Transcript Presentation for BJYeang

LESSONS FROM THE PENANG
GROWTH POLE IN MALAYSIA
MOZAMBIQUE:
INCLUSIVE
GROWTH SEMINAR
MAPUTO
FEBRUARY 10,
2011
FINANCE AND PRIVATE SECTOR DEVELOPMENT
1
Hong Kong
Taipei
KEDAH
NEW TOWNSHIP
INDUSTRIAL PARK
CITIES/TOWNS
EXISTING ROAD
Bangkok
RAILWAY
Beach Resorts
PENANG
ISLAND
PRAI
Bukit
Minyak
Bayan Lepas
Industrial Park
Penang
International
Airport
Kulim
High-Tech
Park
Medan
KL
Singapore
Batu
Kawan
Jakarta
Where is Penang?
2
The Penang Growth Story
Trading
1786-1969
Entrepot
Loss of free port
status
Declining trade
Manufacturing
1970-2000
Global
manufacturing
hub and
tourism
destination
Services Hub
2001-current
Innovation
economy and
business and
services hub
3
Penang’s Economic Transformation
• GDP by sector (1970)
5.5 19.7
0.3
12.7
61.8
• GDP by sector (2010)
1.8 1.6 0.1
Agriculture
Mining
Manufacturing
Services
42.5
54
Construction
US$500 million
US$10,000 million
Success of the Growth Pole Strategy
1970
Population (‘000)
Per capita income (US$)
Unemployment rate (%)
Poverty rate (%)
Infant Mortality Rate (%)
0.78
400
16
32.3
38
2010
1.61
5600
3
0.3
0.4
Value Roadmap – Industrial Transformation
Version 1
Value Add
Version 2
• Business Management
• Outsourcing
• Service Contract
• R&D
• Software
• Global Hub
• Alternative sale
R&D
Sub-con
Support
Centres
Quality
&
Automation
• Low Value Added
Exports
• Textile / Garments
• Labour Intensive
• Electronic Component
Assembly
• Test
• Semiconductor
Manufacturing
• Consumer Electronics
• Automation
• TQC
• Tool & die
• Machine Integration
• Plastic Moulding
• Custom Services
• Improvement Projects
• Semicon process
• Test system
development
• Supply chain
management
• Disk drives
• Investment in hightech machine shops
• Drive components
production
• Test auto handlers
• PCB assembly
automation
• Manufacturing sub-con
• General Manufacturing
machinery
• Base Software
• Design Companies
• Contract
Manufacturing
Global
Competition
• Machine Shop Service
• General Maintenance
• Trade
Basic Industries
Agriculture
60s
70s
80s
90s
Adapted from “Technology Roadmap for the Electrical and Electronic Industry of Penang”
00s & beyond
Version 3 ?
• MNCs
• Operational HQ
• Logistics / Distribution
Centres
• BPO / SSO
• Design & Development
Centres
• Local Companies
• OEM to ODM
• Market Outreach beyond
Malaysia / MNCs
• Growth of Design / R&D
Companies
Why is the Penang story
relevant?
Penang , Malaysia (1970)



Population: 0.8 million
Area: 1,030 sq. km
Income per cap: $400
Nacala, Mozambique (2011)



Population: 0.3 million
Area: 1,300 sq.km
Income per cap: $440 *
Similar Development Challenges
Post conflict: stability and equitable growth
High unemployment : attract investments
Optimize potential of port facilities
Enhance manufacturing competitiveness
Develop tourism potential and protect assets
Improve connectivity : infrastructure
Strengthen National – Provincial partnership
* GNI per capita ATLAS method, WDI 2010
7
Penang Growth Pole Strategy
Period
1964 - 1970
National Plan State Plan
Outcomes
1st Malaysia Plan
Munro Report
Agriculture, health
and education focus
1970 - 1990
2nd Malaysia Plan to
5th Malaysia Plan;
New Economic Policy
Penang Master
Plan
Export-led
manufacturing;
Global orientation
1990 - 2000
6th Malaysia Plan
and 7th Malaysia
Plan
First Penang
Strategic
Development Plan
Solid GDP and FDI
growth but few local
linkages
2000 - 2010
8th Malaysia Plan
and 9th Malaysia
Plan
Second Penang
Strategic
Development Plan
Faltering growth and
competitiveness;
middle income trap
2007 - 2025
10th Malaysia Plan
(current) onwards
Northern Corridor
Economic Region
Blueprint
World class economic
region: innovation
and talent
Penang Growth Pole Strategy
Ingenuity
and
Institutions
Infrastructure
and
Incentives
Investments
9
INGENUITY
KEY LESSONS
1. Develop a long
term shared
vision based on
challenges and
opportunities
2. Target strategic
sectors but
remain flexible
to new prospects
• Penang Master Plan (1971) set out
the long-term growth strategy, in a
market economy setting, utilizing
available resources for export-led
manufacturing and tourism (global
orientation)
• Penang Strategic Development
Plans 1 and 2 built on this strategy
• National 5 Year Plans provided
overall policy framework and
resource envelope for public
expenditure
Lessons from the
Penang Strategy
1. Lead implementation
agency: coordination and
One Stop Shop roles
2. Sector growth strategies:
manufacturing, tourism
3. Integrated spatial planning:
SEZs, new growth centers,
housing, urban renewal and
land banks
4. Infrastructure investment
planning: logistics, utilities
5. Skills development:
incentives and PPPs
INSTITUTIONAL
REFORMS
KEY LESSONS
1. A capable lead
agency for
effective
implementation
2. Federal-Stateprivate sector
communication
and trust is
critical
• Penang Development Corporation
Enactment (1971) to spearhead
socio-economic development,
poverty reduction, job creation
and improvement of quality of life.
• Federal Industrial Development
Authority Act (1965) for
investment promotion and
facilitation
• Free Trade Zone Act (1971)
• Promotion of Investment Act
(1986) for incentives
Enabling Role of the Lead Agency
• Focal point for strategy, planning, communications,
intra-agency coordination and consensus building
• First point of contact for investors: information is key
• Business facilitation: from start up to closing
(coordination and follow through role)
• Regular dialogue with investors: address concerns
related to infrastructure, regulations, permits,
approvals, Customs, Immigration, security and
Municipal services
• Investment promotion and business matchmaking
SYNERGY FOR GLOBAL COMPETITION:
THE PENANG MODEL
Federal Government
MITI / MIDA, MOF
• Institutions
• Incentives
• Infrastructure
Penang Development
Corporation (PDC)
Foreign Investors
Capital, Technology
Local
Investors
GLOBAL /REGIONAL
MARKETS
• SEZs
• Business
Services
• Skills
• Initiative
• Ingenuity
14
• Demarcation of roles and
INFRASTRUCTURE
responsibilities for infrastructure
AND INCENTIVES
development and maintenance:
Federal, State, Local Authority and
KEY LESSONS
Development Agency
1. Investment plan • Free Trade Zone Act (1971) for
with
free zone incentives
accountability
• Promotion of Investment Act
(1986) for sector/location-based
for delivery
incentives
2. Software is
• Business environment is more
more important
important than financial
than hardware
incentives : transparent and
predictable processes
Good Hearing and a Light Touch #
• Innovative local economies are built one
conversation at a time : need people close to the
action who have good hearing, patience and a
light touch
• Good governance pays in the long run
• Attract and retain the best and brightest talent
• Work with what you have: learn, copy, experiment
and innovate - second-best solutions do work!
• Sustainable Growth = Competitive Edge
# F. Hutchinson, Penang Economic Monthly, July 2010