Penang initiates measures to minimise impact of Middle East conflict

PENANG has undertaken several measures to minimise the impact of the Middle East conflict on the economy, especially in the energy sector.

With global oil prices continuing to experience record highs, Chief Minister Chow Kon Yeow (Padang Kota - PH)  said that the state has in place an early warning system.

To offset the crises, the state has consolidated its industrial ecosystem and introduced an RM100 million fund to mitigate climate change and change the focus from fossil fuel to renewables and new tech, Chow told the state legislative sitting.

Chow said that there is no denying that the Middle East conflict has an impact in Penang, especially in the sectors of manufacturing, semiconductor and utilities - areas which require high energy consumption.

"There is also a wait-and-see stance by potential investors," said Chow.

Chow, who is also the Batu Kawan Member of Parliament, said that this has also caused the labour market to be sluggish.

Job creation is also impacted as employers become cautious, especially in high-skilled vocations, said Chow when responding to a verbal question from Lee Boon Heng (Kebun Bunga - PH) on the impact of the  war.

Raw oil prices have also increased, with an acute shortage felt in some countries, disrupting the international logistics movement, Chow pointed out.

Within Penang, small and medium enterprises and multinational corporations are facing cash flow issues due to rising operational costs, while there is now a shift or a clamouring for alternative energy sources, such as renewables, said Chow.

"As a semiconductor hub, Penang is exposed to such challenges. We are also facing a disruption to the global supply chain," said Chow.

He was informed that about 40 per cent of the industrial players in Penang have reported a rise in production costs and exports between five and 10 per cent.

Another 28 per cent recorded a rise in production costs of between 11 and 20 percent while some have reported a rise of up to 30 per cent in costs.

Penang has undertaken several dialogue sessions to help the private sector weather the latest challenges.

Among its dialogue partners are Free Industrial Zone Penang Companies’ Association (FREPENCA), Federation of Malaysian Manufacturers (FMM), Small and Medium Enterprises Association (SAMENTA), and the Association of Malaysian Medical Industries (AMMI).

Penang is also part of the early economic warning system, wired up to what is happening globally, Chow divulged.

The local partners in the system are Bank Negara and the Ministry of Investments, Trade and Industries, as well as the Department of Statistics.

"We are constantly monitoring the economic indicators," said Chow.

But in times of crises, there are opportunities emerging, so Chow said that the state continues to focus on attracting high-end investments in areas of electrical and electronics, semiconductor chips and Artificial Intelligence (AI).

There is also a shift towards automation and producing more medical devices.

Chow said that the higher energy prices have also caused the Penang Water Supply Corporation (PBAPP) to incur additional costs. - May 11, 2026.