BRUNEI: A NEW AND WELL-HEELED MINISTATE

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP84S00928R000200050003-4
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 13
• Document Creation Date: December 22, 2016
• Document Release Date: February 2, 2012
• Sequence Number: 3
• Publication Date: December 1, 1983
• Content Type: REPORT

Declassified in Part - Sanitized Copy Approved for Release 2012/02/02 : CIA-RDP84SO0928R000200050003-4
Lirectorate of OrAA VV_
Intelligence 25X1
Brunei: A New and
Well-Heeled Ministate
Secret
EA 83-10242
December 1983
300
Declassified in Part - Sanitized Copy Approved for Release 2012/02/02 : CIA-RDP84SO0928R000200050003-4
 25X1
Declassified in Part - Sanitized Copy Approved for Release 2012/02/02 : CIA-RDP84SO0928R000200050003-4
Declassified in Part - Sanitized Copy Approved for Release 2012/02/02 : CIA-RDP84SO0928R000200050003-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/02/02 : CIA-RDP84SO0928R000200050003-4
Directorate of Secret
Secret
Intelligence 25X1
Brunei: A New and
Well-Heeled Ministate
An Intelligence Assessment
This paper was prepared by
Office of East Asian Analysis. Comments and queries
are welcome and may be directed to the Chief,
Southeast Asia Division, OEA,
Secret
EA 83-10242'
December 1983
Declassified in Part - Sanitized Copy Approved for Release 2012/02/02 : CIA-RDP84SO0928R000200050003-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/02/02 : CIA-RDP84SO0928R000200050003-4
Secret
Brunei: A New and
Well-Heeled Ministate 25X1
Key Judgments Oil-rich Brunei enters nationhood in January 1984 with an affluence
Information available unmatched in Southeast Asia, but its stultifying political system and
as of 1 December 1983 divisive racial policies could mean future internal strains:
was used in this report.
? The apolitical populace will increasingly question the Sultan's autocratic
rule as independence brings greater contact with the outside world,
especially as students return from overseas.
? The Sultan's unbudging opposition to a representative political system
increases the likelihood of an eventual confrontation.
An unassimilated Chinese minority-largely denied citizenship by dis-
criminatory practices-is quiet because it is prosperous. Should prosperity
diminish or discrimination become oppressive, communal tensions could
develop like those in neighboring Malaysia. Chinese frustration already has
resulted in a slow emigration of managerial and technical personnel, whose
continued departure could impair functioning of the vital oil and natural
gas industries.
Although content to be a bit player on the international scene, Brunei is
showing an active interest in political ties with the United States and a
larger US commercial presence in Brunei. The Bruneians are also showing
interest in US military assistance programs, and we anticipate such a
request soon after independence.
Secret
EA 83-10242
December 1983
Declassified in Part - Sanitized Copy Approved for Release 2012/02/02 : CIA-RDP84SO0928R000200050003-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/02/02 : CIA-RDP84SO0928R000200050003-4
Secret
Figure 1
MLutong
0Miri
Kampong Lumut
\ T U
Kampong \ t7 s
AWN Badas ; `~~
F\
'
Kampong
Telingan
Kampong
Tenajon
Marudi
Pula u
Labuan
East
Cnannel
Kampong
Mompakul
ictori3
Brunei
Bay
International boundary
-?- District boundary
* National capital
-?- Railroad
Road
0 10
II -r1
0
20 Kilometers
10 20 Statute Miles
Declassified in Part - Sanitized Copy Approved for Release 2012/02/02 : CIA-RDP84SO0928R000200050003-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/02/02 : CIA-RDP84SO0928R000200050003-4
Secret
Brunei: A New and
Well-Heeled Ministate
A British protectorate for nearly a century, Brunei is
approaching independence on 1 January 1984 with a
distinct lack of enthusiasm. Although internally self-
governing since 1959, the Delaware-sized, oil-rich
sultanate on Borneo's northern coast has been content
to let Britain handle its external affairs and defense.
Brunei's reluctance to stand on its own stems in part
from residual suspicions that neighboring Malaysia-
whose state of Sarawak splits Brunei in two-wants to
incorporate it. Brunei declined to join the Malaysian
Federation on its formation in 1963 because of dissat-
isfaction with arrangements for sharing its oil earn-
ings, and Malaysia's subsequent backing of Bruneian
dissidents spawned Bruneian suspicions.
