Preparing Penang for the Next Economic Lift-off

OPENING SPEECH by Dato’ Dr Ooi Kee Beng, Executive Director of Penang Institute at the Penang Economic Forum 2024, co-organised by Affin Hwang Investment Bank and Penang Institute. 25 June 2024.

OVER THE LAST few months, working with the team from Affin Hwang Investment Bank organising this conference has sparked in us at Penang Institute, the commitment to hold a Penang Economic Forum every year. I certainly feel that the time has indeed come for that idea to be plausible, and necessary. Organising an annual conference is never easy—unless the idea behind the conference, in this case the Economic Prowess and Potential of Penang, has great dynamic and currency. This conference—and I hope it can become a series—is a direct expression of the growing economic importance of the northern states, and Penang is buzzing again as the major engine of growth in this part of the country, just as it did in the years before the Second World War. Penang was then the logistical hub as well as the processing centre for much of the peninsula’s economy.

Banks came into being in Penang as easily as schools, newspapers and printing houses did. Our seas were busy, and our capital and people radiated outwards for economic advantage and as part of the modernising of this part of the world. At independence, Penang was the only city in the federation of Malaya.

In fact, even after independence, especially the early 1970s, Penang’s industrialisation played the role of stimulus for much of Malaysia’s industrialisation process.

Finally coming out of the Asian Financial Crisis that hit the whole country so bad, the total value of exports going through Penang International Airport and the Port of Penang is the highest in the country. And today, Penang’s E&E Sector, which has thrived for over 60 years, especially the semiconductor sector, has captured the attention and the imagination of the world. The US-China trade war is bringing benefits to Penang, and Malaysia. For that, we should not only be grateful, but we also remain alert to the opportunities on offer.

In fact, organising this conference with Affin Hwang has sparked in me personally renewed interest in Penang’s economic history. And I am someone who has always been fascinated by the socio-political history of northern Malaya. That history suddenly appears more relevant than ever before as a field of policymaking study because it can help us understand present opportunities. It is in need of a revisit, but with the present day as the vantage point.

Most histories of Penang have been too parochial. More often than not, they do not incorporate its economic, social and political dynamics into the ups-and-downs of Malaysia’s economic, social and political history. You may have observed from the subjects to be discussed today that we—Affin Hwang and Penang Institute—are trying to do that today, and to do that in a fashion that is as relevant to the country’s economic progress as possible. It is a start of a conversation, and of an approach of studying what future possibilities await Penang, Sarawak, Johor, and the rest of the country.

We are interested in the future and the potential of the national economy of Malaysia as a whole.

More concretely, the research interests we have had at Penang Institute concerning economic growth have concerned three areas. First, the manufacturing sector. That’s more standard economic stuff, which today includes a lot on supply chains and the supply of labour matching the demands of industry. Second, the services sector, which very often boils down to tourism interests. What tourists are interested in about Penang are mainly three things: heritage, environment, and food. I was tempted to say Food, Food, and Food. But that would not be totally true.

You may quickly see that these two economic legs, which have made up 90% of the state’s economic production, is partly based on the free trade zones that Tun Dr Lim Chong Eu, through the Penang Development Corporation, started in 1970, with hard-won permission from Tun Abdul Razak Hussein, and partly based on the socio-cultural characteristics of early Penang. Put simply for effect, the people of Penang went from port workers and port dwellers to becoming factory workers and tourist guides from the1970s onwards.

Third, economic research and policy thinking has understood the need to diversify the economic nature of the state. Surrounded by sea as it is, Penang is now a major player in the aquaculture sector in Malaysia. I believe that in total value, Penang is the leading state on aquaculture production, if not in volume. In fact, modern agricultural technologies hold much promise in the northern states.

The medical sector is another one that shows great promise of becoming Penang’s third economic leg. Medical tourism is huge, medical education is growing, medical equipment production is humungous in our manufacturing sector.

Malaysia is well-placed to take advantage of the evolving international education sector. I am sure it has not escaped anyone that education is big money. And as you may know, the number of international schools in Penang has been growing fast. International economics now focus on urban centres, and liveability in urban centres require good schools for kids, and good cultural offerings for the accompanying spouses of expatriates and mobile experts.

Finally, needless to say, the financial sector—capital building, SME support, and so on—is another trajectory for Penang to consider growing. Capitalism does not work well if Capital is missing. Domestic investments beyond borrowing to buying apartments and houses or cars are what we hope will broaden the entrepreneurial ecosystem in Penang.

The Penang State Government has been investing substantively in the digital sector, stimulating start-ups, supporting the creative industry, and enhancing digital literacy among Penang’s people in as many practical ways as possible. We certainly welcome the fact that Penang is capturing the imagination and attention of esteemed institutions like Affin Hwang

With this collaboration between Penang Institute and Affin Hwang Investment Bank, we wish to contribute to the strengthening and diversifying of Penang’s economy. It is a good time to be in Penang.

Needless to say, Affin Hwang and Penang Institute have put a lot of effort into providing a glorious lunch experience for you. So even if you wish to leave before the end of the conference, don’t do that before lunch. Do it after lunch.

Thank you all. Enjoy your day.