Construction of a bridge and new manufacturing hub to bring economic benefits to Brunei Darussalam

A number of large-scale construction projects are currently being rolled out in Brunei Darussalam that look set to make a significant contribution to the national economy, greatly facilitating the Sultanate’s connectivity and potentially leading to further substantial construction opportunities. In addition, several small-sized infrastructure projects are under way, which promise to add to the Sultanate’s attractiveness as an investment destination and undergird its growth as a logistics and processing hub.

Streamlining Processes

To increase the ease of doing business in the Sultanate, in 2015 the Ministry of Development (MoD) introduced changes to improve and accelerate the approval process for building and land developments. These changes, which took effect in February of that year, have also adjusted the roles and responsibilities of the government authorities involved in the permit process, namely the Town and Country Planning Department (TCP), the Sultanate’s land-use planning authority, and the newly-established Authority for Building Control and Construction Industry (ABCI).

At each step of the process are a number of procedures that must be completed before any construction project can begin. At the planning stage, for example, an environmental impact assessment or environmental management and monitoring plan must be carried out, and planning approval acquired from the TCP. For development approval, the investor or developer is required to apply to the ABCI to ensure compliance with building and structural safety regulations. Then, after a survey is performed to satisfaction, the ABCI and other relevant authorities perform a documentation review and inspection. If successful, the ABCI issues a permit for construction to begin or the relevant building to be occupied.

One-Stop Shop

The ABCI was established as a one-stop shop for investors and developers interested in developing land and buildings in Brunei Darussalam. ABCI’s remit includes ensuring the safety of newly-constructed or renovated buildings, and coordinating and facilitating procedures for applications to develop land and buildings. The authority also develops and maintains national and international standards, consults on technical barriers to trade, ensures that only quality materials enter the market, and registers companies, laboratories and consultants related to quality management systems.

The consolidating of final inspections and all pre-construction approvals and building permits under this single authority has helped to improve Brunei Darussalam’s ranking in the World Bank’s “Doing Business” report in 2015 and 2016. In 2015 the Sultanate’s ranking for dealing with construction permits jumped 16 places to 21st out of 189 economies overall. In 2015, although Brunei Darussalam’s overall ranking dropped three places to 101, this was attributed to gains made by other economies rather than any changes in the Sultanate. Indeed, in 2016 the Sultanate climbed 20 places to place 81st overall. While its construction permit ranking remained static in 2016, this was attributed to revisions made to the way the survey is conducted.

In 2015 construction, building and heavy equipment, including cement finishing mills, the manufacture of electrical industrial machinery and apparatus, rolling mill plants and sheet metal-forming, were declared as pioneer industries and pioneer products by the Brunei Economic Development Board (BEDB), The BEDB also included technical services, such as construction, distribution, design and engineering services as qualified services.

Labour Supply

Brunei Darussalam relies on foreign labour to fill unskilled and low-skilled jobs. The largest percentage of these are guest workers, who are allowed to work in the country on renewable two-year contracts. The majority are construction workers from Indonesia, Malaysia and the Philippines.

The number of foreign workers in all Bruneian industries – including the construction sector – was 141,852 as of March 2015, according to the local press. In January 2015 the Ministry of Home Affairs announced plans to impose a levy on recruiting foreign workers in certain industrial sectors in the private sector to control the number of foreign workers in the Sultanate. The levy was expected to be introduced in January 2016 but, as of April 2016, it did not appear that its introduction has been pursued any further. Statistics published in the “Labour Force Survey 2014” by the Department of Statistics showed that out of 100,879 private-sector employees in Brunei Darussalam, 46.5% were foreign workers. The survey also found that of all those working in the Sultanate’s construction sector, 70.3% were foreign. Any levy that increased costs or hampered the construction sector’s ability to bring in foreign workers would, therefore, have a dramatic effect on the sector’s operations and costs, especially because Bruneians have historically been reluctant to undertake low-skilled or low-paid work, such as is the norm in the construction sector.

As a way to increase the number of local construction-sector experts, members of the Legislative Council of Brunei have recommended establishing a programme to make construction industry jobs more attractive, stating that such a programme would increase the number of Bruneians in the building industry and improve human resources.

