Industrialisation in Numbers

By Jack Chai, Ong Wooi Leng

August 2022 STATISTICS
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As the second smallest state in Malaysia, Penang contributed the second-largest manufacturing output to Malaysia’s Gross Domestic Product (GDP). This accounts for about 13.9% of the country’s GDP in the manufacturing sector in 2021 – a 0.4% increase from 2020 despite the pandemic.

The total value of Penang’s capital investments in manufacturing projects have almost doubled every decade. Table 1 shows the approved manufacturing investments in Penang for each decade from 1981 to 2020. Total investments saw exponential growth in the years 1991 to 2000, when it tripled from about RM6bil from 1981 to 1990 to RM22.2bil from 1991 to 2000.  

With a solid industrial ecosystem, Penang continued to mark a record-high in capital investments in 2021 in spite of the health and economic crises in the country. 

Foreign investments made up the largest share of Penang’s investments, most significantly in 2021, when foreign manufacturing projects contributed about 98% of total investments.

In 2021, Bayan Lepas Free Industrial Zone (FIZ) is still the most popular destination for manufacturing investments in Penang. Of the RM76.2bil in total investments, Penang Island made up 92.9% (RM70.5bil), with Bayan Lepas FIZ Phase III and IV sowing 92.5% (RM70.2bil) – 99.6% of which were contributed by foreign investments (Figure 1).

In Seberang Perai, Batu Kawan Industrial Park attracted the highest value of capital investments in 2021, followed by Penang Science Park and Simpang Ampat. Foreign investments were largely saturated in these areas while most of the domestic investments were scattered outside the industrial parks in areas such as Bukit Mertajam, Perai, Kepala Batas, Permatang Tinggi and Nibong Tebal (Figure 1).

Since the onset of Penang’s industrialisation, the nature of investments has also evolved from low-value and labour-intensive to higher-value, capital- and knowledge-intensive manufacturing activities.

From 1981 to 1990, a total of 118,694 employments were created from RM5.9bil worth of capital investments (Figure 2). However, the amount of investments subsequently grew at a much faster pace than the growth in employment creation. In the period of 1991 to 2000, the value of investments brought by each employment rose by more than thrice the amount at about RM160,000 per job.

From 2001 onwards, Penang saw a larger amount of investments stemming from the capital- and knowledge-based job functions, indicated by the higher value of investments created for each employment (Figure 2). This means that Penang is gearing towards a higher-income economy.

The industry focus is somewhat different between domestic and foreign investments. A large share of foreign investments over the last decade from 2012 to 2021 was from the electrical and electronics (E&E) industry, at more than 80% (Figure 3). This is followed by machinery and equipment (6%) and scientific and measuring equipment (5.9%).

Meanwhile, out of RM21.5bil, machinery and equipment accounts for a quarter of the domestic investments, from 2012 to 2021, followed by E&E (17%), fabricated metal (9.7%) and transport equipment (7.9%) (Figure 4). These investments produce important engineering parts, components and services to support the supply chain of Penang-based foreign companies.  

Table 2 shows the value added and number of persons engaged in the E&E sector across states in Malaysia in 2020. Penang generated the largest value added in Malaysia despite the pandemic. Out of RM87.3bil produced by Malaysia, more than one-third comes from Penang’s E&E industries. The sector employed about 156,000 people, with each employee yielding approximately RM200,000 worth of value added on average, which trailed after Kedah but surpassed that of Selangor and Johor. 

Jack Chai

Ong Wooi Leng

heads the Socioeconomics and Statistics Programme at Penang Institute. Her work lies in labour market analysis and socio-economic development.