Penang’s Manufacturing Sector Endures Headwinds

The manufacturing sector continues to be a key contributor to Penang’s economic activity, supported by global recognition for Penang’s excellence in the electronics and electrical (E&E) industry.

Figure 1 shows that Penang remains an attractive state for capital investments. In 2016 Penang ranked fourth out of all states, capturing 7% (RM4.3bil) of total capital investments in Malaysia. Out of the RM4.3bil, it should be noted that 70% of the sum came from foreign investments. In 2016 40% of capital investments were contributed by the E&E industry (Table 1) – roughly double the amount of the next most-invested industry. It is also in the E&E industry that Penang observes the most investments from foreign companies.

Figure 2 illustrates that Penang has consistently contributed an average of 23% to Malaysia’s balance of trade for the past consecutive quarters from Q1 2016 to Q1 2017. Being heavily involved in trade, Penang is in turn susceptible to global economic environments. This is evidenced in Figure 3, which shows how Penang’s balance of trade fluctuates year-on-year to reflect global economic environments. Penang’s balance of trade for each comparable quarter is seen to take a dip in 2016, and gain ground in 2017. This corresponds to the world economic outlook projected by the International Monetary Fund (IMF) which projected global growth to slow to 3.1% in 2016 before recovering to 3.4% in 2017.

 

 

To support the manufacturing sector, the Penang government through Penang Development Corporation (PDC) has developed six industrial parks comprising 5,890 acres which function to facilitate industrial development in the state.
These industrial parks are mapped as in Figure 4. Currently, industrial land available for booking is located at the Penang Science Park and Batu Kawan Industrial Park.

In addition, small-medium enterprises (SMEs) have also been identified as a vital component of Penang’s industrial development. At time of writing, three industrial parks under the purview of PDC have been identified to provide ready-built factory buildings for sale and rent to SMEs (Table 2).



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