Tue, Mar 06, 2018 page11

• China adds Brunei to its new silk road

  DISPUTE: Offering big investments is part of Beijing’s strategy to split Southeast Asian nations and ensure there is no South China Sea consensus, an academic said

  • Reuters, BANDAR SERI BEGAWAN
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  On a tiny island off Brunei’s northern tip in the South China Sea, thousands of Chinese workers are building a refinery and petrochemical complex, along with a bridge connecting it to the capital, Bandar Seri Begawan.

  When completed, the first phase of the US$3.4 billion complex on Muara Besar island, run by China’s Hengyi Group (恒逸集團), is to be Brunei’s largest-ever foreign investment project and comes at a time when the oil-dependent nation needs it the most.

  Brunei’s oil and gas reserves are expected to run out within two decades.

  

  Sultan of Brunei Hassanal Bolkiah, front right, inspects an honor guard during National Day celebrations in Bandar Seri Begawan on Feb. 24.

  Photo: Reuters

  As production falls, oil firms will not be investing much into existing facilities, further hampering output, oil analysts said.

  As a result, the nation’s oil revenues, which provide virtually all of Brunei’s government spending, are in steady decline.

  With youth unemployment rising, Brunei’s ruler, Sultan Hassanal Bolkiah, is trying to quickly reform the economy and diversify its sources of income, while fighting graft and cracking down on dissent.

  Brunei’s changing fortunes have been reflected its financial industry.

  HSBC Holdings PLC pulled out of Brunei last year, while Citibank NA exited in 2014 after 41 years.

  Bank of China (中國銀行), meanwhile, opened its first branch in the sultanate in December 2016.

  The Muara Besar project is promising more than 10,000 jobs, at least half of which would go to fresh graduates, media reports in Brunei said, but claims that thousands of Chinese workers have been shipped in to build the complex has angered some local residents.

  “There are no jobs for us, so why create some for the Chinese?” a shopkeeper in the capital asked.

  Hengyi Industries Sdn Bhd, the local firm building the refinery, did not respond to requests for comment.

  The company, founded in 2011 and based in Bandar Seri Begawan, expects to complete the first phase of the refinery and petrochemical complex on Muara Besar by the end of the year, according to its Web site.

  A US$12 billion second phase is to expand the refinery capacity to 281,150 barrels per day, and build units to produce 1.5 million tonnes per year of ethylene and 2 million tonnes per year of paraxylene, the company said last month.

  Total Chinese investment in Brunei is now estimated at US$4.1 billion, according to the American Enterprise Institute’s China Global investment tracker.

  That is almost certainly going to rise as China ramps its Belt and Road Initiative.

  Sometimes called the “21st Century Maritime Silk Road,” it envisages linking China with Southeast Asia, Africa and Eurasia through a complex network of ports, roads, railways and industrial parks.

  “Brunei is an important country along the 21st Century Maritime Silk Road,” Chinese Ambassador to Brunei Yang Jian (楊健) said at the opening ceremony in February last year of a joint venture running Brunei’s largest container terminal.

  Accumulated US foreign investment in Brunei, by contrast, was just US$116 million in 2012, the latest figures available, according to the US Department of State.

  China invested about US$205 billion in East Asia between 2010 and last year, according to the China Global investment tracker.

  It has been increasing those investments, while tussling with four other Southeast Asian nations, including Brunei, over competing claims to islets and atolls in the South China Sea

  “Building good relations and offering big investments are part of China’s strategy to split Southeast Asian nations to ensure there is no consensus on South China Sea matters,” said Jatswan Singh, associate professor at the University of Malaya in Kuala Lumpur, who has authored four books on Brunei. “The sultanate is hard-pressed for investments to diversify its economy and in this sense the Chinese investments are important to [Brunei],” he said.

  Brunei has not commented publicly about its territorial claims in the South China Sea.

  There was a time not so long ago, with oil prices at more than US$100 a barrel, when Brunei citizens could not care less about jobs at a refinery.

  Squeezed between two Malaysian states on the island of Borneo, Brunei provided cradle-to-grave benefits for its 420,000 citizens, including zero taxes, subsidized housing, and free education and healthcare, but the sultan has had to whittle back some of those benefits — Brunei has been in recession for three straight years — and tighten up the ship of state.

  The 71-year-old Bolkiah, the world’s second-longest-reigning monarch, reshuffled his Cabinet last month, replacing six top ministers — just over a couple of years after they were appointed.

  No explanation was given.

  Sources close to the government and foreign diplomats said Bolkiah wanted to weed out corruption and address grumbling among the Malay-Muslim majority, who are unhappy with the pullback in welfare programs, budget cuts and unemployment.

  In the last available official report in 2014, the unemployment rate was put at 6.9 percent.

  Unofficial figures suggest youth unemployment could be as high as 15 percent.

  “A majority in Brunei expect a job in the government, state-linked firms, or in the oil and gas sector, but all three have been hit pretty hard,” one Western diplomat said.

  Bolkiah, who is also prime minister, controls the key portfolios of defense, finance and foreign affairs.

  The Sultan of Brunei’s office did not respond to a request for comment and newly appointed ministers refused to comment during National Day celebrations on Feb. 24.

  However, the sultan is still popular.

  He marked 50 years in power in October last year with a glittering procession through the capital on a gilded chariot, cheered by well-wishers.

  However, in the long run, an economy based on a dwindling single source of income could erode the relationship between the ruler and his subjects, said Muang Zarni, democracy advocate and a former research fellow at the London School of Economics.

  “That doesn’t mean that will translate into street protests, but Bruneians know things are not as rosy as they appear in the sultan’s newspapers and TV channels,” said Zarni, who quit the University Brunei Darussalam in 2013 over what he said was a lack of academic freedom.
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