Australian Defence Minister Linda Reynolds made her first visit to Brunei last month as part of her Indo-Pacific trip to ramp up defense cooperation with members of ASEAN, including claimants of the South China Sea.
Reynolds met the Sultan of Brunei and Second Minister of Defence, Pehin Halbi, and appointed Colonel Daniel Hauser as Australia’s resident defence adviser in Brunei to deepen the defence partnership between the two countries.
“Brunei and Australia enjoy a strong and longstanding relationship, and share common interests in a secure, stable, and open Indo-Pacific,” Reynolds said, adding that cooperation between the two countries has increased significantly during the COVID-19 pandemic.
Since the beginning of the year, several joint military training have taken place between both countries, including navy exercises to strengthen maritime security in the South China Sea.
Reynold’s subsequent visits to Singapore and the Philippines highlighted Australia’s growing defence stance in the region; and what observers see as an increased military presence of U.S. allies in the region that has seen already seen increased activity from China which has been expanding its maritime claims.
For the maritime nation of Brunei, which is also one of the region’s weakest military forces with no deployment in the South China Sea, Reynolds’ visit provides a safety net against Beijing, its biggest foreign investor and rival claimant.
Brunei in 1984 declared maritime jurisdiction over the 200-nautical miles of its Exclusive Economic Zone (EEZ) but has remained largely low-key despite territorial flouting by Beijing’s expansive nine-dash line claim in the South China Sea.
Though it actively joins ASEAN claimants in negotiating with Beijing, Brunei has not asserted its territorial sovereignty. Observers believe this is because it lacks the military and economic means to do so.
The country’s US$430 million defence budget this year was expanded to take into consideration the protection of national assets in the South China Sea and COVID-19. Albeit a 2.7 percent increase from 2019, the funding has put a strain on the government due to wider economic challenges, noted The Diplomat.
Economic Lifelines
An oil-producing nation, Brunei has long relied on energy export to generate 90 percent of its revenue and 60 percent of its GDP, despite efforts to diversify revenue streams in the past decade.Academics said the global economic slowdown, exacerbated by plunging oil prices, ongoing trade tensions, and COVID-19, could taint the country’s economic outlook.
International banks, such as Citibank and HSBC, have pulled out of Brunei in recent years on account of downscaling; JP Morgan and Deutsche Bank boycotted Brunei-owned hotels last year following its death-by-stoning law for crimes such as adultery and homosexuality.
Topping Southeast Asia’s highest unemployment rate at over 9 percent (youth unemployment at 15 percent), Brunei is expected to use up its oil reserves within two decades.
“The sultanate is hard-pressed for investments to diversify its economy and in this sense, the Chinese investments are important to [Brunei],” Jatswan Singh, associate professor at the University of Malaya in Kuala Lumpur, told the South China Morning Post.
Beijing, by far the country’s largest foreign investor with investments exceeding US$17 billion, has promised over 10,000 jobs for the second phase of Henyi Group’s refining and petrochemicals joint venture—a key driver of Brunei’s economic diversification.
Bank of China also jumped into the fray and opened its first branch in the nation with a population just under half-a-million, despite the “challenging environment” and “small and limited market” conditions described by GM Wang Xiaolin in an interview with Chinese state-media Xinhua.
As Brunei eases laws for foreign investors, Chinese firm Pure Fresh inked a US$400 million deal for an aquaculture supply-chain that includes the sale of Brunei’s premium blue shrimps on China e-commerce giant JD.com via direct flights to China.
Putting Down Consensus
“Building good relations and offering big investments are part of China’s strategy to split Southeast Asian nations to ensure there is no consensus on South China Sea matters,” Singh warned.Singh’s view was echoed by geostrategist Brahma Chellaney. “Typically, China starts as an economic partner of another country, only to gradually become its economic master,” he said.
He added that Beijing exploits the vulnerability of “small, strategically located countries that borrow big” through debt traps, like its investments that led to the takeover of Lao’s national electric grid, Sri Lanka’s Hambantota seaport, and the Maldives’ various islets in the Indian Ocean archipelago.
While Brunei financed its projects without borrowing Chinese funds, it remains to be seen if it can escape unscathed from Beijing’s influence, under the watchful eye of Australia.
As it will be appointed as ASEAN chair next year, Brunei’s stance on Beijing’s territorial claims and encroachment of member states’ EEZs will likely determine if ASEAN indeed has the consensus to tackle Beijing.
Whether it stands by Beijing’s territorial claims or breaks its silence this time around, no one quite knows where Brunei will pivot.
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