It is divided into 4 districts, namely Brunei-Muara (capital),Tutong, Balait and Temburong. It became a British protectorate in the year 1888 and joined the ASEAN countries in 1984. Since 1962, Sultan Hassanal Bolkiah had ruled the nation and is said to be the seventh wealthiest individual whose worth is valued for about $42 billion dollars, all thanks to its vast reserve of oil and gas, It is a country where its citizens enjoy great subsidies from the government and pays no tax. Brunei has the second highest human development index among the South East Asia nations, according to .http://www.bbc.co.uk/news/world-asia-pacific-12990058.
The people of Brunei enjoys so much from its government .This is a country where education is free and compulsory from ages 5 to 16.The literacy percentage of the people of Brunei is 60%.
COUNTRY FACTS (courtesy BBC report on BRUNEI)
Full name: Brunei Darussalam
Population: 406,000 (UN, 2011)
Capital: Bandar Seri Begawan
Area: 5,765 sq km (2,226 sq miles)
Major languages: Malay, English, Chinese
Major religions: Islam, Buddhism, Christianity
Life expectancy: 76 years (men), 81 years (women) (UN)
Monetary unit: 1 Bruneian dollar = 100 cents
Main exports: Crude oil, liquefied natural gas, petroleum products
GNI per capita: High income: $31,800 (World Bank, 2009)
INVESTING IN BRUNEI Brunei’s economy is based on oil and gas, while its major exports are crude oil, petroleum products and liquefied gas. This has made it to provide its citizens with the highest per capita incomes in ASIA. It solely relies on imported goods and manufactured products for the whole country. Brunei is a good investment haven because of its peaceful nature and stability in the polity. http://www.globserver.cn/en/brunei/doing-business
In making sure that business ethics are maintained, the Ministry of industry and Primary resources is solely in charge of facilitating and promoting trade in Brunei and is been sub- governed by the 4 tiers of chambers of commerce namely :
National Chambers of Commerce and industry
Brunei Malay Chamber of Commerce and Industry
Brunei international Chamber of Commerce and industry
Chinese Chamber of Commerce
ECONOMIC ANALYSES OF BRUNEI ECONOMY Brunei earns about 95 % of revenue from export and this has led to their economy having a strong come back in 2010 after a little down turn and GDP rose by 5 % in the first half of 2010 http://www.globserver.cn/en/brunei/imf-consultation .
Presently the Brunei government is looking at diversifying into other economic areas while setting aside huge amount of money to back up this kind of initiative. This funds are been set aside in other to be assessed by genuine investors ,either through public private partnership or joint ventures ,especially in energy sectors, telecommunications and above all Food business industry.
Why invest in Brunei So many factors could lure any interested investor into Brunei. The Government of Brunei has put so many measures in place to make the country suitable for an average investor, who is looking at his ROI to mature in the shortest period. In deciding whether or not to invest in Brunei certain factors needs to be looked into as to affirm its overall attractiveness and also by balancing it with other key factors as narrated by (Charles Hill 2009)
Economic policies: This has to do with the size of the Brunei economy, whose economic growth is based on its free market system and its capacity for growth (Charles Hill 2009). Brunei practices the Constitutional Sultanate type of government, (where all power is invested in the Sultan who doubles as the Prime Minister) .Although the Sultan has some 29 council members whom he consults, but in this case I do not think the opinion of this members really counts. The Sultan genuinely manages the wealth of the nation very well, as this is evident in the standard of living of the people of Brunei. He has also made provision for free education, free medicals, subsidized housing, and even the rice that is been sold to the masses enjoys a whole lot of subsidy.
The Sultan has been able to put in place good economic policies that would attract investors. Brunei government is looking ahead to the future where the natural oil and gas reserves may not be able to generate enough money for the economy. It is looking at ways to diversify into other sectors and with these kinds of plans, he needs foreign investors to do this for him.
Costs: Many factors like economic, political and legal factors determine the cost of doing business in a Brunei. For example, in Nigeria a foreign company trying to invest may have to pay off some cash to greedy politicians before been allowed to operate. This can be attributed to the ideology of the people. Whereas such an act is seen as a criminal offence in Brunei, because of Sharia law system being practiced. So also the infrastructural status of Brunei have been considered and found to be at par with some developed Asia countries within its environ which also help reduce cost of technological import on the part of an investor.
Risks: The risks of doing business in Brunei could also be determined by some factors such as political and economic factors
Political Risk: has been defined by (Charles Hill,2009)” as the likelihood that political forces will cause drastic changes in a country’s business environment that adversely affect the profit and other goals of a business enterprise. In his own opinion (S H Robock) believes that “political risk tends to be greater in countries experiencing social unrest and disorder. Such unrest he claims is more pronounced in countries where there are more than one ethnic group or countries where its resources has been mismanaged by different leaders and subsequently led to poor standard of living and inflation. With all these given examples, Brunei can be said to be free of any unrest as explained above because it has enjoyed a stable government for so many years and its ruler His Majesty Sultan Haji Hassanal Bolkiah who doubles as the Prime Minister, Minister of finance, and also as the defence Minister.
