Opening Speech by Penang Chief Minister Lim Guan Eng In Wawasan Open University On The Nishimura Lecture Organised By The Penang Institute On 17 March 2014.
A very good afternoon I bid to all of you. It is my pleasure to welcome the esteemed Professor Kiyohiko Nishimura, former Deputy Governor of the Bank of Japan and Dean of the Faculty of Economics, University of Tokyo, to Penang. He will be delivering a very important lecture that touches on the lessons from the recent financial crises and its relevance to the future of our region.
The significance of this lecture cannot be over-emphasised, given the looming clouds of economic uncertainties. These uncertainties come from different directions and I shall delve into three main themes.
Firstly, the tapering of quantitative easing by the Fed has commenced, though the pace of tapering may change subject to the robustness of US economic recovery. As we all know, quantitative easing has been an important factor in Asia in the last few years as it allowed extra liquidity to flow into this region. The question is, what will happen when capital leaves? Certainly, there is bound to be an impact on Malaysia.
We are already seeing some effects of the tapering, as our foreign reserves have begun to shrink, which basically means that we are experiencing capital outflow. Whilst the ringgit’s weakening value has seen a rise in exports, it also means that the price of imported goods will increase, thus causing inflation. In these trying times, such an effect will further aggravate cost of living problems for low and middle-income households. Another problem associated with higher inflation is also the risk of increasing interest rates, which may be an added burden to our already high personal household debt problem, which currently stands at 83% to GDP.
Secondly, the Chinese economy is undergoing a period of rebalancing. With slower economic growth expected, its implications are serious considering that China is one of Malaysia’s largest trading partner. Already, there is some re-evaluation of China’s demand potential, especially after China suffered its first onshore bond default following the failure of Shanghai Chaori Solar Energy Science & Technology Co to make an interest payment.
Thirdly, global debt has soared by RMUS$30 trillion or more than 40% from US$70 trillion in mid-2007 to USD100 trillion in mid-2013 according to the Bank for International Settlements. This is due to the fact that governments in crisis suppressing interest rates and borrowing heavily in an attempt to generate growth to pull their economies out of recession. Private companies have taken advantage of record low interest rates by borrowing predominantly to fund share buybacks. The sharp increase in debt puts these countries’ financial security at risk, especially when interest rates begin to increase.
The more relevant question for us, is how do these three uncertainties relate to Penang?
Preparing Penang For The Future.
As I said earlier, external shocks will bear significant impact on Malaysia and Penang, being that our economy is still largely dependent on export-oriented manufacturing. Whilst it is impossible for anyone to predict the financial markets, it is important to remember two things:
1. A rising tide lifts all boats; and
2. Only when the tide recedes do you discover who is swimming naked.
As a responsible government in Penang, we believe in being prepared. For when the day comes that the tide turns, we do not want to be caught naked but instead be the best equipped amongst our peers. In other words, I am talking about strengthening our financial position.
Since taking over in 2008, the Penang state government established a budget-based administration and governance based on the principles of CAT (Competency, Accountability and Transparency). Through the implementation of open competitive tenders for all public procurements and tenders, requiring all state elected representatives to make public declaration of assets and full disclosure of government contracts signed with the private sector, making CAT governance of competency accountability and transparency our core values.
Thus Penang have been able to record budget surpluses every year without increasing any rates, increase our state assets by 50% from RM800 million to RM1.2 billion, rescue a local government(Seberang Perai Municipal Council) from bankruptcy within only one year and more importantly reduce our state debts by 95%. These achievements have been corroborated by Transparency International as well as the annual Auditor-General’s reports.
More importantly, the practice of good and clean governance in Penang has helped us become the top foreign direct investment (FDI) state in Malaysia for the period of 2010 to August 2013, with investments amounting to RM19.7 billion or nearly 20% of Malaysia’s total FDI of RM103 billion. Thus, we have demonstrated that good and clean governance can not only help us save money, but also secure the confidence of investors.
