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Penang Investment Seminar

Speech by Penang Chief Minister, the Right Honourable Mr Lim Guan Eng

Penang Investment Seminar on September 13, 2011 at Rasa Sayang Hotel


Powering Penang’s Investment by Transforming into an International and Intelligent City

Penang embarked on its industrialisation process back in the early 1970s to revitalise the State’s economy after the late 1960s doldrums, a result of the withdrawal of its free port status by the Federal Government.

Since then, industrialisation had, in fact, restructured Penang’s economic composition from a mere 13% contribution from the manufacturing sector in 1970 to 51% in 2010. Penang’s success in industrialisation, especially in the 1970s and 1980s are attributed to the fact that Penang started with export-oriented industrialisation with some unique advantages. These include:

  1. Penang has a long tradition of English and Chinese education, which contributed to literacy rate well above the national average. This had further contributed to the availability of a pool of educated and easily trained labour force;

  2. As a result of the 1960s doldrums, Penang started with relatively lower wage rates compared with other industrialised locations at that time;

  3. As a colonised State, Penang had inherited a well developed trade-related infrastructure and institutions from the British;

  4. Penang had a pro-active State Government led by the late Tun Dr Lim Chong Eu, who embarked on a visionary strategy, which was successful in mitigating the adverse impact of the affirmative fundamentals of the 1971 National Economic Policy. The late Tun Dr Lim’s strategy of export-oriented industrialisation also benefited from Malaysia’s long-standing commitment to an open trade and investment policy, emphasising on export-oriented growth.

The State’s policy on job creation then assimilated well with the concept of international division of labour popularly introduced and adopted in the late 1960s and 1970s when transnational corporations (TNCs) began looking for cheaper locations for their plants or were forced out from the established industrial nations because of falling profits. This policy also associated well with emerging opportunities for international specialisation, where Penang at that time specialised in relatively low wage, labour-intensive, non-unionised electronics assembling activities. Penang’s involvement in the export-oriented industrialisation, especially in the electronics industry at that time linked its economy with the global production network.

After four decades of industrialisation in Penang, investments today, no longer look for sizeable supply of manual labour force. On the other hand, these new investments entail the employment of knowledge-based, specialised, professional and skilled human resource. To cater for these investments and their requirements, Penang has taken the initiative to shift from the sweat shop of yesterday to the smart shop of today’s knowledge-based economy.

Nonetheless, it is the aspiration of the State Government to be less dependent on the manufacturing sector as the driver of the State’s economy. We want to see a more balanced economic structure for the State so as to be less vulnerable to the vicissitudes of the global business cycles. This means that we want to see a more dynamic services sector and a more sustainable economic growth for the State. Likewise, we also yearn for a more equitable and just society.

Amongst some of our recent achievements are:-

  1. Penang ranked top in terms of investments approved in 2010. With a total of RM12.2 billion investments approved for the State, Penang accounted for 36% of the total foreign direct investments (FDI) approved for the country in that year. For the first half of this year, Penang ranks second with RM4.59 billion of investments. Penang tops in terms of FDI, accounting for 24% of the total FDI approved for the country.

  2. The Penang International Airport registered the highest arrivals growth amongst the other airports in Malaysia in 2010, recording a 25% increase with 4.1 million arrivals compared with 3.3 million in 2009.

  3. Penang was voted as the top 8 islands in the world that “You must see before you die” by Yahoo Travel in February 2011.

  4. Penang Government’s Competency, Accountability and Transparency (CAT) Governance was commended by Transparency International in 2010 for anti-corruption efforts.

  5. Three straight years of budget surpluses by the Penang State Government earned mentions from the Auditor General’s Report as the best financially managed state in the country.

  6.  Penang tops in Malaysia in Green Initiative, as the first state in Malaysia that has implemented the “everyday is no free plastic bag day” ruling in shopping complexes, hypermarkets, pharmacies, fast food restaurants and chain outlets. The State authorities are going all out to make Penang cleaner and greener through various projects such as coastal cleaning and spring cleaning @ George Town World Heritage Site.