Economy Risk :According to (Charles hill, 2009) “defined it as the likelihood that economic mismanagement will cause drastic changes in a country’s business environment that hurt the profit and other goals of a particular business enterprise” .Brunei economy has been the cynosure of all eyes as regards its boisterous economy. Lately the Sultan of Brunei has taken a major step in reshaping the future of the country’s economy, pointing out the need for the country to diversify into other sectors, such as tourism, agriculture and fishery. Nevertheless, Brunei’s economy is jeering up for the future especially as it welcomes investors from the outside world, who will help develop the IT sector and its proposed ISLAMIC banking.
Measures put in place by Brunei Government to attract and stinulate foreign investors The Sultan has passed Flexible business laws guiding the modus operandi of business investors in Brunei where ownership of business for foreign investors could be as high as 100% ownership.
Brunei government has put in place a Zero company Tax policy for foreign investors of up to 8yrs. This implies that there is no tax on personal income, payroll or even on the export.
Brunei has one of the best living conditions and standards in the region, this is visible in the lifestyle and good health the citizens so enjoy
Being a small country, the local market is small also, there is relatively no competition within the foreign investors / market
Brunei government has been able to invest so much into the economy of the country and this has helped it to achieve a Low and cheap Utility cost
The laws governing foreign investors are quite flexible and investor friendly in Brunei.
There is possibility of 100% foreign ownership in investment
There is provision of investment incentive by the Government for new investors, which helps to nurture your business from starting up the business ,passing through growth till it reaches expansion stage
Creation of new economic strategy to reduce unemployment and increase other business opportunities
An infrastructure development programme to ensure Government keeps investing by partnering with external stakeholders
A security strategy to ensure Brunei’s political stability, where all citizens and foreigners feel secure while they go about their daily business
With all these evident measures, it is easy to say that it more of advantage to invest in Brunei where the polity is stable and enjoys good policies from the Sultan who has managed to give back proceeds from the crude oil back to its citizens.
PROPOSED MARKET ENTRY / BUSINESS STRATEGY After deciding on choice of country to move into, another uphill task is to decide how to enter the market. There are different types of market entry but it is necessary to consider other factors that helps make the right choice of entry. Each market entry has its merits and demerits. However, there is also need to say that there is no perfect entry as far as this strategy is concerned. Many factors could be considered while choosing the type of market entry options to choose from. There are different kinds of models, but for purpose of this report I have decided to recommend the SWOT ANALYSIS STRATEGY
This implies that organizations should adopt a strategy that is most suitable for it, which helps it to achieve its internal capabilities (strength and weakness) while also considering the external capabilities such as opportunities and threats. (Kenneth Andrews, 1970).
Also other entry mode could be analysed as against the options mentioned earlier. These include considering the options of Exporting products directly in to Brunei which will in turn increase the cost of transportation
Franchising is another method through which a company might want to use to gain entry into a country but it also comes with its own problems such as not having control over quality of one’s product.
Other methods that could be looked into are Joint ventures and full ownership of subsidiaries.
HOW TO REGISTER A BUSINESS ENTERPRISE IN BRUNEI It is important to outline what type of food product and items that will be offered to the public. Research should be carried out on the type of food that is acceptable to the people of Brunei putting into consideration that it is an Islamic country. There is need to create an operating plan
Sourcing for good location to establish the business is very important. Other facilities such as warehouse, storage, and equipment should be considered at this stage. It is important to also keep in mind if the property for the business would be bought , rented or even be built to suit the kind of business being proposed
It is necessary to register the business name with the local authority at the chambers of commerce and industry office for proper documentation and licensing
.Employ a tax expert to clarify all tax issues as the case may be and all other necessary permits that may be needed
RECOMMENDATION The following factors were considered before arriving at this recommendation
Supportive Environment: the Government of Brunei believes in sustaining the human environment through right practice as regards industrial pollution and emission. Any company that is found guilty is banned and evicted from its location. There is heavy investment in infrastructures and facilities.
Infrastructure: Brunei can comfortably boast of well-developed infrastructures compared to its surrounding neighbors. Its telecom industry is well developed that an average Brunei citizen could boast of having a phone. The sea port that serves the country has also been improved upon to serve all kinds of maritime business. While its road are of good standards.
Taxation: Brunei does not operate income tax or export tax, which proves as a good starting point for a new investor.
Import duty: Imported goods, foodstuffs and materials for industrial use do not pay import duties.
