SPEECH BY CHIEF MINISTER OF PENANG AT THE MICCI ANNUAL LUNCHEON DIALOGUE 3 September 2015 G Hotel:
Penang Recorded RM4.33 Billion In Investments For The First Half Of 2015, A 7.4% Economic Growth Rate For 2014 And Expected 6.2% In 2015
I am delighted to be delivering this luncheon address at the annual dialogue with MICCI, the oldest chamber of commerce established in Malaysia. Today, I would like to share with you some of the challenges that all of us face and how Penang is standing out amongst the crowd and achieving its aspirations.
Economic headwinds facing us are numerous. Firstly, the implementation of GST on 1 April 2015 has adversely affected our retail economy business is down 20-25% in Penang and 50% in places outside Penang.
The federal government’s promises of minimal impact on the economy has shown to be untrue. So bad is the situation until the federal government has failed to fulfill its promise to refund GST payments made within 2 weeks. If the federal goverment cannot even make refunds within 2 weeks, public confidence is affected as if they cannot even pay up.
Secondly, the RM42 billion on 1MDB scandal has caused a loss of confidence amongst fund managers impacting negatively on our economy. Our ringgit has depreciated significantly against all currencies and is about 30% down against the US dollar.
RM has become the worst performing currency in Asia this year. This effectively means that Malaysians are poorer by 30% in US dollar terms. Overall, investors in Bursa Malaysia were poorer by more than RM159 billion between July 15 and August 25 based on the drop in the market capitalisation of 909 counters traded on Bursa when the Bursa dropped from 1,727 points in July 15 to 1,532 on 24 August 2015.
This 30% ringgit depreciation has significant impact on Penang, as we are supposed to graduate to a high-income economy this year. According to the World Economic Forum Human Capital Report, a high-income economy is one with a GDP per capita of USD12,467 or RM40,481 based on the then-exchange rate of RM3.27 to USD1.
However, the ringgit’s 30% depreciation means that the benchmark of USD12,467 or RM40,841 has been raised to RM52,000. Penang was expected to achieve a GDP per capita of RM42,251 based on a population of 1,681,922 people and a GDP of RM71.063 billion by this year. This would have exceeded the benchmark of RM40,841 required to become a high-income economy. Unfortunately, with the current value of our ringgit, this is far off from the RM52,000 (USD12,467) now needed. So now only are we suffering from imported inflation due to the ringgit’s weakening value vis-à-vis the US dollar, we will also miss out on becoming a high-income economy.
At least Penang is able to lessen the negative impact through our manufacturing and services sectors which is externally-related. Indeed, many of the companies that are favoured by investors in the midst of the upheaval are Penang based, such as Inari, Globetronics and Vitrox. These companies, together with their local suppliers, will be able to mitigate Penang’s economy from the negative effect from the ringgit’s fall.
Our tourism sector is also expected to get an additional boost from overseas visitors and domestic tourists. Although we are already Malaysia’s top tourist destination, I urge the operators to take this opportunity to invest further in their products and make Penang even more attractive, competitive and premium rated.
Besides, Penang’s talents who are working overseas will find Penang’s properties even more attractively priced. All these will help mitigate the negative impact from the ringgit’s fallout. Of course, there will be businesses who are not exposed to these dynamics and will find that the ringgit’s fall compresses business profit margins. I encourage these businesses to invest in productivity enhancing processes or reinvent the business to cope better with the current testing times.
Malaysia is also highly vulnerable due to foreigners owning close to 40% of the Malaysia Government Securities, amounting to RM165 billion. The widely expected US interest rates hike later this month will put the spotlight on the investment decisions of these investors. Therefore, getting our domestic finances in order is of high priority.
The Federal Budget next month should focus on cutting waste and eliminating corruption rather than increasing taxes, levies and bureaucratic red tape. In Penang, we have shown how good clean governance and prudent financial management can go hand in hand. From 2008 to 2013, we recorded budget surpluses of RM453 million. This 6 years surplus is more than the RM373 million in budget surpluses BN recorded in the 50 years it ruled Penang from 1957-2007. This clearly shows what competency, accountability and transparency can do.
