The conversion of the tiny oil-rich sultanate of Brunei into a prosperous offshore centre has been in the offing for some time now, and last week its Deputy Finance Minister Selamat Munap reiterated Brunei's plans to woo the world's Muslims away from conventional money markets.
Mr Munap told a news conference: 'As Muslims become more and more devout, there is increasing demand for Islamic papers and money market instruments. And there are not enough of those instruments. So, once we set up our centre there will be demand for those products.'
Brunei's top officials hope to induce Muslims from Indonesia, Malaysia, the western Asian nations, Sudan, Turkey and Morocco to invest in Brunei. The Sultan of Brunei stated back in July that his government would establish an international financial centre aimed at making Brunei a regional economic hub. Mr Munap said: 'The size of the Islamic money market is quite large. Nearly 22 percent of the world's population is Muslim.'
Conventional products such as insurance are expected to form the core of Brunei's fledgling offshore industry. Robert Miller, head of supervision at the Brunei International Financial Centre, says that Brunei is looking to lure Chinese corporates wanting better insurance cover which could set up captive insurance firms in the sultanate. Mr Miller, who played a significant role in setting up Bermuda and Labuan in Malaysia as offshore financial centres, said: 'There is insufficient insurance capacity in China because much of it lies with the state.'
Brunei certainly doesn't want to be blighted by accusations of money laundering, and has already unveiled new laws to guard against any such practices. The new laws, introduced in August, cover international banking, companies, trusts, limited partnerships and registered agents. Laws on insurance licensing and regulation, securities and mutual funds will be enacted over the next few months. The authorities have also vowed to keep a watchful eye on the activities of hedge funds. Mr Munap said: 'We will act strongly against money laundering and against proceeds from criminal activities.'
Brunei's move to create a financial hub is an attempt to diversify its oil-based economy. Brunei was hit to a certain extent by the Asian economic crisis which began in 1997, although its oil earnings shielded it from the worst of the crisis. It is expected that Brunei's economy will expand by 2.5 per cent this year and by 3.5 per cent in 2001.
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