  7. Penang is the safest state in Malaysia with the highest reduction of 27% in crime index amongst all states in Malaysia. For the first 6 months of this year, Penang again topped the country in reducing crime by another 26%.

  8.  Penang is the most liveable city in Malaysia with a vibrant art and culture. 


We have identified 7 key factors that account for Penang’s success as a location of choice for investments. They are:

  1. Ready availability of human talent;

  2. Effective and efficient supply chain management;

  3. Competent and reliable logistics and communications hub;

  4. Strong Intellectual Property protection;

  5. Good, non-corrupt governance and effective leadership;

  6. Building creativity and innovation in science and technology; and

  7. Liveable city environment.

With these 7 key factors, we will continue to promote Penang as the preferred location for investments in electronics, LED / SSL, medical devices, photovoltaic / solar and aerospace / avionics industries. In addition to these high value manufacturing industries, we are also aggressively promoting and encouraging the existing companies to move up the value chain to include research, design and development activities in software, hardware and firmware in their Penang operations.

Other than manufacturing and its related activities, we hope to develop and promote Penang as the hub for shared services and outsourcing, particularly for business process outsourcing (BPO), information process outsourcing (ITO) and knowledge process outsourcing (KPO). We are encouraging companies to set up Regional Headquarters (RHQ) in Penang and we have allocated land on Penang island for the establishment of both the SSO hub as well as RHQ.

We would also like to encourage world class universities as well as institutes of higher learning to set up their branch campuses in Penang, be it for the purpose of producing graduates or for research. A 200-acre plot on Penang island has been designated as an education hub.

Healthcare is another service industry which we are promoting intensely and it is the desire of the State Government to develop and promote Penang as a Medical City. Currently we have the strong presence of 7 major private hospitals that provide private healthcare to both local and foreign patients. The much popularised cross border healthcare, particularly from patients in ASEAN will further boost Penang’s position in medical tourism.

I also wish to share with you some of the major infrastructure projects that we have planned for Penang.

  1. The Penang Third Link or the Penang – Butterworth Tunnel. This 6.5 km stretch will be a undersea subway tunnel linking Gurney Drive on Penang Island with Bagan Ajam in Seberang Perai North District. Estimated to cost RM1.95 billion, this 3rd link will improve connectivity and meet travel demands from the island to mainland

  2. The Gurney Drive – Lebuhraya Tun Dr Lim Chong Eu By-Pass. This 4.2 km stretch will link Gurney Drive with Lebuhraya Tun Dr Lim Chong Eu via Pangkor Road, Perak Road and Sungai Pinang Road. Costing at RM630 million, this by-pass will connect the northern fringes of George Town to the eastern corridor of the island circumventing the Central Business District.

  3. Lebuhraya Tun Dr. Lim Chong Eu – Bandar Baru Air Itam By-pass. This 4.6 km stretch will link Bandar Baru Air Itam (Farlim) with Lebuhraya Tun Dr Lim Chong Eu with interchanges at Bandar Baru Air Itam, Jalan Yeap Chor Ee, Jalan Sultan Azlan Shah and Lebuhraya Tun Dr Lim Chong Eu, near the Penang Bridge. Estimated to cost RM920 million, this by-pass is anticipated to reduce traffic congestion on the local roads.

  4. Tanjung Bunga – Batu Feringgi - Teluk Bahang Paired Road. Stretching for 12 km, this road will be parallel to the existing coastal road from Tanjung Bunga to Teluk Bahang. Estimated to cost RM580 million, the paired road will reduce traffic congestion on the existing North Coastal Road and accommodate generated traffic from new developments.

Request for proposals for these projects will be out sometime end of this year. It is my wish that all these infrastructure projects will be accomplished, thus be the catalysts for further growth in Penang.

