to ensure that the residents of Brunei will have enough savings and finances instead of using their disposable income for loan repayments. With the current situation of oil prices, such move (of the policy) has not benefited the local economy as loans are hard to come by especially those in the lower tier income group. In a long run, the TDSR or loan cap will be good for the country as people will have more disposable income than rather ending up using majority of their salaries to pay off loans. Remember the credit card policy? That really worked well, right? and this shouldn’t be a problem. It will just take time to adjust to the new financial environment. Car dealers will have to come up with better deals or promotions just like how Boustead are currently executing with their promotions with Suzuki and Nissan (tablets and smartphones respectively) to attract customers.

Another theory that cannot be discounted is the fact that the Malaysian ringgit has caught interest of Bruneians. The exchange rate now is BND 1 to RM 3 which is a real steal for us. For many Bruneians, Miri is still considered a shopping paradise. Just imagine this – It was reported that over two million arrivals from Brunei to Miri alone in 2013. I’m pretty sure the statistics will be even more in Year 2015 with the current weak currency of the Ringgit. Shopping will be cheaper and they will even buy their groceries across the border as it’s a cost saving measure.

So who are at the losing end? Of course, our local retailers and the department store owners. I interviewed two sources on how the supermarket business in Kuala Belait and Bandar and both gave similar responses – “people prefer shopping and spending across the border.” One commented that usually after Hari Raya season, their supermarket business is slower but this year, it’s even quieter and slower than last year. Even the extension of the opening hours across the border is not helping the Brunei economy.

Now that I have laid some of my findings based on reports and interviews, it’s not too premature to say that Brunei is undergoing a small recession – budget cuts, deficits, lower car sales and lower revenue in local supermarket as some of the effects.

Need action, less talking: I have attended many lectures, talks, keynote addresses, you name it,  for the past 10 years and the same topic remains – “Diversification” and we all have become accustomed to the over-abused word but it has only become a mere phrase than a means to an end. From the progress of Brunei, we have taken baby steps to diversify by creating new industries – pharmaceutical, the halal brand and also the Mitsubishi Gas Chemicals and Itochu Corporation from Japan for the methanol plant at the Sg Liang Industrial Park (SPARK). These are all good signs to come as it creates more job employment.

Even earlier this year, Brunei Economic Development Board and South Korean company DongYang GangChul, said that the BND 107 million project at the Bukit Panggal Industrial Park in Tutong will be a major boost to Brunei’s economy. The idea is the plant will produce billet and aluminium extrusion and export back to Sout Korea. I’m not really sure what are the status of this project as I have not seen any updates.

My biggest curiousity is the Pulau Muara Besar (PMB) project. There have been many mentions of the PMB project but as far as I know there is very little happening as the big players such as Hengyi Industries Sdn Bhd, a petrochemical firm, will only begin their refinery operations by early 2017. Of course, this is no easy project and it requires intensive homework and making sure all the criteria are met. This is perhaps the biggest project for the Brunei economy as the refinery will cost at least BND 4 billion. But now it’s more of a waiting game until early 2017.

From the looks of it, Brunei needs a good number of Foreign Direct Investment, just similarly like Hengyi Industries. It’s never an easy task to bring foreign investors to pump in money into the economy. I believe that Brunei is a very ideal hub for this kind of industries and of course, the foreigners will need our vote of confidence in order to succeed. The PMB project would have been talking point (with action) if nothing was delayed and the refinery plant up and running by now. Maybe I’m just tired listening to the same old phrase and the emphasis of “diversification”.

On a positive spin, what’s trending (and booming now) are the influx of food and beverage outlets such as Rack & Brew, The Library Cafe, Ner|Dee Cafe, Chatime and coming soon (end of the year), Cinnabon. If you are thinking of opening a business, then F&B is a better approach as we still have the culture to dine out or even limteh. And let’s not forget the upcoming travel fair by Royal Brunei and we Bruneians love to travel (so maybe, just maybe, people are saving to spend on traveling).

What’s my outlook on Brunei 2016? It’s hard to say. I just hope that we can help one another and let our egos down that Brunei needs a wake up call. Our voices can be a stimulus and hopefully the Government of Brunei and the private sector can work together to tackle a growing (bad) seed before it can turn to a plant.

This article doesn’t represent the opinions of others apart from my own. I typed this because I feel it’s very relevant to our community and I also want to help to contribute to the betterment of our Brunei economy. If you have any queries or comments, you can drop me an email ranoadidas gmail and I’m more than happy to hear from your end. Sources of facts: The Brunei Times.