OBG talks to Dato Ali Apong, Deputy Minister, Prime Minister’s Office, and Chairman, Brunei Economic Development Board (BEDB)

Interview: Dato Ali Apong

What are the priority areas for attracting foreign direct investment (FDI) to Brunei Darussalam?

DATO ALI APONG: In terms of attracting FDI, Brunei Darussalam has continuously prioritised sectors other than oil and gas, especially in the key clusters of food, pharmaceuticals and cosmetics, renewable energy, data centres, and disaster recovery centres. Building on the success of Simpor Pharma’s halal pharmaceuticals manufacturing plant, the BEDB has continued to pursue opportunities in the life sciences cluster. The country offers great opportunities for investors wishing to manufacture halal products for export.

In recent months, we have garnered encouraging responses from foreign investors, and in April 2014 we signed a land lease agreement for the establishment of a $50m carbon steel pipe manufacturing plant by China’s Huludao City Steel Pipe Industrial. In June 2014 we also signed a memorandum of understanding with South Korea’s Dongyan Gangchul for the establishment of an aluminium billet and extrusion plant. These and other ongoing FDI projects, such as the initial phase of the Zhejiang Hengyi refinery and aromatics cracker complex, are expected to create over 2000 jobs.

In order to support the operational framework for such export-oriented projects, the BEDB is also prioritising FDI in logistics services. Export-oriented industries will be providing the required volumes to enhance the commercial viability of the logistics sector, creating synergy between the two areas. Additionally, the BEDB has been working closely with relevant government agencies to set up a world-class data centre.

What can be done to further improve the ease of doing business in Brunei Darussalam?

DATO ALI: According to the World Bank’s 2014 “Doing Business” report, Brunei Darussalam improved its overall ranking for ease of doing business from 79th in 2013 to 59th in 2014. This improvement was largely due to the establishment of the Public Credit Bureau under the Autoriti Monetari Brunei Darussalam, which has enhanced the consolidation of and access to credit data. Following this improvement, we must continuously enhance reforms in order to remain competitive in an evolving business environment.

The role of the BEDB is to act as the primary agency that facilitates the investment process for foreign investors. Account managers within respective clusters are assigned to work closely with investors. This involves providing guidance through the early stages of the process, such as understanding the investment environment and regulations, and linking them with local partners. This support continues into later stages in the form of assistance with registration, securing relevant permits, operational approvals and commencing exports according to the project’s schedule.

To which particular incentives are investors most responsive, and through which avenues is the BEDB providing such incentives?

DATO ALI: Investors are offered a comprehensive package of incentives to assist them in building sustainable businesses that also support the country’s economic diversification. This includes Brunei Darussalam’s attractive tax environment, which offers numerous incentives. Investors are also entitled to exemptions from corporate income tax, as well as from import duties on raw materials and machinery under pioneer status for a period of eight to 11 years for strategic industries.

An additional incentive is provided via our build-and-lease option for core facilities or buildings in order to defray upfront capital costs. An example is CAE’s Multi-Purpose Training Centre, where the BEDB has funded and constructed the core facilities based on the investor’s designs, which will then be leased back to the company over a period of time. In addition to the financial aspects of the investment, this arrangement assures investors that the BEDB will manage the building and construction according to the project’s schedule. Moreover, our rates for utilities are among the most competitive within the region. Recently, the BEDB has been receiving more interest from foreign investors due to Brunei Darussalam’s political and economic stability, transparency and its strategic agreements with key international partners.

What impacts have recent pro-business measures had on the Bruneian economy, and what further measures are being targeted?

DATO ALI: The BEDB has several dedicated industrial sites within the country that offer convenient access and infrastructure to investors in the ICT, light manufacturing, energy, petrochemicals, and oil and gas industries. The BEDB is also expanding the Anggerek Desa Technology Park, where construction in Phase 3 aims to encourage the growth of innovative local and foreign firms and is set to be completed in late 2014. The technology park will also host research and development facilities, as well as multimedia-related activities.

Furthermore, through the setup of the Brunei Intellectual Property Office (BruIPO), The BEDB has provided an intellectual property (IP) infrastructure adherent to international standards. For two years running, Brunei Darussalam has been kept off the US Trade Representative Office’s “Special 301 Watch List”, which in itself is a testimony to our regard for IP rights. Moving forward, BruIPO will be implementing an integrated IP administration system that is more business oriented. This will not only place Brunei Darussalam on par with IP offices worldwide, but will create and promote a business-friendly ecosystem that ensures small and medium-sized enterprises (SMEs) and multinational corporations (MNCs) are afforded IP protection.

How are local SMES being encouraged to expand beyond the country’s borders, and what role do domestic funds play in this process?

DATO ALI: We recognise the importance of nurturing homegrown entrepreneurs and this remains a key undertaking. The BEDB supports and encourages aspiring local businesses to look for opportunities and new avenues to expand their businesses abroad into newer and bigger markets. Since the launch of the Promising Local Enterprise Development Scheme (PLEDS), the BEDB has assigned it with the main objective of assisting promising SMEs to transform into MNCs that are comparable to international publically listed companies. Account managers are assigned to a firm to assist in conducting detailed business gap and financial analysis. Apart from identifying areas for improvement, the analysis also includes benchmark exercises that serve to ensure value creation by assessing the level of competitiveness and allowing for a better review of a firm’s overall position. The BEDB closely monitors and provides the necessary support in the form of various assistance schemes and facilitates the achievement of an action plan by providing a timeline.

Additionally, the BEDB may introduce investment fund partners under PLEDS Asset Holdings, administered by the BEDB, or other potential investment funds such as Abraaj Capital and the Strategic Development Capital Fund. Aside from providing capital injections through equity investment, PLEDS Asset Holdings enables the fund manager to sit on an SME’s board. Through this arrangement, the fund manager is able to enhance the enterprise’s performance in order to equip the company for an initial public offering. The fund manager also adds value to local firms by providing global connections, networks and market insights.

Moreover, the BEDB has been preparing innovative start-ups to venture overseas in the last few years through its iCentre initiative. This exposure will enable start-ups to operate in entrepreneurial ecosystems, such as Silicon Valley, which will allow for access to new markets, resources and networks. It will also build up local firms with an on-the-ground understanding of market trends and encourage a sense of urgency through exposure to hyper-competitive environments. To date, one local start-up, Chrends, has received early stage funding from a Silicon Valley venture capital fund in order to further develop its team and product in the US.