Nevertheless, it will be difficult to sustain Penang as the investment location of choice if Penang does not offer a liveable environment to retain the human talents. As such, we have identified 7 elements of change towards assuring Penang’s premier position as the most liveable and vibrant city in Malaysia. These key elements include:

  1. Public security and order with one of the lowest crime rates and political stability;

  2. Capable delivery of services and actively managing change;

  3. Economic vibrancy and competitiveness;

  4. Quality of life and diversity;

  5. Environmental friendliness and sustainability;

  6. Heritage conservation with cultural vibrancy; and

  7. Intelligent city fuelled by human talent.

I realised that it is important to adapt and adjust to new circumstances in order to enhance Penang’s position as an international city. As an export-oriented economy, Penang is susceptible to sudden changes in the global economic developments and misfortunes. Thus, to survive, we have to adapt and to balance economic growth with greater equitable development for all.

Penang has to find its niche as an international city and it is important to brand Penang synonymously with competency, accountability, intelligibility, quality, reliability, safety, sustainability and integrity. Penang has to achieve international standards in all economic and social aspects to attain and retain its position as an international city. These standards encompass technological developments, human resource development, infrastructure, logistics, education, healthcare, housing, utilities, recreation & leisure, and hospitality services.

To be an intelligent city, Penang will evolve towards a strong integration of the 6 dimensions of intelligence as follows:-

  1. Human intelligence as the basic unit relates to people in Penang: the expertise, inventiveness and creativity of the individuals who live and work in Penang.

  2. Collective intelligence refers to the capacity of human communities to synergistically evolve together through integration, competition, cooperation and collaboration in knowledge and innovation.

  3. Digital intelligence as a prerequisite in this modern internet world where broadband is available to the population for communication infrastructure, digital spaces, and online problem-solving tools.

  4. Institutional intelligence applies to the techniques and technologies that support and enhance decision and management processes according to rule of law and competent leadership. There is no point having smart citizens if the leadership is unintelligent as that will only drive smart people away

  5. Integrity intelligence refers to adherence of moral and ethical principles.

  6. Residual intelligence refers to the advantages Penang has from its 40 years of experience with top cutting edge technology companies.

For Penang to attain both international and intelligent city status, we have lined out our policy directions, which include:

  1. Reviving Penang’s liveability by being sustainable. We will enhance efforts to:

    1. promote and enhance our heritage;

    2. maintain the quality of the physical environment;

    3. develop and provide affordable housing for the lower-income and middle-class working population;

    4. improve traffic and transportation system through the provision of free bus shuttle service from mainland Penang to the Bayan Lepas industrial park for factory workers; and

    5. preserve the cultural and psychological dimensions of liveability.

 Revitalising Penang’s business environment by

  1. reducing red tapes and streamlining processes;

  2. supporting SME growth through our 3-prong approach, i.e.

    1. SMART Centre to provide intelligence, guidance and facilitation in business matching and capacity building ;

    2. SMI Centre to incubate local start-ups and provide space to SMIs that could not afford their own facility; and

    3. SMI Village to provide ready-built factory and industrial land specially for the SMIs.;

 attracting and retaining talents through CAT Centre’s initiatives

ï‚· investing in upgrading George Town in accordance with the necessary developmental guidelines. A 2009 World Bank Report on Glocalisation (globalisation & localisation) stressed that the city is an economic unit which serves as a keystone in promoting multifaceted growth and development.

ï‚· Reclaiming responsibilities and mandate for Penang. I strongly believe that decentralisation of decisions and resources is an absolute necessity to effectively reach out to communities as well as investors for the sole purpose of development. On the local aspect, Penang can introduce social safety net policies for the elderly as well as empower and energise the local councils. On the economic front, decentralisation of decisions and resources will expedite the provision of permits and incentives to the promoted and targeted investors.

By transforming Penang into an international and intelligent city, we will be more assured of a continuous inflow of FDI which will create multiplier effects, inclusive of rising domestic investments, strong supply chain, economic revitalisation, increasing income for the local population, and more importantly, moving away from the middle-income trap.

Thank you.

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