Brunei Darussalam, a small sovereign state on the island of Borneo (or Kalimantan) in Southeast Asia, stands as a remarkable example of economic transformation in the modern world. With a population of just over 450,000 people, Brunei boasts one of the highest GDP per capita figures globally, largely thanks to its vast reserves of oil and natural gas.
It is needed to consider the historical roots of Brunei’s economy, the pivotal role of oil discovery in its ascent to wealth, the strategies for development and diversification, the current economic landscape, the challenges it faces, and its prospects for sustained success.
Drawing on a rich tapestry of historical events and contemporary policies, Brunei’s journey illustrates how natural resources, when managed prudently, can propel a nation from poverty to affluence.
Brunei’s economic history predates the discovery of oil by centuries, rooted in trade and maritime dominance. Before the 10th century A.D., ancient Chinese accounts described Brunei (then known as Po-ni or similar variants) as a prosperous trading hub. The economy thrived on exporting foodstuffs, jungle produce like camphor, and minerals such as gold, while importing manufactured goods from regions including China, Java, Cochin, Pahang, Trengganu, and Kelantan. Under the control of the king, Brunei maintained a fleet and engaged in extensive regional trade, with prosperity peaking in the pre-Islamic period from the 7th to 9th centuries, fueled by gold and camphor from Sabah’s west coast and the Philippines.
By the 13th century, chroniclers like Chau Ju-kua portrayed Brunei as a wealthy kingdom with a large fleet and valuable exports. However, this golden era waned by the late 14th century due to pillaging by Sulu forces, reducing Brunei to an impoverished fishing village by 1371. A revival occurred in the early 16th century under Sultan Bolkiah, who expanded Brunei’s thalassocracy (maritime empire), boosting wealth through trade routes. The fall of Malacca in 1511 temporarily benefited Brunei, but Spanish occupation of Manila in the late 16th century severed key trade links, initiating a decline.
The 17th century brought further setbacks with a civil war from 1661 to 1673, weakening the economy and allowing rival ports like Sambas and Banjarmasin to siphon trade. Territorial losses accelerated in the 19th century: Between 1840 and 1890, Brunei ceded lands to the Brooke regime in Sarawak and the British North Borneo Company (BNBC), including the resource-rich Limbang in 1890. This eroded sago exports and revenue streams, leaving Brunei economically destitute. By the early 1900s, British officials debated implementing the Residency System, doubting Brunei’s financial viability without external aid. In 1904, M.H.S. McArthur recommended an initial loan, leading to Brunei becoming a British protected state in 1906. At this point, the treasury struggled to generate income, relying on limited monopolies and facing administrative funding shortages.
This pre-oil era paints a picture of a once-mighty trading empire reduced to vulnerability, setting the stage for a dramatic turnaround.
The discovery of oil in 1929 at Seria marked a watershed moment, fundamentally altering Brunei’s economic trajectory. Prior to this, the nation was economically backward, with limited infrastructure and revenue. The oil find, exploited by Brunei Shell Petroleum (BSP)—a joint venture between the Brunei government and Shell—catapulted Brunei into modernity. By the mid-20th century, oil and gas became the backbone of the economy, transforming Brunei into the third-largest oil producer in Southeast Asia (averaging 180,000 barrels per day) and the ninth-largest liquefied natural gas (LNG) producer globally.
Oil revenues surged in the 1970s amid global price hikes, peaking Brunei’s GDP at $5.7 billion in 1980. This windfall enabled the launch of Five-Year National Development Plans starting in 1953, focusing on infrastructure, agriculture, education, healthcare, and communications. The government invested surpluses in foreign reserves, building a sovereign wealth fund to safeguard future generations. Full independence from Britain in 1984 further accelerated growth, as Brunei reaped benefits from its resources without colonial oversight.
Post-discovery issues emerged, including managing newfound wealth under the Residency System (until 1959), redeeming monopolies, and addressing territorial losses’ lingering impacts. Nonetheless, oil preserved Brunei’s status as a Malay Islamic Monarchy and funded welfare programs, including free education, healthcare, and no personal income tax—hallmarks of its social contract with citizens.
Brunei’s post-independence development has centered on leveraging oil wealth while pursuing diversification to mitigate resource dependency. The economy is classified as mixed, blending private freedoms with centralized planning and regulation. Oil and gas dominate, contributing over 50% of GDP, 70% of domestic product, and 99% of exports in recent decades. However, the government has actively promoted non-oil sectors since the 1990s, with non-oil activities rising from 24.3% of GDP in 1991 to 64% in 1996.
