Bringing Penang towards a greater future

Tree-lined bicycle lanes and canals connecting neighbourhoods island-wide.

Penang’s leaders already saw the need to move beyond being a low-cost production centre for the world as far back as the 1960s. The same visionary zeal is required to keep up with the fast-moving world today.

HOW Penang handled the triple shocks of 1969 is a story worth retelling.

There was an unplanned change of leadership in Penang when the late Tan Sri Wong Pow Nee relinquished his position as the first chief minister when the Alliance lost the state to Gerakan (then opposition) in a general election on May 10, 1969.

Three days later, Malaysia was plunged into unrest following the riots of May 13. Against this backdrop, another blow came when the federal government revoked Penang’s status as a free port, which plunged the state into a crisis with unemployment shooting to as high as 15% in 1970.

Penang’s leadership in the post-1969 era quickly regrouped, and rolled into motion plans – some formulated during Wong’s era. Dr Lim Chong Eu (the late Tun) oversaw the groundbreaking of the first phase of the Bayan Lepas Free Industrial Zone (FIZ), covering an area between the airport, Jalan Sultan Azlan Shah and the Kluang River, which opened in 1972.

Good demand for industrial land right next to the Bayan Lepas Airport meant the zone expanded, including by land reclamation (especially for Phase 3, which sits on partially reclaimed land), with the final phase completed by the 1990s.

Tenants of the 560 ha (1384 acres) FIZ now include Intel, AMD, Hewlett-Packard, Clarion, National Semiconductor, Hitachi, Osram, and Bosch. This group, given the nickname the Samurai Eight, were the first multinationals to wager on Penang’s future, followed by Motorola and Dell, rightly earning Penang the nickname the “Silicon Valley of the East” – a description of the electrical and electronics (E&E) manufacturing sector clustered around Bayan Lepas.

The E&E sector has been the country’s major economic contributor and largest export earner for decades. In 2020, the E&E industry contributed 45.6% of Malaysia’s exports worth RM386.1bil, which translates to 5.6% to the country’s gross domestic product.

An intelligent infrastructure designed to drive future development.An intelligent infrastructure designed to drive future development.

Factors that led to mushrooming of the E&E industry in Penang

Bayan Lepas FIZ has a few obvious attractions, such as being served by two bridges to the mainland, other than being right next to the Penang International Airport.

Other supporting infrastructure and developments include the Universiti Sains Malaysia (since 1969), the Collaborative Research in Engineering, Science and Technology Centre (or CREST, since 2012), and the Penang Skills Development Centre (or PSDC, since 1989) that was set up to nurture a new generation of skilled and knowledge workers.

On the list are also many good supporting institutions, such as hospitals, convention centres, hotels, schools (at least five renowned international schools on island side), other than manifold leisure and recreational attractions within easy reach.

There are also plans to improve connectivity within the island, such as those outlined under the Penang Transport Master Plan to usher Penang into an overall more sustainable place by 2030. These include a proposed LRT network, and improvements to the road network coverage through roads such as the Pan Island Links 1 and 2.

Other equally important factors when it comes to drawing FDIs and local investments include a highly supportive and focused state government, along with a ready supply of qualified workers.

In a speech in October following the unveiling of the 12th Malaysia Plan (2021-2025), minister in the Prime Minister’s Department (Economy), Datuk Seri Mustapa Mohamed, said: “The E&E industry plays a critical role in the country's industrial development. Indeed, Malaysia is a major global manufacturing hub for the E&E industry, producing about 13% of the global back-end semiconductor output.

“E&E accounts for 40% of Malaysian exports. In the first eight months of 2021, Malaysia’s total trade in E&E products amounted to RM477bil. Exports rose 18.8% to RM282bil. As we all know, the E&E sector represents about 35% of Malaysia’s total exports.

“For the past 50 years, we have been successful in creating a comprehensive E&E ecosystem, particularly for front-end to back-end semiconductor manufacturing activities,” said Mustapa at the recent 12th Malaysia Plan webinar titled Boosting E&E Industry in Moving up the Value Chain.

