Focus on food security: Self-sufficiency and increased capacity are central aims

Growing global food insecurity has turned Brunei Darussalam’s attention back toward its farms. Pursuing self-sufficiency across all sectors over two decades, the government is funding an overhaul of sector practices with the aid of foreign expertise. The goal of achieving economic diversification away from the energy sector has led the government to capitalise upon these investments to develop a downstream food processing and agribusiness industries, which is targeted directly at regional export markets. Investor interest is now building and signs of a paradigm shift are slowly emerging.

ECONOMIC CONTRIBUTIONS: GDP contributions over the past five years have demonstrated positive trends overall, increasing 21.4% from BN$65.9m ($51.3m) in 2007 to BN$80m ($62.3m) in 2011 and gross outputs have increased 90% since 2000 to BN$241m ($187.7m) in 2011. However, annual growth rates have fluctuated over the past decade, denoting an inherent vulnerability to global market risks, and the Sultanate remains almost entirely reliant on foreign food imports, including 96% of its staples and 80% of all foods. Food imports accounted for 15% of total imports in 2010, worth BN$494m ($384.7m). Exports of food and live animals has not exceeded 0.1% since 2003, averaging just BN$3m ($2.3m) per annum (pa) through 2010.

Brunei Darussalam’s livestock sector, incorporating eggs, broilers, cattle and buffalo, is the Sultanate’s top performer. Valued at approximately BN$139.89m ($109m) in 2011, Brunei Darussalam has achieved 99.3% and 99.2% self-sufficiency in eggs and broilers, respectively, but less than 1% in beef. The Sultanate’s agrifood processing industry meanwhile was valued at around BN$57.21m ($44.6m) in 2011, while its crop sector was at BN$43.86m ($34.2m). For rice, fruits and vegetables, self-sufficiency in 2011 stood at 4.4%, 15.4% and 62.8%, respectively, marking one of Brunei Darussalam’s most challenging sectors for development.

PASTURES NEW: Brunei Darussalam’s agriculture potential had receded significantly, given the energy sector’s eminence, until global food prices spiked in 2007 and put a spotlight on national food security concerns. Announced in 2009 by Sultan Haji Hassanal Bolkiah, new agricultural policies were codified in the Sultanate’s national development plan, Wawasan Brunei 2035. The plan is designed to reverse the industrial status quo, creating an environment conducive to business and employment opportunities for Bruneians as part of a diversified economy (see Economy chapter).

Under the Ministry of Industry and Primary Resources (MIPR), the Department of Agriculture and Agrifood (DAA) is hoping to build upstream domestic production and create a downstream, value-added agribusiness sector. Yet much of this remains difficult to achieve. New Zealand-based consultancy AbacusBio is set to deliver a master plan to lay out goals for advanced research and capacity in agro-biotechnology, in May 2013.

In the interim, the DAA has pushed forward within its means, working to strengthen institutional structures and to maximise agricultural land use, developing Brunei Darussalam’s marketing and export potential, as well as pursuing the adaptation and adoption of technology. While initial goals for self-sufficiency laid out in 2009 have been deemed impossible to achieve, investments and international collaborations are having a marked impact.

FIELDS OF VISION: A goal of 60% self-sufficiency in rice has been proposed for 2015, but national production totalled just 1480 metric tonnes (mt) in 2011, accounting for 4.44% of the 33,315-mt annual demand. While the DAA anticipated only a moderate increase to 5-6% self-sufficiency in 2012, the 2011 harvest was notable, with a 38% year-on-year (y-o-y) increase. The y-o-y spike in 2011 was partly attributable to a three-year collaboration between the MIPR and Singaporean firm Sunland Agri-Tech to develop high-yield rice strains for the Sultanate, and points to the potential for considerable future growth. This resulted in the development of the hybrid rice variety “Titih”, which boosted yields from 2-3 mt/ha to 3.8-8.7 mt/ha. The increase was also partly attributed to better crop management due to the establishment of the Rice Farmers' Field School, which increased yields by 1.59 mt/ha.

