Speech By Penang Chief Minister Lim Guan Eng In The ASLI Conference In Singapore On Penang Investment Opportunities

Penang is a small island located off the northwest coast of Malaysia. With a total land area of about 1,031 sq km when combined with the mainland portion of the state, we make up the second smallest state in Malaysia. However, though we may be small in size, I am sure many of you here in Singapore will agree with me when I say that good things come in small packages.

We share many similarities with Singapore. Penang, being a part of the Straits Settlements, had its humble beginnings as a prosperous port city. Naturally blessed with the strategic geographical advantage as the gateway into the Bay of Bengal and a pivotal point in the spice and silk trades, Penang was able to carve a commercial niche as an international transhipment hub and entrepôt.

This continued until free port status was withdrawn in the 1960s. Faced with the need to adapt, Penang showed typical resilience by taking advantage of the global industrialisation trend and quickly positioning itself as a base for export-oriented manufacturing. In five decades, manufacturing as a component of the economy grew from a mere 13% in the 1970s to 51% in 2010. At the same time, we have also moved up the value chain and diversified beyond low-skills low-productivity manufacturing into higher technology, knowledge-based sectors such as LEDs, renewable energy, biotechnology and even venturing into areas such as shared services and business process outsourcing.

Today, we are now one of the largest global electronics manufacturing hubs and a world-renowned tourist destination that has managed to maintain the delicate balance between a highly-urbanised and developed state and the physical and living heritage that has made us a UNESCO World Heritage City.

Factors of success
Ladies and gentlemen,

The lynchpin of Penang’s future success is based on five key factors. Firstly, Penang is blessed with valuable human talent in the form of a dynamic workforce. Thanks to an inherited legacy of well-developed institutions, Penangites have a high rate of literacy well above the national average, as well as a multi-lingual population that is conversant in English, Mandarin and many other languages. As a result, our talent pool has been the backbone of our economy. The superior quality of Penang talent is of course well-known to Singapore, as many of our sons and daughters have ended up headhunted by Singaporean universities and corporations. Sometimes I think our biggest export product has not been electrical and electronics goods but in fact our people!

Secondly, Penang has been a traditional logistics hub with well-established trade-related and communications infrastructure. Linkages between our port, rail, air and highway facilities are seamless and well connected. Besides the RM250 million airport upgrade currently on-going, the Second Penang Bridge linking BatuKawan on the mainland and BatuMaung in the south of the island will be ready in less than a year’s time. We are also planning to build an undersea tunnel as a third link between the mainland and the island, in anticipation of future growth and development.

Thirdly, as a result of Penang’s long involvement in the manufacturing sector, we have been able to not only foster a local supply chain ecosystem of high-quality, efficient supply services but also embed ourselves in the global production network. The existence of such an established ecosystem makes us an ideal location for any investor looking to set up shop.

Fourth, Penang is highly liveable. According to ECA International, we are the most liveable city in Malaysia and 8th most liveable in Asia. While we may not be able compare to Singapore, which ranks amongst the top in the world, we are tops in education and healthcare both in terms of money and value for money – two key areas for expats and their families. And equally important, Penang is the safest city in Malaysia with the highest drop in crime index for the last 4 years. Who wouldn’t fancy living and working in a tropical island paradise with beaches and hills within twenty minutes of each other? On top of that, we are also a cultural capital and, most important of all, home to the best food in the world. This is why Yahoo Travel! has ranked Penang as one of top 8 islands in the world to visit before you die.

Finally, while the availability of human talent, logistics, mature supply-chain and liveability are important factors, there is one crucial element that binds them all together – institutional stability provided by good governance. In short, there must be rule of law. In this, Penang offers strong intellectual property protection and an effective, non-corrupt government based on the core principles of Competency, Accountability and Transparency (CAT). Penang has recorded budget surpluses every year, reduced our debts by a record 95% over 4 years to nearly debt free winning accolades not just from the annual Auditor-General’s Report as the best performing state but also from Transparency International for implementing open competitive tenders.

We also passed the Freedom of Information Enactment which allows disclosure of government contracts with the private sector. And to top it off, we have also become the first state in Malaysia to have the entire state cabinet including the Chief Minister make a full public declaration of assets.

These measures, in addition to solid fiscal fundamentals and prudent financial management, have led to Penang becoming the number one investment destination in the country in 2010. This historic feat was repeated in 2011 as well, with the total foreign direct investment achieved over those two years making up 28% of the national total. For a state that makes up only 6% of the nation’s population, that is no mean feat. Further Penang contributes 25% of Malaysia’s imports and exports and nearly 2/3 of Malaysia’s health tourism receipts.

