With gold reserves hitting an all-time high, Brunei holds a glittering opportunity—but can the nation overcome outdated policies and unlock its true potential? As neighbours slash taxes and attract global investors, is Brunei’s 15% gold tax holding it back from joining the ranks of global gold hubs? The stakes are high, and the future is golden—if Brunei dares to seize it.
By Malai Hassan Othman
BRUNEI DARUSSALAM, JANUARY 2025: Brunei’s gold story is brighter than ever, with reserves reaching a record-high of $352.746 million in July 2024, up from $339.532 million in June.
However, the nation’s 15% import tax on gold bullion appears to be holding it back.
In contrast, neighbouring countries like Singapore, Malaysia, and Thailand have eliminated gold import taxes, making them attractive hubs for global gold trade and investment.
Brunei’s unchanged policies may be costing it competitive opportunities.
The pressing question is: Can Brunei leverage its increasing gold reserves to strengthen its economy, or will it allow this golden opportunity to slip away?
Brunei’s Current Gold Policy: Outdated and Outpaced
While Brunei’s gold reserves are at an all-time high, the nation’s gold policies remain behind the curve.
Back in August 2011, the recorded gold reserves were $0, reflecting a time when gold was not prioritised within its financial strategy.
Since then, reserves have steadily grown, with the nation now holding 4.53 tonnes of gold as part of its total reserves, which also includes foreign currencies and other financial assets.
Despite this progress, the 15% import tax on gold continues to disadvantage Brunei.
In ASEAN, countries such as Singapore and Malaysia have scrapped gold import taxes, creating vibrant gold markets and attracting global investors.
Brunei risks being left behind unless it adapts.
The Risks: Striking the Right Balance
While lowering or eliminating the gold tax presents promising opportunities, it is also accompanied by significant risks.
Independent economic observers caution that without appropriate safeguards, Brunei could face unintended consequences.
1. Risk of Financial Crimes
Gold, being a high-value asset, can be exploited for illegal activities such as money laundering and tax evasion. If Brunei reduces its gold tax without strong regulations in place, it may inadvertently become a haven for criminals seeking to conceal their wealth.
Insight from Experts: “Gold has historically been a tool for illicit financial flows,” stated an economic observer specialising in the gold economy. “Brunei must implement robust anti-money laundering frameworks and transaction monitoring systems to mitigate this risk.”
Lessons from Switzerland: Switzerland’s thriving gold trade is not solely due to zero tax but also because of its strict anti-money laundering (AML) regulations. Brunei must ensure that every gold transaction is traceable and compliant with international standards.
2. Potential Economic Disparities
Reducing the gold tax could disproportionately benefit wealthy investors and large corporations, potentially leaving ordinary Bruneians behind. Without careful planning, such a policy could widen the economic gap and inspire public criticism.
Local Perspective: A small gold trader in Gadong expressed concerns, stating, “If the government reduces the gold tax, will that help small traders like us, or will the benefits go to big companies and foreign investors?”
3. Market Volatility
Dramatically lowering the tax may lead to market speculation, resulting in volatility in gold prices. Brunei must consider a gradual approach, initiating changes with small adjustments to avoid market disruption.
Opportunities to Boost Local Businesses
Brunei’s gold policy should benefit not just international investors but also empower local businesses. Lowering the tax could invigorate industries such as jewellery-making and gold trading, creating jobs and fostering economic growth.
Voices from the Community: Dayang Sara, a jeweller in Bandar Seri Begawan, explained, “The 15% tax makes it harder for us to compete with imported gold jewellery. If the tax is lowered, it could lead to lower costs for small businesses like mine and better prices for customers.”
Lessons from Thailand: Thailand’s jewellery sector has flourished due to its zero-tax policy on gold imports, allowing small businesses to thrive. Brunei could replicate this success by offering training programs and tax incentives to local entrepreneurs.
Expert Recommendations: A Path Forward
Economic observers with expertise in the gold economy suggest that Brunei can draw lessons from global gold hubs to forge a strategy that balances opportunity with caution. The following steps are proposed based on best practices:
· Gradual Tax Reductions:
Implement: - Reducean incremental reduction of the gold tax, beginning with a decrease to 5%, allowing time to monitor impacts and adjust regulations as needed.
· Strengthen Regulatory Frameworks:
Introduce digital tracking systems for gold transactions and require proof of ownership for large purchases to ensure transparency and prevent misuse.
· Develop Gold :Infrastructure:
Invest in secure vaults, modern trading platforms, and gold-backed financial products. Collaborating with banks and local businesses can attract both domestic and regional investors.
· Integrate Gold into Islamic Finance:
Create innovative financial products, such as gold-backed Sukuk (Islamic bonds), to draw Middle Eastern investors, leveraging Brunei’s position as an Islamic finance hub.
· Empower Local :Entrepreneurs:
Provide tax breaks and training programs for small-scale gold traders and jewellers, ensuring that benefits extend to grassroots levels rather than just large corporations.
Public Sentiment: Balancing Benefits and Concerns
The debate surrounding Brunei’s gold tax intertwines both economic and public perception issues.
Some view tax reform as a means to modernise the economy and create new opportunities, while others worry that it will favour the elite at the expense of the general population.
To address these concerns, experts advocate for transparent communication and public awareness campaigns to clarify how gold reforms will benefit all Bruneians—not just a select few.
The Golden Opportunity
Brunei’s record-high gold reserves symbolise both pride and potential.
However, the 15% gold tax presents a barrier, hindering the nation from competing on the global stage.
With thoughtful reforms, Brunei could unlock powerful avenues for economic growth, diversification, and leadership in Islamic finance.
However, the associated risks are real. Without appropriate regulations, gold reforms could lead to financial crimes, market instability, or economic inequality.
Striking the right balance will demand careful planning, strong governance, and public trust.
The time to act is now. Will Brunei rise to the occasion and seize its golden opportunity, or will it allow the chance to slip away? The answer will shape the nation’s future. (MHO/01/2025)
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