CLOSING THE GAP: The roll-out of Laila and Titih to rice farmers – guaranteed with the government’s purchase of the commercial rights and technical assistance provisions earlier this year – is expected to rapidly close the gap on the country’s self-sufficiency targets. While HYV and hybrids are expected to gradually replace indigenous rice strains, wider sectoral issues must also be addressed, most notably infrastructure and training. “The primary challenge for us is that we are largely reliant on rain-fed irrigation mechanisms,” Hajah Aidah Haji Mohd Hanifah, the acting director of the DAA, told OBG. “Only 330 ha of rice are equipped with infrastructure, but these produce about 600 metric tonnes.”

With just 25% of Brunei Darussalam’s 1304-ha of rice paddy under cultivation producing almost 60% of supply, substantial investments are required in the sector’s infrastructure in order to exploit hybrid breeds’ potential. Ahead of a planned expansion to 5000 ha, the Sultanate’s infrastructure capacity will be completed in Brunei Muara district in 2014 and cost nearly BN$22m ($17.13m) ONGOING: Collaborations, public-private partnerships (PPPs) and joint ventures have all been embraced by the government, which is offering potential investors substantial incentives under the Brunei Economic Development Board’s Pioneer Industries scheme (see Industry chapter). Pragmatic partnerships with foreign firms in commercial collaborations also remain popular vehicles for growth, given opportunities to share expertise and ensure technology transfer to local industry.

“We are looking for commercial operators to come into Brunei,” Hajah Aidah told OBG. “We allocated 165 ha to Korean firm Landevel two years ago to operate rice production and are ready to welcome other firms in joint venture partnerships with the DAA and local firms.” Such ventures will be critical for Brunei Darussalam to reach its 2035 goals, but the Sultanate’s agricultural sector has historically attracted nominal investment. It received as little as 1% of the ninth national development plan budget ( 2007-12) and has commanded a flat 0.5% of total commercial bank loans since 2005, which have been declining in value since 2008.

BOTTLENECKS: The availability of land remains a further restriction, with approximately 75% of the Sultanate’s 526,500 ha under forest cover. While 5895 ha is currently gazetted for agricultural purposes – equivalent to 1.1% of the Sultanate’s total land area – just 3926 ha was under cultivation in 2011.

Moreover, contemporary initiatives to revitalise the sector have faced the challenges of small, lowproductivity land holdings and a poorly skilled, ageing workforce dependent on migrant labour.

Average rice harvests in 2010 of 1.5 mt/ha were half the FAO global average and crops are the industry’s poorest performer. While HYV and hybrid strains are being introduced they require new, stringent cultivation practices. This presented several technical issues, but the 2010 launch of the Rice Farmers Field School in partnership with the Philippines Rice Research Institute, indicated positive results in 2011, leading the government to require that all rice farmers attend from 2010 onwards.

In turn, offering the DAA’s cooperation with Wasan Vocational School has been a key step in building interest among school leavers. The school now provides Brunei Darussalam Technical and Vocational Education Council diploma courses, including threemonth industrial attachments, in agriculture science, animal husbandry, aquaculture and fisheries, biotechnology, food science and technology, and horticulture and science. Yet growing disinterest among younger generations in what they perceive as an outdated lifestyle makes this an uphill struggle as the majority of farmers approach retirement age. This has ultimately left the industry uncomfortably dependent on the use of migrant labour; these accounted for approximately 74% of the 4955 workers recorded across the agriculture, forestry and fisheries sectors by the Department of Economic Planning and Development in 2009.

“We are trying to reduce our reliance on foreign labour through mechanisation,” Hajah Aidah said. “We are acquiring machinery for mechanisation of farming activities such as planting, transplanting (rice), harvesting, drying and sorting, which we are providing at half-price to eligible registered farmers.”