And so, because of these five factors that I have mentioned, Penang has been able to establish itself as the home to some of the biggest names in the business, such as Advanced Micro Devices (AMD), Agilent Technologies (originally Hewlett Packard), Fairchild Semiconductor (originally National Semiconductor), Intel, Clarion, Renesas (originally Hitachi), OsramOpto Semiconductors (originallyLitronix), Robert Bosch and up to 300 other multinational corporations.

Key industries
Ladies and gentlemen,

As I mentioned earlier, Penang has been a traditional leader in the electronics manufacturing sector, especially in areas such as semi-conductors, electronics, medical devices, storage hardware and even the halal industry.

However, over the last few years, we have aggressively promoted Penang as a destination of choice for investment in higher value-added technology such as LED/solid-state lighting devices, renewable energy, biotechnology, as well as aerospace/avionic industries. The results have been encouraging and many corporations such as Intel have now made Penang their base for research, design and development activities.More recently,leading USB flash drive manufacturer Phison Electronics Corp has selected Penang to be its first overseas location by setting up its engineering development and design centre in Penang. This significant move by Phison will not only attract more scientific and engineering talent but also lead to technology and talent transfer to Penang.

Other than manufacturing and its related activities, we are also promoting Penang as a hub for shared services and outsourcing, particularly in business processing outsourcing (BPO), information technology outsourcing (ITO) and knowledge process outsourcing (KPO).

At the same time, while we will continue to build upon our solid manufacturing base, we also seek to beef up our services sector. In this, we wish to take a leaf out of the Florida book. Although Florida is a high-tech, high-knowledge state, more than 50% of its economy is derived from the services sector. Hence, Penang is now aiming to promote our services industry through sectors such as tourism, healthcare, education, hospitality, MICE (Meetings, Incentives, Conventions and Exhibitions), property and logistics.

Penang is of course well-known as a tourist destination, what with our hills, beaches, glorious food and colourful social and physical cultural heritage. These are our treasures that attract people, investors and tourists to Penang.

Within tourism itself, we are also carving a niche as a leading provider of medical tourism. About two-thirds of national medical tourism receipts nowcome from Penang, with Penang hospitals servicing 60% of the total 555,000 foreign medical tourists who came to Malaysia for healthcare in 2011. We currently have seven major private hospitals that provide high-quality yet affordable healthcare to both local and foreign patients.

In addition to becoming a Medical City, Penang also aims to be a regional Education Hub. Historically, students from the northern region of Malaysia and even from Thailand have sought out Penang for commercial studies as well as English classes. Today we have more than 30 public and private universities and colleges, in addition to nine reputable international schools. Furthermore, in a bid to draw the interest of students from around the region, we have successfully attracted the Asian Women’s Leadership University to set up campus in Penang. The AWLU will be a liberal arts institution managed by the renowned Smith College from the United States.

As for the MICE industry, construction is already underway to build the Subterranean Penang International Conference & Exhibition Centre (SPICE), which will be a massive underground exhibition centre with the “Penang People’s Park” on the ground above that will include a sports arena as well as an aquatic centre. Following closely behind will be the construction of an iconic conference centre at The Light, an upcoming coastal development in Penang. The conference centre at The Light will be designed and managed by Suntec, which is regarded as one of the best MICE developers and managers in the world.

Besides the above, we are also embarking on developing the Penang Tech Centre, which will become a public showcase of technology and innovation as well as a centre for convergence of industry, innovators and thinkers. This project will be spearheaded by the Penang Science Council, which is a government-facilitated but wholly private-sector led initiative. To give Penang the competitive edge, Penang is the only state in Malaysia to offer free wifi in public places.

The trinity of residents-tourists-investors
Ladies and gentlemen,

I believe that in order for Penang to make the leap into the future, we must be able to fulfil the trinity of choice, which I define as: the habitat of choice for residents, the destination of choice for tourists and the location of choice for investors in setting up business.

Besides strengthening the five key factors of success which I have outlined earlier, it is also important for Penang to build upon our natural niches as an innovative industrial base, heritage city and campus for intellectual property creators as well as ensuring equitable distribution and sustainable development for all.

Penang will be the first state in Malaysia to eradicate poverty by 2013. We are also undertaking a massive public housing programme and have appointed the best builder of public housing in the worl, namely Surbana, formerly known as HDB Corporation. On sustainable development, we are proud to be the number one green state in Malaysia with the highest recycling rate, banning plastic bags at supermarkets and the use of polystyrene packaging, weekly car-free Sundays and turning Penang into the Bicycle State of Malaysia.

Ladies and gentlemen,

Our vision is to transform Penang into an international and intelligent city. Our mission is to make Penang the preferred location that is clean, green, safe and healthy. We can guarantee that the freedoms and openness that we see in Penang will still remain 10 years or 20 years from now.

Thank you.

Lim Guan Eng

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