Brunei Darussalam: Further downstream

The Sultanate’s policy to promote industry as a means of diversifying the economy is starting to produce the dividends the government had in mind when it established the programme on industrialisation, though it still has some way to go before achieving all its objectives.

In early March, during a session of the Legislative Council, Mohammad Yasmin Umar, the minister of energy, gave a briefing on the petrochemicals complex to be developed at the Sungai Liang Industrial Park (SPARK) by the Mitsui Consortium of Japan. With a budget of $2.8bn, the six plants at the downstream facility will produce a range of chemicals using Brunei Darussalam’s abundant natural gas as a feedstock. Among the chemicals to be produced will be ammonia, urea, diammonium phosphate, and ammonium sulphate, all basic ingredients used in the production of fertilisers, textiles and plastics.

In his address, the minister said the complex would create around 500 new positions directly and an additional 1500 jobs indirectly. This marks an important milestone, as the Sultanate becomes a regional exporter of petrochemicals. There are further ramifications, however.

While large-scale projects such as the petrochemicals facility at SPARK and other downstream developments will be major revenue generators for decades to come, it will be the industrial spin-offs that will create far more jobs and private sector wealth. Though only a rough guide, for every position that the petrochemicals complex will create, three more will be generated to support the development.

A brief look at list of service tenders most recently opened by the Sungai Liang Authority, the state agency charged with developing the industrial park, show a range of contracts that will benefit several segments of the economy. Currently on offer are contracts for the maintenance and servicing of air conditioning units; the supply of furniture, office fittings and fixtures; and the provision of fire fighting and hazardous materials safety equipment.

Such spin-offs are one of the aims of the government’s industrial development policy. According to Abdul Rahman Ibrahim, the second minister of finance, it is hoped that investments in projects aimed at fostering industrial development and innovation will have a flow-on effect for non-oil sector growth.

As projects to facilitate economic development are rolled out, it is expected that the banking, insurance, finance and real estate sectors will benefit, Ibrahim said on March 18 during a briefing on the latest national development plan and the 2012-13 budget to the Legislative Council. Other positive spin-offs would include greater demand for enterprises, as well as retail, transportation and other services, the second minister said.

SPARK’s growth potential is quickly being recognised by other sectors, which are looking to take advantage of the country’s wider industrial development. There has been a recent upsurge in interest in real estate in the Sungai Liang area, attributed by developers to the expansion of downstream oil and gas industries in the district.

Yusuf Flynn, the sales director at RumahKu Real Estate, said there was still a lag between the Sungai Liang region’s industrial development and the supply of residential property, with a strong response to the recent launch of a 136-unit housing project nearby. The increased interest in property in the areas around the Sultanate’s industrial developments should translate into more construction, infrastructure and services.

Further downstream from the major industrial developments, the flow of investments is also continuing. In February, the Ministry of Industry and Primary Resources appointed a contractor to carry out initial construction work on a new industrial park at Batu Apoi. The park, which is scheduled to be completed in 2013, will be developed as a centre for small and medium-sized enterprises (SMEs) – another focal point of the government’s industrial.

It is through SMEs that supporting industries will flourish, with the greatest number of new jobs expected to be created through these enterprises. While hydrocarbons will continue to underpin Brunei Darussalam’s’s economy for many years to come, it will be the flow-on effect from downstream industries that will create new employment opportunities and promote wider private sector development.