Keynote Speech by the Rt. Hon. Mr. Lim Guan Eng, Penang Chief Minister on 20 November 2014 – Penang State Industrial Manufacturing Conference, Vistana Hotel Penang.
Good morning. I would like to thank the organizer for inviting me to speak in this prestigious event.
Theme: “Productivity Innovation: The Penang Experience” by Addressing the 5 key Challenges Mentioned In the World Competitiveness 2014-15 Report.
This Penang State Industrial Manufacturing Conference is the first ever Industrial Manufacturing Conference be held by Penang State Government. It offers a platform for industry leaders and consultants to come together to share their success stories, knowledge and exchange ideas. Participants can also gain new insights about latest industrial trends.
Ladies and gentlemen,
ASEAN Economic Community (AEC)
The ASEAN Economic Community (AEC) with over 600 million population and USD2 trillion GDP is set to come into force from 31 December 2015, will bring about greater opportunities. I urge you to look at ASEAN as a market due to the immense opportunities available, especially with the AEC, which would see more doors opening for them. The Penang State Government hopes that companies here can take advantage of these opportunities into consideration. These are opportunities that you do not want to miss.
Promotion of High Growth Industries
To transform into a high income economy, we need to go beyond the factor-driven model of growth. We must focus on productivity and innovation. Productivity and innovations are the keys to prosperity.
A more sustainable growth strategy will be needed, and this essentially means exercising economic reforms are crucial. Some key challenges we are facing include; infrastructure investment and investing in human capital in order to produce highly-skilled workers and professionals, among others to effect productivity on a broader scale.
Transforming our economy cannot be achieved merely by changing structures but there must also be a major shift in people’s attitudes including knowledge for development. We need to change our mindset to improve labour productivity, be innovative and boost economic activities and growth in all sectors.
In 2013, manufacturing and services sectors remained as main sources of growth of Penang; manufacturing sector grew at 3.5 percent while services sector at higher growth rate of 5.8 percent.
Shared services and outsourcing (SSO) sector in Malaysia raked in revenue of RM12.8 billion last year, a 22 per cent rise from 2012 (MDeC). Analyst firm Gartner has estimated a global SSO market size of US$443 billion by 2014.
Ladies and gentlemen,
Move towards hi-tech and high value production and activities
Penang is the backbone of the nation’s E&E manufacturing and exports for the past four decades. Penang’s economy was contributed 48% by manufacturing and 47% by services in 2013. Penang manufacturers have evolved to move-up the value chain to produce higher value-added products.
Penang must also develop our services sector so that we can seek convergence with products, technology and services. This convergence requires companies and governments not only to create new eco-systems but also adapt to changing eco-systems to survive. It is a Penang State Government’s policy to enhance the knowledge content of the economy.
Emphasis will also be made on the promotion of higher value added manufacturing and related services as well as knowledge-based services such as Shared services and Outsourcing (SSO) Centre.
In Penang, the Cybercity has been successful in catalyzing the growth of the IT industry in Penang. Today, many companies in the electronics industries have made Penang their administrative and manufacturing hub. This will also enhance Penang’s efforts to establish a services hub in addition to the existing manufacturing hub in Penang. Most of the SSO operations in Penang are those involving MNCs centralizing their functional operations such as human resource, finance and accounting as well as IT in Penang, such as AMD, Dell, Intel and Motorola. Other companies that have set up their shared services here include Citigroup, Wilmar, Air Asia, IHS, Atmel, Toll Forwarding and Jurong Shipyard.
To stimulate future growth, the Penang State Government has set aside land in Bayan Baru (BPO Prime), Bayan Lepas (BPO Park) and a 100,000 sqft Creation Animation Triggers (CAT) in the George Town heritage enclave to be the Penang IT-BPO Hub. BPO Prime & BPO Park are to offer at least 1.7 million sq. ft. of exterior space within the next three to five years. The 74 acres Penang BPO hub will be Penang’s biggest BPO project. Penang is investing in the shared services sector that will see the creation of tens of thousands of high-paying and knowledge-intensive jobs.
The setting up of BPO hub will be among some of the initiatives taken by the State to attract and retain talent in Penang. This is in line with Penang’s economic development and investment strategy and I am confident that BPO’s success in Penang will also be Penang’s and Malaysia’s success.