Such technical efficiency in Brunei Darussalam stands at 76% and moves to improve the use of resources and technologies could increase profit efficiency by 19%, according to the results of a recent survey conducted by Japan's Kyushu University. However, such initiatives are something of a placebo for the industry if the Sultanate’s wider economy does not expand as well.

SMEs remain in the primary stage of development and are lacking in capital resources. Mechanisation does not yet denote internationally competitive market prices, given a reliance on imported technologies. Furthermore, research conducted by the local Centre for Strategic and Policy Studies indicates the country requires a population of at least 800, 000-900,000 if it is to achieve a diversified economy with sufficient critical mass.

Yet as the government embarks on its 10th national development plan (2013-17), it is resisting calls to release more land and open the doors to skilled migrant workers, although that may become a reality in 2015 with the ASEAN Economic Community. The government is instead concentrating on the modernisation of agricultural practices, including maximising yields and the fully exploiting already allotted land. This has translated into a drive toward market-driven sustainable agriculture, providing business prospects and employment opportunities.

GOING GREEN: Despite registering a healthy 40.3 kg per capita consumption demand, growth in the fruit sector has been inconsistent in recent years. Total domestic consumption remains 17,041 mt, down 20% from its high point of 21,266 mt in 2002. However, the government has embraced modern farming practices and its 2023 production target of 24,000 mt would mean 100% self-sufficiency, particularly taking into account moves toward niche “organic” export markets. Initial steps have already been made with moves to reduce dependencies on fertilisers. Once provided free to farmers, the government has cut pesticides subsidies, providing them at half price in an initiative to encourage greenhouse and hydroponic farming practices.

The government is also working in collaboration with the Centre for Agricultural Bioscience International. The non-profit organisation is helping the Sultanate to upgrade its national biosecurity levels to better comply with trading frameworks such as the World Trade Organisation and the International Plant Protection Convention. These efforts have focused on capacity building in quarantine and biosecurity services, ecologically friendly integrated pest management and managing plant diseases.

PRODUCE STANDARDS: Such practices have necessitated upgrades in production monitoring mechanisms, with the DAA rolling out several accreditations and standards, including Good Agricultural Practices (GAP), Quality Assurance Quality Care and the currently voluntary Horticultural Farm Accreditation System, adapted from the ASEAN GAP.

“Brunei must ensure that standards are maintained to enter the local market, otherwise we run the risk of becoming a dumping ground for a lesser quality of goods from international producers,” said Ahmad Morshidi, the group chairman and managing director of Ideal Multifeed Farm.

The DAA’s ongoing campaign to plant 100,000 indigenous fruit trees is also creating pipeline production to come onstream within the next five years. In parallel, the DAA is seeking private investment on supervised land to capitalise on foreign expertise and kickstart downstream industries. Following proposed studies on the distribution, genetic diversity and development of indigenous fruits that will result in the collection and conservation of fruit germplasms, the DAA plans to register and clone high-quality indigenous fruits to be used in future breeding programmes. While a distant goal, this would benefit local industry, which posted a 20.62% y-o-y decline to BN$4.6m ($3.58m) in 2011, leaving imports worth BN$23.46m ($18.27m) to make up the shortfall created by 30% self-sufficiency.

Comparatively, growth opportunity in Brunei Darussalam’s much larger vegetable market is flat. Valued at BN$31.29m in 2011, it posted moderate growth of just 3% y-o-y. While per capita consumption at 52.5 kg pa is strong, growth potential is weaker given adequate overall self-sufficiency of 62.8%. With 85% self-sufficiency in tropical vegetables, the opportunity for growth lies in temperate vegetables supply, for which the Sultanate imports BN$8.84m ($6.88m) each year, 72% of supply. In this regard, the DAA is pursuing similar strategies to the fruit sector, with ongoing research programmes to collect, conserve and commercially produce indigenous vegetables with the adaptation of high technology.