As we move forward, the government is upgrading from a budget-based administration that plugs leakages and cuts waste or inefficiencies to an outcome-based administration which stresses on positive impact and difference to the stakeholders that generates economic growth (pro-growth), creates employment opportunities (pro-jobs) and foster equitable justice (pro-poor).
Penang believes that economic growth alone is not enough if income inequality is not reduced through equitable distribution of wealth. 40 years after Arthur Okun’s book of “Equality and Efficiency:The Big Tradeoff”,International Monetary Fund’s economists have concluded that reducing inequality accelerates not reduces economic growth not in occasional spurts but sustained growth.
Hence, Penang is not only the first state in Malaysian history to wipe out corruption but also the first state to wipe out poverty. Adopting the unconditional cash transfer or UCT model of topping up all families whose monthly household incomes are below the poverty line of RM790 per month, Penang has managed to free itself from absolute poverty. Now, we are focusing on reducing relative poverty through cash aid and providing affordable home ownership by building 20,000 affordable housing units throughout the state in addition to another 20,000 units more from the private sector supply.
Penang has relied on the twin economic engines tourism whether medical, education or recreation in nature and manufacturing in electrical and electronic sectors, automation, medical devices and aerospace. However, the key to future economic success is not an over-reliance on one sector but to seek convergence of not only the manufacturing sector but also both the services and government sector.
Penang is investing in the shared services sector through a RM 3.3 billion Business Process Outsourcing and Information Technology Outsourcing(BPO-ITO) hub that will see the creation of tens of thousands of high-paying and knowledge-intensive jobs. Already, global financial services firm Citibank has opened their Global Citigroup Transaction Services centre here, employing more than 1,000 local employees with an annual volume of 20 million transactions worth USD5.8 trillion.
In addition to Citigroup, other companies that have set up their shared services here include Wilmar, Air Asia, HIS, Atmel, Toll Forwarding and Jurong Shipyard. In total, the IT-BPO Hub will comprise of 74 acres of IT-BPO Park in Bayan Lepas, a planned development of 7 acres BPO Prime in Bayan Baru for ICT companies and a 100,000 sqft Creation Animation Triggers (CAT) in the George Town heritage enclave.
In pursuit of our goal to become an international and intelligent city, we have taken the important steps of institutionalising the fundamentals of rule of law, good and clean governance, as well as integrity in leadership. Following on from that, we have established outcome-based administration that focuses on creating a rising tide that lifts all boats.
While these initiatives have strengthened our financial position and built resilience, we have also taken steps to ensure we stay ahead of the game in manufacturing and services, in order to ensure Penang is best prepared in the eventuality of an economic tidal change.
Education is our lifeboat to the future. Not only can it reduce inequality, it can provide mobility and opportunity to all. Only a sound education foundation can provide ladders of opportunity and escalators to mobility. Penang state government is adopting a 3-prong approach towards strengthening our education system:-
• Giving annual funding to existing half-funded vernacular and religious schools;
• Building Learning centers that focus of STEM teaching of science, technology, English and Mathematics; and
• Attracting world class universities as well as adopting the German vocational school system within multi-national corporations.
These are huge challenges and success is yet uncertain. But we must be willing to try and invest in education. For only when we boldly invest in the future then can we win the future.
For this reason, it is important not to rest on our laurels. Therefore, lectures such as this one today are important as the insight from an insider such as Professor Nishimura will undoubtedly prove to be invaluable to all of us, whether as government, corporations or individuals in Penang and Malaysia.
除了花旗集团，其他来到槟城设立资源共享服务的公司，还包括了丰益国际、亚航、HIS, Atmel, Toll Forwarding 以及 Jurong Shipyard。槟城资讯工艺商务流程外包中心将分为三个部分，即于占地74英亩地 的峇六拜 IT-BPO、峇央峇鲁BPO Prime（占地7英亩）, 及乔治市古迹区10万平方尺的创意动画区（CAT）