Lushly landscaped waterways connect homes with places of work.Lushly landscaped waterways connect homes with places of work.

Mustapa said under the 12MP, the E&E industry is targeted to contribute RM120bil to the GDP and generate RM495bil in export earnings by 2025 as more and more Malaysian companies join the industrial ecosystem of providing products or services required by multinational operations here, including those in the automotive, consumer and medical device segments.

In this regard, he recognised Penang island as one of the key players, with its 30% representation in the Malaysia’s E&E sector, with many local companies benefiting from this vibrant ecosystem as they grow in tandem with the MNCs based in the Bayan Lepas FIZ.

Hosting what is now one of Penang's largest economic sectors, the FIZ has reached full capacity at the turn of the millennium, and investors have settled for industrial land in both the Batu Kawan Industrial Parks 1 and 2 near Butterworth, which is on the mainland side of Penang. With the BKIP1 already fully subscribed, attention is now on BKIP2, which should provide a buffer for industrial land for the next 10 to 20 years.

BKIP2 will be 10th industrial park in Penang, after Mak Mandin, Perai, Seberang Jaya, Bukit Tengah, Bukit Minyak, Penang Science Park, Penang Science Park North, BKIP1, and Bayan Lepas, which is the only industrial park on the island side (and one that is filled to the brim already).

With 450 acres of public open space to explore and enjoy, life on PSI is refreshingly healthy.With 450 acres of public open space to explore and enjoy, life on PSI is refreshingly healthy.

Space to support future industrial and manufacturing growth

Mustapa acknowledged that a number of our SMEs have made a name for themselves in the global E&E sector and singled out Bayan Lepas-based SkyeChip as an outstanding company in this regard.

SkyeChip is a design company dedicated to deliver cutting edge intellectual property core and integrated circuit (IC) solutions for artificial intelligence and high-performance computing that was founded in 2019 by a group of world class IC designers with an average experience of more than 15 years in MNCs such as Intel, Altera, Broadcom, Spansion, Motorola and such.

SkyeChip prides itself at being able to provide a compelling mix of work and leisure that puts work-life balance as keystone in talent attraction and retention, with its location within the Bayan Lepas business district considered a plus.

“The centralised location of Bayan Lepas plays an important role in improving work-life balance by providing a super convenient location where shopping centres, restaurants, food courts and banks are just within a five-minute walking distance,” said S.K. Fong, SkyeChip chif executive officer and co-founder as it touts the benefits of its island location.

He also pointed out that professionals, Malaysians or otherwise, like to live on the island side of Penang, and cited the recent crowning of Penang as the Third Best Island In The World To Retire On (2021) – an award created by International Living, where Penang came in third after Malta and Mallorca, Spain, as yet another indication. International Living is a portal that specialises in overseas retirement trends for over 40 years.

Fong said even if office rental in the Kulim Hi-Tech Park in nearby Kedah, which is around 40km away from Penang island, is significantly cheaper, he dares not take the risk of moving his operations there as he thinks not only will he be unable to retain his experienced workforce, but will likely fail to hire new talents.

He added that with Friday as the weekend in Kedah, workers with children who still go to school in Penang find it difficult to synchronise their off days as Penang observes Saturdays and Sundays as the weekend.

“There is that misalignment between parents and their children’s’ schedule. The Batu Kawan Industrial Park may help a bit, but in my opinion, nothing beats the island. It is the first choice any day.”

Beautiful beaches, easily accessible and open to all, assure a better work-life balance.Beautiful beaches, easily accessible and open to all, assure a better work-life balance.

According to Malaysia Semiconductor Industry Association (MSIA) president Datuk Seri Wong Siew Hai, there is no time to waste in sitting back to admire the past success of Penang, and pointed out the impending shortage of suitable sites to host future cutting-edge research and development facilities as a threat to Penang’s competitiveness.

