Tackling natural resource depletion an revenue decline through diversification: the case of Brunei Darussalum

Exports of hydrocarbons have been a great boon to the small state of Brunei Darussalam and, as such, this paper argues that it provides an example of a country that has not been overly afflicted by the “resource curse” or “Dutch disease”. But it has been adversely affected by oil and gas price volatility that inevitably has a profound impact on hydrocarbon exporters, despite resorting to futures markets. Given Brunei’s minimal non-hydrocarbon tradable sectors, and like all other countries that are heavily reliant on the export of hydrocarbons, it is confronted by the iron law of resource depletion, compounded by the volatility of the oil market. This reality has prompted the government of Brunei to embark on industrial diversification. This paper provides 3 hi-tech sectors which can be deemed as comprising the basis for an industrial policy: semi-conductors and fibre optics, hi-tech farming, and advanced manufacturing.