Pehin Dato Suyoi Osman, the former minister of development, responded positively to the recommendation, saying that the ministry would increase and review its efforts to improve local skills in the construction industry and would discuss possible solutions with the private sector. Some industry players agree that education is key to sector development. “Long-term and sustainable growth can be achieved through the enhancement of the education system, which remains the cornerstone of any economy,” Yap Boon Siang, managing director at DHJ Electrical Engineering, told OBG. “Brunei Darussalam has already made great strides in that regard.”

Health & Safety

Part of the campaign to increase the number of local construction workers employed in the Sultanate is a safety drive undertaken by government officials. Statistics released by the Public Works Department (PWD) in 2014, the latest year for which data is available, showed that accidents in the construction industry across the Sultanate had increased by 22 cases over the previous year to a total of 95 cases, including six deaths. This was a 30% increase from 2013 when 73 construction-related accidents were reported. Government officials have urged contractors to comply with regulations to employ qualified health and safety auditors on all construction projects, in line with stipulations in the Health, Safety and Environment (HSE) plan, which is submitted to the Health, Safety and Environment Section of the Public Works Department before beginning any project. The HSE plan identifies hazards that may arise from a construction project and proposes risk controls to ensure workers’ safety.

The construction industry as a whole has also been pressed to ensure projects are completed in a timely manner. In March 2015 Suyoi told a group of civil engineers upon their graduation from the ministry’s Further Learning Programme, with a Postgraduate Diploma in Professional Engineering (Civil Engineering), to avoid delays, terminations and cost overruns in their projects. He blamed such project mishaps on poor supervision, inexperience and inadequate knowledge of how to implement agreed specifications for construction projects, which he said was the responsibility of consultants and engineers who should fine-tune their technical skills to become efficient managers and supervisors, as well as produce high-quality buildings and infrastructure. “Constant pursuit of knowledge and skills here is vital because the construction industry is extremely complex,” he said. “We need officers and engineers who are capable of increasing their skills, ready to work in a new and challenging environment.”

Green Buildings

Adding to the government’s push to professionalise and modernise the construction industry and its practices, in May 2015 it was announced that, under new guidelines, all new government buildings would be required to adopt green design, construction, operation and maintenance.

The guidelines, called the Energy Efficiency and Conservation Building Guidelines 2015 for Non-Residential Buildings (EEC Guidelines), are expected to reduce the amount of energy that new buildings consume by between 30% and 50%. The guidelines will be amended to existing building environmental sustainability regulations and will be voluntary for the private sector for the time being.

This announcement was followed, in March 2016, by the rollout of a green rating system for existing non-residential buildings. Developed by the PWD, the system – called the Brunei Accredited Green Unified Seal (BAGUS) – is a “green tool” to assesses sustainability and durability. On the day of its launch, three government buildings were awarded with BAGUS status, namely the MoD and PWD headquarters, and the Housing Development Department.

The EEC Guidelines are meant to encourage green building designs and best practices in the construction industry to tackle climate change issues. The guidelines also promote renewable energy and reducing dependence on non-renewable energy, resulting in less pollution and energy consumption. Shortly following their introduction, it was announced that two new mosques would be built in full compliance with the guidelines. Scheduled for completion in March 2017, the mosques – to be built under the Rimba and Lumut national housing schemes – are expected to cost approximately $25m, and will be the first mosques in Brunei Darussalam to comply with the new guidelines.

Large-Scale Projects

In the same month that the EEC Guidelines were introduced, construction began on one of Brunei Darussalam’s most significant current construction projects: the Pulau Muara Besar (PMB) island petrochemicals plant. Located in the Brunei-Muara district, 5 km offshore from Muara Port, PMB is being developed as an oil and gas refinery, deep-water port and manufacturing hub.

Major infrastructure upgrades to be performed on the island include a deep-water container terminal, a bridge linking PMB island to the mainland, a manufacturing centre with commercial facilities and services, an export processing zone, a single-buoy mooring system and a coking plant. The 260-ha plant, built by China’s Hengyi Industries, will have a production capacity of 135,000 barrels per day of crude oil and condensates. When fully operational in 2018, the plant is expected to contribute around $2bn per annum to the Bruneian economy.

