Buzz Sociopolitics Malaysia: A Post-Industrial Future for Penang?

A Post-Industrial Future for Penang?

August 28, 2012

A Post-Industrial Future for Penang?

by Zairil Khir Johari

The advent of a digital era, characterised by seamless as good as instantaneous send of information as good as unprecedented levels of tellurian interconnectedness, has seen a paradigm shift in social, political as good as mercantile strategies worldwide.

In fact, it is commonly pronounced which a universe has entered in to "the believe revolution or believe economy", which a small have argued to be "the ultimate proviso of capitalism"[1]. In this age of knowledge, mobile capital as good as a easy spread of record have meant which a prolongation of products have increasingly shifted to low-cost countries.

"This is a healthy progression, generally for grown economies," records international investment landowner Julian Candiah. "As GDP per capita rises as good as countries gets richer, a lot of a lower-valued components of a manage to buy have migrated to low-cost countries. We have seen this hand-off many times, initial in a 1970s to a South-East Asian Tigers, as good as afterwards in a 1990s to China, as good as now to Bangladesh, Vietnam, Cambodia, etc. Even China is now relocating up a worth chain."

As grown economies proceed to decouple themselves from industrial production, it is suggested which destiny success would no longer be predicated on normal factors such as land, work as good as tender materials, though on a creation of worth extracted from knowledge, skills as good as creativity.

In alternative words, destiny jobs in a so-called believe manage to buy would need operative with a smarts as good as not with a hands. Soft power, as go! od as no t tough power, would expostulate a universe forward.

So how usually has this examination fared?

e-Britain

In 1997, Tony Blair was elected as Prime Minister of Britain on a call of Cool Britannia as good as a promise of ushering in a brand brand new golden age. Having successfully rejuvenated as good as remodelled a now centrist, market-embracing Labour Party, a youngest British Prime Minister in scarcely dual centuries sought to mortar a afterwards lagging Britain in to a "forefront of a believe economy".

According to Blair as good as alternative deindustrialisation advocates, this brand brand new knowledge-driven manage to buy is a "equivalent of a machine-driven manage to buy of a industrial revolution"[2]. In alternative words, destiny British success would distortion in a country's ability to shift from an industrial manage to buy to a single formed on services. To steal Blair's own words, Britain indispensable to transform a "workshop of a world" in to a "e-commerce capital of a world".

This premise, though an innovation, was not a brand brand new one. Margaret Thatcher had been a first, dual decades before, to allot deindustrialisation as a heal for what she deemed to be an uncompetitive, manufacturing-based British economy. By articulating a "knowledge economy" in a context of a globalising universe driven by ICT, Blair gave a plan renewed direction.

For over a decade, a supervision pursued this policy, branch a British manage to buy in to a world's second largest services exporter after a US. This was completed on a at a behind of of beautiful services such as film, music, fashion as good as advertising, as good as alternative norm! al servi ces such as finance, computing as good as ICT. The lifelike prophesy of a believe manage to buy looked set to come true.

Today, some-more than a decade later, Blair's prophesy stays usually that. Having experienced a largest deindustrialisation exercise in post-war Europe, in which a industrial share of a manage to buy saw a decrease from 30% in a 1970s to about 11% today, a single would be hard-pressed to opine which a British manage to buy is in a better figure than it was.

The British used to have cars, ships as good as engines for a world. They gave all which up to sell culture, tourism as good as financial advice, usually to find which selling things simply cannot yield a same volume of employment which creation things can. Unemployment is now at a tip turn given 1995, whilst income lack of harmony has reached a 30-year peak.

The British northeast, once a unapproachable home to numerous factories, warehouses as good as dockyards, has now turn a print child of a post-industrial wasteland, sprawling with vale buildings as good as murky estates. Not usually have a cacophonous activities come to an end, so as well have a jobs, apprenticeships, local industries as good as support services which typically characterize an ecosystem built around creation things. Meanwhile, a opening left at a behind of stays clear for a generation of displaced Britons.

Services-driven Penang?

Though it took a while, a same discuss has now done a approach to Penang's shores. In recent times, sure buliding have spoken out about a need to reinvent Penang's normal mercantile base. Citing a fast-depleting land bank as good as competition from some-more cost-effective neighbours, they argue which a production zone has reached a zenith.

Their solution? To transform a services zone to rein! state pr oduction as a subsequent engine of growth. According to them, Penang no longer has a analogous worth in manufacturing, as good as should instead concentration on building resources as good as talent in service industries such as tourism, healthcare, ICT as good as finance. After all, Penang is no stranger to mercantile change, carrying evolved from a free pier in to an industrial beacon. The subject is, is it time to change?

