Foreign Investment, State Capitalism, and National Development in Borneo: Rethinking Brunei–China Economic Relations

Abstract

Faced with dwindling oil and gas reserves, Brunei has been hard-pressed to diversify its reliance on hydrocarbon. China has emerged as an attractive prospect to the Brunei government, especially since the launch of the Belt and Road Initiative. This article analyses a few major Chinese projects in Brunei and postulates three interrelated arguments. Firstly, Chinese investors have targeted Brunei's natural resources and fiscal incentives. These firms have minimal interest in the Sultanate's small domestic market as they eye the export sector. Secondly, these projects have been orchestrated by China's provincially-owned state-owned enterprises (SOE) and private firms, instead of centrally- controlled SOEs. State support has generally been channelled to these projects in an at-arm's length manner. Thirdly, while Brunei is relatively skilled in attracting Chinese investors to further its own political economic goals, at least in the short-run, it is uncertain whether such capital exports have helped in ameliorating the structural limits of the country’s economy.

Negotiating China's rise: The dynamics of Chinese business associations and the Belt and Road Initiative in Brunei Darussalam

“…Under the facilitation of both governments, mainland Chinese enterprises began to enter Brunei around a decade ago, culminating to a peak in 2016 (Lim et al ., 2023). One flagship BRI cooperation between China and Brunei was the Brunei‐Guangxi Economic Corridor (BGEC), established between Brunei and China's Guangxi Zhuang Autonomous Region in 2014, which attracted a handful of Chinese companies from Guangxi to Brunei.…”

“…In recent years, economic cooperation between two countries is evident in connectivity and infrastructure, information technology, finance, transportation and maritime industries. However, the most significant recent Chinese investment has been in the refinery and petrochemical project, carried out by Hengyi Industries from Zhejiang, China, which is the largest FDI (US$3.5 billion) Brunei has ever received (Lim et al ., 2023).…”

Precarity among transient migrants: Mainland Chinese workers in Brunei Darussalam during the COVID-19 pandemic

“…The decline of the homogenous economy with its showing overreliance on oil and gas resources has pushed Brunei towards economic diversification, seeking new growth opportunities and attracting inward foreign direct investment. To this end, China's BRI was able to find synergy with the Wawasan Brunei 2035, the long-term development strategy announced by the Brunei Sultan in 2007 (Lim et al, 2023). The BRI cooperation between the two countries manifested in the establishment of 42 Chinese enterprises in industries such as fishery, infrastructure, finance, manufacturing and telecommunications, bringing an estimated 1,450 Chinese laborers to the Sultanate by 2022 (Zhao and Hoon, 2023).…”