Courting the little kingdom

Why Brunei matters to China

Mustafa Izzuddin

Trade and industry, International relations, Arts, culture & society, South China Sea | Asia, East Asia, Southeast Asia

15 December 2016

The sultanate of Brunei may be small, but there are big, mutual benefits, from close bilateral relations with China, Mustafa Izzuddin writes.

On 23 April 2016, China announced that a four-point consensus had been reached with Brunei, Cambodia and Laos on how to address the South China Sea dispute. Laos and Cambodia being parties to the consensus came as no surprise as both countries are perceived to exist within China’s sphere of influence. But the inclusion of Brunei raised some eyebrows as it was not just a Muslim-majority country, but also a claimant in the South China Sea dispute, unlike the other two. Why then was Brunei courted by China, culminating in the country acceding to the four-point consensus?

Principally, China wanted to diversify its support base in anticipation of the arbitral tribunal’s verdict, which, as expected, ruled in favour of the Philippines. The more allies China could capture, the more potency its rejection would have of not just the tribunal’s authority, but also its eventual verdict. So unsurprisingly, in the lead up to the decision, China decided to court Brunei to solicit its support for a stop-gap alternative to the tribunal, the four-point consensus. Equally unsurprising then was Brunei’s anodyne response to the tribunal’s final judgment.

The four-point consensus proposal was mooted in the same year Brunei and China were to celebrate the 25th anniversary of the establishment of bilateral relations. The feel-good factor, accompanied by heightened bilateral political trust, may have contributed to Brunei being more amenable to support China’s proposed alternative to the tribunal ruling. Not to mention that Brunei has been home to a minority Chinese population since the 15th century, which can be perceived as added leverage in bringing Brunei and China closer together.

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And importantly, Brunei is the one claimant state in the dispute that has chosen to adopt a non-aggressive posture by not occupying any of its claims or maintaining a military presence to protect them. This is despite the fact that Brunei had published a map to outline its jurisdiction in the South China Sea and disclose its Exclusive Economic Zone as allowable under the United Nations Convention on the Law of the Sea. Brunei’s claims include maritime features of Louisa Reef, Owen Shoal, Rifleman Bank, and Bombay Castle. Although the claim to Louisa Reef has pitted Brunei against Malaysia, neither side has sought to escalate the conflict, but have rather sought to resolve any occasional spats diplomatically.

Brunei’s approach to the South China Sea dispute has endeared it to China in three ways. First, Brunei is opposed to escalating the conflict in the South China Sea, because, being a small state, it wants to operate in a stable and secure regional environment. As such, Brunei has not been averse to the idea of bilateral negotiations, which China favours, to address the protracted dispute in the South China Sea. Second, Brunei does not rank the South China Sea as its topmost foreign policy priority, and has been keen to stress that the issue will not act as an impediment to better relations with other claimants, namely China, should such a foreign bilateral relationship bring domestic benefits to Brunei.

As a related third reason, China sees Brunei as an important country on ASEAN matters as it has a seat at the table in the regional organisation. As well as assisting with opening another front for Chinese engagement in the region, Brunei is increasingly viewed by China as being able to mould its image in Southeast Asia, particularly given the distrust built up in the South China Sea dispute. But whether Brunei actually wants to help reverse China’s negative image is highly doubtful. It is more likely that Brunei will stay neutral rather than do the bidding of China in ASEAN, not least as to ensure that the country remains on good terms with the organisation’s other members.

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However, where there is mutual interest such as in trying to bring the ASEAN-led Regional Comprehensive Economic Partnership (RCEP) – a proposed mega-regional free trade agreement – into fruition, Brunei could prove to be an important partner for China, which is extremely keen on the RCEP as it is an alternative to the American-led Trans-Pacific Partnership (TPP). In fact, RCEP has become even more important to those ASEAN members such as Brunei which are signatories to the TPP, not least because the prospects for the TPP have stagnated with the election of Donald Trump as the next President of the United States.

Brunei also appreciated the fact that Beijing has sought not to interfere in its internal affairs. When the Sultan of Brunei publicly announced in 2014 the decision to implement Islamic (Sharia) law and the attendant penal code in the country in three phases, the Chinese chose to steer clear of the issue as they regarded it to be a domestic matter, and not of any real vital interest to them. In contrast, Brunei was subjected to strident criticism and strong external pressure and boycotts, mostly by Western celebrities, secular NGOs and the foreign media.

