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ASEAN, Brunei Darussalam, Economy

Components of China’s Special Economic Zone in Relation to Brunei’s Economic Development


(Xi Jinping Meets Sultan Haji Hassanal Bolkiah of Brunei at the Great Hall of the People in 2014. Picture courtesy of http://www.news.cn)

The Brunei government has undertaken yet another bold step in intensifying economic development and growth with the signing of MOU to introduce a 40 square kilometres Special Economic Zone located in the Jerudong waterfront and Tungku region. China’s CFLD (China Fortune Land Development International), the government of Brunei, and Darussalam Assets (DA) will be the principle partners in carrying out the policy. As Brunei undertakes the path of development, it would serve us well to learn some of the concepts needed to enhance and build up the SEZ policy.

Special Economic Zones (henceforth SEZ) could be defined as government-owned lands that are zoned and leased to the private sectors or SOEs for the purposes of industrial and commercial activity for a given time period. SEZ is modelled after China’s SEZ policy, one of the bedrock economic policies that enabled China to take-off during their period of recovery under the leadership of China’s highly respected premier, the late Deng Xiaoping. The SEZ was first introduced in Shenzen in 1980 and subsequently expanded to other coastal cities such as Zuhai, Xiamen, Dalian, Guangzhou, Fuzhou, and Shanghai years later. SEZ was considered as an integral component of Deng’s Open Door Policy (1978). It also represents a core component of the Beijing model of development (or “Beijing Consensus”).

Deng Xiaoping’s main task was to revive China after decades of economic slowdown and recession. Knowing that focusing on developing China in its entirety would be a monumental task, he has chosen the said policy whereby he and his team would primarily identify, zone, build and incorporate a market-based economic system along the eastern coastal cities of China. Four areas were focused, namely agricultural, industrial, national defence, and scientific and technological sectors – this as conceptualised by Zhou Enlai in his Four Modernisation (1963) programme. Deng Xiaoping’s intent was that these coastal cities would become the economic dynamos that will fuel China’s rise, and will someday serve as models for inland city provinces to emulate.

At the heart of the approach was Deng Xiaoping’s “experimental point method” or the “experimentation-based” approach. The experimentation approach is a method whereby when you are about to undertake a nation-wide project, do it at a small scale first. If it fails, it fails, discard it before it causes any further damage; If it succeeds, it succeeds and it should be magnified. It did not take long before the coastal cities to succeed under the Policy. He quickly expanded the SEZ programmes to other Chinese coastal cities and eventually inland cities followed suit, strengthening the existing national market-based frameworks and accomplishing the Open Door Policy and Four Modernisation programme along the way. The process also contributed to immense global technological, management, knowledge, and capital inward transfer that were crucial in contributing to the rapid rise of China in the changing global order.

In regards to Brunei’s SEZ, there are a lot of factors that have to be considered. In SEZ the government-owned lands are leased shall be utilised for the purpose of targeted industrial and commercial activity. Brunei’s main economic composition of Oil & Gas would mean that there is a higher chance that China will continue on focusing on developing chemical-based downstream industries at the SEZ strip, to complement China’s US$ 4bn Hengyi plant project in Pulau Muara Besar. Such industries could subsequently produce additional economic demand for other inter- and intra-linked services, such as legal, insurance, banking, human resource, cleaning, and logistic services – in which Bruneians and Brunei-based businesses have to capitalise on. According to the Borneo Bulletin news article, CFLD will also be developing a “flagship new industry city model” in the designated area, which could be good news in capitalising economic development for the lands that have for so long been under-utilised.

SEZs may necessarily be given freer reign to extend its economic activities with more flexibility and with less imposition of government bureaucracy and regulation. In today’s climate, companies need to quickly capitalise on change and being set up in a market-based environment would potentially serve them well in scaling their growth within that zone. At the same time, Brunei must learn to regulate lightly how the companies in order that best practises could be implemented and potential mistakes mitigated from the policy. On this note, continuous learning is a must because the SEZ-like regulation could then be incorporated into the country’s economic legislation in order to make it more conducive for Brunei-based MSMEs and MNEs to be ever more competitive in the changing economic order.

Who knows through the access of knowledge and skill-sets in managing SEZs, perhaps the government could “repackage” the existing economic programmes (such as the Land Department’s former TOL policy) and offer them to local MPKs, Mukims, and Districts to apply them for local economic development purposes. This gives the people the opportunity to lease lands from the government with the purpose of promoting economic activities on behalf of the government with a more up-to-date system to ensure that economic returns can be maximised and potential abuses of the system minimised. For instance, a Kampong in Temburong could apply for a SEZ to host an eco-tourism zone or Mukim Mentiri could do a SEZ for fisheries zones quickly and efficiently. Then there is the question on whether what would happen to the land when it is leased. On this question, SEZ only leases government-owned land for a definite period of time. The land is owned by the Government of Brunei and will continue to remains so.

Concentrating the economic activity of inter-linked or inter-related businesses and industries within the SEZ zone will necessarily produce what development geographers would call the ‘agglomeration effect’. When people and businesses are concentrated within one or few locations, there is a higher chance of generating increased interactions and transactions among the parties operating in the area. Doing so will also enhance global-local links, knowledge transfer, economic transactions, and ideas generation needed to scale up growth and development. Urbanisation (people moving into BSB) and increased migration (expats moving to Brunei) may result from the process so we may expect an additional population increase if the project is successful and sustained in the next few years.

To unlock the fruits of the Brunei-based SEZ, it would also be good for the governments involved to strengthen their commitments to inclusive growth. Inclusive growth occurs when the vast majority of those directly or indirectly involved in the project gets a slice of the growth, particularly for the host country. In simple terms, that means it should create sustainable jobs for locals, particularly PMET/PTEM (Professional, Managerial, Executive, and Technical) jobs. Next, the SEZ could become another fundamental source of revenue for the government by means of taxation imposed on each hectare of lands that are utilised by our counterparts involved in the project. Next, local entrepreneurs or MSMEs have to be given continual assurance that they too could partake in the economic process through contract opportunities offered to supply inter- and intra-industry demands.

The SEZ also brings another opportunity for the people from Brunei and China to host additional dialogues with the public for the purpose of knowledge exchange. The key to succeeding in this regard from the Brunei government’s part is the need to involve the youths and private sectors in the discussion. Host a forum so they could get the chance to contribute ideas for change. Involving them would be a great initiative to empower the youth and local business community. Such engagement among the people from Brunei and China should be highly encouraged and intensified in Brunei in regards to SEZ and other areas of economic policy-making.

To conclude, SEZ is a bold step undertaken by His Majesty’s government that should deserve high praise. Such a policy modelled after China’s reflects a high degree of commitment in shaping our country for the better. Admittedly, SEZs is a complex policy that has no fixed formula; indeed it has its own list of inherent disadvantages, but with China’s help we could learn the essence of how it works and reap the merits of such policy effectively and efficiently, and potentially utilise it as an experiment that can be introduced to local communities at the Kampong-, Mukim-, and District-level. Ultimately, however, it is our people who shall be responsible for its success, and success could only happen as long as we, as a people, abide by the timeless advice of Sultan Bolkiah the 5th that Bruneians should always be hungry for knowledge and adapt ourselves to the changing times. Such advise are true then, they are true today.

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