The World Trade Organization (WTO) has conducted its third trade policy review of Brunei Darussalam and has looked at progress since the previous review in 2008.

The WTO noted that Brunei has simplified and liberalized its trade regime with the average MFN tariff decreasing from 4.8% in 2007 to 1.7% in 2014. Brunei has a low inflation rate, strong fiscal position and a current account surplus. The WTO has encouraged Brunei to increase the pace of diversification of the economy away from oil in view of the current low oil price.

The WTO has also encouraged Brunei to reduce the remaining obstacles to foreign direct investment (FDI) and create an economic environment that is friendlier to business. Brunei participates in bilateral and regional trade agreements and has thereby deepened its integration in the global economy.

In its domestic legislation Brunei has carried out legal and regulatory reforms including a stronger framework for the business environment, financial services and intellectual property. The WTO has urged Brunei to pass additional measures on competition and to promote greater transparency in government decision making on trade policy issues. Also a more level playing field needs to be created between state-owned and private enterprises (both foreign and domestic).

It has been noted by WTO members that service sectors such as tourism, telecoms, construction, finance and transportation have potential for growth and for the diversification of Brunei’s economy. Brunei is therefore being encouraged to increase its commitments under the General Agreement on Trade in Services (GATS).

The WTO members have indicated their satisfaction with ongoing reforms of customs procedures including the introduction of e-customs and of a National Single Window. Brunei has however increased the number of items covered by its excise duties and trading partners have asked about the rationale for this. WTO members are pleased with Brunei’s efforts to improve intellectual property protection although they have some issues concerning the new Patent Law.

It has also been noted however that despite its low applied MFN tariffs Brunei has bound tariff rates that are significantly higher than the MFN applied tariffs. The bound tariff is the maximum level to which the MFN tariff could rise on a given commodity. The gap between the bound tariff and the applied tariff, known as the binding overhang, is quite high and this adds uncertainty for trading partners.