GOVERNMENT INCENTIVES AND SUPPORT FOR BUSINESSES IN BRUNEI

Brunei Darussalam, nestled on the northern coast of the island of Borneo, is a sovereign state known for its rich oil and gas resources. In recent years, the Sultanate has been actively diversifying its economy beyond the energy sector, aiming to foster sustainable growth and attract investments across various industries. Central to this economic strategy are the numerous government incentives and support programs designed to encourage entrepreneurship, stimulate innovation, and enhance the competitiveness of businesses operating within its borders. This blog explores in detail the range of government initiatives available to support businesses in Brunei.

Introduction to Brunei’s Business Environment

Brunei offers a stable political climate, strategic geographical location, and a business-friendly regulatory framework, making it an attractive destination for investors and entrepreneurs alike. The government’s commitment to economic diversification is evident in its proactive approach to supporting business development through a variety of incentives and support schemes.

Government Support Schemes:

1. Financial Incentives and Taxation

The corporate income tax rate stands at a competitive 18.5%, significantly lower than many other jurisdictions in the region. Moreover, certain industries may benefit from tax holidays, exemptions, or reduced rates to encourage investment and facilitate business expansion. One of the primary ways the Bruneian government supports businesses is through financial incentives and favorable taxation policies:

1. Corporate Tax Incentives: Brunei offers competitive corporate tax rates, with specific incentives for industries deemed critical to economic diversification. Qualifying businesses may enjoy tax exemptions or reductions, particularly those involved in sectors such as manufacturing, tourism, and technology.
2. Exemptions and Deduction: Specific tax exemptions are granted for dividends received from foreign investments, capital allowances for machinery and equipment, and deductions for research and development expenses. These incentives aim to reduce the cost of doing business and incentivize investment in innovation.
3. Tax Holidays: New industries or projects deemed strategically important to Brunei’s economic diversification goals may enjoy tax holidays ranging from 5 to 15 years. This includes sectors such as manufacturing, technology, and renewable energy.

 

2. Financial Support Programs

To facilitate access to capital and encourage business expansion, Brunei provides various financial support programs:

1. Microfinance Scheme: Aimed at supporting small and medium enterprises (SMEs), this scheme offers accessible financing to entrepreneurs who may face challenges in securing traditional bank loans. It helps SMEs to start, grow, and sustain their businesses.
2. Government Grants: Grants are available to support R&D projects, technological innovation, and capacity-building initiatives. These grants aim to spur innovation and enhance the competitiveness of businesses in global markets.
3. Venture Capital and Seed Funding: To nurture startups and early-stage enterprises, the government facilitates access to venture capital and seed funding through partnerships with financial institutions and investment funds.

 

3. Infrastructure Development

Infrastructure plays a crucial role in supporting business operations and economic growth. Brunei has invested in developing modern industrial parks and facilities:

1. Industrial Parks: Brunei’s industrial parks offer state-of-the-art infrastructure and facilities, including ready-built factories, utilities, and logistical support. These parks serve as hubs for manufacturing, warehousing, and distribution activities, facilitating operational efficiency for businesses.
2. Technology Hubs and Incubators: The government has established technology hubs and business incubators to support startups and SMEs in the technology and innovation sectors. These facilities provide shared office spaces, access to mentorship programs, and networking opportunities, fostering entrepreneurship and innovation.

 

4. Sector-Specific Incentives

Brunei provides targeted incentives to promote growth in specific sectors crucial to its economic diversification strategy:

1. Energy Sector: Incentives are available for companies investing in renewable energy projects, including tax breaks and regulatory support. These initiatives aim to promote sustainability and reduce the country’s dependence on traditional energy sources.
2. Digital Economy Initiatives: With a focus on advancing the digital economy, Brunei offers incentives for businesses engaged in digital transformation initiatives. This includes grants for adopting digital technologies, support for digital startups, and policies to facilitate e-commerce and digital payment systems.

 

5. Human Capital Development

The development of a skilled workforce is essential for sustainable economic growth. Brunei invests in human capital through various initiatives:

1. Skills Training Programs: The government collaborates with industry stakeholders to provide skills training programs tailored to the needs of businesses. These programs aim to enhance the capabilities of the local workforce, ensuring they possess the skills required by industries operating in Brunei.
2. Scholarship Programs: Scholarships are available for Bruneian students pursuing higher education in fields aligned with national economic priorities, such as engineering, information technology, and business administration.

 

6. Support for Innovation and Research

Innovation is critical to driving economic growth and competitiveness. Brunei supports innovation through:

1. Research and Development (“R&D”) Grants: Financial support is available for companies engaged in R&D activities aimed at developing new products, processes, or technologies. These grants encourage innovation and contribute to the advancement of key sectors within the economy.
2. Collaboration with Universities and Research Institutions: The government promotes collaboration between businesses, universities, and research institutions to foster innovation ecosystems. This includes joint research projects, technology transfer initiatives, and partnerships aimed at commercializing research outcomes.
3. Environmental and Sustainability Initiatives

Brunei is committed to sustainable development and environmental conservation:

1. Green Incentives: Businesses involved in eco-friendly practices and green technologies may qualify for incentives promoting environmental sustainability. These initiatives aim to minimize environmental impact and support the transition towards a greener economy.
2. Ease of Doing Business Initiatives

Brunei has implemented reforms to streamline regulatory processes and enhance the ease of doing business:

1. Economic Development Board (“EDB”): The EDB serves as the primary agency responsible for promoting investments in Brunei. It provides comprehensive support to investors, including assistance with business registration, licensing, and navigating regulatory requirements
2. One-Stop Centre: To streamline the process of setting up and operating businesses, Brunei has established a one-stop center where investors can access all necessary services and approvals efficiently. This initiative aims to reduce bureaucratic hurdles and enhance the ease of doing business in the country.
3. Online Business Registration: Businesses can register online through a simplified process, reducing administrative burdens and accelerating the time to start operations. The registration process has been simplified through online platforms such as the Business Registration System (BRS).
4. Simplified Tax Filing System: The tax filing system has been streamlined through electronic filing systems.
5. Single Window Clearance System: A single window clearance system facilitates smoother interactions between businesses and government agencies, streamlining approvals and permits required for business activities.
6. These developments support economic growth and attract further investments across various sectors.

International Trade Agreements

As a member of ASEAN (Association of Southeast Asian Nations) and signatory to international trade agreements such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), Brunei benefits from enhanced market access and reduced trade barriers. These agreements provide businesses in Brunei with opportunities to expand their export markets and access to a larger consumer base.

Conclusion

Brunei, a country having a low tariff regime, a tax incentive, and a flat corporate income tax of 18.5% on net earnings, presents numerous business prospects. Despite its tiny size, Brunei has a prosperous and stable economy that has grown steadily over the last decade.
Brunei as a country has well-developed social and business infrastructure, making it much easier for business owners and entrepreneurs to establish a company in Brunei. Brunei’s well-developed business infrastructure comprises several modern transportation networks, ports, and airports..