Brunei Banks on Finance Sector
BRUNEI is trying to establish itself as an international finance centre (IFC) in one of several initiatives to broaden its economy beyond the traditional source of income, oil and gas.
In the past two months, Sultan Hassanal Bolkiah has enacted seven pieces of legislation to prepare for trustee and offshore banking services for both western and Islamic institutions and customers.
Ministry of finance officials have closely examined other offshore banking venues around the world and believe Brunei has a good chance of capturing market share by complementing existing centres. 'We are striving to fall somewhere between Singapore and Bahrain,' said Robert Miller, head of supervision for the IFC.
'We could complement Bahrain, for example, as an Islamic centre in a South-east Asia time zone and instead of being wary of Singapore as a competitor, we think it will be to our advantage to have that centre so close by.'
So far, two local banks have applied for trustee licences and more than a score of banks have made enquiries.
The idea for developing Brunei as an IFC was born about 15 years ago, but the issue was only revitalised in 1996 after the nearby Malaysian island of Labuan was established as an offshore centre. It is not surprising, then, that Kuala Lumpur has not made any comment on Brunei's move, while Indonesia has welcomed the initiative as positive for regional business.
A western banker in Brunei's capital, Bandar Seri Begawan, said an IFC might provide some but not enough stimulus to help pull the domestic economy out of the doldrums. 'Firstly, and maybe most importantly, the sultan is still a very wealthy man who has plenty of pull in the region,' he explained.
'The IFC will offer tax-free incentives for banks and trustee companies and the ministry has been careful to enact anti-money laundering legislation to keep out the riff-raff. There are already half a dozen international banks here and some of them are bound to offer offshore services as result. But it won't be the magic solution to the country's problems,' he added.
HSBC, Citibank, Standard Chartered Bank, BNP-Paribas through a joint venture with Baiduri Bank Overseas Union Bank and Maybank already have operations in Brunei to service the country's 350,000 inhabitants.
Establishing an IFC is one of several moves to try to bolster the country's flagging economy. Twin tragedies struck Brunei in the 1990s when oil prices plunged at the same time as the sultan's youngest brother, Prince Jeffri, squandered $15bn of the country's reserves, mostly through his flagship company Amedeo Development Corporation, Brunei's main property development and construction firm. …