Brunei is also loath to give up the British protective
shield that has permitted it to concentrate on exploit-
ing its oil and natural gas reserves, earnings from
which have provided it with an affluence unap-
proached in Southeast Asia; in 1980 per capita GDP
was $27,000 (see appendix). For their part, the British,
although nettled by what they saw as unjustified
criticisms by the UN decolonization committee of an
unwanted colonial role, have found it difficult to
extricate themselves. Britain almost had to issue an
ultimatum to get Bruneian acceptance of independ-
ence, according to the US Embassy in Malaysia,
which is accredited to Brunei. Even so, there has been
continuing Bruneian foot-dragging, underscored by
delays in choosing a date for independence celebra-
tions, which will now be on 23 February.
Brunei's readiness to pay the $2.5 million annual cost
of retaining a 900-man Gurkha battalion provided by
the British reflects Brunei's uneasiness about standing
on its own. An acrimonious debate with the British
over British concern that the Gurkhas not be used
against internal opponents of the Sultan's regime has
apparently been resolved to London's satisfaction. For
the British, Brunei affords a locale for rotating Gur-
kha troops from Hong Kong, as well as the only jungle
training facilities available to the British Army. Brit-
ish expatriates will probably continue to serve in the
Bruneian armed forces and civil administration, al-
though in decreasing numbers.
25X1
Brunei's almost feudal political system appears cer-
tain to foster political agitation, particularly as inde-
pendence brings greater contact with the outside
world and the reclusive Bruneians become more ex-
posed to new ideas. The ruling class is a small, closely
knit group with little contact with the rest of the
population. The 36-year-old Sultan Hassanal Bolkiah
is an absolute monarch and makes all decisions of 25X1
consequence. Under the constitution, the Sultan is
chief executive and personally nominates the incum-
bents of all executive offices. Since a 1962 rebellion
aimed at overthrowing the Sultan and establishing a
North Borneo republic, members of the legislative
council as well have been appointed by the Sultan.
These appointed officials never make a statement at
variance with the Sultan's views, and, if the Sultan's
views are unknown, they do not venture an opinion.
They are hesitant even to present political ideas to the
Sultan, according to the US Embassy.
Political activity has been proscribed and Brunei has
been governed under a state of emergency since the
abortive 1962 rebellion against the Sultan's rule. A
handful of participants in the uprising remain in
prison without ever having been brought to trial. 25X1
Political parties are banned, there are no elections,
and by all accounts of local observers the royal family
has set itself firmly against any democratic experi-
ments. Nevertheless, the populace is quiescent, partly
out of contentment with the high standard of living.
Declassified in Part - Sanitized Copy Approved for Release 2012/02/02 : CIA-RDP84SO0928R000200050003-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/02/02 : CIA-RDP84S00928R000200050003-4
Secret
A commoner Acting Chief Minister, appointed two
years ago, is responsible for the daily functioning of
the government. An impressive administrator, he has
developed a popular following by holding village
meetings and listening to citizens' suggestions. For
this reason, however, he has come under suspicion
from the Sultan, quick to see a commoner with a
political base as a threat. Local observers speculate
that on independence the Sultan may remove the
Chief Minister and appoint his malleable brother as
prime minister and perhaps foreign minister
Although there is no organized movement for political
reform within Brunei, the exiled Brunei People's
Party, which led the 1962 uprising aimed at creating
a north Borneo federation of Brunei and the present
Malaysian states of Sabah and Sarawak, continues to
agitate for a democratic state. The only serious
political organization that has ever existed in Brunei,
it had the allegiance of half of the population at the
time of the rebellion, according to the US Embassy.
One of the most likely threats to stability will come
from students returning from abroad. Formerly, only
a handful of Bruneians went abroad for study, most of
them members of or associated with the royal family
and thus more controllable than commoners. Since
the mid-1970s, however, more and more commoners
have gone abroad. Some 2,000 students now in the
United Kingdom, because Brunei has no university,
could become the nucleus for demands for an opening
up of the political process. Even a moderate dose of
modern political thought will make many of them
harsh critics of the Sultan's tight control. There is also
a risk that students in the United Kingdom will take
up the Islamic radicalism that has infected Malaysian
students there.
