This document provides an overview of foreign direct investment (FDI) in Brunei Darussalam. It defines FDI and describes the different types, including greenfield investment, horizontal FDI, and backward/forward vertical FDI. It also outlines the main motivations for FDI, such as being resource-seeking, market-seeking, or strategic-asset seeking. The document discusses the importance of FDI for economic growth and development as well as some barriers. It then provides examples of how Brunei is working to attract more FDI through improving infrastructure, providing incentives, and developing special economic zones. Finally, it summarizes recent news articles about land zones and incentives that could further boost FDI in Brunei.

1. FOREIGN
DIRECT
INVESTMENT
FDI IN BRUNEI DARUSSALAM
PRESENTED BY:
SYAFIQAH
LINA
HIDAYAH
HNDBM/11/02(G1)

2. CONTENTS:
 Introduction to FDI
 Types & Method of FDI
 Importance & Barriers to FDI
 Advantages & Disadvantages FDI
 How Brunei attract FDI
 World’s FDI incentives that Brunei can adopt
 Latest news of Brunei attracting FDI

4. It is a direct investment into production/ business by
company of country A into country B either by:
Buying a company
Expanding operations in exiting business
operations
Simply defines as an investment made by a
company in one country, into a company of the
another country.
Usually involves participation in
management, joint-
venture, transfer of technology
and expertise.

5. International Business 5e
Growth of World FDI vs. GDP

6. International Business 5e
Reasons for FDI Growth
Increasing
globalization
International mergers
and acquisitions
Entrepreneurship
and small firms

7. STRATEGIC
ASSETS
SEEKING

8. Inward (inflow) is when the foreign
capital are invested in local
resources.
The inflow of foreign capital into
Brunei
For example : General Motors decides
to open a factory in Brunei. They are
going to need some human capital.
That human capital is inward FDI for
Brunei.
Inward FDI is encouraged by Tax
breaks, subsidies, low interest
loans, grants.
Inward FDI is restricted by
Ownership restraints or
limits, differential performance
requirements

9.  Outward (outflow) is when the local resources are
invested to another country
 The outflow of Brunei capital to other country
 For example: Brunei invest in Dorchester Hotel
 Outward FDI is encouraged by Government-backed
insurance to cover risk
 Outward FDI is restricted by Tax incentives or
disincentives on firms that invest outside of the
domestic country.

10.  An investment involve the flow of FDI by building
up
 New production capacities
 Expansion of the existing production
 Greenfield Investing is offered as an alternative
to another types of investment, for example as
mergers and acquisitions, joint ventures, or
licensing agreements.

11.  An investment made by a
multinational company in
different nations.
 It is the investment made for
conducting similar business
operations.
 For example: Apple Inc. factory
in Brunei
 Horizontal FDI results in expansion
of the parent company and
brings FDI in the other economy

12.  Backward Vertical = It is when an
industry abroad provides inputs for
a firm's domestic production
process
 For example: Brunei Shell
Petroleum with Royal Dutch Shell
 Forward Vertical = industry abroad
sells the outputs of a firm's
domestic production process.
 For example: when Volkswagen
entered the United States market it
acquired a large number of
dealers rather than distribute
its cars through independent
United States dealers

13. Resource Seeking
This investment aimed
to get production factor
supplies at low cost.
The investment is
seeking access to
existing resources
For e.g. : China low
labour cost
The most important
among these are:
1. Raw materials,
2. Labour,
3. Public incentives
4. The chance to
restrain logistic costs

14. MARKET SEEKING
Its aim is to realize a direct presence in the
foreign market to quickly develop sales revenue
and control the marketing mix policy.
It allows firms to pursue strategic goals such as
threatening competitors by entering their home
market.
An example is General Motors’
investment in China which is
market seeking because the cars
built in China are sold in China.

