The FDI angle

• The oil-rich kingdom of Brunei is trying to diversify its economy as oil production wanes.
• Strategic 2035 blueprint targets food, ICT, tourism, services, and green tech for diversification.

Why it matters: The small country of Brunei Darussalam has long been dependent on oil and gas to fuel its economy, but with declining reserves and the global push to go green, the country is looking to widen its foreign direct investment sources and diversify its economy.

Nestled in the island of Borneo, which it shares with Indonesia and Malaysia, Brunei forms one of the 10 countries in the Association of Southeast Asian Nations (Asean). 

The country, ruled as an absolute monarchy under a sultan, is richly endowed with hydrocarbons. The resulting oil and gas bonanza has contributed to the high standard of living for its citizens, but it came at a price. 

“To some extent, the dominance of the energy sector in Brunei has inhibited the development of other sectors, as it limits the incentives for investment in emerging sectors such as technology, tourism and services,” says Vanne Khut, economist at the Asean+3 Macroeconomic Research Office.

With a population of less than half a million people, Brunei ranks the second-highest in Asean for gross domestic product (GDP) per capita (current prices) at $34,800 in 2024, according to IMF data. But its economic trajectory against first-placed, resource-scarce Singapore speaks volume about an economy in dire need of diversification — up until the mid-noughties, both countries shared the same GDP per capita. Fast-forward to 2023, Singapore’s GDP per capita of $89,3700 is almost three times higher. 

Things may be approaching a turning point as the country’s oil production has since halved from around 200,000 barrels per day in the mid-noughties. 

“Brunei’s foreign direct investment (FDI) landscape is in a very interesting and transformative stage,” says Daniel Leong, acting CEO at the Brunei Economic Development Board. “Although we are founded on a very strong upstream oil and gas sector, we are making a concerted effort to expand into new sectors.”

FDI success in the downstream oil

The oil and gas sector (extraction and liquified natural gas production) accounted for 50.3% of Brunei’s GDP in the second quarter of 2024, according to government data. The non-oil and gas sector, which features petrochemicals and other industrial activities, accounted for the remaining 49.7%. 

The government has now formed a strategic blueprint until 2035, and identified five priority sectors: downstream oil and gas industries, food, services, tourism, and information and communication technology.

Among these, Brunei’s downstream oil and gas sector has attracted the largest investment projects so far. 

Chinese enterprise Hengyi Industries invested $3.45bn in a joint venture with the Bruneian government to develop an oil refinery and petrochemical complex that opened in 2019. It is the largest FDI project in the country to date, according to foreign investment monitor fDi Markets. With an additional investment estimated at $13.65bn, phase two was launched in 2023. 

Global push to go green

For a country that has been heavily reliant on oil and gas, Brunei is at a difficult crossroads as the global push for sustainability continues. 

The government has made pledges to develop its green and blue economy under its economic blueprint for 2035, including investment into green technology and ensuring land and environmental preservation. Currently, 58% of Brunei’s land area is conserved under the Heart of Borneo initiative, while 70% of Brunei’s total land remains rainforest.

“Renewable energy development, especially solar power, is central to meeting [environmental] goals due to Brunei’s favourable sunlight conditions,” Mr Leong says.

In October 2024, Hengyi Industries launched the Project Sustainable Integration of Natural and Renewable Energy, also known as Project Sinar. The solar energy initiative aims to provide renewable energy for its petrochemical refinery through the installation of solar panels.

“If Brunei is serious about renewable energy, then it has to look into a domestic grid expansion as well,” says Kaho Yu, the head of energy and resources research at Verisk Maplecroft. 

The Brunei Economic Development Board also manages more than 27 industrial parks. Some of these are prioritised for foreign investors and planned strategically, especially those in the downstream oil and gas sector, because of heavy investments and safety considerations required.

“For most of our other parks, we look at the type of activity, whether it’s heavy, medium or light industry, and we try to cluster them together,” says Leong. This way, certain industrial chains can develop, creating more efficiency.”

Fierce competition in south-east Asia

Despite being richly endowed with natural resources, Brunei has not developed as quickly as its south-east Asian neighbours. The country’s small population and market size limits the economy of scale for businesses and hinders the country’s ability to attract large-scale investments into sectors other than oil and gas.

“Even though Brunei has been trying to improve its investment climate, bureaucracy and regulatory hurdles still pose challenges for investors,” Ms Khut notes.

In 2025, the government is introducing a national digital ID and a single sign-on platform for public services, which aims to further streamline business and licensing processes. Investors would also like to see further upgrades to the country’s infrastructure. 

“The amount of revenue that’s generated from oil and gas, which has been reinvested into the infrastructure compared to the other Asean countries, has not been a right proportion,” says Julian Neo, managing director for Malaysia and Brunei, DHL Express. “For example, the Brunei International Airport cargo where we operate one of our three facilities in, we have not seen any reinvestment in it for many years.”

However, according to Mr Neo, the government has been open to feedback and has made plans to upgrade the airport’s cargo areas. 

The clock is ticking on Brunei’s diversification agenda. With hydrocarbon reserves falling, and the world moving to greener forms of energy, diversification for the small south-east Asian country is not an opportunity any longer, but a real long-term necessity. 

Natasha Teja is a freelance journalist based in Singapore. 

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This article first appeared in the December 2024/January 2025 print edition of fDi Intelligence