GEORGE TOWN: Penang expects inflow of investment to be slow this year as companies recover from the global financial crisis but the manufacturing and services sectors are expected to be resilient, said Invest-in-Penang Bhd chairman of the executive committee Datuk Lee Kah Choon.

He said on Wednesday, March 10 the state government's aspiration was to make Penang a high-income hub by creating more high-income jobs for the knowledge workers.

"In order to move towards a high income society, Penang has to move towards a post-industrial phase, namely moving away from the traditional production-based economy towards a knowledge-based economy," he said.

Lee said the services and industrial sectors, which included higher value activities such as research, design and development as well as business development and distribution, were crucial in order to achieve the objective.

"The Penang State Government promotes investments that generate quality jobs for its people rather than quantity," he said.

He was responding to criticisms that the state had "neglected" the manufacturing sector as investments slowed down.
Lee emphasised that manufacturing would remain the main engine of growth for the economy of Penang while the services sector would not be disregarded.

The services sector, particularly trade, tourism and education used to be the largest contributor to the Penang's economy before export-oriented industrialisation was introduced in the early 1970s with the free trade zone in Bayan Lepas.

"Today, these sectors remain strong in Penang and it is therefore important to emphasise the significance of these sectors and their contribution to the State's economy, together with emerging sectors like healthcare and medical tourism," he said.

Lee said investPenang, a unit of the state government initially focused on promoting industry-related investments but had since expanded its role to include investments in the services sector.
"Additionally, investPenang has also set up the SME Market Advisory, Resource and Training (SMART) Centre to further assist the development of SMEs in the local, regional and global markets through its various activities.

"It is undeniable that Penang registered a drop of investments approved in 2009. However, this is in tandem with the drop in investments in Malaysia as a whole. The drop in investments is mainly attributed to the world financial crisis and the reduction in the world FDI today," he added.

Lee said the UNCTAD's Global Investment Trends Monitor in January 2010 indicated that global FDI has contracted by 39% while FDI inflows to Malaysia had contracted 66.6%.  

On the contrary, in 2005 when global economic growth was spurred by cross-border mergers and acquisitions, global FDI inflows in 2005 were actually 29% higher than in 2004.

"As such, it is not right to compare investments approved in 2005, when the economy was booming with 2009 when the whole world was experiencing doldrums. Therefore, a comparison of the 97/98 Asian Financial crisis with the recent financial crisis would be more acceptable," he said.

"In 1997, investments approved for Penang totalled only RM1.4 billion, although exports to the US were not affected. The ringgit was also pegged at RM3.80 to US$1, making exports from Penang and Malaysia very competitive.

"However, the investment figure of RM1.4 billion is still lower than the RM2.2 billion approved for Penang in the midst of the financial crisis," he said.

While Penang may rank 5th in terms of value of investments approved, he said in terms of projects, Penang ranked third after its traditional competitors Selangor and Johor, which have larger tracts of land to offer to the investors.

Lee said Sarawak, which ranked first and Sabah, which ranked third managed to record higher investments because of some large projects like polycrystalline silicon, mixed acid, hydrogen, fumed silica, trichlor-silane, silicon tetrachloride and hydrofluoric acid which will not be compatible with Penang's industrialization plan of promoting green technology.