Speech By Chief Minister of Penang Lim Guan Eng at the Malaysian International Chamber of Commerce and Industry luncheon talk
Good afternoon ladies and gentlemen. It is my pleasure to address this luncheon in the presence of such highly influential business leaders. I would like to extend my appreciation to the Malaysian International Chamber of Commerce and Industry (MICCI) for putting this together.
The theme of today’s talk is “Convergence – Penang’s Future”. Convergence is indeed an interesting concept. It can be viewed from many aspects and I will explain how convergence has helped Penang, as well as how it will propel Penang further.
Building on Penang’s manufacturing prowess
We have many internationally acclaimed manufacturers in Penang. The confidence that these investors have in Penang has led many, such as Intel, to relocate their R&D facilities to Penang. With the opening of the Second Penang Bridge linking the island and Batu Kawan, more high-tech manufacturing space has been made available.
Increasingly, companies are also raising the services element of their manufacturing process in Penang. For example, Dell Computers has its maintenance and services hub in Penang, where diagnostics and after sales services are provided to Dell customers as far as Australia. This is an example of the convergence of services and manufacturing. Increasingly, services has become as if not more important than the manufacturing of the product itself. Indeed, if we are to use the renowned jet engine manufacturer, Rolls-Royce, as an example, close to 50% of its revenue is from services – such as the regular maintenance and diagnostics of jet engines.
Besides revenue, there are significant benefits of the convergence of services with the manufacturing process as companies can also get quicker feedback from their customers on their products, thus providing valuable information for their R&D projects. In addition, the services element of businesses, be it R&D or after-sales maintenance, has an added advantage of insulating the local economy from the cyclical impact of inventory build-up and draw downs, therefore providing Penang’s economy with additional resilience. Ladies and gentlemen, this is the basis of manufacturing++ (manufacturing plus plus) and “smart manufacturing.”
Already, many firms such as AMD, First Solar and Intel have relocated their global services operations of human resource administration and finance to Penang. This is in addition to the continuous upgrade of their manufacturing facilities. As such, we view this trend as a great encouragement, and the state government will continue to facilitate this important convergence.
Building on Penang’s talent
The convergence of talents to Penang has also resulted in the rapid development of the shared services sectors, such as Shared Services and Outsourcing (SSO), Business Processing Outsourcing (BPO) and Knowledge Processing Outsourcing (KPO). Right now, Citigroup, the global financial services giant, has its Global Citigroup Transaction Services centre in Penang, employing more than 1,000 local employees who processes an annual volume of 20 million transactions worth USD5.8 trillion.
This case is not an outlier. Other companies have also set up their shared services functions in Penang, including Wilmar, AirAsia and Jurong Shipyard. In fact, the convergence of these shared services sectors by international firms to Penang has led to a shortage of Grade A office spaces. Therefore, we are investing in a RM3.3 billion Business Process Outsourcing and Information Technology Outsourcing (BPO-ITO) hub in Bayan Lepas to ensure the continuous growth in this sector that can create tens of thousands of high-paying and knowledge intensive jobs.
Ladies and gentlemen, all these types of convergence mean that Penang does not only do R&D, high-tech manufacturing and provide after-sales services to many sophisticated components that run today’s businesses, but that Penang is also providing crucial business functions for some Fortune 500 companies. If anything, this has firmly placed Penang as a node in the global space.
Building on Penang’s unique culture and heritage
Penang’s diversity of culture and heritage, augmented by our UNESCO World Heritage status, provides an exceptional backdrop to the convergence of creative talents.
As you tour certain parts of the George Town, a somewhat bohemian atmosphere has also taken off on its own in certain parts of the heritage city – the only place in Malaysia where you can find such a culture highly visible. The State Government intends to spur this further by renting a renowned heritage building to develop the Creative Animation Triggers, which will become space for a growing creative industry.
