GEORGE TOWN – State investment promotion agency InvestPenang is targeting manufacturing investments of RM5 billion this year, a figure agreed on by the board, despite only raking in RM1.1 billion in the first quarter of 2021.
Special Investment Adviser to the Chief Minister Datuk Seri Lee Kah Choon said 2021 will be a year of consolidation on the investment landscape, with efforts to be placed on strengthening human resources, vaccinating workers and localising the supply chain.
The efforts are expected to propel sustainable industry growth once the pandemic is over, he added.
“Historical trends suggest that, after one to two years of investment growth, consolidation could happen before another spike.
“We cannot have a straight-line increase – it is not sustainable. When there is a spike in investment, it will follow with consolidation.
“We have to consolidate human resources through training to prepare for the next phase of increase in investment,” he said.
Penang’s total manufacturing investments had dropped from RM16.9 billion in 2019 to RM14.1 billion last year, although it has seen an increase in domestic direct investment (DDI).
Lee said the DDI increase, especially in the fabricated metal products sector, is a good sign as the state has been working hard to expand it.
“This shows that local large companies and small and medium industries (SMI) are beginning to support multinational companies (MNCs) attracted to Penang.
“The main goal is to ensure locals are benefitting from FDI (foreign direct investment) in Penang.”
Despite the drop, Lee said Penang’s contribution to the country’s economy remains substantial, with the state clocking RM1.1 billion in the first quarter of 2021 (1Q21) from approved manufacturing investments (1Q20: RM7.1 billion) derived from 40 projects.
A total of 52% of the investments came from DDI while the remaining 48% were contributed by FDI.
‘Punching over our weight many times over’
On the trade front, Penang continues playing a substantial role in driving the country’s exports, clocking up RM84.9 billion of exports in 1Q21 (+22% year-on-year), making it the top contributor of the country’s exports with a 30% share.
Penang generated RM28.2 billion in trade surplus during the same period, representing 48% of Malaysia’s total.
“We are punching over our weight many times over,” Lee said.
He said he expects the consolidation to continue into the first half of next year, with the pickup registering in the second half of 2022.
“I am expecting more pent-up demands due to the pandemic and slow roll-out of new tech. But once it settles down, even if borders are only partially open, I think the investment community is going to be very busy.”
He said the cyclical pattern is a healthy trend, though this season was impacted by the closure of international borders, among others. But this period of consolidation, he explained, will give companies breathing space before moving on to the next stage of growth.
“In the meantime, Penang, as an electrical and electronics hub, is evolving from the test and packaging sector, expanding from supply chain to the front end.
“We are seeing a surge in the machinery and equipment sector because they use a lot of electronics. We are also seeing a surge in medical devices investment into Penang, because a big part of these medical devices is also electronics-based.
“Electrical and electronic products are the core, but within the core business, we are also evolving and expanding. There are other electronics-based products that we are moving into as well.”
Underpinned by a healthy pipeline of investment enquiries that may materialise beyond this year, he reiterated that InvestPenang’s target of RM5 billion in manufacturing investments this year is possible. – The Vibes, June 18, 2021
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