Sultanate’s economy 57th freest in 2021 Index

Izah Azahari

Brunei Darussalam’s economic freedom score is 66.6 making its economy the 57th freest in the 2021 Index, according to the 2021 Index of Economic Freedom published by The Heritage Foundation.

Its overall score is unchanged from 2020 with an improvement in the government spending score partially offsetting a decline in property rights. Brunei Darussalam is ranked 11th among 40 countries in the Asia–Pacific region. Its overall score is above the regional and world averages. According to the Economic Freedom Score, the regional average in the Asia-Pacific region is 60.2 while the world average is at 61.6.

Although economic freedom has declined slightly in Brunei over the past five years, the country’s economy remains firmly in the moderately free category.

The major factor holding Brunei back in the Index of Economic Freedom continues to be its very low score on the fiscal health indicator. The government should continue to expand the financial sector by establishing a bond market and stock exchange.

As the world faced the COVID-19 impact in 2020, three deaths had been attributed to the pandemic in Brunei Darussalam as of December 1, 2020. The economic growth was forecast to decline to 0.1 per cent for the year.

In terms of government size, Brunei has no personal income tax. The top corporate tax rate is 18.5 per cent for most companies and 55 per cent for oil and gas companies.

The overall tax burden equals 20.6 per cent of total domestic income. Government spending has amounted to 32.9 per cent of total output (GDP) over the past three years, and budget deficits have averaged 8.2 per cent of GDP. Public debt is equivalent to 2.5 per cent of GDP.

Business freedom is largely unchanged from last year in terms of regulatory efficiency. The labour force speaks English and is well-educated.

Brunei has made progress in promoting growth led by the private sector, but more can be done.

The government continues to provide heavy subsidies for such basic goods and services as fuel, power, food, healthcare, and education.

In the open markets, Brunei Darussalam has eight preferential trade agreements in force, and its trade-weighted average tariff rate is 0.2 per cent. One formal non-tariff measure is in place, but other impediments to trade flows persist.

State-owned enterprises distort the economy, and foreign ownership of land is restricted. The small financial sector remains dominated by banks. Islamic financial services have grown in recent years.