The US Embassy believes that returning students will
challenge the stultifying political system, and Islamic
radicals will rail
Malaysian Deputy Prime Minister Musa Hitam, who
25X1
Declassified in Part - Sanitized Copy Approved for Release 2012/02/02 : CIA-RDP84S00928R000200050003-4 --
 Declassified in Part - Sanitized Copy Approved for Release 2012/02/02 : CIA-RDP84S00928R000200050003-4
Secret
worked in Brunei for many years before he entered
politics, sees the political system as so feudal and
decadent that it is certain to fall. under the influence
of a growing, politically aware commoner elite. He
over joining the Islamic Conference, according to the
US Embassy, because it does not want to get drawn
into Arab political disputes.
25X1
25X1
foresees radical change within five years.
Although not an immediate threat to the new govern-
ment, another vexing issue is the uncertain citizenship
status of some 50,000 Chinese, about 25 percent of
the population of 210,000. As in Malaysia, the Chi-
nese dominate business and form a major part of the
work force of the oil and gas industry. Although
prosperous, they are actively discriminated against.
Only about 10 percent are citizens, and rigid require-
ments-such as fluency in the Malay language and
demonstrated knowledge of the culture of the 65-
percent Malay majority-prevent any great increase
in the number of Chinese citizens. Although nonciti-
zens, including some British-protected persons, will
become stateless at independence, the Bruneian Gov-
ernment has not resolved the Chinese problem, despite
British urging. Several hundred Chinese management
and engineering personnel have already emigrated,
mostly to Canada, where they are working in the oil
and gas industry. Some Bruneian oil industry officials
have expressed concern that the departure of Chinese
could reach such proportions that Brunei's ability to
run its oil and gas industry would be in jeopardy. Even
if the Chinese remain, communal strife along the lines
of that in neighboring Malaysia could easily develop
should prosperity decline or social and religious dis-
crimination become more repressive.
A Bit Player Internationally
Because its fledgling diplomatic service numbers only
about 40 officers, after independence Brunei will
initially concentrate on joining the Commonwealth,
the UN, and ASEAN. Brunei will give first priority to
relations with ASEAN, into which it will be wel-
comed shortly after independence, and will establish
embassies in each of the five ASEAN capitals. It also
plans to convert its current liaison office in London
into an embassy and will open a diplomatic mission in
the United States, either in New York or in Washing-
ton. Although staunchly Muslim, Brunei is undecided
Within ASEAN, Brunei's relations will be closest
with Malaysia, despite the residue of distrust over
Malaysia's past efforts to destabilize Brunei. The
Bruneian Government apparently is satisfied that the
Mahathir government in Kuala Lumpur is sincere in
its efforts to put past Malaysian wrongdoing behind
it, according to the US Embassy. Whatever future
Malaysian intentions, Brunei calculates that member-
ship in ASEAN will provide a constraiint against
Malaysia.
In the transitional period toward independence, Bru-
nei has looked to Singapore as its tutor in internation-
al diplomacy. Despite the UK's formal responsibility
for Brunei's foreign affairs, Brunei has made a prac-
tice of attaching itself to the Singaporean delegation
as observers at international gatherings. According to
the US Embassy, Brunei has felt more comfortable
with a fellow Asian nation and sees Singapore's views
on some international issues as more compatible than
the UK's. In any case, commercial and official links
with Singapore are strong, and Singapore Prime
Minister Lee Kuan Yew has visited Brunei several
times. For its part, crowded Singapore values the use
of Bruneian terrain for the infantry training it lacks
space for at home. Such exercises are usually carried
out in low key in order not to arouse Malaysian
Although bitter over Indonesian involvement with the
1962 revolutionaries and the fact that Jakarta still
harbors the leader of the uprising, Brunei is now
apparently satisfied that the Indonesians are keeping
the aging rebel leader under wraps. The warming of
relations with Indonesia was underscored by a visit to
Indonesia by the Sultan, at his initiative, in 1981.
25X1
25X1
Declassified in Part - Sanitized Copy Approved for Release 2012/02/02 : CIA-RDP84S00928R000200050003-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/02/02 : CIA-RDP84SO0928R000200050003-4
secret
Malaysia: Brunei's Former Nemesis
Malaysia's pique over Brunei's refusal to join the
Malaysian Federation in 1963 led Kuala Lumpur to
support remnants of the 1962 uprising in Brunei.