Ladies and gentlemen,
Preparing Penang for the Future:
Boosting Growth via Productivity and Innovation
Malaysia’s Total Factor Productivity (TFP) growth at 2.3 percent per annum (NPC Annual Productivity Report) is very low for the middle-income group of countries.
The Penang state government is committed towards being competitive. To attracting investors to Penang, we realize that we cannot rely only on our comparative advantages but also creating new competitive advantages.
According to the WEF World Competitiveness Report 2014-15, Malaysia has much to improve in areas of
2. Inefficient government bureaucracy
3. Poor work ethic in national labour force
4. Insufficient capacity to innovate
5. Inadequately educated workforce
Penang enjoys a well-deserved reputation of being the most efficient and cleanest government in Malaysia through implementation of CAT governance of competency, accountability and transparency. Penang is the only state government in Malaysian history that has been praised by Transparency International for implementing open competitive tenders.
We have an established reputation of a good work ethic in the manufacturing sector built up over 40 years of tradition and experience – making Penang one of the most dynamic electronics and medical devices cluster in the world. We emphasis especially on productivity enablers specifically focusing on promoting the development of concentrated industrial clusters and supporting ecosystem and increase target investment quality.
We will continue the strong collaboration between academia and business as well as strong focus on education to increase productivity and good work ethic with skills development to facilitate industries to move up the value chain through centers of excellence such as the Penang Skills Development Corporation (PSDC).
In the same time, Small and medium enterprises (SMEs) are also encouraged mechanization, automation and upgrading of its capacity to increase innovation and productivity.
Education is our lifeboat to the future. Not only can it reduce inequality, it can provide mobility and opportunity to all. Only a sound education foundation can provide ladders of opportunity and escalators to mobility. Penang state government is adopting a 3-prong approach towards strengthening our education system:-
• Giving annual funding to existing half-funded vernacular and religious schools;
• Building Learning centers that focus of STEM teaching of science, technology, Engineering and Mathematics; and
• Attracting world class universities as well as adopting the German vocational school system within multi-national corporations.
In order to cope with IT innovation, the Penang State Government has established the Penang Science Council (PSC) to reinforce the talent pipeline from schools to industries and businesses, and to make Penang into the centre of excellence for science and technology. PSC has been generating interest in science and technology amongst the youth and inspiring them to adopt a career in science and technology as well as cultivating innovative and dynamic thinking. A Penang Tech Center will be set up to rekindle interest in science and technology. We have the most dynamic Penang International Science Fair and successful exhibitions which have to be held in the sports stadium.
Finally, to improve the quality of our workforce requires us to improve the quality of our educational institutions. Beyond cultivating interest in science and technology, the Penang State is also attracting world-class institutions of higher education to establish in Penang. The United Kingdom’s Hull University together with the local KDU University have committed to Penang offering liberal arts courses, engineering, accounting, business studies, logistics and law. The Penang State Government aims to attract the bright brains from other parts of Malaysia and the world to learn, live and then work in Penang.
We focus on productivity improvements and innovation capabilities to ensure export dynamism. Clearly we have met the 5 challenges outlined in the World Competitiveness Report.
Ladies and gentlemen,
The ECA International has voted Penang to the most liveable city in Malaysia, and the 8th in Asia due to our excellent healthcare and educational infrastructure. Being voted the most liveable city in Malaysia further enhances Penang’s attractiveness as a BPO Hub by offering more to the best and the brightest talents. By having a pool of knowledge workers to support the knowledge intensive activities, the overall economy and wellbeing of Penang will be further enhanced, thus making in Penang an Intelligent City.
Both the government and private sector must focus on what works and ignore what don’t. Building human talent, retaining knowledge and focus are the key ingredients for developing IT, services and R&D. Better productivity and innovation are key components in keeping the Penang economy competitive.
Before I end my speech, I would like to thank all for collaboration to make today’s event a success. I would also like to welcome the distinguished speakers for taking time out of their busy schedule to be with us. I hope all of you will have a fruitful time; gaining knowledge and exchanging ideas. I wish you all a productive and inspiring seminar.
LIM GUAN ENG