Published November 25, 2008

Penang hopes reforms will attract investment

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(PENANG) Malaysia's manufacturing state of Penang believes it can introduce controversial economic reforms and win investment despite a global economic slowdown and the challenge of being an opposition-run state.

The opposition alliance's triumph in Penang, the third-largest state in terms of economic output in Malaysia, was one of the biggest shocks in March's historic elections that brought the opposition to power in five of the country's 13 states.

How well it can now govern those states could determine whether the alliance can sustain an unprecedented challenge to the Barisan Nasional government, which has ruled this south-east Asian country of 27 million people for 51 years.

'Yes, the economic slowdown has affected Penang. I'm not going to run away from admitting it,' Penang Chief Minister Lim Guan Eng told Reuters in an interview last week.

'That's why, we are adopting an expansionary budget next year, one that is pro-growth, pro-jobs and pro-poor,' he said.

Despite the prospect of Malaysia's economic growth slowing to just 1.5 per cent next year from an expected 5.4 per cent this year, according to leading local investment bank RHB, Penang has seen a rise in foreign investment.

The state has received US$1.69 billion worth of investment in the first seven months of 2008 against US$1.3 billion for the whole of last year, Mr Lim said.

US firm National Instruments said this month it would spend US$80 million to set up a plant, while Honeywell said it would shift some operations to the island.

The island, lying strategically at the head of the Malacca Strait and a free port until 1969, built up one the largest electronics manufacturing bases in Asia from the 1970s offering good infrastructure and a bilingual workforce.

'Investors feel that because there is a new government, and they feel that because this new leadership is in tune to their concerns, this is one of the added advantages that they want to invest in Penang,' Mr Lim said. - Reuters