Malaysian clandestine operations using exiled dissi-
dents, plus Malaysian-instigated criticism by the UN
decolonization committee of the British presence in
Brunei, continued until the mid-1970s.
The Hussein government, which came into office in
Kuala Lumpur in early 1976, began a laborious
process of reconciliation. "Polo diplomacy" between
the royal houses of the peninsular Malaysian states
and the Brunei Sultan's extended family plus Ma-
laysian offers of exchange and educational facilities
to growing numbers of Bruneian officials, students,
and military officers-slowly allayed Bruneian suspi-
cions. Malaysia continued to harbor a few partici-
pants in the 1962 rebellion, and it does so even now,
but apparently has put a lid on their political activi-
ties. By 1982, relations had improved to the point
that Brunei-which until then routinely attached
itself to the Singaporean delegation at international
meetings-sent its UN observers along with the Ma-
laysian delegation. The reconciliation was capped by
Relations with the other ASEAN members-Thai-
land and the Philippines-are cordial but not close.
Thailand provides most of the rice consumed in
Brunei and sends some workers to the labor-short
country. The Philippines sends larger numbers of
workers, including some 3,000 working on the Sul-
tan's new palace.
Brunei has shown no intention of opening ties with the
Soviet Union or China; neither has publicly shown
interest in the new nation.
With massive oil revenues and continued British help
in running the civil administration, Brunei should
embark on independence smoothly. Brunei's economic
well-being is a hedge for now against serious chal-
lenges to the anachronistic and unchanging political
a visit to Brunei this year by Malaysian Prime
Minister Mahathir, for whom the Bruneians have a
high regard. Historical tensions have thus dissipated,
although-with Bruneian memories of the period
when Malaysia was actively confronting Brunei-
residual antipathies will linger for some time.
The ill-concealed disdain some Malaysian officials
have for Brunei's feudal political structure will con-
tinue to annoy the Bruneians, and Malaysian territo-
rial claims promise to be nagging irritants. Brunei
has long smarted over Malaysian continental shelf
maps, which claim the entire north Borneo coast,
recognizing no continental shelf for Brunei, a particu-
larly significant omission because Brunei's oil and
natural gas reserves are almost all offshore. Brunei
regards as arrogant Kuala Lumpur's refusal to dis-
cuss Brunei's claim to the Limbang salient of the
adjacent Malaysian state of Sarawak-an area
which was detached from Brunei in the 1890s and
which splits the small sultanate into two segments.
system. Within the next few years, this sense of well-
being will be tested. Prosperity notwithstanding,
growing popular aspirations for a political role and
divisive communal policies appear certain to bring
internal strains.
If Brunei has its way, the United States will play a
larger role in Brunei's affairs after independence. The
Sultan has shown a lively interest in relations with the
United States, and, according to the US Embassy,
Brunei is anxious to establish a resident US diplomat-
ic mission.' Bruneian officials, although having only a
' The dearth of trained personnel kept Brunei from opening an
office in Washington, attached to the British Embassy, in the last
25X1
25X1
Declassified in Part - Sanitized Copy Approved for Release 2012/02/02 : CIA-RDP84SO0928R000200050003-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/02/02 : CIA-RDP84SO0928R000200050003-4
Secret
rudimentary knowledge of the United States, have
been approachable to US diplomats visiting from the
US Embassy in Kuala Lumpur. The Bruneians are
especially interested in sending students to the United
States for college and postgraduate training; almost
none are here now.
Underscoring Brunei's interest in strengthening ties
with the United States was its decision last August to
shift the management of investment funds totaling
$5 billion from British to US banks (Citibank and
Morgan Guaranty). The Bruneians have also shown
interest in US security assistance programs, and an
early request after independence is anticipated. Like
Singapore, Brunei would be prepared to pay cash for
equipment and training, according to the US Embas-
sy. It apparently hopes to capitalize on its location
along air routes and sea lanes between US bases in
the Philippines and facilities in Singapore, Australia,
and New Zealand. Brunei has some of the world's
best jungle warfare training facilities and a modern
2,500-meter runway near the capital city (Bandar Seri
Begawan), which it may envisage as a refueling stop
for US military flights. In view of Brunei's outgoing
attitude toward the United States, Bruneian-US rela-
tions after independence should get off to an amicable
5 Secret
Declassified in Part - Sanitized Copy Approved for Release 2012/02/02 : CIA-RDP84SO0928R000200050003-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/02/02 : CIA-RDP84SO0928R000200050003-4
Secret
Appendix
The Economy-Awash in Oil
Brunei's economy is dominated by the oil and natural
gas industries, which together account for 80 percent
of the GNP and 99 percent of export earnings. These
industries are the second-largest employers after the
government, whose bloated civil service comprises
nearly one-half of the work force.
