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Articles, Commentaries, Penang Monthly [formerly Penang Economic Monthly]

E&E and E&E: Penang’s Two Economic Legs Showing Strong Muscles

By OOI KEE BENG, Penang Monthly Editorial, August 2022

AS WITH Singapore three decades later, Penang, on being taken over by the British in 1786, immediately depended on the benefits of being a free port. The contingencies of such an economy quickly came to define most of what we consider Penang Culture today.

This unique culture covers all aspects of what we know as modern living. Without a doubt, multiculturalism provided the format for much of this. Not only have various communities lived together, they came to take it as a welcomed condition of their existence that cultures should accept each other, and get along for mutual enrichment.

Publishers, schools and newspapers serving different cultural denominations appeared, living side by side, generating an organic Penang identity that reflects the lifestyle innovations and economic conditions of its vibrant society.

Penang Island is well located at the southern end of the Andaman Sea, at the eastern end of the Indian Ocean, and at the northern end of the Straits of Melaka all at the same time. And in maneuvering regional economics involving Siam, Kedah and Acheh and international trade and politics involving the Europeans, Penang’s population made the most of the opportunities on offer. Over the two centuries, all these communities left their mark quite clearly on the island and on the mainland opposite it.

But in 1969, Penang, now a part of the Federation of Malaysia, lost its free port status as a consequence of the centralizing imaginations that underlay the federal government’s nation-building agenda. Having its economic carpet pulled from under its feet, Penang’s unemployment rates immediately soared.

In the changed scenario following the 1969 racial riots and the opposition taking power in Penang, a new economic base was created under Chief Minister Lim Chong Eu. Taking advantage of the electronic revolution then emerging in the world, Penang, through its free trade zones—the first in Malaysia—turned itself over the next decades into a global manufacturing hub, serving MNCs and earning for itself the title of “Silicon Valley of the East”.

Thus, Penang society today reflects a cultural schizophrenia in that its strong traditional port heritage persists in the older parts of the city, while hi-tech factories, shopping malls and high-rise residences populate hastily developed parts of the island and the mainland.

Global Recognition

The cultural, political and intellectual heritage developed between 1786 and 1957 gained international recognition in 2008 when UNESCO put George Town—along with its sister Malaysian port, Melaka, on the World Heritage List. It is this deep heritage that remains a major attraction for tourists visiting George Town.

The two legs of Penang’s economy—manufacturing and tourism—now stand at a crossroads. On the one hand, its manufacturing sector—especially its impressively vibrant Electric and Electronic (E&E) sector—has to ascend the global value-added ladder, and this may be most achievable through broad digital investments. On the other hand, the need is strong to transform the state’s many green and heritage assets into top-end destinations for Experiential and Ecological (E&E) tourism.

Given the sinewy E&E muscles of its two economic legs, Penang’s future seems bright. However, despite its enviable global reputation both in manufacturing and tourism, some general weaknesses need remedying. The drive to digitalise is underway; the Penang State Government established the agency Digital Penang in 2020 for this purpose. But much traditionalist resistance and institutional lethargy may slow down what is already a delayed development.

More broadly, Penang’s main problem remains the development and maintenance of a relevantly-skilled workforce and the attracting and detaining of talents. Be that as it may, foreign investments into Penang continue to break records, to the extent that the state has trouble finding enough land for the purpose. These in themselves are positive problems, but they need solid solutions, and quickly.

Furthermore, the Creative Digital District (CD Square@GeorgeTown) in the old business district, launched earlier this year by Chief Minister Chow Kon Yeow holds promise, and if ideas to transform the town of Butterworth, which lies directly across the straits from George Town, into a digital transport hub are adopted in the near future, the synergy created across the waters would strongly attract companies to the area. And in Bandar Cassia in the Batu Kawan industrial area, procedures to develop a digital medical hub are fully underway, supported by the Penang Development Corporation.

Furthermore, standards of livability remain enviably high in the state, albeit that there is much room for improvement, especially regarding public transportation.

Where Penang’s ecological reputation is concerned, things are looking better than anyone could have hoped. Exactly a year ago, the International Coordinating Council of UNESCO’s Man and the Biosphere Programme granted official designation to the Penang Hill Biosphere Reserve. This reserve comprises 12,481 hectares of marine and terrestrial ecosystems in northwestern Penang Island.

At the same time, the Penang State Government has agreed to establish a marine sanctuary in the waters off the east coast of Penang Island, to be called the Middle Bank Marine Sanctuary (MBMS). Penang Institute and the Centre for Marine and Coastal Studies (CEMACS, Universiti Sains Malaysia) are presently preparing the initial report to pave the way for this goal to be achieved.


About Ooi Kee Beng

Dr OOI KEE BENG is the Executive Director of Penang Institute (George Town, Penang, Malaysia). He was born and raised in Penang, and was the Deputy Director of ISEAS - Yusof Ishak Institute (formerly the Institute of Southeast Asian Studies, ISEAS). He is the founder-editor of the Penang Monthly (published by Penang Institute), ISEAS Perspective (published by ISEAS) and ISSUES (published by Penang Institute). He is also editor of Trends in Southeast Asia, and a columnist for The Edge, Malaysia.


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