Brunei all out to woo HK investors

Brunei all out to woo HK investors

Oil-rich sultanate eyes global halal food market as part of ambitious plan to diversify nationaleconomy

Halal food aficionados and investors alike may be looking at a new financial oasis – the tiny,wealthy Islamic sultanate of Brunei Darussalam on the northern shores of the island of Borneo.

Brunei – sandwiched between the Malaysian states of Sabah and Sarawak and with a populationof just over 400,000 – has set its sights on the growing halal food market, backed by a globalMuslim population of 1.6 billion, in a bid to diversify itself from the monarchy’s traditional heavyreliance on oil to drive the economy.

“More than two thirds of our GDP and about 90 percent of our exports are still dependent on oiland gas. The recent fluctuation in oil prices around the world highlights the urgency for economicdiversification,” Desmond Lim, assistant chief executive officer at the Brunei EconomicDevelopment Board, told China Daily.

The Brunei government has set aside a 466-hectare plot of land for the development of biotech-related industries, especially halal-food processing and other innovative streams, such as thepharmaceutical and cosmetic products trade.

The project, located at the northwest of the capital, Bandar Seri Begawan, and named BruneiBioInnovation Corridor (BIC), has already attracted four mainland companies in setting up theirfootprints there under its first phase, with a total investment of $100 million.




Hong Kong enterprises, although still adopting a wait-and-see attitude, are also in discussionswith the Brunei authorities.

“The four mainland companies are engaged in the food, biotech and Chinese traditional-medicineindustries,” said Gary Ho, managing director of SQW China Ltd – BIC’s management andconsulting company.

“At the same time, we’re looking for Hong Kong firms specializing in logistics, financialarrangement and fund-raising to build up their presence here as well and, hopefully, we can seesome major progress by the end of this year,” Ho said.

The global halal-food industry is estimated $634 billion, with 63 percent of the potential comingfrom Asia. At present, 2 percent of the Chinese mainland’s population, are Muslims and it’sexpected to be the world’s 19th largest by 2030.

Hong Kong also boasts a strong Muslim community of more than 300,000, including those livinghere and visitors, according to Muhammad Munir Chaudry, president of the Islamic Food andNutrition Council of America.

“Halal includes everything, from those eaten to those used on the body,” Chaudry said. “And, ourregulations are mainly from the holy book, which is Koran, and tradition as well as culture.”

Food and other products containing ingredients from the pig or alcohol are not considered halal.The criteria for non-pork items include their source, the cause of the animal’s death and how theywere processed.

Brunei, with a 64-percent Muslim population, claims to have a highly-regarded program on halalcertification, including strict guidelines, a state-backed certification agency, a religious council anda high degree of food safety.

The nation’s competitive electricity and water prices, tax benefits, a strong commitment toresearch and training, as well as membership of the Association of Southeast Asian Nations(ASEAN), are favorable incentives for investors looking for a springboard into the ASEANcommunity.

“For example, if a company wants to conduct halal-food manufacturing here and target theASEAN region, it can easily source its raw materials from Borneo island itself and othercountries,” Lim said.

“It can also access other countries via Brunei, while using the Brunei halal certificate as a strongbrand name, and enjoying the tax benefits, regardless of whether it’s a joint venture with the localgovernment or sole proprietorship,” he added.

Personal income tax, sales tax, manufacturing tax and capital tax are waived in Brunei, whileother investment incentives allow companies to be exempted from corporate income tax andimport duties on raw materials and machinery for the first eight years, with a three-year renewaloption.

But, while the sultanate boasts of high halal food standards and certification, it lacks advancedtechnologies and the right talent to back up its halal brand.

The BIC’s first phase, costing the government $30 million, is seen as a pilot program for thecountry’s economic diversification, along with other smaller industrial parks that have alsoattracted prime Asian investors like Japan’s Mitsubishi Group.

Hong Kong’s abundant talent pool and logistics sophistication are seen as a big asset for Bruneiin its journey to attain its economic goals.

“Hong Kong’s own role as a logistics transshipping hub, its rich experience in freight forwardingand advanced biotechnologies will be helpful and inspiring for Brunei to explore its own economicmodel,” said Ho.

But, the drawback appears to be Hong Kong companies’ limited understanding of Brunei and itsculture, as well as their lack of exposure within the ASEAN region, and this prodding Ho and theBrunei government to go the extra mile in drawing more investments from Hong Kong.

“I think Hong Kong entrepreneurs still don’t possess enough data and market information to helpthem grow in the ASEAN region,” Ho added.

The first phase of BIC will break ground within two months and some 15 companies are expectedto set up shop there some 18 months after its completion.

The project is expected to provide up to 28,000 full-time jobs, 9,500 of which will be related tofood processing. The second phase will focus on infrastructure facilities, such as hotels andwarehouses, while the third phase will be geared towards the development of finance-relatedbusinesses.

Progress has also been made in the Brunei-Guangxi Economic Corridor created in Septemberlast year. In particular, Guangxi Beibu Gulf International Port Group Co Ltd has completed andsubmitted its management and development plan for the Muara Port container terminal in Brunei.


The Brunei BioInnovation Corridor blueprint (outlined in red) is located at the northwest of Brunei’s capital, Bandar Seri Begawan. The project’s first phase (highlighted in light red) will break ground soon. Brunei has exempted personal income tax, sales tax, manufacturing tax and capital tax to propel investment and attract technology-savvy talents to back up its halal food brand.

Source: China Daily