1. LESSONS FROM THE PENANG GROWTH POLE IN MALAYSIA
MOZAMBIQUE:
INCLUSIVE
GROWTH SEMINAR
MAPUTO
FEBRUARY 10,
2011
FINANCE AND PRIVATE SECTOR DEVELOPMENT

2. Where is Penang? Hong Kong Taipei Medan Singapore Jakarta KEDAH
NEW TOWNSHIP
INDUSTRIAL PARK
CITIES/TOWNS
EXISTING ROAD
RAILWAY
KEDAH
Beach Resorts
PENANG
ISLAND
PORT
Penang
International
Airport
Bayan Lepas
Industrial Park
Batu
Kawan
Bukit
Minyak
PRAI
Kulim
High-Tech
Park
Bangkok
Medan KL
Singapore
Jakarta
Where is Penang?

3. The Penang Growth Story
Trading
Entrepot
Loss of free port status
Declining trade
Manufacturing
Global manufacturing hub and tourism destination
Services Hub
2001-current
Innovation economy and business and services hub

4. Penang’s Economic Transformation
GDP by sector (1970)
GDP by sector (2010)
US$500 million
US$10,000 million

5. Success of the Growth Pole Strategy
1970
2010
Population (‘000)
0.78
1.61
Per capita income (US$)
400
5600
Unemployment rate (%) 16 3
Poverty rate (%)
32.3
0.3
Infant Mortality Rate (%) 38
0.4

6. Value Roadmap – Industrial Transformation
Value Add
Version 1
Version 2
Version 3 ?
Business Management
Outsourcing
Service Contract
R&D
Software
Global Hub
Alternative sale
R&D
Sub-con
Support Centres
MNCs
Operational HQ
Logistics / Distribution Centres
BPO / SSO
Design & Development Centres
Quality
&
Automation
Semicon process
Test system
development
Supply chain
management
Disk drives
Base Software
Design Companies
Contract
Manufacturing
Semiconductor
Manufacturing
Consumer Electronics
Automation
TQC
Global
Competition
Investment in high-
tech machine shops
Drive components
production
Test auto handlers
PCB assembly
automation
Manufacturing sub-con
General Manufacturing
machinery
Local Companies
OEM to ODM
Market Outreach beyond Malaysia / MNCs
Growth of Design / R&D Companies
MNC
Low Value Added
Exports
Textile / Garments
Labour Intensive
Electronic Component
Assembly
Test
Tool & die
Machine Integration
Plastic Moulding
Custom Services
Improvement Projects
Machine Shop Service
General Maintenance
Trade
SMI
Basic Industries
Agriculture
60s
70s
80s
90s
00s & beyond
Adapted from “Technology Roadmap for the Electrical and Electronic Industry of Penang”

7. Why is the Penang story relevant?
Penang , Malaysia (1970)
Nacala, Mozambique (2011)
Population: 0.8 million
Area: 1,030 sq. km
Income per cap: $400
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

8. Penang Growth Pole Strategy
Period
National Plan
State Plan
Outcomes
1st Malaysia Plan
Munro Report
Agriculture, health and education focus
2nd Malaysia Plan to 5th Malaysia Plan; New Economic Policy
Penang Master Plan
Export-led manufacturing; Global orientation
6th Malaysia Plan and 7th Malaysia Plan
First Penang Strategic Development Plan
Solid GDP and FDI growth but few local linkages
8th Malaysia Plan and 9th Malaysia Plan
Second Penang Strategic Development Plan
Faltering growth and competitiveness; middle income trap
10th Malaysia Plan (current) onwards
Northern Corridor Economic Region Blueprint
World class economic region: innovation and talent

9. Penang Growth Pole Strategy
Investments
Infrastructure and Incentives
Ingenuity and Institutions

10. INGENUITY
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
KEY LESSONS
Develop a long term shared vision based on challenges and opportunities
Target strategic sectors but remain flexible to new prospects

11. Lessons from the Penang Strategy
Lead implementation agency: coordination and One Stop Shop roles
Sector growth strategies: manufacturing, tourism
Integrated spatial planning: SEZs, new growth centers, housing, urban renewal and land banks
Infrastructure investment planning: logistics, utilities
Skills development: incentives and PPPs

12. INSTITUTIONAL REFORMS
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
KEY LESSONS
A capable lead agency for effective implementation
Federal-State-private sector communication and trust is critical

13. 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

14. SYNERGY FOR GLOBAL COMPETITION: THE PENANG MODEL
Institutions
Incentives
Infrastructure
Federal Government
MITI / MIDA, MOF
SEZs
Business Services
Skills
Penang Development
Corporation (PDC)
Foreign Investors
Local
Investors
Initiative
Ingenuity
Capital, Technology
GLOBAL /REGIONAL MARKETS

15. INFRASTRUCTURE AND INCENTIVES
Demarcation of roles and responsibilities for infrastructure development and maintenance: Federal, State, Local Authority and Development Agency
Free Trade Zone Act (1971) for free zone incentives
Promotion of Investment Act (1986) for sector/location-based incentives
Business environment is more important than financial incentives : transparent and predictable processes
KEY LESSONS
Investment plan with accountability for delivery
Software is more important than hardware

16. 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