Thanks to these surpluses, we have been able to carry out many social welfare programmes and distribute cash aid to the needy. As a result, we were able to reduce our income gap. This is proven by our Gini Coefficient, which is the measure of income inequality where a higher number signifies greater income inequality, reducing from 0.42 before to 0.37 in 2012. This 0.37 by Penang is much superior to our national gini coefficient of 0.42.
Thanks to our CAT model of governance, international investment increased. From 2008 to 2014, we managed to attract RM48.2 billion worth of investments, which is 93% higher than the RM24.9 billion invested from 2001 to 2007.
Ladies and gentlemen,
This brings me to what Penang is doing to achieve our aspirations and ride through the storm. As highlighted in my speech last year, Penang wants to be an international intelligent city by leveraging on the available talent, liveability, heritage, good governance and Penang’s strategic location. We seek convergence of our manufacturing, services and public sector to create synergies in both new and existing industries that can create positive economic spillovers. I am glad to be able to share with you some of the initiatives that the State has done in the past twelve months to accelerate the convergence.
An empowered organisation is one in which individuals have the knowledge, skill, desire and opportunity to personly succeed in a way that leads to collective organisational success. During the 10th Malaysia Plan, our economy grew 5.3 percent with 1.8 million new jobs created – 1.3 million jobs in services, manufacturing (431,000 jobs), construction (78,000 jobs) and agriculture (11,000 jobs). The skilled workers in the country make up a dismal 28 per cent of the total workforce, far off from the targeted 35 per cent to be achieved in 2020.
In the area of talent, the state government has introduced German Dual Vocational Training in Penang. We want to bring in the foundation that underpins Germany’s manufacturing prowess into Penang. The first batch of the students will start on Mechatronics next week and will be employed in companies such as B Braun, Southern Steel, Robert Bosch and Osram. In addition, to bringing in German Dual Vocational Training, the state government is also supporting it financially. The programme is open to all companies in Penang and I encourage your participation to upgrade your employee’s skills.
No doubt because of the depth of our talent pool which we are continuously cultivating, foreign investors have continued to prefer Penang as an investment destination. According to MIDA, in the first six months of this year, Penang attracted RM4.33 billion worth of investment, compared to RM3.13 billion last year.
This is set against excellent GDP growth of 7.4% in 2014 in Penang; and the 11th Malaysia Plan estimates Penang’s GDP growth this year to be equally robust at 6.2%. We also have full employment with Penang recording the historic low 1.2% unemployment rate last year. Such good employment market is translated to households in Penang enjoying household income growth of 7.6% annually between 2012 and 2014.
These are all excellent footing as we embark on an ambitious RM27 billion Penang Transport Master plan to develop comprehensive public transport infrastructure in Penang. This will be a “big bang” approach that will involve land, sea, air and rail solutions for the people of Penang.
As you are aware, we have recently selected the Project Delivery Partner who is going to seek the required approvals from the relevant authorities together with a detailed proposal on the layout for the RM27 billion project. The implementation of this 5 in 1 approach combining buses, taxis, LRT, ferries and cable car is timely as the global economy is softening.
The injection of construction activities will help cushion any of the negative impact externally. Therefore, by investing in public infrastructure, Penang will be able to ride out the current economic situation and emerge stronger at the end.
Ladies and gentlemen,
The economic clouds might be darkening with the ringgit’s depreciation and a global economic slowdown. However, Penang is well positioned to capitalise on any new opportunities.
We are continuing to make ourselves more attractive and robust. Coming into power in 2008 just before the financial crisis, this government has proven to be able to navigate economic storms.
Together with businesses like yours, we are investing to make Penang better.
至少槟城还可以依赖我们两大外在相连的制造业和服务业减轻经济不景的影响。很多位于槟城、备受投资者青睐的公司如Inari, Globetronics 及Vitrox也正处于逆境。这些公司与自己的本地供应商合作，将能够帮助我们减缓槟州经济因马币贬值所承受的负面影响。
在打造专才方面，槟州政府引进了德国技职训练系统——这套让德国制造业的表现如日中天的系统。我们的第一批学生将往机械电子工程领域发展，他们将被德国贝朗, 南方钢铁, 博世公司以及欧司朗所录用。政府除了引进有关系统外，也给予财政上的支持。这项计划公开予州内所有的公司，我希望您能参与，一起提升员工的技能。