By focusing on niche segments the sector is sure to grab a greater share of the market

The country is currently in the midst of an ambitious agricultural reform campaign designed to ease the Sultanate’s heavy reliance on foreign imports by increasing domestic output of key commodities such as rice, fish, crops and livestock. Limited by a dearth of plantable land – just 1% of Brunei Darussalam’s already small land mass is gazetted for agricultural use – the agricultural, forestry and fisheries sector made up just 0.73% of GDP in 2013, or BN$146.3bn ($114.8m), according to data from the Department of Economic Planning and Development (JPKE). In order to mitigate land restrictions and other challenges associated with the country’s relatively small population, the Sultanate’s strategy is currently to work on maximising efficiency and targeting niche markets. By focusing on research and development (R&D), modern agro-industrial practices and higher-yielding crops, as well as bolstering domestic processing operations, the agriculture sector is looking to ease its reliance on foreign food imports and boost its cash-crop exports.

Cash Crops

Brunei Darussalam’s agricultural, forestry and fisheries contribution to the economy is modest. The sectors’ annual output registered a total of BN$131.9m ($103.5m), or 0.63% of GDP, in 2011; BN$151.5m ($118.88), or 0.72% of GDP, in 2012; and BN$146.3m ($114.8m), or 0.73%, in 2013, according to the JPKE. As a result, the country imports some BN$600m ($470.82m) worth of food each year with a particularly high percentage of imports of rice and livestock. The country fares much better in terms of fish, poultry and egg output; the Sultanate is largely self-sufficient in the latter two categories and has boosted exports recently in the former.

By contrast, Brunei Darussalam exported only BN$20.6m ($16.16m) worth of food products in 2013, although this represented an impressive 243% increase over the BN$6m ($4.7m) exported in 2012. Ongoing investments in the agriculture, fisheries and processing sectors continued to spur growth through early 2014 as food exports jumped year-on-year (y-o-y) by 215.4% in April 2014 from BN$1.3m ($1.02m) to BN$4.1m ($3.2m), followed by a 241.7% y-o-y increase in May from BN$1.2m ($941,640) to BN$4.1m ($3.22m).

Oversight

The Department of Agriculture and Agrifood (DAA), operating under the Ministry of Industry and Primary Resources (MIPR), is the primary body tasked with promoting and regulating the agriculture sector. The DAA’s duties include reviewing and formulating policy, promoting investment, building stakeholder capacity and increasing productivity. The DAA also carries out R&D projects and operates a network of 23 agricultural stations that range in size from less than a hectare to more than 250 ha. The MIPR plays a key role in implementing Brunei’s Agriculture and Agrifood Incentive Scheme, which assists domestic farmers with the cost of production and sets price controls for locally produced rice. The prices of other food products are regulated by the JPKE in accordance with the Price Control Act Chapter 142.

The DAA is now finalising a new medium-term strategic plan after recently wrapping up its previous programme, which covered 2008-13. The priorities pursued in the most recent strategy included: improving agricultural policies, legislation and regulation; encouraging investments from the public and private sectors; fully utilising human resources and increasing the capacity and skills of staff; intensifying and consolidating support programmes that will stimulate agri-business development; improving marketing methods through effective and efficient market infrastructure and distribution systems; building the capacity of and strengthening relationship with stakeholders; and transferring appropriate and up-to-date technologies.

The main objectives of the upcoming 2014-18 strategic plan, which the DAA announced in May 2014 it was preparing to release, will focus on programmes that improve the nation’s food security through sustainable production of primary commodities such as rice, vegetables, fruit, chicken, cattle and chicken eggs, as well as the development of related technologies. It will also target the expansion of secondary industries such as the processing of agrifood, in particular the development of a food incubator for entrepreneurs and a Food Development Centre to be set up at the Bio-Innovation Corridor in Kampung Tungku. Other relevant bodies involved in the sector include the Department of Supply and State Stores, which works under the Ministry of Finance and is responsible for importing, storing, and supplying rice and sugar.

Challenges

Constrained by a government edict restricting agricultural use to 1% of Brunei Darussalam’s 5765 sq km of landmass and employing only a fraction of its population, the country’s agricultural sector operates under a much different systems than neighbouring agro-industry powerhouses such as Malaysia, Indonesia and Thailand.

As of 2013, the total gazetted area for agricultural development stood at 12,344 ha. The largest concentration of workable land is located in the Belait District, which contained 4656 ha of agricultural land, followed by Brunei Muara with 3710, Temburong at 2065 ha and finally Tutong holding 1913 ha. However, due to the long bureaucratic process involved in changing the classification of gazetted land to cultivation, only 5658 ha of this total was approved for use in 2013 – 4892 ha is currently being cultivated – leaving the remaining 6685 ha still in processing.

However, 5658 ha already represents 0.98% of landmass, making it unclear how much more land can be gazetted for agricultural use as any significant increase would push the total over the 1% threshold.

Focussing On Rice

In spite of financial assistance from the government, Brunei Darussalam remains heavily dependent on imports to meet its rice consumption requirements, with domestic growers producing only approximately 3.61% of demand as of 2013. The government is seeking to rectify this imbalance through an ambitious initiative to put the country on the path to food independence by increasing yields and expanding paddy acreage (see analysis), although as of early 2014 the initial target of 60% self-sufficiency by 2015 appears unlikely to be met.

