BANDAR SERI BEGAWAN • On a tiny island off Brunei's northern tip in the South China Sea, thousands of Chinese workers are building a refinery and petrochemical complex, along with a bridge connecting it to the capital, Bandar Seri Begawan.
When completed, the first phase of the US$3.4 billion (S$4.5 billion) complex on Muara Besar island, run by China's Hengyi Group, will be Brunei's largest foreign investment project, and comes at a time when the oil-dependent country needs it the most.
Brunei's oil and gas reserves are expected to run out within two decades. As production falls, oil firms will not be investing much in existing facilities, further hampering output, oil analysts say.
As a result, the country's oil revenues, which provide for virtually all of Brunei's government spending, are in steady decline.
With youth unemployment rising, Brunei's ruler, Sultan Hassanal Bolkiah, is trying to reform the economy and diversify its sources of income.
"The Sultanate is hard-pressed for investments to diversify its economy, and in this sense, the Chinese investments are important to (Brunei)," said Dr Jatswan Singh, an associate professor at the University of Malaya in Kuala Lumpur who has authored four books on Brunei. "Building good relations and offering big investments are part of China's strategy to split South-east Asian nations to ensure there is no consensus on South China Sea matters," he added.
Total Chinese investment in Brunei is now estimated at US$4.1 billion, according to the American Enterprise Institute's China Global investment tracker. That will almost certainly rise as China ramps up its "Belt and Road" initiative.
Sometimes called the "21st Century Maritime Silk Road", the initiative envisages linking China with South-east Asia, Africa and Eurasia through a network of ports, roads, railways and industrial parks.
Brunei's changing fortunes have been reflected in its financial industry. HSBC pulled out of Brunei last year, while Citibank exited in 2014, after 41 years. Bank of China, meanwhile, opened its first branch in the sultanate in December 2016.
The Muara Besar project is promising over 10,000 jobs, at least half of which would go to fresh graduates, media reports in Brunei said. But claims that thousands of Chinese workers have been shipped in to build the complex has angered some locals.
In the last available official report in 2014, unemployment was put at 6.9 per cent. Unofficial figures suggest youth unemployment could be as high as 15 per cent.
REUTERS
