Datuk Seri Lee Kah Choon said Penang’s economy is driven by the two pillars, tourism and manufacturing sector. — Pictures by KE Ooi

GEORGE TOWN, June 13 — In the state dubbed the “Silicon Valley of Malaysia”, factories have lost their crown ― as the main driver of economic growth ― to the services sector. 

The mainstay of the state economy for decades, manufacturing accounted for 44.1 per cent of the state’s output in 2015, behind the 49.5 per cent contributed by the services industry.

According to InvestPenang director Datuk Seri Lee Kah Choon, the state can expect positive growth in both industries as tourism will keep driving the services sector while the electronics and electrical (E&E) sector continues to lead the manufacturing industry.

“The services sector, the main bulk of which is tourism, is providing 50 per cent of the employment while the manufacturing sector is providing 33 per cent,” he said.

The remainder are from sectors such as agriculture and construction.

Penang's gross domestic product (GDP) grew by 5.5 per cent to RM69 billion in 2015. While the figures for 2016 have yet to be released by the Statistics Department, Lee predicted they will at least match 2015’s performance.

Penang recorded a total of RM59 billion in investments between 2008 and 2016. It registered RM4.3 billion in investments, RM3.1 billion of which came from abroad, for 2016.

“The unemployment rate for Penang stands at 2.1 per cent as at 2016, the second lowest in Malaysia,” Lee said.

Penang is known as the silicon valley of Malaysia and the sector is now overtaken by the services sector.

‘We can see the feel good factor’

While manufacturing is no longer the state’s main growth catalyst, Lee said it will continue to be both robust and vital.

Lee is predicting at least a 10 per cent growth in the manufacturing sector in Penang for this year and even next year, based on “very encouraging” demand.

The global semiconductor equipment market is expected to increase by 11 per cent to reach RM176.35 billion (US$41.1 billion) in 2017, and Lee noted that 40 per cent of global shipments of assemblers of microprocessors are from Penang.

“We can see the feel-good factor in the share markets, although this can't be taken as a sure sign to gauge the industry, but the signs are very clear, the share prices of of any listed Penang-based electronic companies have gone up in the past 12 months,” he said.

Penang's large semiconductor companies such as Globetronics, Inari, ViTrox, MMS Ventures and Elsoft are expected to see further growth and this will contribute to the growth in LED, aviation, automotive, Internet of Things, big data and artificial intelligence sectors.

The growth of tourism in Penang forms the main bulk of the tourism sector in Penang.

Medical tourism fast increasing

While tourism is currently the jewel of the services sector, global business services (GBS) and business process outsourcing (BPO) are both growing rapidly.

“This is evident with the existence of almost 50 GBS companies in Penang providing more than 8,000 high income jobs to locals and serving both regional and global markets including complains such as Citigroup, IHS Market, Celestica and Luxoft,” Lee said.

The refurbished RM10 million GBS@Mayang is expected to be ready by 2018 while the RM200 million GBS by the Sea project will be ready in 2012.

Penang recorded 6.7 million passengers at its Penang International Airport in 2016, or more that the 6.5 million that the airport is rated for. At the Port Swettenham Cruise Terminal, 1.2 million passengers were recorded for 2016.

Aside from traditional tourism, Lee said medical tourism was fast increasing in the state, growing from 302,000 visitors in 2015 to 347,000 in 2016.

The medical tourism industry also generated an increase in revenue of RM458 million in 2016, a 17.92 per cent increase from RM391 million in 2015.

Recently, the sale of land in Peel Avenue to Island Hospital for the hospital to develop a RM2 billion Island medical city with 300 hospital beds clearly indicated the state's intention to turn Penang into a medical tourism hub.

The Penang Centre of Medical Tourism, involving 10 private hospitals in Penang, was also formed to promote medical tourism in Penang.

Other supporting sectors

Lee said supporting sectors to the manufacturing and services industries in the state were also thriving.

These include a RM25 million investment by a company offering Automated Test Equipment (ATE) solutions, Aemulus, a RM100 million investment by Scandinavian IBS, domestic investments to form small-medium enterprise (SME) industry clusters such as the Penang Gold and Jewellery Industry Cluster and the Penang Automation Cluster (PAC).

Five local gold and jewellery companies are investing a total RM49.6 million into the gold and jewellery cluster, creating 730 jobs, while RM63 million is invested into PAC.

The PAC is a SME precision metal fabrication cluster zone set up under PAC through a joint partnership between ViTrox Corporation Berhad, Pentamaster Technology and Walta Engineering. A total 18 SME cluster companies will be contributing RM40 million into the total RM63 million investment sum.

http://www.themalaymailonline.com/malaysia/article/penang-manufacturing-sector-now-just-second-fiddle-but-still-going-strong