After increasing significantly from 1480 tonnes in 2011 to 1756 tonnes in 2012, rice production tailed off again to 1237.3 tonnes in 2013, according to JPKE data. The bulk of output came from Brunei Muara District, which harvested an area of 490.94 ha in 2013, yielding 764.6 tonnes of rice after milling, according to the most recent DAA figures available. This was followed by the districts of Tutong, which contributed 150.9 tonnes from 292.71 ha of land, and Belait, which produced 139.4 tonnes of milled rice from acreage of 267 ha. Temburong produced another 182.6 tonnes of rice from 237.80 ha of paddy area.

There are numerous factors contributing to the Sultanate’s perennially low rice output. Some of these are being addressed through the self-sufficiency initiative and include insufficient irrigation and drainage infrastructure; pest and disease outbreaks; lack of policy support for agriculture in rural areas; strategic focus on agri-business; and the usage of traditional low-yielding rice strains. Other challenges may be harder to address such as relatively high production costs compared to imports (currently mitigated by government assistance), difficulty in getting land tracts gazetted for agriculture use and the lack of interest among the local people to do rice farming due to urban migration.

Meeting Demand

As a result of the implementation of modern, large-scale poultry farms in Brunei Darussalam, the country’s demand for chicken and eggs is largely met by domestic producers. An impressive 97.1% of total poultry consumption of 23,762 tonnes was met by local farmers in 2013, which produced 23,062 tonnes of chicken meat in the year worth BN$104.43m ($81.9m), according to the DAA. Of the 61 poultry farms active in the country, a handful of firms dominate the sector. These include market leader Soon Lee Farm, with the highest share of 4267 tonnes of meat, and QAF Farms with 3565 tonnes. This was followed by Ideal Multifeed Farm, which produced 3232 tonnes, Hua Ho Agriculture Farm with 2374 tonnes and Syarikat Kumpulan Harapan Baru, with 1666 tonnes. A total of 56 smaller firms made up the remaining 7958 tonnes, holding around 35% of the market.

Agro-Industry

Without the ability to compete in terms of economies of scale with mass agriculture exporters in the region, Brunei Darussalam is instead focusing on strategic niches. By capitalising on its developed infrastructure, the country is hoping to obtain quality raw materials from other regional markets in order to add value to commodities that will then be exported. Early progress in this segment, which includes primary production activities along with agrifood manufacturing and processing, trading of agricultural inputs and agricultural produce, and other related activities, has already been made in form of large-scale poultry and seafood farming, modern food manufacturing and food-based professional services.

This segment should receive a further boost with the signing of a memorandum of understanding in September 2013 between China’s Guangxi Ming Ming Agriculture Company and local rice producer Asia Enterprise to build an agricultural industrial park in the country to produce fruits, vegetables, rice, poultry and fish. The BN$4m ($3.14m) project would be constructed in two phases over four years at an 80-ha site and will house 66 ha of planted area, along with 13 ha set aside for a greenhouse and 1 ha for a training centre. The partnership will further solidify Asia Enterprise’s position as a market leader in Brunei Darussalam, where it is one of the largest dealers of fertilisers, pesticides, seed and agricultural machinery.

Other major agricultural projects under way as of mid-2014 include a plan for building a combined livestock and fruit tree farm in Tutong; the Brunei Darussalam Halal Science Centre in the 500-ha Bio-Innovation Corridor, which will carry out tasks that include halal authentication, detection, innovation and R&D; and a more than $21m irrigation project for Brunei Muara District, which will provide rice farmers with the infrastructure necessary to boost productivity.

Fisheries

In spite of maintaining strict catchment standards to protect its domestic stocks, Brunei Darussalam’s fisheries sector has also experienced renewed growth in recent years. Local production has increased from 15,058 tonnes in 2011 to 18,252 tonnes in 2013, driven largely by the capture industry, which accounted for 14,320 tonnes of this output. Although starting from a relatively low base, the aquaculture industry has more than doubled its output over the same three-year span, during which production grew from 301.8 tonnes to 606 tonnes. The most significant factor in this growth was the dramatic spike in farmed prawns, which increased from 156.8 tonnes in 2011 to 456.4 tonnes in 2013, while processed seafood expanded from 1250 tonnes to 3326 tonnes over the same time period.

One particular bright spot in the prawn farming sub-sector has been Golden Corporation, which has ramped up its production of the blue shrimp found almost exclusively in Brunei Darussalam. Operating out of its BN$30m ($23.5m) processing facility in Tapak Perindustrian Serambangun Tutong, the company is a 60:40 joint venture between the government’s investment and trading arm for economic diversification, Semaun Holdings, and local seafood producer Golden Corporation. While the firm employs a fishing fleet for the capture segment, much of its activities are focused on shrimp farming operations, for which it recently acquired an additional 200 ha of land from the Brunei Economic Development Board. This is turn is expected to allow a doubling of production to 100-125 tonnes of shrimp per month, or 1200-1500 tonnes per year for export to current markets in China, Hong Kong, Taiwan, South Korea and Japan, as well as possible future destinations in the EU and Middle East. Several other industrial fishery parks are also operating across the country, including the 40-ha Eco-Aquaculture Park in Telisai.

Outlook

While recent strategic shifts have placed a new premium on reaching self-sufficiency in food production, a number of factors continue to contribute to delays in achieving this target. While these immediate goals may remain unmet for the time being, significant progress is still being made in terms of boosting yields and developing a more robust infrastructure that will continue to support domestic production and provide more import replacement products. The second component of the agricultural strategy, developing agro-industry and processing capacity with a bent towards exports, should also provide long-term value for the sector, provided it can continue to attract investment.