15. Strategic asset seeking
 It is an investment led to increase self-
competitiveness through the acquisition of strategic
assets such as technologies not available in the home
market, or rather links with global value-chains.
 This kind of investment typically regards firms located
in emerging or developing countries (particularly
China), and are often undertaken for various reasons
such as to lower costs of production or the will to
expand on overseas markets. Similarly to the
efficiency seeking firms, the strategic asset seekers
aim to capitalise on the advantages of the common
ownership of a network of activities and capabilities
in diverse environments.
 For example: China low labour cost so the Apple Inc.
built its factory there.

16.  by incorporating a completely owned
subsidiary or company anywhere
 by acquiring shares in an associated
enterprise
 through a merger or an acquisition of an
unrelated enterprise
 participating in an fairness joint venture with
another investor or enterprise

17.  Resource for economic
growth
 Money inflow from overseas
 Business grows in several
countries
 FDI & Economic
development
 Opportunities
 Competitive requirement
 Corporative Activities
 Branch plant or subsidiary
company operations
 Rise in National Income

18.  Formal restrictions on FDI include limits on
foreign ownership
 Screening and approval procedures
 Informal barriers may also be important
 Barriers to investment
access, operations, areas, products, ownership
and land use
 Barriers on labour, policy, institutional and
control variables
 Political controversial

19.  New jobs are created
 New technology are implemented
 Availability of scarce of factory of
productions, products and raw materials
 Improving the balance of payment though import and
export substitution
 Revenue to the government through taxation
 Improved political relations
 To get additional expertise
 Increase in the number of competition
 Expand local business
 Stimulate the local economy and thus increasing in
GDP

20.  Political changes leads to “Expropriation”
 Cultural and political indifference
 Investing is more expansive than exporting
 FDI always at risk
 Threat to local product
 Takes away employment opportunities
 It brings harm to the environment
 Foreign market recession
 Inequality of income distribution

22.  Improving its domestic infrastructure
 Improving logistic and transportation
 Stable legal and financial framework
 Providing fiscal incentives
 Increase awareness
 Remove the difficult regulations
 Reduce corruption and encourage transparency
 Enact policies to provide training and skills upgrading to develop
their workforce

23.  Low corporate tax
 Tax holidays
 Preferential tariffs
 Special economic zones
 EPZ - Export Processing Zones
• Bonded Warehouses
• Loan guarantees
• free land or land subsidies
• job training & employment
subsidies
• infrastructure subsidies
• R&D support
• derogation from regulations
(usually for very large
projects)

24. Incentives to further attract FDI

25. Incentives to further attract FDI

26. Borneo Bulletin – Thursday
22 November 2012
The study has also identified several land
zones along the coastal corridor suitable for
industrial and commercial use –
 Telisai Energy Park for petrochemicals and heavy
industries;
 Panaga for general industries, warehouses and
assembly;
 Anduki for logistics and warehouse uses;
 Keriam for light manufacturing, processing and
distribution; Brunei Creative & Knowledge Industries
Precinct located around the Agrotechnology Park
 Universiti Brunei Darussalam (UBD) for knowledge-
based industries, research and education, high tech
business and creative industries;
 Brunei Aerotech Precinct located around the Brunei
International Airport, for business, retail, leisure and
entertainment services, as well as storage and
'distribution network facilities
 Pulau Muara Besar for petrochemicals and logistics.

27. The key actions are –
 To ensure the incentives offered by Brunei are competitive
 The process of creating special purpose zones can respond to new investment
proposals;
 To review the mechanisms for investment attraction and facilitation, and ensure
decision-making is expedited within stated timelines;
 To adopt the recommended sustainable urban development areas (SUDAs), ie
Telisai Energy Park, Brunei Creative & Knowledge Industries Precinct and
Brunei Aerotech Precinct, and establish a development authority for each SUDA;
 To give statutory effect to the plans recommended in this study;
 To ensure the private sector can take a lead role in future urban development
including the release of registered title land for purchase, and foreign investors are
offered secure long-term leasehold of required land for economic development and
to prepare a State Land Management Plan where ministries will be required to
prepare a business case to identify future land requirements and the government
to prepare a strategic infrastructure development strategy with funding provided to
enable a continuous rollout of infrastructure to support the local construction
industry.
Borneo Bulletin – Thursday
22 November 2012

28. THE END