The year saw the heightening of government efforts to bring the country out of recession. The economy performed sluggishly, with the estimated gross domestic product (GDP) growth for the year dropping to 0.6 per cent. Like other countries in the region, Brunei was not insulated from the regional financial crisis. Yet it was not too adversely affected by the crisis partly because of the fact that the Brunei dollar, which was pegged at one-to-one to the Singapore dollar, had fallen by only 15-20 per cent against the U.S. dollar. What cushioned Brunei from more exchange rate depreciation was Brunei's earnings in U.S. dollars for its oil and gas exports, which constituted 90 per cent of its exports.1
Indirectly, however, the crisis had caused many of Brunei's trading partners, particularly the countries of the Association of Southeast Asian Nations (ASEAN) and Japan, to reduce their demand for oil, thus affecting Brunei's exports. This was aggravated by the slump in oil prices, which dropped to a low of US$9 a barrel at the beginning of 1999. As oil remains the mainstay of the economy, the drop in oil prices drastically slashed Brunei's revenues. Government revenue from investment, which is mainly controlled by the Brunei Investment Agency (BIA), was affected by the unfavourable investment climate. In addition, the collapse in early 1998 of the Amedeo Development Corporation, owned by His Royal Highness (HRH) Prince Jefri, also the chairman of the BIA, had some effect on government investment. The government task force set up in September 1998 to investigate alleged irregularities in Amedeo had yet to make its findings public.
However, in July 1999 the Brunei High Court ordered Amedeo to be wound up, leaving a debt of B$6 billion owing to more than twenty-five creditors. Two other Amedeo-sponsored companies, Jerudong Park Hotel (B) Sdn. Bhd. and Amedeo Fishing Sdn. Bhd., were also ordered to be wound up.2 A Singapore firm of accountants, Foo, Kon & Tan, was appointed to oversee the liquidation process. Many creditors, expressing their concern over the executive managers' declaration that a number of Amedeo's assets and project values both within and outside Brunei were listed as unknown, lodged claims ranging from B$1 billion to B$5.1 billion. The big surprise during the liquidators' meeting was that HRH Prince Jefri too put in a claim, for B$5.1 billion, the exact amount the BIA was bidding.3
Meanwhile, the government worked out different strategies to pull Brunei out of its economic problems. The Brunei Economic Council, set up in September 1998 to steer the sluggish economy through the crisis, met several times. In early March 1999, the chairman of the Council, HRH Prince Mohamed Bolkiah, the Minister of Foreign Affairs, announced that he had received seven reports from various committees which included reports on Finance and Banking, Facilitation of Economic Policies, and Diversifying from Oil and Gas. The reports identified the reasons behind the economic problems faced by the country and offered short- and long-term remedial measures. The council later considered each of the reports in detail.4 However, by the end of 1999 the council had yet to make its recommendations on how to overcome the sluggish economy.
Nevertheless, it was reported at the beginning of 1999 that the government had considered increasing oil production to give a boost to the ailing economy.5 Since 1981, Brunei has adopted a conservation policy by reducing its oil production so that future generations can continue to enjoy the wealth of the nation. Oil production was reduced gradually to a level of 150,000 barrels a day. This target was achieved in 1988. In view of the economic slowdown, the government planned to increase oil production by at least 50,000 barrels a day. Brunei sold about 90 per cent of its crude oil under term agreement, while the rest was sold on the spot market. Under term agreement, 28 per cent was exported to ASEAN countries, 18 per cent to Japan, 27 per cent to Korea, 6 per cent to Taiwan, 18 per cent to the United States, 1 per cent to Europe, and 1 per cent to other countries. …