It is evident that investment in Brunei has more of opportunities than risk, because of all the aforementioned reasons above.
I would recommend an investment in Brunei. Considering all the right policies the government has been able to put in place.
CONCLUSION I am pleased to inform you that after putting in a lot of work and information gathering into this report, I am strongly of the opinion that investing in Brunei would not be regretted as evident in this report.
Though it is a small country but, its ROI will be achieved over a short period of time, if all the variables are to be considered such as the Risks, economic policies, and cost implication of doing business in Brunei which is very low. I would suggest an overall overview of this report, where all the merits are deeply looked into and used as a parameter for investing in Brunei.
With the government planning to diversify into other sectors of the economy, It is my belief that Brunei will begin to enjoy more influx of foreign workers, foreign investors, and even huge number of tourist.
Another area that needs to be looked into as regards investing in Brunei is the futuristic plan of the region. This is a plan that the Sultan has proposed to take them through a journey of 20years. Within this period, it has made plans to invest in building more high rise structure, roads, airports, universities, hospital, and make the region attractive to the outside world. It also plans to be self-sufficiency in the year 2015.
In all of these, the Sultan has a major role to play. The Sultan has been able to maintain a stable government and economy .It is my opinion that the political stability will not experience any changes in a long while as the ruling family intends to maintain its grip on power by not allowing any political process that would want to usher in a new government.
Although there have been a little complain about the extravagant lifestyle of the royal family, no real opposition has come out to publicly condemn this government. If things remains as it is with no change in power ,then Brunei’s economy stability is guaranteed which is most suitable for any investor.
The Lack Of Advertising Can Effect Demand Economics Essay
1. Introduction This assignment will explain supply and demand and how both are key variables that impact price with examples from everyday life.
Firstly to explain that price is derived by the interaction of supply and demand. The market price is dependent upon both of these components. The market is where an arrangement between buyers and sellers to buy or sell goods or services will occur and can agree on a price. When an exchange occurs, the agreed price is called the equilibrium price.
2. Demand “Demand in economics has three characteristics, desire to have a good, willingness to pay for that good and the ability to pay for that good. In absence of any of these three characteristics there is no demand” Gupta G.S (2006).
Demand is based on consumers and is the relationship between the price that is charged and the amount of that product that will be bought at that price. The quantity demanded is the amount of a product people are willing to buy at a particular given price.
3. The Law of Demand states that when the price of a product increases then less will be demanded. When the price of a product is decreased then more will be demanded. The reason quantity demanded is a key variable to price is we must assume people have a limited amount of income. With other things being equal the higher the price of a product the smaller the amount that can be purchased and vice versa.
Another factor that influences demand is substitutes. Most products have such as Tesco tea is a substitute to Lyons tea. If the price of Lyons tea rises relative to the price of Tesco brand, customers will buy less Lyons tea and more of the Tesco substitute.
The relationship between price and the amount of product people want can be illustrated on a demand schedule and a demand curve.
4. Demand Schedule illustrated in table 1.1 shows the quantities demanded at each different price other things being equal. We can see as price is reduced demand increases. This demand schedule can then be illustrated by drawing a demand curve which graphs the relationship between the quantity demanded of a product and its price.
Table 1.1 Demand schedule
Price of Video Game (Euro)
Quantity Demanded of Video Game Per Day
5. A Demand curve shows how price influences the quantity demanded by plotting price on the vertical axis and quantity demanded on the horizontal axis. As price goes down demand will increase. We can see this from the demand curve illustrated in graph 1.2. that the demand curve slopes downward from left to right indicating as price falls demand increases, for instance if the price of a video game is at five euro there is a quantity demand for five , however when the price is lowered to one Euro the quantity demand increases to twenty five.
Graph .2 Demand curve
6. Shift in a demand occurs when a good’s quantity demanded changes even though the price remains the same. The shift can increase or decrease depending on a number of factors such as:
When income increases customers will buy more goods and vice versa.
If the price of substitute goods decreases customers will switch to that product and vice versa.
If price of a complement product decreases the demand for both will rise, i.e. if the price of DVD players decreases the demand for the DVD player and DVD’s will increases and vice versa.
Change in taste influences demand. If customers are in favour of a product demand goes up, when they change against a product demand goes down.
Advertising or the lack of advertising can effect demand
Population change also has an effect but usually long term.
Graph 2.1 illustrates a shift in demand where that if a consumer’s income increases from 200 Euro to 250 Euro a week, one of the conditions of demand has changed. With the increased income the consumer is willing and able to buy more video games. This leads to the demand for video games per day increasing demand with no change of price.
Graph 2.1. Shift in demand curve.
7. A perverse demand curve is when a price rises, demand rises and when price falls demand falls. This is the opposite of a demand curve (figure 1.2). There are two main reasons this may happen.
