2018 Index of Economic Freedom

Brunei Darussalam

overall score64.2
world rank70
Rule of Law

Property Rights56.6

Government Integrity45.4

Judicial Effectiveness57.1

Government Size

Government Spending57.7

Tax Burden85.6

Fiscal Health20.0

Regulatory Efficiency

Business Freedom79.9

Labor Freedom88.9

Monetary Freedom75.1

Open Markets

Trade Freedom89.1

Investment Freedom65.0

Financial Freedom50.0

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Quick Facts
  • Population:
    • 0.4 million
  • GDP (PPP):
    • $32.5 billion
    • -0.2% growth
    • -1.5% 5-year compound annual growth
    • $76,884 per capita
  • Unemployment:
    • 2.0%
  • Inflation (CPI):
    • -0.7%
  • FDI Inflow:
    • $-149.6 million
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Brunei’s economic freedom score is 64.2, making its economy the 70th freest in the 2018 Index. Its overall score has decreased by 5.6 points, with an 80-point drop in the score for fiscal health far outweighing improvements in judicial effectiveness and government integrity. Brunei is ranked 16th among 43 countries in the Asia–Pacific region, and its overall score is above the regional and world averages.

Brunei’s ongoing economic struggle to emerge from a long recession has been exacerbated by low oil and gas prices. The government hopes that a well-educated, largely English-speaking population, excellent infrastructure, and political stability will attract foreign investment to diversify the economy to other industries, such as information technology and halal manufacturing, that are permissible under Islamic law. The country benefits from moderately well-maintained monetary stability (the Brunei dollar is pegged to the Singapore dollar at parity) and a relatively high degree of market openness.

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Background

Brunei, two enclaves surrounded by the Malaysian state of Sarawak, lies on the northern coast of Borneo. The sultan serves as his own prime minister, minister of defense, foreign minister, and minister of finance. He is advised by several councils, including a Legislative Council and Privy Council, which he appoints. Oil and gas account for over half of GDP, 90 percent of government revenue, and 95 percent of exports but generate only a small fraction of employment. Most of the population works directly for the government. In 2016, as oil prices declined, Brunei’s economy slowed substantially and reported negative growth rates. Brunei has extremely low manufacturing capacity and imports most of its manufactured goods and food.

Rule of LawView Methodology

Property Rights 56.6 Create a Graph using this measurement

Government Integrity 45.4 Create a Graph using this measurement

Judicial Effectiveness 57.1 Create a Graph using this measurement

Only Brunei citizens may purchase land; foreign firms must have a local partner. Protection of private property is weak. The judiciary is not constitutionally independent. Brunei is one of the world’s last remaining autocracies, and the sultan wields nearly absolute power. The law provides criminal penalties for corruption by officials, and the government generally implements it effectively.

Government SizeView Methodology

Brunei has no personal income tax. The top corporate tax rate is 18.5 percent for most companies and 55 percent for oil and gas companies. The overall tax burden equals 33.1 percent of total domestic income. Over the past three years, government spending has amounted to 37.5 percent of total output (GDP), and budget deficits have averaged 10.9 percent of GDP. Public debt is equivalent to 3.1 percent of GDP.

Regulatory EfficiencyView Methodology

Registration requirements for starting a business have been simplified, and a one-stop shop now facilitates the overall operation of small and medium-size enterprises. The public sector employs approximately 43.5 percent of the citizen workforce. The law does not set a minimum wage, but most employed citizens receive good salaries. The government provides generous but price-distorting subsidies for fuel, power, food, health care, and education.

Open MarketsView Methodology

Trade is significant for Brunei’s economy; the combined value of exports and imports equals 83 percent of GDP. The average applied tariff rate is 0.5 percent. Nontariff barriers impede some trade. Government openness to foreign investment is above average. The small financial sector remains dominated by banking, which is well capitalized and open to foreign competition. Islamic financial services have grown considerably in recent years.

Country's Score Over Time

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Regional Ranking

rank country overall change
1Hong Kong90.20.4
2Singapore88.80.2
3New Zealand84.20.5
4Australia80.9-0.1
5Taiwan76.60.1
6Malaysia 74.50.7
7South Korea73.8-0.5
8Japan72.32.7
9Macau70.90.2
10Vanuatu69.52.1
11Kazakhstan69.10.1
12Thailand 67.10.9
13Philippines65-0.6
14Azerbaijan64.30.7
15Indonesia64.22.3
16Brunei Darussalam64.2-5.6
17Tonga63.10.1
18Kyrgyz Republic 62.81.7
19Fiji62-1.4
20Bhutan61.83.4
21Samoa61.53.1
22Cambodia58.7-0.8
23Tajikistan58.30.1
24China57.80.4
25Sri Lanka57.80.4
26Solomon Islands57.52.5
27Mongolia55.70.9
28Papua New Guinea55.74.8
29Bangladesh 55.10.1
30India54.51.9
31Pakistan 54.41.6
32Nepal54.1-1.0
33Burma53.91.4
34Laos53.6-0.4
35Vietnam53.10.7
36Micronesia52.3-1.8
37Uzbekistan51.5-0.8
38Afghanistan51.32.4
39Maldives51.10.8
40Kiribati50.8-0.1
41Timor-Leste48.11.8
42Turkmenistan47.1-0.3
43North Korea5.80.9
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