Although catalyzing the creative element of the society is an important role all by itself, the spurring of creativity will further enhance business attractiveness and resilience. This is because more and more companies are taking the route of direct sale to consumers. Take for example Nestlé, the leading food and beverage producer known for its famous coffee powder, has now successfully commercialised the commodity and taken it a step further with the Nespresso machine. This is a successful example of how creativity – in branding, marketing, advertising and product design – has become a crucial element in successful businesses.
Therefore, when creative talents converge with Penang’s manufacturing prowess and our growing services sector, greater brands and products can be established that will enable businesses to charge premium prices.
To establish a creative cluster, 3 T’s are required – Talent, Technology and Tolerance. Tolerance of new ideas and dissent is necessary if we are to fully harness the fruits of freedom to think and express ourselves. In Malaysia, only in Penang do we have all 3Ts which are critical success factors towards a creative cluster.
The convergence of the creativity element with local business talents can also further anchor Penang as an important international business hub in the region. After all, Penang has proven time and time again to be a hotbed for entrepreneurs – spawning companies such as Globetronics and Eng Teknologi. Indeed, the convergence of the manufacturing and services sectors depends on the creative talents who can integrate both processes to add value.
Building on Penang’s liveability
Penang is consistently rated one of the top ten most liveable cities in Asia. This is a direct product of the convergence of both our soft and hard infrastructure, all of which we are continually improving. As we all know, Penang not only embraces a more open arts and cultural philosophy, but also firmly believes in upholding the rights of its citizens – allowing for greater democratic space through our Speaker’s Corners, Freedom of Information Enactment and even our unfortunately failed attempt at reintroducing local government elections.
In terms of hard infrastructure, much has been done to improve the existing road networks despite our financial limitations. Now, we are in the midst of a RM27 billion tender to seek a project delivery partner to implement our Penang Transport Masterplan Strategy, which will ultimately make Penang a state with a well-defined and fully connected road network and dispersal system, as well as a well-integrated and sustainable public transport system. So far a record 42 companies have bought copies of the tender.
Such liveability will complement the policy convergence of trade liberalisation, open skies, freedom of movement of capital and labour; as well as the ASEAN Economic Community (AEC) that comes into effect from 31 December 2015.
Indeed, if one visits one of the private hospitals in Penang, one will be amazed by the number of foreign patients seeking medical treatments here. This is due to a convergence of factors – the superior medical care offered by our healthcare professionals, the relatively affordable prices, as well as the recreational opportunities available in Penang. As a result, the success of this sector is reflected in the rapid expansion and high occupancy rates of many hospitals in Penang. Some countries have even suggested Penang as a business model to emulate for medical tourism.
Ladies and gentlemen, as businesses, talents and industries converge to Penang due to our superior liveability factors, all these will push Penang to become a regional business hub encompassing trade from Northern Sumatra, Southern Thailand, Southern Myanmar and Northern Peninsular Malaysia. This will then perpetuate the positive feedback loop of convergence.
Building on Penang’s good governance
In our pursuit of becoming an international and intelligent city, the state government has institutionalised the fundamentals of rule of law, good and clean governance, as well as integrity in leadership. The convergence of the CAT principles of Competency, Accountability and Transparency and the implementation of open competitive tenders for all public procurements and tenders have resulted in significant savings and good financial management.
At the end of the day for us to be strong and prosperous, we must build self-reliance by weaning Penangites from the dependency syndrome, especially on resources and money politics where money is spent on buying influence instead of investing in the future.
Ladies and gentlemen, the convergence of many factors – the evolution of business models, Penang’s geographical location, social and cultural diversity, creative talents and finally state government policies – will propel Penang’s future to greater heights. These factors will make Penang the ideal hub for the establishment and growth of your businesses whether it is in manufacturing or in the services sector. My government understands businesses and is committed to providing the best environment for businesses to thrive. After all we are not your competitors but your collaborators. We are here to facilitate and not frustrate bearing in mind the business of government is to stay away from business.
Thank you.