Giffen goods, named after the economist who discovered the phenomenon was based on the observation that the poor of Victorian London bought less bread when it was cheap. The reason being when the price of an inferior good falls the customer has more income available to buy higher quality goods.
Exclusive goods, is when there is a greater appeal for exclusivity for some consumers and as the price increases so does demand. Examples of exclusive goods are certain types of jewellery and cosmetics.
8. Supply Is “a fundamental economic concept that describes the total amount of a specific good or service that is available to consumers” (www.investopedia.com)
Supply is based on manufactures and can be defined as the total amount of goods available for purchase which along with demand is one of two key variables that impact price. The higher the price of a good the greater the quantity that will be supplied other things being equal. There are five determinants of quantity supplied,
The price of the commodity is cost of production plus profit. We expect the higher the price, the more profitable it will be to make thus increasing supply.
If the price of other commodities increase. The production of the commodity whose price that does not increase will make it less attractive than before. Therefore we expect the supply of a commodity will fall as the price of other commodities rise.
Price of factors of production is an important influence on price. If the cost to produce a product increases the profit margin will be reduced. For that reason if the cost of labour increases this will cause a reduction in supply. However if there is a decrease in cost of labour a larger quantity can be profitably supplied.
The goals of firms. Producers might want to decide to keep the price high to restrict demand keeping profits high, a good example of this is the sale of I-phones. They may also decide to sell as much as possible, even if it costs them some profit in doing so.
The state of technology can aid a producer in minimising his cost of production and increasing efficiency. Mass production is therefore possible with technology, reducing the cost to make a unit.
9. The law of supply states that all other things equal, as the price of a good rises its quantity supplied will rise. This results in producers willing to offer more products for sale on the market at higher prices by increasing production as a way of increasing profits.
Table 3.1 illustrates a supply schedule showing the different quantities of video game consoles that producers are willing and able to supply at different prices over a given time period.
Table 3.1. Supply schedule.
Price of video game console (Euro)
Quantity supplied per day
10. A supply curve illustrated in graph 3.2 is a graph that shows the relationship between the price of a good and the quantity supplied. When price increases the quantity supplied also increases.
Price is plotted on the vertical axis and quantity supplied is plotted horizontal axis. The supply curve is upward sloping from left to right reflecting the law of supply. If for example the price of video game consoles increases from four euro to five euro per console we can see that the quantity demanded will increase from 50 to 60, we can see this by following the supply curve in graph 3.2.
Graph 3.2 supply curve.
11. A shift in a supply curve is when there is a change in supply for a reason other than a change in price.
Graph 4.1. illustrates that the supply curve has shifted to the right. This means that more is supplied at the same price.
The major causes of a rise in supply shifting the supply curve to the right are:
improvements in technology
reduced price of raw materials
reduced production costs
reduced labour costs.
The supply curve can also shift to the left showing a fall in supply. This means less will be supplied at the same price.
The major causes for this are:
a switch in production to a more lucrative option
increase in price of raw materials
a decline in demand for the product
increases in the cost of production.
Graph 4.1 Shift in a supply curve
12. Price and output determination. The price of a good regulates the quantities demanded and supplied. By combining the supply and demand curves we can show how the actual price of a good and the quantities bought and sold are determined.
13. Equilibrium may be defined as the point where supply equals demand for a product. The equilibrium price is where the demand and supply curves intersect. This shows us the point where the quantity demanded equals the quantity supplied giving us the equilibrium price. By looking at graph 5.1 where the demand curve crosses the supply curve in the centre is known as the market clearing price. The market clearing price is where there is no surplus or shortage.
Surplus occurs when quantity supplied exceeds quantity demanded.
Shortage occurs when quantity demanded exceeds quantity supplied.
The equilibrium price will remain unchanged once the demand and supply curves remain unchanged. If either the demand or supply shifts, it will result in a new equilibrium price. Such as if console games are one euro each, consumer demand can exceed supply. This leads to a shortage of console games in the market. Shortages will to force up the price and consumers contend to buy the product. When prices increase to a point where consumers will not buy the product or buy substitute product, demand decreases. This creates a surplus. To reduce surplus the price goes down and consumers start buying again maintaining equilibrium.
Graph 5.1. Supply and demand curves intersecting
14. Conclusion Supply and demand are considered a fundamental basis of economics. They are key variables of price and output in different markets. They are an essential part of a free market economy that will respond to changes to overcome shortages and surplus and maintain an equilibrium price and help keep the market stable.
Demand refers to how much of a product is sought by buyers. Quantity demanded is the amount of a product consumers are prepared to purchase at a certain price.
Supply refers to how much the market can offer. Quantity supplied refers to the amount of a product producers are prepared and able to supply at a certain price. Therefore price is a reflection of supply and demand.