MEAT OF THE MATTER: Technology adaptation is the key to Brunei Darussalam’s divergent livestock sector. The broiler industry posted positive growth of 20% over the past five years and production of 22,962 mt per annum ensures self-sufficiency of 99.2%, complemented by 99.3% self-sufficiency in egg production (128.87m per annum).

However, the local beef industry has declined some 60% since 2007, hampered by a reliance on imported feed, high labour costs and a small domestic market. Producing just 28.43 mt per annum, equivalent to 0.69% of the 4098 mt annual demand, beef imports have risen 32.14% since 2007, meeting the demand increase of 30%.

The DAA is looking to redress the balance with the development of market infrastructure through attracting private investment and increasing domestic capacity and business opportunities. The switch to closed houses for broilers is expected to further leverage efficiencies, while the development of feedlots is part of the beef industry strategy. This, the DAA has reported, will minimise the amount of land required, and, with a higher concentration of cattle, will reduce the cost of grain imports to be comparable with other ASEAN countries.

Such competitive pricing will make or break the industry. Australia, Brunei Darussalam’s principal source of beef, has seen a 6% reduction in live steer exports, from 6364 head (buffalo and cattle) in 2007 to 5999 in 2011 (though this was an increase from 4309 in 2010). This is generally indicative of the growing economic prerogatives throughout the consumer market in response to a 11.6-percentagepoint inflationary increase in food and drink prices since 2007 and has been seen in increased demand for cheaper Indian and Chinese frozen imports, Pengiran Hassan, the executive director of Bandar Seri Begawan-based meat importer Halaqah, told OBG.

Moreover, frozen imports may increase further from January 2013, when the grace period for abattoirs in Brunei Darussalam to meet Australia’s exporter supply chain assurance system standards – which require stunning live animals, a practice considered to be against halal ideas – expires. The Australian government has provided assistance to a local halal firm, Mulaut Abattoir, a subsidiary of Royal Brunei Airlines, to raise standards. However, with just two abattoirs in operation, 2013 may see a further reduction in live imports if standards are not met and Australian export licences are refused.

In any case, it is clear that self-sufficiency in meat remains a distant goal for Brunei Darussalam, given the current restrictions on land availability, feed import costs and standards that are not globally competitive. “Brunei Darussalam is too small to compete or to matter in terms of the international meat industry,” Pengiran Hassan told OBG.

WEIGHTED SCALES: Brunei Darussalam’s fisheries industry, however, is poised for significant expansion in aquaculture and has already made bold steps into downstream industries and export markets. MIPR’s Department of Fisheries (DoF) is predicting 176% growth in the overall sector by 2023, to BN$373m ($290.5m). This follows a tripling of industry value over two decades to BN$241m ($187.7m) with the breeding industry valued at BN$140m ($109m, 58%), farming at BN$44m ($34.27m, 18%) and seafood processing at BN$57m ($44.4m, 24%). While fisheries are poised for 55% growth, to BN$112m ($87.2m) by 2015, this will likely mark the sector’s ceiling.

The DoF has moved to preserve the Sultanate’s fisheries resources in favour of aquaculture, beginning with a moratorium imposed in 2000 on new trawler licences. This was followed in 2001 with an increase in mesh size of trawl cod-end from 38 mm to 51 mm and the moratorium on fishing in Zone 1 (0-3 nautical miles) where fishermen operating certain fishing gears, part-time fishermen and operators using foreign labour were transferred to Zone 2 (3–20 nautical miles) in 2008.

RESPONSIBILITIES: This was concurrent with the creation of three designated “no-take” Marine Protected Areas that encompass 20% of Brunei Darussalam’s maritime territories. Most of the industry’s forthcoming growth will be from new developments, Abdul Halidi Salleh, the DoF’s acting director, told OBG. “Aquaculture is expected to constitute 50% of the fisheries industry, providing BN$200m ($155.8m) in revenue pa by 2023,” Abdul Halidi said. “This value is mainly from shrimp production by improved production from existing sites, opening up more aquaculture sites, as well as from fin fish culture.”

