Oil-rich sultanate eyes global halal food market as part of ambitious plan to diversify national economy

Halal food aficionados and investors alike may be looking at a new financial oasis - the tiny, wealthy Islamic sultanate of Brunei Darussalam on the northern shores of the island of Borneo.

Brunei - sandwiched between the Malaysian states of Sabah and Sarawak and with a population of just over 400,000 - has set its sights on the growing halal food market, backed by a global Muslim population of 1.6 billion, in a bid to diversify itself from the monarchy's traditional heavy reliance on oil to drive the economy.

"More than two thirds of our GDP and about 90 percent of our exports are still dependent on oil and gas. The recent fluctuation in oil prices around the world highlights the urgency for economic diversification," Desmond Lim, assistant chief executive officer at the Brunei Economic Development Board, told China Daily.

The Brunei government has set aside a 466-hectare plot of land for the development of biotech-related industries, especially halal-food processing and other innovative streams, such as the pharmaceutical and cosmetic products trade.

The project, located at the northwest of the capital, Bandar Seri Begawan, and named Brunei BioInnovation Corridor (BIC), has already attracted four mainland companies in setting up their footprints there under its first phase, with a total investment of $100 million.

Hong Kong enterprises, although still adopting a wait-and-see attitude, are also in discussions with the Brunei authorities.

"The four mainland companies are engaged in the food, biotech and Chinese traditional-medicine industries," said Gary Ho, managing director of SQW China Ltd - BIC's management and consulting company.

"At the same time, we're looking for Hong Kong firms specializing in logistics, financial arrangement and fund-raising to build up their presence here as well and, hopefully, we can see some major progress by the end of this year," Ho said.

The global halal-food industry is estimated $634 billion, with 63 percent of the potential coming from Asia. At present, 2 percent of the Chinese mainland's population, are Muslims and it's expected to be the world's 19th largest by 2030.

Hong Kong also boasts a strong Muslim community of more than 300,000, including those living here and visitors, according to Muhammad Munir Chaudry, president of the Islamic Food and Nutrition Council of America.

"Halal includes everything, from those eaten to those used on the body," Chaudry said. "And, our regulations are mainly from the holy book, which is Koran, and tradition as well as culture."

Food and other products containing ingredients from the pig or alcohol are not considered halal. The criteria for non-pork items include their source, the cause of the animal's death and how they were processed.

Brunei, with a 64-percent Muslim population, claims to have a highly-regarded program on halal certification, including strict guidelines, a state-backed certification agency, a religious council and a high degree of food safety.

The nation's competitive electricity and water prices, tax benefits, a strong commitment to research and training, as well as membership of the Association of Southeast Asian Nations (ASEAN), are favorable incentives for investors looking for a springboard into the ASEAN community.

"For example, if a company wants to conduct halal-food manufacturing here and target the ASEAN region, it can easily source its raw materials from Borneo island itself and other countries," Lim said.

"It can also access other countries via Brunei, while using the Brunei halal certificate as a strong brand name, and enjoying the tax benefits, regardless of whether it's a joint venture with the local government or sole proprietorship," he added.

Personal income tax, sales tax, manufacturing tax and capital tax are waived in Brunei, while other investment incentives allow companies to be exempted from corporate income tax and import duties on raw materials and machinery for the first eight years, with a three-year renewal option.

But, while the sultanate boasts of high halal food standards and certification, it lacks advanced technologies and the right talent to back up its halal brand.

The BIC's first phase, costing the government $30 million, is seen as a pilot program for the country's economic diversification, along with other smaller industrial parks that have also attracted prime Asian investors like Japan's Mitsubishi Group.

Hong Kong's abundant talent pool and logistics sophistication are seen as a big asset for Brunei in its journey to attain its economic goals.

"Hong Kong's own role as a logistics transshipping hub, its rich experience in freight forwarding and advanced biotechnologies will be helpful and inspiring for Brunei to explore its own economic model," said Ho.

But, the drawback appears to be Hong Kong companies' limited understanding of Brunei and its culture, as well as their lack of exposure within the ASEAN region, and this prodding Ho and the Brunei government to go the extra mile in drawing more investments from Hong Kong.

"I think Hong Kong entrepreneurs still don't possess enough data and market information to help them grow in the ASEAN region," Ho added.

The first phase of BIC will break ground within two months and some 15 companies are expected to set up shop there some 18 months after its completion.

The project is expected to provide up to 28,000 full-time jobs, 9,500 of which will be related to food processing. The second phase will focus on infrastructure facilities, such as hotels and warehouses, while the third phase will be geared towards the development of finance-related businesses.

Progress has also been made in the Brunei-Guangxi Economic Corridor created in September last year. In particular, Guangxi Beibu Gulf International Port Group Co Ltd has completed and submitted its management and development plan for the Muara Port container terminal in Brunei.

agnes@chinadailyhk.com

The Brunei BioInnovation Corridor blueprint (outlined in red) is located at the northwest of Brunei's capital, Bandar Seri Begawan. The project's first phase (highlighted in light red) will break ground soon. Brunei has exempted personal income tax, sales tax, manufacturing tax and capital tax to propel investment and attract technology-savvy talents to back up its halal food brand. Photo provided to China Daily

(HK Edition 05/20/2015 page11)