Brunei is heavily dependent on its gas and oil reserves, which are set to run out in 20 years. Western banks are leaving the country. So far China has invested US$ 4.1 billion. Chinese capital is behind a new US$ 3.4 billion refinery and petrochemical complex under construction as well as the bridge that will link it to the capital. Some US$ 12 billion in investments are expected in the future.
Bandar Seri Begawan (AsiaNews/Agencies) – As it tries to cope with a recession that is now in its third year, Brunei is increasingly turning to Chinese investments, which can give the sultanate an important place in Beijing’s Belt and Road initiative (BRI), China’s new silk road.
In Muara Besar, a small island in the South China Sea off the northern tip of Brunei, thousands of Chinese workers are building a refinery and petrochemical complex, as well as a bridge connecting it to the capital, Bandar Seri Begawan.
When completed, the first phase of the US$ 3.4 billion complex, run by China's Hengyi Group, will be Brunei's largest-ever foreign investment project.
The project comes at a time when the oil-dependent country needs it the most since its oil and gas reserves are expected to run out within two decades.
As production falls, oil firms will not be investing much into existing facilities, further hampering output, oil analysts say. Thus, the country's oil revenues, which provide virtually all of Brunei's government spending, are in steady decline.
With youth unemployment rising, Brunei's ruler, Sultan Hassanal Bolkiah, is trying to quickly reform the economy and diversify its sources of income, whilst fighting graft and cracking down on dissent.
Brunei's changing fortunes have been reflected in its financial industry. HSBC pulled out of Brunei last year, whilst Citibank exited in 2014 after 41 years. By contrast, the Bank of China opened its first branch in the sultanate in December 2016.
A US$ 12 billion second phase will expand the refinery capacity to 281,150 barrels per day, and build units to produce 1.5 million tonnes per year (tpy) of ethylene and 2 million tpy of paraxylene.
Total Chinese investment in Brunei is now estimated at US$ 4.1 billion, according to the American Enterprise Institute's China Global investment tracker.
China, the latter noted, has invested about US$ 205 billion in East Asia between 2010 and 2017, mostly in ports, roads, railways, and industrial plants.
At the same time, Beijing has been increasing its investments whilst tussling with four other South-East Asian nations, including Brunei, over competing claims to islets and atolls in the South China Sea.