The project has been timed to coincide with the opening of the 2.7-km, four-lane Kampong Serasa bridge. The bridge, which will link PMB’s western shore to the mainland, is being built by the Chinese contractor China Harbour Engineering Company (CHEC). The development includes the construction of a four-lane road on PMB as well as power, water and telecommunications services. CHEC, a subsidiary of China Communication Construction Company (CCCC), will offer jobs on the project to qualified local graduates in order to facilitate knowledge and expertise transfer, as part of CHEC’s corporate social responsibility contribution.

Another bridge under construction is the Sungai Kebun Bridge, which will connect Mukim Lumapas to the country’s capital, Bandar Seri Begawan, and is expected to be fully completed in June 2016. The bridge will have two dual carriageways and two interchanges and is estimated to cost $138.9m. The construction of the bridge, which is set to become the world’s second-longest, one-pylon, concrete-cable stayed bridge, is a joint venture between the local firm Swee and South Korea’s Daelim Industrial. Upon its completion, the bridge is expected to carry around 9000 commuters from the Mukim Lumapas and Mukim Sungai Kebun areas per day.

Mega-Bridge

Another large-scale project in the works that is expected to provide a significant contribution to the infrastructure and economy of the Sultanate is the $1.6bn Temburong bridge which, for the first time, will link the Brunei-Muara district in western Brunei Darussalam with Temburong in the east. When complete, the journey time between the Sultanate’s two separate halves – which is currently around a 1.5-hour journey over land, involving multiple border crossings, or a 45-minute boat ride – to 20 minutes. The complex project, which spans a distance of some 30 km, was divided into six separate contract packages: CC1, which consists of the Mentiri tunnels); CC2 (marine viaducts); CC3 (navigation bridges); CC4 (Temburong viaduct); CC5A (traffic control and surveillance system, supervisory control and data acquisition systems, and road lighting); and CC5B (a power supply system).

The contract for the CC2 package, a 13.4-km viaduct across Brunei Bay worth over $600m, was awarded to a joint venture between Daelim Industrial and Swee in February 2015. According to local press reports, work has since begun on site-management facilities at Serasa, the importation of machinery, reclamation for a docking yard, ground investigation along the bridge alignment and material sourcing. In September 2015 the MoD awarded another package to Daelim and Swee – the CC3 – to construct the project’s navigational bridges. At the same time, the MoD awarded the package to build the Temburong viaduct to a joint venture between China State Construction Engineering Corporation and Ocean Quarry and Construction. The CC4 package encompasses the construction of a 11.8-km viaduct over the mangrove swamp between Tanjung Kerasek and Labu in the Temburong district; a smaller bridge crossing Sungai Labu; and a junction treatment at Jalan PuniLabu, also in Temburong. Work on the navigational bridge and the Temburong viaduct is expected to be completed between February and March 2019.

According to the PWD, the Mentiri tunnels package will involve the construction of a series of tunnels with a total length of around 3.6km, passing through the Mentiri Ridge overlooking the Brunei channel. Each tunnel will contain a two-lane carriageway of 5.7 metres in height. Traffic will enter the tunnel at Jalan Utama Mentiri in the west and at Temburong bridge in the east. When the bridge is completed, the Temburong district will be easily accessible for further construction projects for the first time. The government will then be able to act on its plans to ramp up development in the district which, due to its isolation and conservation commitments, hosts pristine forests and plentiful natural resources.

Foreign Investment

Chinese companies are eager to partner with Bruneian firms on infrastructure construction projects, as these types of projects forward China’s plans to improve connectivity across Asia. China has already invested heavily in Brunei Darussalam, with projects such as the Hengyi oil refinery and the steel pipe manufacturing facility at Huludao. China’s construction firms are also keen to be part of the Muara Port development, and the Temburong bridge project and highways. “We are trying to help infrastructure building so we can upgrade the connectivity here,” Yang Jian, China’s ambassador to Brunei Darussalam, told press in April 2015. Chinese investment is also bringing benefits in terms of skills sharing. Shan Zhigang, the project director at China State Construction Engineering Corporation, told OBG, “In terms of human capital, the private sector, especially foreign contractors in the construction industry, should focus on technical transfer and know-how.”