Eliminating disease outbreaks and maximising yields has been at the forefront of DoF initiatives to modernise both the prawn and fish aquaculture segments, particularly in local farms that have shouldered much of the blame for previous outbreaks (see analysis). This has given rise to several successful joint ventures and PPPs that have helped the Sultanate emerge onto the regional export market and are attracting international investor interest.

This includes Brunei Darussalam's first indoor red grouper breeding pond, launched in 2009 by local fisheries company Myinvesco Hi-Q Biotech in a joint venture with Taiwanese firm Hi-Q Marine Biotech International. Valued at BN$3.4m ($2.6m) the fish farm will eventually produce 250 mt per annum. The Brunei Darussalam-China joint venture BioMarine also began to employ deep-cage fishing techniques in 2009; the company sent the Sultanate’s first live exports to Hong Kong in October 2012.

CAGES: With space limited onshore, offshore cage culture is expanding, Abdul Halidi told OBG. “An ongoing constraint to development of Brunei Darussalam’s fisheries industries is the availability of appropriate land for development given competition with other priorities like housing and other industrial activities,” he said. “In some cases, shortage of land fill has delayed the completion of projects. Also, due to limited cage culture areas in the Brunei Bay and other river estuaries, the DoF has opened up offshore areas for cage culture operations.”

Capitalising on its strong environmental record and attracting the interest of oyster farmers, Brunei Darussalam’s fish culture cages have found a strong market niche in surrounding East Asian markets. Further investment is now anticipated that will help the segment leave behind the BN$3.34m ($2.6m) revenue in 2011 and reap the 2023 projections. While processed seafood products are also expected to reach BN$61m ($47.5m) in 10 years, growth is limited by current upstream capacities.

PARKS & INNOVATION: While substantial and necessary investments are already under way in upgrading the Sultanate’s upstream sectors, known capacity constraints are expected to limit growth to BN$1.13bn ($876m) by 2023, albeit a substantial increase of 829%. However, almost double that value is expected from downstream processing, which could reach BN$2.13bn ($1.66bn), amounting to projected growth of 2552%.

This has created an ongoing paradigm shift toward vertically integrated industries and services. Presenting contemporary and future challenges for Brunei Darussalam, enabling uniform growth across disparate economic sectors has exposed a scarcity of domestic research and development (R&D) capacities and companies. The government has accordingly placed development of research clusters and innovation parks at the forefront of strategy.

Ahead of the curve, Brunei Darussalam’s Telisai 40-ha Eco-Aquaculture Park (TEAP) opened in 2010, while a proposed 500-ha Brunei Agro-Technical Park (BATP) outside of Bandar Seri Begawan has been earmarked as the future R&D focal point for agricultural industries. At an estimated cost of BN$20.5m ($16m), the 50-ha, 25-lot Phase I development is scheduled for completion in January 2013, following groundbreaking ceremonies held in April 2011.

Heralded as an incubation centre for local SMEs alongside the major vertically integrated operators in agriculture, food products, forestry, pharmaceuticals, cosmetics and aromatics, the BATP is also expected to become the future home of the rapidly expanding Brunei Halal food brand, which is gaining international prominence for its strict standards.

GLOBAL PRESENCE: Expanding over Phases II and III, the BATP will help to increase Brunei Darussalam’s presence in the global halal market by incorporating the Halal Science Centre and the Food Development Centre, the latter being under development by Agriteam Canada Consulting. Providing support services and technology transfer to local SMEs, the Food Development Centre is set to host laboratories for food processing, microbiology, packaging, and sensory evaluation, among other areas of interest.

