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By Regina William. FOR MORE than 40 years, Penang, dubbed the Silicon Valley of the East, has drawn top-notch multi nationals to her shores. Many of the pioneer companies which set up base in Penang are still here, and over the years have expanded and enhanced their operations. Although foreign and local investments plunged from a record RM10.16 billion in 2008 to RM2.17 billion last year due to the global economic slowdown, the picture for the first seven months of this year has been encouraging. Total proposed capital investment from January to July was RM2.25 billion, and Penang improved its position from No 5 nationwide to No 3. While it remains to be seen if Penang can maintain its position for the rest of the year, people whom The Edge Financial Daily spoke to were optimistic. Datuk Lee Kah Choon, chairman of the executive committee of InvestPenang, described Penang’s move up the ranking as inspiring because since 2006, Penang has been ranked fourth or fifth. “This performance will motivate and drive InvestPenang to put in more efforts to move towards achieving the target of RM4.2 billion investments for this year,” Lee said.
He attributed Penang’s improved performance to several factors, including the improved economy which has seen investors putting in new investments or reinvesting in their existing operations. “Compared with other major towns in Malaysia, Penang has a lower cost of doing business. This is complemented by the availability of quality infrastructure and amenities as well as a strong supply chain. “Human resources is an added advantage for Penang as with almost 40 years of manufacturing experience, our talents are considered among the best in the country, if not the region. This accomplishment is also due to the effectiveness of InvestPenang and MIDA to facilitate both existing and potential investors to promote Penang as the location of choice for investments,” Lee added. Malaysian International Chamber of Commerce and Industry (MICCI) Penang chairman Datuk Seri Nazir Ariff said the investments secured have placed Penang on the right track. “MICCI is encouraged by this news and we hope the trend will continue as long as the state government moves in the right direction. What we are doing in Penang now is right — the atmosphere, political stability and the transparency system,” he said. “When PR first took over from the Barisan Nasional, they (investors) were very nervous but after two-and-a-half years, they are more comfortable in dealing with the state government.” Nazir observed that it was much easier now to obtain approvals due to the transparency system put in place by the state government and the local council. The two advisory panels set up by the state government have also enabled industries to get direct access if they had problems. “Penang will continue to do better in the years to come as everyone now realises that the state government is serious, and is here for the long term,” said Nazir, who is also the executive director of Ivory Properties Group Bhd. He called on the federal government to delegate more powers to the state when dealing with foreign investors. “Approvals are governed by federal regulations which are stifling incoming investments. We could do better and we would surely score even higher investments. It is discouraging to hear that some investors are being encouraged to invest in Johor instead of Penang or Selangor. When they get there, they realise that the infrastructure is not really in place and they take their investments elsewhere, and we as a nation are losing out,” said Nazir. Malaysian American Electronics Industry chairman Datuk Wong Siew Hai also welcomed the latest investment figures for Penang. “With the slowdown last year, many investors put their plans on hold until they could figure out how the economic situation was panning out,” he said. Wong added that investments or reinvestments took time. The process of carrying out comparisons, site visits to determine if a place was conducive for business and also to live in and whether the necessary facilities and infrastructure were present, was a long one. Investors must first like a country and then the incentives provided before they choose a location, he said. “They will of course evaluate our human resources, and if there are clusters of SMEs to support them, and this is where Penang has a big advantage. With almost 40 years of E&E experience, Penang is one of the favourite destinations and I believe we will continue to attract investors,” Wong said. He said the island was lacking in land reserves for industrial purposes and investors now have to move to the mainland where there is still some industrial land for sale in Bukit Minyak and Batu Kawan. “The state government needs to open up more land for industrial purposes in Batu Kawan and also change the master plan of the township to facilitate the growth of the manufacturing sector. “On the island, meanwhile, the only choice available now is to buy up old buildings for industrial use, while some manufacturers are consolidating their operations at one site,” he added. Datuk OK Lee, the Federation of Malaysian Manufacturers (FMM) northern region chairman, noted that Penang ranked only slightly below Johor in terms of total proposed capital investment. He attributed the sluggish investment performance last year to the “wait and see” attitude adopted by global MNCs. The situation has since improved, he said. “As far as the electronics sector is concerned, the low-cost industries would stay away from Penang while high-end investors would make their way here.” Lee said while there were companies — especially labour-intensive ones — moving out, there were many industries moving into Malaysia, especially in the high-technology sector. “With our world-renowned supply chain and support services, we have been able to attract new investments to Penang,” he said. “One of the local SMEs serving the electronics industry in Penang had even commented that the pick-up in recent months has been so good for the electronics sector, with the increase coming on so fast that the SMEs cannot cope with the overwhelming demand. We may be be stuck in the middle-income trap, but being in the middle-income bracket, we can always attract those from the higher income nations to relocate. “This is especially so for manufacturers in Europe and Australia. If they find their presence there no longer competitive and are looking to move out, Penang will surely be one of their best choices and options,” Lee added. He said the manufacturing sector seemed to be doing well despite the fact that Malaysia was not as innovative as Taiwan, China or South Korea. “We can still survive as a middle-income nation but we have to move up as our people need to move into a higher income bracket,” Lee added. He attributed the improved investments in Penang to rising costs in other countries, especially in Europe. “We cannot compete with low-cost countries, which is good in a way as we now have higher value-added products manufactured which needs qualified people and they in turn can earn higher pay,” he said, adding that Malaysia was no longer considered a cheap country. Lee said the political manoeuvring in the country has also scared off investors and that if this got worse, it would be bad for Malaysia. However, most investors who wanted to invest in Malaysia had high regard for Penang which is seen as the first choice for electronics, he said. “Overall, I am still very optimistic about Penang’s future in attracting more investments,” Lee added. ** Republished with permission. This article appeared in The Edge Financial Daily, October 25, 2010.
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