Because of oil and gas revenues, Brunei has foreign
exchange reserves of some $13 billion and an annual
balance-of-payments surplus of $1-2 billion, although
the exact amounts are masked by Brunei's secretive-
ness on financial matters. The huge surplus has been
used to underwrite a rapid pace of modernization and,
in addition, to provide the populace with large subsi-
dies for food and housing, and free education and
medical care.
Oil production is the monopoly of Brunei Shell, a
consortium jointly owned by the Brunei Government
and Shell Oil. Crude oil production is currently
150,000 barrels per day, down from 255,000 b/d a
few years ago (see figure 2). The decline is partly due
to the soft world oil market, but also reflects a
deliberate policy decision by the government to con-
serve its oil reserves. Proven reserves of 1.8 billion
barrels are sufficient to last well into the next century
at current production rates. Declining world oil prices
and the cutback in Brunei's oil output since 1979 have
reduced foreign exchange earnings, but only to the
extent of paring the massive annual payments surplus
and not enough to have any effect on economic well-
Figure 2
Brunei: Oil Production
and Government Revenues
Revenuesa
Billion US $b
1
0 1971 75
Oil Production
Thousand b/d
350
20
200
0
50
0 1970 75 80 83e
being.
Similarly, large reserves of natural gas, nearly 225
billion cubic meters, will last 30 years at current
production rates. Practically all of the annual produc-
tion of 7 billion cubic meters is exported as LNG
(liquefied natural gas) to Japan under a 20-year
contract that runs through 1993. The LNG plant,
which opened in 1973, is jointly owned by the Brunei
Government, Shell, and Mitsubishi.
aRoyalities from oil and gas account for nearly all revenues.
b Converted at the Brunei exchange rate of July 1980.
Estimated.
Declassified in Part - Sanitized Copy Approved for Release 2012/02/02 : CIA-RDP84SO0928R000200050003-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/02/02 : CIA-RDP84SO0928R000200050003-4
Secret
Lumut, Brunei
Oil policy in Brunei apparently is aimed at shifting
emphasis away from any single foreign operator. In
exploring for new oilfields, for example, Brunei has
shown interest in providing competition for Shell. The
Jackson Company of Dallas was awarded a concession
in 1982. Although it has made no commercial discov-
eries, the Bruneian Government apparently has been
impressed with its technology and has encouraged it
to continue. Two other American firms (Woods and
Sunray) have been awarded oil and gas exploration
leases on Brunei's continental shelf.
There is a growing US business presence in Brunei,
one the Bruneian Government encourages. Bechtel
has two major management contracts-for construct-
ing the Sultan's palace and the Foreign Ministry
building. A US firm has built housing for Shell, and
US banks (Bank of America and Citibank) are active
and competing successfully with their more staid
British competition. Sheraton has opened Brunei's
only hotel of international standards.
As a result of the dominance of oil and gas, there is al-
most no other productive economic activity. Construc-
tion and commerce are the only significant modern
sectors besides government and petroleum. Production
of food, fish, rubber, and timber have declined in
recent years, and Brunei now imports 80 percent of its
food. Efforts to promote manufacturing under a five-
year plan that ended in 1979 produced few results.
Specific projects-a pulp mill to tap Brunei's unex-
ploited forests and a glass factory to utilize local sand
deposits-have not gotten off the ground.
Economic diversification efforts are now focused on
agriculture, and a British consulting firm is conduct-
ing a multimillion-dollar study to determine the best
prospects. Full employment and the attractions of a
comfortable urban life raise doubts, however, about
the likelihood of any extensive development program
becoming successful.
Declassified in Part - Sanitized Copy Approved for Release 2012/02/02 : CIA-RDP84SO0928R000200050003-4
 Declassified in Part - Sanitized Copy Approved for Release 2012/02/02 : CIA-RDP84SO0928R000200050003-4
Secret
Declassified in Part - Sanitized Copy Approved for Release 2012/02/02 : CIA-RDP84SO0928R000200050003-4