In the main, Western critics have failed to grasp the notion that Brunei is not going to sacrifice Islamic principles for economic benefits, including from the West. This is not to say that Brunei is not interested in making money through trade and investment. In fact, for the Bruneians, most of whom fought back against Western criticism of both Islamic law and the monarchy, Islamic principles and economic or financial gains go hand in hand. The reality is that Bruneians are, by and large, conservative in their Islamic thinking but liberal in their economic outlook – a point lost on Western critics who knee-jerked in their reactions to Brunei’s decision to impose Islamic law, but a point fully understood by the economic-driven Chinese political elites in Beijing.

A similarly economic argument is that consonant with the aims of ‘Vision Brunei 2035’ to achieve progressive and sustainable economic growth, Brunei is actively pursuing a post-oil economy so as to reduce the country’s overreliance on oil and gas and be less subject to fluctuations in the global pricing of oil exports. Diversifying from oil and gas meant that Brunei needed to further develop other sectors of the economy, including by attracting foreign direct investment and trade.

In this regard, China’s global economic footprint is ideal for helping to diversify Brunei’s economy, particularly in developing local infrastructure and investing in the financial sector. In fact, China is already Brunei’s largest foreign investor, with direct investment of around B$116 million in the first four months of 2016. Notable examples include the construction of a US$4 billion oil refinery at Pulau Muara Besar and the US$1.6 billion Temburong Bridge as well as the Bank of China being the first financial institution to be granted approval to open a branch in Brunei. The Brunei-Guangxi economic corridor project was also signed in 2014 as a lucrative joint venture to boost bilateral trade.

More on this: Silk Road blocks: the problem with China’s ‘One Belt, One Road’

The net effect is that the deepening economic engagement between Brunei and China has benefited both sides: for Brunei, assisting efforts to diversify its economy; for China, further enlarging its economic footprint in Southeast Asia, with access to Bruneian oil and gas to meet its growing energy demand driven by economic growth. China’s economic engagement with Brunei can also be viewed in the context of the Chinese interest in incorporating Brunei into President Xi Jinping’s ‘One Belt, One Road’ grandiose initiative.

Lastly, Brunei’s receptiveness to China has to do with its future royal succession. A primary focus of the current 70-year-old Sultan of Brunei and his loyalists is to ensure that the kingdom remains intact when the royal succession eventually takes place. To this effect, the kingdom must ensure a continued stream of revenue from economic growth in order to provide extensive social welfare for its people such as in education and healthcare, and in so doing, keep them contented by preserving the social contract. Thus, it is necessary for Brunei to diversify its economy because, at some point, its oil and gas reserves will be depleted. There has been simmering tension within Bruneian society where a growing number of youths are perceived to have become restless and the public outcry over the government’s move to relocate Tamu Kianggeh market in December 2015 also prompted the authorities to redouble their efforts to find ways to placate the average Bruneian. These efforts are directed at economic diversification to increase revenue and create jobs, and, as noted above, a turn towards Islam as both a unifier and deterrent in state-society relations.

It is, however, wrong to think of Brunei as a Chinese satellite and by implication, having surrendered its sovereignty as a smaller country to a much larger one. On the contrary, Brunei has jealously guarded its sovereignty as a sultanate. Importantly, Brunei has been wary of China’s historical ambivalence on the overseas Chinese and communist expansionism, and remains cautious today, given China’s domineering role in the unresolved South China Sea dispute. As such, Brunei has not been shy in occasionally reminding the Chinese to adhere to international law, not least pertaining to regional developments in Southeast Asia.

Moreover, Brunei is in favour of counterbalance – synonymous with small state diplomacy – whereby it maintains close bilateral relations with Britain and the US in both economic and defence security matters. In other words, China, though a major investor, is not the only country providing Brunei with economic nourishment.

On the whole, China’s courtship of Brunei and Brunei’s receptiveness to Chinese affection is premised on the national interests of both countries. For Brunei, it is about the survival of the three “S” – sultanate, state and society – which, according to the monarchical, political and religious elites, are inextricably intertwined, and shape the geopolitical future of this small country of around 420,000 people.

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Izzuddin, Mustafa. 2017. "Courting The Little Kingdom - Policy Forum". Policy Forum. http://www.policyforum.net/courting-little-kingdom/.

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