GEORGE TOWN – There are indications that Penang’s economy can be among the fastest to rebound among all the states in the country.
This is due to its strong manufacturing base and diversified services sector which are set to recover from the upheavals of Covid-19.
Datuk Ooi Kok Seng, who is the northern branch head of the premier accounting firm KPMG Malaysia, said that for the last 15 years, Penang has been consolidating its manufacturing strength and it has also diversified from a labour-intensive economy to shared services.
“Penang has tapped the global business services through the construction of the 18,000 sq ft Global Business Services complex in Bayan Baru. It’s fully occupied so the signs are good.”
Speaking in a recent interview with The Vibes, Ooi said that Penang also knows that it can no longer depend on labour intensive industries, hence the greater focus on research and development and shared services which to date, employs up to 1,000 highly skilled Malaysians.
The presence of multinational corporations, part of the global supply chain network, is another indicator that Penang is wired up to global trade and has a role to play, particularly in the production of electronics and electrical (E&E) products, said Ooi.
The entry of several Fortune 500 companies into the newly established Batu Kawan Industrial Park is another reason for the state to be optimistic that the it can rebound swiftly.
The likes of Micron and Intel reinvesting in Penang are also confidence boosters to the market.
To add another dimension is the introduction of the Penang Transport Master Plan which comes on the back of the Penang Southern Islands reclamation project.
Such projects can drive up domestic consumption and bring more value to the economy, said Ooi.
“This is a spillover effect which the state can probably tap into and perhaps make up for the losses incurred by the small medium enterprises due to the significant lockdown measures which the country was forced to impose to contain the pandemic.”
“We must have the right platform to create economic activities. If we have no room to expand, the state will become stagnant. Our gross domestic product (GDP) is dependent now more than ever on new activities. New businesses need space.”
Hence, the creation of three man made islands, said Ooi.
Despite the pandemic, the E&E sector is also ramping up production as the global call to work from home has ramped up a huge demand for E&E components, he pointed out.
And with 50% of the GDP in Penang driven by manufacturing, the economy is showing signs of resilience despite the paralysing effects that the virus has caused to the economy, he added.
“Yes, 2020 was a difficult year but the demand for products such as storage space for notebooks and laptops has become bigger. They are driving up the demand.”
Furthermore, Penang is a hub for electronic chips, so there is an even higher demand.
While there was significant withdrawal of labour-intensive factories last year, namely by Pen Apparel and Inari, it was inevitable because Penang was moving up the supply and value chains, Ooi said.
In line with the foreseeable increase in market demand, Ooi said that the tiff between China and US which had escalated into a trade war before the pandemic, may have also positioned Penang higher in the global supply chain.
In the last three years, the market capitalisation of small medium industries in Penang has also grown, of which some listed firms here became firms worth billions of dollars, although the value may have plunged slightly due to the pandemic, Ooi pointed out.
However, he said the tourism sector may take longer to recover while medical tourism may have some advantages as many private hospitals in Penang have recorded good reserves to help them weather the consequences of the pandemic.
All in all, the fundamentals remain strong for Penang and the state can recover faster if the authorities can come up with an effective plan to contain the virus through the vaccination drive and the upholding of new norms, said Ooi. – The Vibes, June 11, 2021
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