By Himanshu Bhatt. AFTER the “pleasant shock” Penang got last year when it found itself having amassed a whopping RM12.238 billion in investments – the highest anywhere in the country – it was only inevitable that it had to do some settling down. By all realistic accounts, the record seemed unlikely to be matched, let alone surpassed. With the added woe of an acute shortage of skilled workers, a global phenomenon, the state has now reasoned that the scale achieved last year made it necessary to work on “digesting”, or merging and integrating, existing ventures. And so it set a much more modest target of RM6.1 billion in investments this year, or half the figure in 2010.
Very pertinently, the forecast has taken into account a report by American IT research and advisory company Gartner Inc in September last year that indicated worldwide semiconductor revenue growth is expected to drop from 31.5% in 2010 to 4.6% in 2011. This is an extremely vital indicator, for Penang’s industrial boom that began in the 70s with the setting up of its free trade zone, was powered by the semiconductor business. It was the collective investment of foreign giants like Intel, AMD, Hitachi (now Renesas), Agilent and National Semiconductor that skyrocketed the state’s economy, making it a powerhouse in Asia. But the current situation has now somehow compelled the state to see itself ushering in what may be a new era in its industrial focus. From riding on investments from gigantic multinational corporations (MNCs), the state is being prodded by circumstances to veer increasingly, in a manner it has not done before, toward small and medium scale industries (SMIs). Penang announced recently that it is developing an “SME Village” for such enterprises at a 32ha site in Batu Kawan, to be ready by the end of next year. Through its agency InvestPenang, it has also incepted an SME Market Advisory, Resource and Training (SMART) Centre and the Career Assistance and Training (CAT) centre to address worker shortage. And in a latest move, the state has begun developing a new RM40 million “incubator hub” in Bayan Lepas to assist new small and medium scale enterprises (SMEs). These measures represent a turning point for Penang’s famed industrial zones. Although the authorities have long spoken about supporting and encouraging SMIs, the scale with which the current administration is devoting its efforts – and money – for SMI development is unprecedented. The initiatives are expected to complement the state’s strategy to nurture and attract high “value-added, high-tech, knowledge-based companies”. This intense focus on quality over company size may well mark a radical turn in Penang’s industrial history. And it is one the state has been compelled to adopt as electronics MNCs become increasingly difficult to draw into the state. In 2009, an unidentified foreign MNC withdrew its plan to invest a staggering US$3 billion (RM9.21 billion) in Penang, after failing to obtain a guarantee from the state government that it would be able to get at least 1,000 electrical and electronics engineers. And even of the record RM12.238 billion made last year, new investments amounted to only RM2.846 million; the rest derived mostly from expansions by existing operations. Hence, one can see the wisdom of lending intensified emphasis to supporting the development of SMEs. As it is, they contributed one-third of Malaysia’s GDP last year, and the figure is expected to rise. The idea is also to boost such local companies to increase their competitive edge, not only to support the MNCs, but also to compete internationally as global suppliers or even Malaysian brand names. Even more symbolic, SMIs may now well mark a new chapter in the evolution, necessitated by the instinct to adapt and survive in Penang’s famed hi-tech industrial sector. ** Republished with permission. This article first appeared in the June 23, 2011, edition of theSun. Himanshu is theSun’s Penang bureau chief.
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