Brunei is currently a politically stable and peaceful country that enjoys one of the highest per capita incomes in Asia due to an abundance of hydrocarbon reserves. However, it is the smallest Southeast Asian nation in terms of its population (415,717) and second smallest in terms of its land mass (5,765 square kilometres). This, together with its long term existence as a constitutional sultanate or Malay Islamic Monarchy (Melayu Islam Beraja), provides for a fascinating mix of historical, cultural, and political considerations. However, its size, strategic location, and the challenges of modernization and globalization continue to generate a conundrum over the most viable policy approaches to economic, social, and security issues in the long term. Given these considerations, this chapter provides an overview of a broad spectrum of key developments in economic, political, and foreign affairs during 2013. As detailed below, Brunei faced a mixed year where there was a general stasis on the economic front and a new level of conservatism politically, but a successful mix of international diplomacy and leadership vis-à-visSoutheast Asian regionalism.

Economic Affairs

The pace of economic development in Brunei Darussalam has been quite mediocre in recent years. At the time of writing, Brunei was estimated to have achieved only 1.4 per cent real GDP growth during 2013 and this follows from 0.9 per cent in 2012. While real GDP growth is predicted to accelerate to 2.1 per cent in 2014 and 2.5 per cent in 2015, such growth falls far short of the official target of 6 per cent that is declared in the country's Vision/Wawasan 2035. This relatively lacklustre performance is primarily a consequence of continued dependence on the export of hydrocarbons and an associated lack of capacity to diversify the economy away from such dependence despite numerous decrees and directives to the contrary by Sultan Haji Hassanal Bolkiah. Nonetheless, the hydrocarbon revenue remains sufficient to maintain significant trade and budget surpluses; a state-of-affairs that is reinforced by the long-term channelling of its oil wealth into significant investments abroad. The economic climate was also reinforced by continued low inflation (estimated at 0.8 per cent in 2013), an outcome that is a consequence of the currency peg to the Singapore dollar and the government's continued subsidization of certain basic items like rice and sugar.