19 April 2017
Brunei Opens Food Sector to FDI as it Bids to be Major Halal Player
Having embarked on a transformative agricultural strategy, Brunei is now seeking higher levels of foreign investment as it bids to diversify its halal food production and export sector, while paving the way for the success of its post-oil economy.
Of late, agricultural production and food processing have rapidly ascended Brunei's policy agenda. This has been driven, partly at least, by the government's desire to both rebalance the economy to compensate for the fall in oil prices and reduce the country's reliance on imported foods.
With abundant natural resources and a population of just 417,000, oil-rich Brunei Darussalam has one of the highest per-capita GDP levels Southeast Asia. Its diminishing oil and gas reserves – which account for more than 60% of its GDP and 90% of its export revenue – have, however, forced the country to reassess its domestic productive capacity.
The country's economic blueprint for its future is Vision Brunei 2035, which outlines how the country will ready itself for the time when it can no longer rely on income from its oil and gas reserves. Advocating the diversification of the nation's economic and infrastructural base, it provides a route map for establishing a sustainable economy supported by agriculture and the agrifood sector.
Back in 2009, the country first began moves to bolster long-term agricultural production and food processing. In line with this, a 500-hectare Agro Technology Park was established close to the international airport and Muara Port. The remit of this new facility was to undertake agri-tech research and development, while looking to enhance the country's distribution and logistics capabilities. It was also seen as a potential incubator for SMEs in the agricultural sector.
To date, the overall strategy seems to be on course. In 2010, the country's agricultural output was valued at B$228.43 million (US$164 million), with agrifood processing contributing some B$53.76 million. By 2015, the total was B$366.15 million, with the value of the agrifood processed doubling to B$110.48 million – although this still only accounted for just 0.5% of Brunei's GDP. By 2020, the country hopes to have reached its agricultural output target of B$1,080 million, with processed agrifoods contributing B$340.77 million.
As agricultural output continues to rise, the lower cost of domestically produced food is also helping to keep inflation in check. In January 2017, the Food and Non-Alcoholic Beverages Index decreased by 0.9% year-on-year, according to the country's Economic Planning and Development Office.
One sector where Brunei believes it may have a competitive advantage is in the production and processing of halal-certified food production for both the domestic and export markets. The country has a robustly Islamic culture and has already established high standards for halal food production, with the government now looking to expand the overall capacity of the sector. Although the country has made it known that it welcomes external investment, it plans to fund much of this expansion itself.
As part of this expansion, in June last year, Ghanim International, a state-owned halal food production company, introduced 25 new Bruneihalal products, including cordials, breaded chicken and soy-based mayonnaise. Speaking at the launch, Haji Mohammad Yasmin bin Haji Umar, Brunei's Minister of Energy and Industry, said: "Our food strategy includes government initiatives and investments across the whole food value chain. We believe FDI in the food sector will play an integral role in delivering a full-scale supply chain system for Ghanim, as well as for many other local businesses."
Earlier this year, the Department of Agriculture and Agrifood, Ministry of Primary Resources and Tourism published Investment Opportunities in Brunei Darussalam's Agriculture and Agrifood Sector, its new strategy document for the sector. This highlighted the government's policy objectives and outlined investment opportunities in the areas of agricultural innovation, production and advanced food processing.
Among the key opportunities identified were developing, operating and producing poultry meat and eggs; protected fruit and vegetable cultivation; fertigation systems and vertical farming; dairy goat production and product processing; beef and livestock agriculture and production; rice paddy and downstream product production; agricultural disease monitoring and lab analysis; and food import quality assurance and permit approvals.
In addition to meeting domestic demand, the expansion of Brunei's halal food sector is also geared to the export markets and to meeting the needs of Islamic tourists. At present, a number of national tourism boards have begun to offer tailored packages for Muslim travellers, including the provision of halal foods. In an indication of the potential value of the sector, recent figures from Thomson Reuters show that Muslim tourists account for about 10% of the total global tourism spend, a percentage estimated to be worth some US$233 billion by 2020.
Among the companies already investing in the sector is Hong Kong-based SQW China, which is working with Brunei's Ministry of Industry and Primary Resources to promote a Brunei BioInnovation Corridor linking Brunei and China's Guanxi province. It is believed that a number of other investors from mainland China, Hong Kong, the US, Australia, New Zealand, Latin America and Europe have also expressed an interest in backing Brunei's burgeoning halal business.
Geoff de Freitas, Special Correspondent, Bandar Seri Begawan