Charting Penang’s Future

PENANG is one of the top destinations for foreign direct investment (FDI) in the country. Despite the global crisis following Covid-19, Penang received the third highest manufacturing FDI at RM14.1 billion in 2020, and attracted seven of the 11 high value investments received in Malaysia.

Despite being the second smallest state, Penang is an economic powerhouse that produced the highest export value to the country consecutively in 2019 and 2020 at RM284 billion and RM310 billion respectively. In term of gross domestic product (GDP) per capita, Penang topped the chart among all the states, excluding federal territories, from 2015 to 2019 (see Table 1).

GDP growth in Penang hovered above 5% in the period from 2016 to 2018, with annual value of RM82.5 billion (2016), RM86.7 billion (2017) and RM91.2 billion (2018).

The US-China trade war (2018-2019) had indirectly benefited Penang as the global supply chain disruption led affected manufacturing investments into the state, recording its historic high of RM16.9 billion in 2019.

Penang’s economic survival

Penang’s present economic comfort and achievement cannot and should not be taken for grant- ed. Destabilising elements such as political volatility, uncertain market climate, and the rise of surrounding economies can cause Penang’s economy to collapse.

The events of the early 2000s are still fresh in mind.

More than 12,000 high-tech jobs disappeared from Penang when China entered the World Trade Organisation in 2001.

Penang’s job market and manufacturing investment took a dive with the number of multinational corporations (MNCs) dropping from 63 to 23 from 1994 to 2004. Employment in MNCs declined 69% in the same period.

Penang has to continuously innovate and develop to ensure its own economic survival. With the fourth industrial revolution sweeping across the world, Penang must leverage on existing strengths and expand the capacity in anticipation for the imminent economic reality.

The state government has launched several transformational projects to uplift Penang. The two most ambitious of all are the Penang Transport Master Plan (PTMP) and Penang South Reclamation (PSR).

The Penang Infrastructure Corporation Sdn. Bhd. (PIC) was established as the special-purpose vehicle to oversee the implementation of the PTMP and PSR, with former Penang State Secretary Datuk Seri Farizan Darus appointed as the first chief executive of PIC.

Penang Transport Master Plan

The PTMP is a comprehensive transportation blueprint for both the island and the mainland. Besides providing public transport connectivity through a variety of modes such as Light Rail Transit (LRT), bus, tram, and water taxi, the plan includes a network of major roads and expressways to facilitate the increasing traffic movement and relieve the present and predicted congestion.

Comprehensive transport infrastructure takes decades to be implemented. Singapore, which is smaller than Penang, began planning for their expressways in the 1960s and the Mass Rapid Transit (MRT) in the 1970s. There are currently 11 expressways and six MRT lines in the city-state. The implementation of the whole PTMP is estimated to take up to 30 years and costs over RM40 billion.

As federal government grant and loan guarantee are not forthcoming, the financing of the PTMP has to be sourced by the state government. This is where the Penang South Reclamation (PSR) plays an important role as a catalyst for the future economic growth of Penang.

Penang South Reclamation

The rationale for PSR is strategic as the site is located near Penang International Airport, the vibrant electrical and electronic (E&E sector) ecosystem at Bayan Lepas Free Industrial Zone, and the two industry-led learning institutions: the Penang Skills Development Centre and the Collaborative Research in Engineering, Science and Technology Centre.

Reclaiming land for strategic development is not new in Penang. Many landmarks in the state today that are crucial for the economic ecosystem and social well-being were developed on reclaimed land (see Figure 1).

A large part of Bayan Lepas Free Industrial Zone, Penang Bridge, Tun Dr. Lim Chong Eu Expressway, Weld Quay, Straits Quay, and Karpal Singh Drive were built through reclamation without resulting in environmental disaster. Penang would not be what it is today if not for these developments.

Unlike other massive reclamation projects in the country, the PSR is wholly owned by the state, with the reclaimed land belonging entirely to the state government, not to any private company or developer.

Being a catalyst for the fourth industrial revolution and smart city concept, the PSR aims to create high-value jobs, increase live-ability, and finance the PTMP to ensure Penang’s economic survival for the next 50 years.

Economist and chairman of Khazanah Research Institute, Dr Nungsari A Radhi agrees: “The PSR is a perfectly rational economic project for a place like Penang. It is not necessarily an economically viable proposition everywhere but it is in Penang.”