Roads, Highways & Flyovers

A BN$18.2m ($12.9m), 60-metre flyover across the Tutong-Telisai highway opened in April 2015 to help manage the increasing level of traffic in the area. The highway is one of the country’s busiest. Of Tutong’s 40,000-strong population, about 6000 reside at nearby Kampung Bukit Beruang. A number of new residents are also expected at the newly completed Bukit Beruang national housing scheme.

Five main intersections in Tutong will also see future flyover construction. According to the PWD, the sites pegged for development are the routes leading to the Bukit Panggal industrial site, Jalan Sungai Basong, Jalan Sengkarai, Jalan Bukit Udal and Jalan Tanjong Maya. Furthermore, according to the BEDB, a 18.6-km highway linking Telisai to Lumut is scheduled for completion by the end of April 2016. The BN$138m ($98.2m) highway is expected to ease congestion between the capital and the Belait district, and along the existing Lumut-Telisai road. Surati Construction, a Brunei contracting firm, was the leading contractor for the project, in partnership with CCCC. Work on the highway, which began in 2010, was scheduled to be completed by February 2013, but was delayed by geotechnical issues, according to the BEDB. The complications resulted in the construction of six bridges, the longest of which was 600-metres in length.

New Plans

Under a five-year strategic plan to manage Brunei Islamic Religious Council (MUIB) assets, a five-unit terrace house project worth BN$437,380 ($311,000) is under way in Kampong Katok. Upon completion, the houses will be rented out to the public. “Under this five-year strategic plan, we will be constructing houses and buildings that could generate income for MUIB,” said Mohd Adi Asnawi Adanan, a representative from the council, Badan Tanmiah Harta Majlis Ugama Islam, established to develop MUIB’s assets to generate income for the socio-economic development of the Sultanate’s Muslim community. This follows on the heels of the council’s first project: the construction of five terrace houses in Kampong Rimba at a cost of BN$514,250 ($365,893), pegged for completion before the end of 2016. Although rental prices haven’t been decided, unfurnished houses could be leased for as little as BN$700 ($498) per month. The council also plans to build a multipurpose hall and a child care centre. “The large-scale, affordable housing projects and water supply improvements are both major initiatives, as are the on-going flyover projects designed to ease traffic congestion,” Bobby Chua, the vice-chairman of the construction firm Swee, told the local press.

Materials For Growth

Brunei Darussalam’s only cement producer, Brunei Cement, supplies 65% of the domestic market with output from its singular grinding plant. The company manufactures ordinary Portland cement, which is high in terms of strength and durability, resulting in a longer life span and reduced construction costs. Brunei Cement typically has a capacity utilisation rate of around 50% and, historically, it has benefitted from consistent demand arising from the Sultanate’s various housing projects. However, with many construction projects currently on hold while the economy stabilises, and no new housing projects likely to be announced, Brunei Cement is pinning future hopes on being awarded contracts to supply the Temburong bridge project.

While Brunei Cement does not export its cement, foreign importers do compete with Brunei Cement in the domestic market. Thai cement producer TPI is one of their biggest competitors, while another competitor from China is building a large cement plant in Kalimantan, the Indonesian part of the island of Borneo. Brunei Cement outsources its transportation and distribution services through certified contractors and agents. In line with its Bruneianisation policy, 70% of Brunei Cement employees are from the Sultanate. In 2000 the ratio of locals to foreigners was 30:70 but by 2009 it had flipped to 70:30.

Aside from cement, Brunei Darussalam is dependent on imports for the majority of its construction materials. This tends to increase construction costs, especially as the Brunei dollar is pegged 1:1 to the Singapore dollar, making imports more expensive.

Furthermore, Borneo’s tropical climate requires a unique set of construction materials and methods from those of temperate climates. For instance, set concrete construction with reinforcing steel (rebar) is the norm for most structures in the Sultanate. High humidity and annual rainfall also mean concrete setting takes longer than in temperate climates, increasing construction timelines relative to other areas.

Outlook

The construction of more affordable housing is a welcome development for those Bruneians who have spent several years on waiting lists for accommodation. Elsewhere, with many construction projects on hold, a good deal of attention is currently focused on the Temburong bridge and PMB developments. Alongside these mega-projects, road and port improvements, the increased ease of attaining construction permits, the cultivation of local construction talent and China’s interest in the sector are incremental but key additions to the overall infrastructure of the country and its efficiency.