Edward Tse's Blog

April 24, 2019media

The Diplomat | Brunei: Huawei’s Foothold in Southeast Asia

By Austin Bodetti

April 03, 2019

The Chinese telecommunications company Huawei Technologies’ role in the race to lay the groundwork for 5G, the latest advance in mobile telephony, has sparked concern across the Western world. The United States has pressured its European allies to avoid the Chinese telephone company, warning of “the risks that Huawei’s presence in their networks presents,” while Australia has prohibited Huawei from providing any materials for 5G infrastructure there. In Southeast Asia, however, the Chinese telephone company has received a warmer reception. No country represents this far-reaching trend better than Brunei.

“Getting a foothold in any Southeast Asian country — albeit a smaller country — gives Huawei an opportunity to showcase what it can do and what is acceptable to the region,” observed Edward Tse, chief executive of the consultancy Gao Feng Advisory Company and author of China’s Disruptors: How Alibaba, Xiaomi, Tencent, and Other Companies Are Changing the Rules of Business.

A Bruneian website reported in February that a Huawei executive expressed interest in bringing 5G to the Southeast Asian sultanate, proposing that the technology could increase bandwidth in Brunei to as much as 1.2 gigabytes per second for uploads and 1.4 per second for downloads. A Twitter account belonging to the Bruneian Energy, Manpower, and Industry Ministry then retweeted the article, seeming to confirm the source’s authenticity in addition to Brunei’s interest in the venture.

“An expansion of Huawei’s already-considerable footprint in Brunei to include 5G infrastructure is unlikely to cause major controversy in the sultanate,” pointed out Donald K. Emmerson, editor of the forthcoming book The Deer and the Dragon: Southeast Asia and China in the Twenty-First Century and director of the Southeast Asia Program at the Walter H. Shorenstein Asia-Pacific Research Center.

Given that the Swedish telephone company Ericsson has suggested that Brunei will have to wait until as late as 2022 for 5G, Huawei seems to be moving well ahead of its Western competition there. Bruneians have even taken to Reddit to complain about the potential for a delay in 5G installation.

“Brunei needs foreign direct investment for its long-term program to diversify its economy away from oil and gas production, and China has stepped up as an enthusiastic partner,” said Alvin Cheng-Hin Lim, editor of China and Southeast Asia in the Xi Jinping Era and a senior analyst at Wikistrat, a consultancy that specializes in gamification and geopolitics. “A potential source of conflict may be found in the sultanate’s and China’s competing claims over Louisa Reef in the South China Sea, but the Bruneian government has opted for a low-key approach to this issue.”

Though control over the South China Sea has fast become one of the most divisive territorial disputes in the 21st century, Brunei has done its best to sidestep this controversy. The Southeast Asian sultanate has opted to prioritize foreign direct investment over territorial integrity, declining to push the topic of the South China Sea in exchange for Chinese largess. China, in turn, has incorporated Brunei into the Belt and Road Initiative, a project to expand China’s economic sphere of influence.

“Brunei has pleased China by keeping quiet about its modest claim in the South China Sea and by refusing to join the three other Southeast Asian claimants in a common front against China’s own massive claim,” Emmerson told The Diplomat, referring to the trio of Malaysia, the Philippines, and Vietnam. “Beijing has returned the favor by scaling up its involvement in Brunei’s economy.”

The Bruneian strategy has already seen some return on investment for the relationship between Huawei and the Southeast Asian sultanate. Huawei has long collaborated with Telekom Brunei Berhad, a local leader in the telecommunications industry; in fact, the partnership extends all the way back to 2004. Huawei has also invested in training the next generation of Bruneian engineers, hosting workshops in the Chinese city of Shenzhen for six Bruneian students last year. The Chinese company even seems to maintain accounts on Facebook, Instagram, and LinkedIn dedicated to its presence in Brunei.

“The Bruneian government has been seeking investment in new technologies as part of its economic-diversification drive,” Lim told The Diplomat. “Foreign direct investment in 5G technology, including from Huawei, could facilitate this, especially since the successful rollout of 5G infrastructure could pave the way for the mass deployment of other emerging technologies — like autonomous vehicles. In theory, this could boost the sultanate’s movement up the technological value chain.”

As the global economy moves away from fossil fuels, Brunei is searching for ways to diversify its own economy, which depends on the petroleum industry. The half-dozen Arab monarchies of the Persian Gulf are strugglingwith a similar problem, and, like Qatar and Saudi Arabia, Brunei has achieved mixed results. The Southeast Asian sultanate’s economy shrank by 2.5 percent in 2016 because of a concurrent decline in the price of oil, a problem that could resurface soon. For its part, the Economist Intelligence Unit has concluded that Brunei will “remain dependent on oil and gas for the foreseeable future.”

“Brunei could benefit from increased trade with China and more direct investments,” Tse told The Diplomat, noting that the introduction of 5G would strengthen Brunei’s economy. “The risks are potential concerns from other countries in Southeast Asia and perhaps the United States.”

Experts have recommended a variety of strategies that Brunei could adopt to avert the possibility of future recessions, from expanding the service sector to promoting halal foods. Nonetheless, courting foreign direct investment may offer the Southeast Asian sultanate the best opportunity to wean itself off fossil fuels. Until Brunei finds another method of broadening its economy beyond the petroleum industry, Bruneian officials will likely go out of their way to please their Chinese counterparts — and Huawei.

“If Bruneian criticism of China did arise, the absolute monarchy would do whatever it could to remove the problem or prevent it from getting out of hand,” said Emmerson. “Insofar as Huawei’s further expansion in Brunei would likely be technology-intensive and thus not involve importing large numbers of Chinese laborers, the chance of such discontent arising to begin with would be accordingly less.”

Stimuli supported by China, such as the Brunei–Guangxi Economic Corridor, Pulau Muara Besar Bridge, and Temburong Bridge, may become the future of Brunei’s economy. China Harbor Engineering Company and China State Construction Engineering Corporation, both Chinese state-owned enterprises, already have a substantial presence in the Southeast Asian sultanate. Now that Huawei has all but staked its claim to monopolizing 5G infrastructure there, the private sector in China will likely dominate the telecommunications industry in Brunei. For its part, Brunei will reap the economic rewards.

“While concerns over security have been voiced, Huawei’s projects have not been banned in Southeast Asian countries, and the company remains a key vendor in 5G trials in the region,” noted Lim. “It is likely that Huawei’s 5G investment in Brunei will remain equally uncontroversial.”

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Founder & CEO of Gao Feng Advisory Company, a global strategy and management consulting firm with roots in China. —learn more
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