Brunei’s key diversification initiatives include:
Petrochemicals and Downstream Industries: Developments like the Sungai Liang Industrial Park (SPARK) and a methanol plant launched in 2010 have expanded value-added activities.
Halal Industry: The 2009 Brunei Halal branding scheme targets global Muslim consumers, positioning Brunei as a hub for certified products.
Agriculture, Fisheries and Tourism: Efforts to boost food self-sufficiency and eco-tourism, leveraging Brunei’s rainforests and cultural heritage.
ICT and Services: The Digital Economy Masterplan 2025 aims to enhance digitalization, including a national digital ID and improved connectivity.
The Wawasan Brunei 2035 vision, launched in 2007, encapsulates these goals: fostering an educated workforce, a sustainable economy, and high quality of life. Foreign direct investment (FDI) has been a cornerstone, with incentives like tax exemptions, 100% foreign ownership in select sectors, and a corporate tax rate of 18.5%.
Successes include Hengyi Petrochemical’s $3.45 billion investment in refining, with a planned $13.65 billion expansion, and companies like MC Biotech and Polygel. The Brunei Economic Development Board (BEDB) facilitates FDI through global outreach and support for micro, small, and medium enterprises (MSMEs).
Despite challenges like the 1997-1998 Asian financial crisis and the Amedeo Corporation collapse, Brunei has maintained moderate growth, aided by high oil prices in the mid-2000s.
As of 2025, Brunei’s economy remains robust, with a GDP of approximately $17.9 billion (nominal) and $34.1 billion (PPP) in 2023 figures, projected to grow steadily. GDP per capita stands at $41,713 (nominal) and $79,408 (PPP), ranking second in Southeast Asia after Singapore. In 2024, the economy expanded by 4.2%, its fastest since 1999, driven by upstream and downstream oil and gas rebounds, alongside growth in wholesale/retail trade, air transport, and communications.
Inflation turned negative in 2024 due to lower prices in transport, communication, and clothing, and is expected to average under 1% in 2025-26. The current account surplus is large at 14.5% of GDP in 2024, narrowing to 12.4% in 2025 amid moderating energy prices. Fiscal deficits persist, widening to 12.5% of GDP in FY2024, but government debt is low at 1.9% of GDP.
Exports in 2022 totaled $14.411 billion, primarily mineral fuels and chemicals, with imports at $10.106 billion. Unemployment is 6.8%, with a labor force of 233,198. Brunei benefits from an open economy, encouraging FDI and trade agreements to deepen regional ties.
| Year | GDP Growth Rate (%) | Key Notes |
|---|---|---|
| 2023 | 3.3 | Steady recovery post-COVID |
| 2024 | 4.2 | Fastest growth since 1999, O&G-driven |
| 2025 (proj.) | 2.6 | Supported by agri-food and tourism |
| 2026 (proj.) | 2.6 | Continued diversification focus |
| 2027 (proj.) | 3.4 | Potential uptick from investments |
Despite successes, Brunei grapples with vulnerabilities. Oil price fluctuations have caused recessions, such as in 2015 due to production drops and low prices, leading to persistent deficits since 1988. Over-reliance on fossil fuels (99% of electricity in 2020) poses risks from global decarbonization and climate change. Longer-term challenges include diversifying amid stagnant non-oil growth, potential disruptions to O&G production, and weakened demand from trading partners.
Future prospects hinge on Wawasan 2035, targeting 30% renewable energy by 2035 (e.g., 476 MWp solar plant) and sustainable tourism. Projections for 2025 growth are 2.5-2.9%, driven by FDI and innovation in digital and green sectors. Policy recommendations emphasize prudent fiscal management, labor market flexibility, MSME support, and enhanced transparency. By building domestic capacity and fostering global partnerships, Brunei aims to evolve from an oil-dependent economy to a resilient, diversified powerhouse.
Brunei’s economic success is a testament to strategic resource management and visionary leadership. From a trading empire diminished by colonialism and conflict to a high-income nation powered by oil, its story inspires. Yet, the path forward requires bold diversification to ensure prosperity beyond hydrocarbons. As Brunei navigates global shifts, its commitment to sustainability and innovation will determine its enduring legacy.