Identifier
Created
Classification
Origin
08BANDARSERIBEGAWAN159
2008-05-23 04:31:00
CONFIDENTIAL
Embassy Bandar Seri Begawan
Cable title:  

BRUNEI TO KEEP INVESTMENTS IN U.S.; DOMESTIC

Tags:  ECON EINV PREL BX 
pdf how-to read a cable
VZCZCXRO1493
PP RUEHDT RUEHPB
DE RUEHBD #0159 1440431
ZNY CCCCC ZZH
P 230431Z MAY 08
FM AMEMBASSY BANDAR SERI BEGAWAN
TO RUEHC/SECSTATE WASHDC PRIORITY 4243
INFO RUCNARF/ASEAN REGIONAL FORUM COLLECTIVE PRIORITY
C O N F I D E N T I A L BANDAR SERI BEGAWAN 000159 

SIPDIS

DEPARTMENT FOR EAP/MTS

E.O. 12958: DECL: 05/22/2018
TAGS: ECON EINV PREL BX
SUBJECT: BRUNEI TO KEEP INVESTMENTS IN U.S.; DOMESTIC
SUBSIDIES AFFORDABLE

Classified By: DCM Justin Friedman, reasons 1.4 (b) & (d)

C O N F I D E N T I A L BANDAR SERI BEGAWAN 000159

SIPDIS

DEPARTMENT FOR EAP/MTS

E.O. 12958: DECL: 05/22/2018
TAGS: ECON EINV PREL BX
SUBJECT: BRUNEI TO KEEP INVESTMENTS IN U.S.; DOMESTIC
SUBSIDIES AFFORDABLE

Classified By: DCM Justin Friedman, reasons 1.4 (b) & (d)


1. (C) During the Ambassador's May 19 farewell call on
Minister of Finance II Pehin Abdul Rahman, the Minister said
he subscribed to the view that the worst of the U.S. economic
slowdown would be over by the end of the year. He said the
Ministry and the Brunei Investment Agency (he is a member of
the BIA board) were not undertaking any significant shift
away from U.S. assets. He agreed with Ambassador's
assessment that the lower prices of U.S. stocks might present
some attractive buying opportunities.


2. (C) Pehin Abdul Rahman shared his opinion that the
recent run-up in oil prices was not entirely driven by the
market fundamentals of supply and demand. He estimated that
30-40 percent of recent price increases could be attributed
to speculation by hedge funds that turned into
self-fulfilling prophecies of higher prices.


3. (C) The Minister noted that the increase in market
prices for oil led to a corresponding increase in the cost of
domestic subsidies for refined product. He estimated that
the annual cost of such subsidies was running at about BDOLS
200 million (approximately USDOLS 145 million at current
exchange rate). In response to Ambassador's question about
whether the costs of domestic subsidies for rice were also
rising he affirmed that they were, but that, with a price tag
of only about BDOLS 10 million (USDOLS 7.25 million) per
year, those subsidies were not significant enough to be of
fiscal concern.


4. (C) In response to Ambassador's question about the most
promising sectors for economic growth in Brunei, Pehin Abdul
Rahman identified tourism, transshipment services, and
finance. He told Ambassador that a new Islamic finance law
was in the final stages of preparation, and he hoped it would
give a boost to this sector. He added that a major Japanese
bank was planning to open a Brunei office soon, motivated in
part by the potential business it expected to derive from the
methanol plant being built in Brunei by Mitsubishi.
Ambassador expressed hope that American banks would find an
equal playing field in Brunei, and was assured that they
would. The Minister noted that he had actually encouraged a
major U.S. bank to apply for an asset management license but
had not yet had a positive response, probably because the
bank was currently preoccupied with restructuring its balance
sheet in the wake of its problems with sub-prime loans and
related difficulties.


Visit Embassy Bandar Seri Begawan's classified web site at
http://www.state.sgov.gov/p/eap/bandarseribeg awan/
FRIEDMAN