Case Study: Brunei - Brunei's New Agro Technology Park in the Global Value Chains

11 July 2011
ITC News

The interdependence of the global economy and the increasing reliance of businesses on global value chains have been underlined by the economic pressures generated by the global financial crisis. In the wake of the crisis, there is scope for governments to do more in helping large companies, small and medium-sized enterprises (SMEs) and farmers to export their production.

One such example is Brunei, a heavily oil-reliant country, which has taken measures to diversify its local economy in order to participate more effectively in the different segments of global value chains. Strengthening and promoting the Brunei Halal brand is one way of gaining a competitive advantage in the regional, populous and largely Muslim markets.

Brunei is a small, rich country, with a population of less than 380,000 and gross domestic product (GDP) of about US$ 20 billion (with GDP per capita of US$ 52,000), ranking Brunei ninth in the world in 2009. However, more than 80% of Brunei’s economy relies on oil exports. In the short term this is not a problem, but in the long term the country needs to diversify. Oil revenues give it the resources to do so. One of the most important diversification initiatives being undertaken by the Government of Brunei, with the advice of SQW China Ltd, is to develop a publicly funded, major agro technology park and food processing incubator accompanied in parallel by vigorous promotion of the Brunei Halal brand. These initiatives help local SMEs and farmers to develop and market new value-added products based on agricultural production and the natural flora of the rainforest. Key target markets include South-East Asia and China. Importantly, the plan is a ‘start from the market’ approach, targeting the population of more than 200 million Muslims in China and South-East Asia, who are increasingly demanding high-quality halal food products. Supporting the Brunei Halal brand is a major theme of the initiative.

The technology park will incorporate a mix of research and development, testing and certification activities, and will attract firms developing and manufacturing high-value food, medicinal, therapeutic and cosmetic products derived from fruit, vegetables, herbs and non-timber forest sources. The park will also provide training and business incubator facilities. The specifications for a specialist food incubator are currently being drawn up by SQW China Ltd, in cooperation with the University of Lincoln in the United Kingdom, which itself operates several food incubators. A botanical garden will be constructed as part of the structural landscaping for the agro technology park, which will make it a visitor attraction as well as a location for new business activities. A distinctive feature of the park is to undertake and commercialize research into the nutritional and

medicinal properties of the unique flora of Borneo (70% of Brunei is protected natural rainforest). The combination of botanical gardens, nurseries and research laboratories will provide an environment in which plants can be grown and their key nutritional or medicinal properties analysed and identified.

The aim is to achieve a significant increase in both value and volume of food products, as well as to ensure the required level of quality and purity. The agro technology park will also provide space for the manufacture of products for local and international markets under the Brunei Halal brand. By leveraging the high-quality halal certification process and technology, firms in Brunei can export their products and form production and marketing joint ventures with companies in the region, particularly in China. A subsequent opportunity would be to manufacture in China, based on Brunei

Halal certification, and to re-export from China to the region. Brunei firms will thus be better able to increase production to meet regional market demand. It will be easier to exploit high-value market opportunities, for example in relation to products based on cattle, fisheries and forestry and subject to a strict halal certification process.

At the infant industry stage, the Government will subsidize SMEs and farmers so that they can grow and develop to compete internationally while complying with the strict halal process.

Ideally, the Government should not be the only promoters of the scheme in the long term. In the second phase of the project, private sector venture capital funds will be invited to participate in the expansion of the agro technology park and incubators. By then the project will become a public–private partnership project.

To become an integral part of the global value chains, one other important factor is strengthening the international transport and warehousing logistics networks for local SMEs and farmers. To facilitate this, certain strategic alliance arrangements are under way with several southern Chinese ports and logistics zones in Guangxi and Guangdong provinces to ease the export and import of raw materials and final products. Private sector venture capital funding will also participate in the joint development of logistics services.