While the BATP undoubtedly faces considerable competition from established regional R&D competitors, the Sultanate is banking on its untapped ecological reserves and educated labour force to leverage further investment. With approximately 9000 jobs, including 2000 professionals, planned for the BATP, the goals are achievable, said Hj Sabri Md Taha, the head of the Halal Industry Innovation Centre (HIIC), which is assigned to the future BATP.

“The BATP, once established, will provide services that accommodate the entire value chain,” Hj Sabri told OBG. “This will grow in tandem with the global halal market and provide new opportunities that we can develop in collaboration with foreign companies and institutions. While Brunei Darussalam’s R&D industry is relatively young, we believe that we can tap the healthy latent potential within Brunei’s well educated domestic workforce to quickly meet the industry’s requirements.”

With the HIIC in the process of finalising three MOUs with Osaka University, the Japan Food Research Lab and Florida State University in 2012, the Sultanate’s potential for growth has already come to the attention of and attracted substantial interest from investors and research partners alike.

The government has facilitated R&D partnerships through increased budgets at the Universiti Brunei Darussalam (UBD) and the establishment of the iCentre and Knowledge Hub in the capital. These efforts have already created a unique partnership between UBD and IBM, in the process giving the Sultanate the use of a Blue Gene supercomputer.

By providing local weather modelling at 1.5-km resolution, IBM reports that Brunei Darussalam is now the only nation in the world that has combined highresolution, national-scale, multipurpose, integrated modelling services. Data provided by IBM is already being made available to farmers and rolled out to hydrological forecasting applications for floods, crop productivity underpinned by seasonal and routine crop maintenance (such as fertilising), as well as regional climate modelling.

HALAL BRAND: While such partnerships remain today’s exceptions, they are exemplary of Brunei Darussalam’s ambitions, which are also being realised in the global halal market. Leveraging its growing orthodox Islamic outlook, the Sultanate has rapidly and successfully engineered an expanding global market niche for its halal products under the Brunei Halal (BH) brand. While the brand has gained increasing prominence in the global food sector, with an operational office now in the UK, constrained domestic production capacities have turned its attention internationally where the brand is starting to have a considerable impact amongst confidence-hit halalconsumers (see analysis).

“It is important to understand that there is value-added cost with regards to halal foods, such as the slaughtering process and the particular feeding requirements of chickens,” Ahmad Morshidi, the group chairman and managing director of Ideal Multifeed Farm, told OBG. “Many countries claim to meet the standards of halal, but they don’t stick to the requirements, the Sultanate does. Brunei Darussalam’s halal foods are highly rated and in demand by the Muslim community.”

Yet halal’s potential within Brunei Darussalam’s nascent downstream sectors is unbridled. Capitalising upon untapped resources within the HOB and the strong educational foundation of its domestic workforce, comparable to many of its ASEAN neighbours, the Sultanate is pursuing the development of halal R&D capacities.

Building on BH’s international reputation and scoring some early investment successes, the completion of the BATP will attract a substantial portfolio of partnerships and investments that look set to give rise to the Sultanate emerging as a regional player in halal products across the pharmaceutical, medical, cosmetic, food and agribusiness sectors.

OUTLOOK: After decades of neglect, goals set for the agriculture sector and stakeholders ahead of Brunei Darussalam’s 2013 ASEAN chairmanship will take longer to achieve than its policymakers may hope. Yet, in some cases government policy is in line with departmental and private sector initiatives, notably in the Sultanate’s fisheries industry, which should deliver substantial results in the near future.

In land-based activities, restricted capacities and outdated practices have blunted the effectiveness of reform initiatives and these challenges will continue to define the sector for now. However, the partnerships that have been developed with foreign firms and organisations will deliver the desired reengineering of sector outputs in the long term.

This in turn will determine the realisation of further downstream goals. While development can be expected to help cultivate Brunei Darussalam’s international profile, desired outputs remain dependent on an increase in capacity, capabilities and sector engagement among the Sultanate’s labour force.