Brunei aims to be key destination for investments
By Yusrin Junaidi & Sonia K

Brunei has made strategic efforts to create a conducive business and investment environment for the financial industry to flourish, and thereby turn the country into a vibrant investment domicile.

"This is in line with the country's strategic aspiration to make the financial industry contribute more meaningfully towards the economic growth of Brunei Darussalam, making it a key feature of the country's economic diversification strategy," said Minister of Finance II Pehin Dato Seri Setia Awg Haji Abd Rahman bin Haji Ibrahim.

The minister made a keynote address at the two-day CAAM AI (Credit Agricole Asset Management Alternative Investments) Investment Forum 2008 yesterday at the Empire Hotel and Country Club in Jerudong. The forum is organised by the Credit Agricole Asset Management.

Meanwhile, Credit Agricole Asset Management Group, a major asset management worldwide that has over US$786 billion in assets, announced the opening of its branch office in Brunei yesterday.

According to the Minister of Finance II, the strategic plan charts an orderly path for the integrated development of the country's financial industry, which includes numerous attempts to spur and expedite its development process, with the requisite expertise for such project being provided by expert consultants and practitioners alike, both from within and from outside the country.

He also added, "In line with our strategic focus to develop and promote Brunei Darussalam as a Regional Islamic Financial Centre, the Brunei International Financial Centre (BIFC) offers a comprehensive suite of legislation and relevant licences to cater to the needs of the global market players, particularly those active in Asia.

"The coverage includes, banking and finance, asset and fund management, insurance, international trusts and international company incorporation. The aim is to ensure that Brunei Darussalam as a jurisdiction stays responsive to the changing needs of the market and the customers in providing high quality offerings necessary to become a world-class international financial centre."

He pointed out that aside from the efforts to domicile "offshore" companies and institutions in the BIFC, another key initiative currently being undertaken by the Ministry of Finance is the development of Islamic Finance domestically in Brunei Darussalam, with the intention to turn the country into a niche for Islamic capital market instruments that have recently shown a marked increase locally.

"The effort by His Majesty's Government to develop of a strong and established capital market in the country aims to provide attractive investment avenues to ensure, at least, part of the excess liquidity will be efficiently circulated, and remains within the domestic economic and financial system.

"The Ministry of Finance's issuance of a series of Syariah complaint Government Sukuk Al-Ijarah amounting to a total value of more than $1 billion, demonstrates its commitment in this regard. This is on top of the many innovative commercial products that have started to be offered independently, by the local financial institutions," he said.

Earlier, the minister said: "Alternative investment is currently one of the fastest growing asset classes in the global investment arena and has become accepted as a mainstream asset class, alongside other more traditional assets like fixed income and listed equities, and contributes positively in the diversification of investment portfolios."

He also said that apart from providing portfolio diversification benefits, such investment also offers the potential to enhance overall return to the portfolio on a risk-adjusted basis, hence justifying its increased acceptance amongst professional investment practitioners with an 'Active Management' bent.

"However, it is important to note on its own, alternative investments tend to pose higher risks, and all the more so for the uninitiated, as it requires greater amount of investor diligence.

"As such, it may not match every investor's risk appetite. 'High risk, high turn' is certainly an apt description for this type of investment, although 'high risk' that is 'huge loses' rather than 'high returns' is the more likely outcome for investors not properly schooled in the subject," said the Minister of Finance II.

He also stressed that successful investing in the normally inherently risky 'alternative' category requires that investors possess the right skills and capability to assess and take only properly calculated risks, commensurate with the particular investor's level of risk tolerance.

"With the ever changing and evolving alternative investment landscape, the proliferation of ever more complex products and structures, which are the brainchild of creative sale side 'financial geniuses', sometimes known as 'financial engineers', it is necessary for players to continuously learn from the market, while not forgetting that the more things change, the more they stay the same," he added.

He also highlighted the current banking crisis, involving many top-tier banks of international repute, brought about partly by the demise of CDOs (once touted as safe investments by investment banks), and strongly linked to the sub-prime mortgage collapse in the US, reminds us that these 'innovative' products are not necessarily what they are cracked up to be.

"The debacle highlights the folly of investing in investment product whose actual riskiness is beyond the grasp even of some of the so-called professionals. Suffice it to say that the more complex the product, the harder it will be for the average investor to fully understand, let alone control the consequences arising out of investing in such product," said the Minister of Finance II.

The minister highlighted Brunei's advantages including the country's political stability, its strategic location within the heart of the largest growing region in Asia, its strong and comprehensive legal and regulatory framework, its modern physical infrastructure and the relatively low cost of business operations.

Such a conducive environment has already managed to attract an increasing number of international financial institutions to the BIFC.

He also urged those who have not visited the BIFC to do so and learn more about what the centre has to offer.

The event was also attended by Dato Paduka Hj Ali bin Apong and Awang Hj Bahrin bin Abdullah, Permanent Secretaries, and senior government officials. - Borneo Bulletin (29th Jan 2008)