Brunei's Transformation To Offshore Haven Continues Apace

by Mary Swire, Tax-News.com, Hong Kong

07 October 2002

Brunei's progress towards becoming an offshore financial centre is continuing apace, according to a recent report from the Bloomberg news service.

A review conducted in 1999 by Prince Mohamed, brother of Sultan Hassanal Bolkiah, the jurisdiction's monarch, prime minister, finance minister, and defence minister, concluded that: 'Although Brunei Darussalam still has the appearance of great affluence, there are warning signs of fundamental economic problems which threaten to undermine the prosperity, and, with it, the social stability of the people.'

This, coupled with the fact that by 2001, Brunei's per capita GDP had fallen to US$12,600 led the Sultan to begin an initiative to diversify the nation's income, and to reduce its dependence on oil and gas, which according to recent estimates, account for almost 94% of exports.

However, as Bloomberg reveals, the path has not been an easy one:

'Brunei is starting from scratch,' the news service observed last week. 'It has neither a domestic exchange nor a bond market. Not one of its companies is publicly traded anywhere in the world...The Sultanate has no central bank; it pegs its currency, the Brunei dollar, at 1:1 to the Singapore dollar.'

However, despite these challenges, it all seems to be coming together for the jurisdiction now. The legal groundwork for the Brunei International Finance Centre has been drafted, and compliance with international anti-money laundering and tax evasion laws is the responsibility of BIFC head of supervision, Robert Miller, a lawyer with experience in Bermuda.

The Sultanate also recently awarded its first offshore banking licence to the Royal Bank of Canada, allowing it to accept deposits and provide investment services to non-resident clients, and the International Brunei Exchange is set to go into operation this month.

In an interview given late last month, Mr Miller suggested that Brunei Darussalam stands to benefit from the perceived hostility in the United States towards Muslim investors. The growing number of wealthy citizens in Asia (the region's millionaires now control 20% of the assets of wealthy individuals worldwide) is also likely to prove beneficial for the fledgling offshore state.

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