Arguing that the lack of space for expansion or new business has impeded the growth momentum from the Bayan Lepas FIZ, Wong said even BKIP will one day be bursting at the seams, just like how Bayan Lepas FIZ is now.

“If Penang does not move forward quickly enough, we will be losing investors to somewhere else,” said Wong, who has more than 30 years in the industry, and is also currently the chair of the E&E Productivity Nexus, as well as board member of the Penang Tech Centre Bhd and Penang Science Cluster Bhd.

Wong suggested that having new industrial sites as close to Bayan Lepas as possible would be the best natural location for the expansion for cutting-edge research and development and manufacturing, as well as enterprises such as software engineering and global business services (GBS).

One such emerging site could be the proposed Penang Southern Reclamation (PSR), which aims to add around 1,800ha (4,500 acres) of land in the form of three man-made islands built on shallow sea next to the airport.

“The location next to an established ecosystem with available talent pool and supply chain such as testing, packaging, software design all at the doorstep makes it the best of both worlds for the E&E sector.

“This easily addresses the future E&E expansion and spill over due to PSR’s proximity with the FIZ, facilitating the modelling and replication of another successful ecosystem,” said Wong, who added the location addresses real issues such as increasing the talent pool in the E&E sector, reverse the brain drain of talent out of Malaysia as it attracts global investors.

The need for a future-proofed industrial ecosystem

In his many missions outside the country to court foreign investors, Penang Chief Minister Chow Kon Yeow often gets asked: “Do you have industrial land that facilitates the development of industrial parks that are in line with the current needs of investors, such as being able to meet requirements under the Environmental, Social and Governance (ESG) Criteria?”

ESG criteria are a set of standards that “socially conscious” investors use to evaluate potential investments. For example, the environmental criterion considers how well a company or investment will perform in terms of stewardship of the natural environment, or how well it “closes the loop” by minimising waste and energy use, considering the need to address climate change. The answer lies in a fully master planned green field development by Denmark’s Bjarke Ingels Group in partnership with Malaysia’s Hijjas Architect & Planners, which is the case for PSR’s 700-acre Island A, touted as the “Silicon Island”.

The key to make PSR an iconic development in the region is the setting up of smart industrial parks on the reclaimed island network. Island A, the first of the three to be made available for development, will showcase the possibilities of PSR in meeting market requirements for a highly desirable future-proofed manufacturing hub.

The entire place will be developed in line with UN Sustainable Development Goals (SDGs), with the emerging Green Tech Park, the centrepiece for cutting-edge E&E ecosystem, featuring lots of solar photovoltaic power, super low energy buildings, and green mobility (bicycles and electric public transport over private cars) to achieve near-zero carbon emissions.

Coastal wetlands protect the islands from erosion and facilitate rewilding with native flora and fauna.Coastal wetlands protect the islands from erosion and facilitate rewilding with native flora and fauna.

All these will be complemented by water recovery, storage, and treatment, and sustainable waste management practices, among many others that easily makes Silicon Island a smart and sustainable city that is a great place to live, work, and play in.

A study conducted for the project in 2021 reported that PSR is expected to significantly contribute to the nation’s economy, with RM2.2tril GDP impact and 460,000 job opportunities by 2050. With pressure building up on companies to achieve carbon zero by 2050, PSR is well positioned to capture growing investments from E&E companies looking for a sustainable location in meeting their ESG goals.

Wong said with the right ecosystem in place, the well-designed extension of the Bayan Lepas FIZ can facilitate the emergence of the next global village for tech talent and enterprises through synergy with Penang island’s plus factors.

“There are aspects such as natural attractions, heritage, food, culture, world-class educational institutions, good medical care, alongside an environment that is abuzz with activities and vibrant E&E activities. The collective appeal of all these is what I call the X-Factor that makes the island the place of interest for both investors and modern workforce, all of whom are increasingly seeking out ESG-centric developments,” he added.

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