Today, production stays a bedrock of a Penang economy, simply contributing some-more than half of Penang's mercantile output. In a final dual years, Penang has etched itself as a tip end in a country for production investment, notching RM12.2bil in 2010 as good as RM9.1bil in 2011. Of this amount, RM17.7billion came in a form of FDI, which equates to which a second smallest state in Malaysia had managed to attract scarcely a third of sum national FDI. At a rate a citation is going, there is zero to prove a need for a realignment of strategies.

This is not to contend which an over-reliance in production is without a pitfalls. In fact, Penang's industrial, export-dependent manage to buy is indispensably some-more exposed than alternative states to shifts in tellurian mercantile trends. This was a box during a 2008 financial crisis, ensuing in a GDP drop of over 10% in genuine conditions (based on constant 2000 prices). In contrast, Malaysia's GDP usually fell by 1.6% during a same period. Manufacturing output in Penang additionally decreased by 20.2%, stand in a decrease suffered nationally.

Global mercantile forces have been of course tough to resist. That said, Penang managed to bounce at a behind of with a genuine GDP expansion of 10% in 2010. And notwithstanding this severe patch, Penang's GDP per capita had essentially increased somewhat over this duration of time. This was completed because, over a years as good as some-more so in recent times, Penang has been means to build up an industrial bottom which is not merely done up of low-skills as good as low v! alue-add ed public lines though additionally cutting-edge record with heading brands such as Intel, Motorola, Sony, Dell, Honeywell, Bose as good as National Instruments.

As Candiah says, "The pretence is not so much to do 'manufacturing correctly', though to do 'correct manufacturing'. The game must be value-added, high-productivity manufacturing. And to a credit of a folks in charge, they have managed to get it right so far."

Today, Penang is relocating towards high-end production such as solar panels, LEDs, medical inclination as good as a like. Just final year, Singapore Aerospace Manufacturing opened a facility in Penang to furnish pointing components for a aviation as good as aerospace industry. Such value-added industries have been usually a kind which will yield a mixture indispensable for Penang to move up a production worth chain.

The parable of a services-based economy

But what about a grown countries which have managed to "graduate" in to services-based economies? Singapore, for example, is typically used as an e.g. of a successful former industrial power-turned-services provider. Should which not be Penang's destiny direction?

Though widely accepted, a above hypothesis is not entirely accurate. Ha-Joon Chang, a heading Cambridge economist, has frequently forked out which tall income believe economies which appear to be services-based have been in actuality highly industrialised economies. For example, Switzerland, believed to be a post-industrial manage to buy reliant on services such as a promissory note zone as good as tourism, in actuality ranks as a country with a second tip production value-add (MVA) per capita[3]in a world. Singapore ranks third. And in a Competitive Industrial Performance Index, Singapore is a universe series one.

What many fail to assimilate is which a success of countries like Switzerland as good as Singapore is formed on their industrial foundations. And it is from such a foundatio! n which they have been means to turn off a services supply chain encompassing research, design, engineering, legal, financial as good as sales. In alternative words, a single initial needs to have a product before a single can supplement worth to it as good as finally, consumerise it. The same citation is additionally evident in alternative tall income Asian economies such as Japan, Korea as good as Taiwan.

As a universe progresses, there can be no disbelief which expenditure of technological products will usually increase. Economic downturns may at a moment moderate demand, though in a end, some-more rsther than than reduction production will be indispensable to support to a growing market. Instead of reducing manufacturing, a plan should be to precedence on a existent bottom as good as concentration on value-adds through technology, automation as good as capability improvement.

Not what you produce, though how you produce

Years after sounding a musical instrument call for deindustrialisation, a British supervision is now articulate about a "march of a makers". In final year's bill speech, a Chancellor of a Exchequer proudly admitted which a difference "Made in Britain" will once again expostulate a nation forward.

Meanwhile, a Obama administration has embarked on a production expostulate in a bid to revitalise a lifeless American economy. In a recent debate by Gene Sperling, director of a National Economic Council, at a discussion aptly titled "The Renaissance of American Manufacturing", it was forked out which production is responsible for 70% of R&D in America, notwithstanding being usually 12% of a economy.

Not usually that, production jobs compensate on average 25% aloft than non-manufacturing jobs. Sperling afterwards added, as if struck by an epiphany, which production would be a key to tackling a country's ballooning traffic deficit.

Whether it is as well small as well late stays to be seen, though a actuality is! which a US as good as Britain have eventually realised a intensity multiplier effect, in conditions of jobs as good as services, which is fundamental in manufacturing. What is understood to be a knowledge-based manage to buy is in actuality a corollary ensuing from a grown up industrial base. In alternative words, production is a prerequisite for innovation.

Closer to home, it is vicious which you learn from a practice of others before it is as well late. To contend which production has appearance is disingenuous. If anything, it holds even some-more intensity today than it did a couple of decades ago. What is indispensable is not to reinstate production though to create depth as good as specialisation through creation as good as technology. Moving forward, it will be about how you furnish rsther than than what you produce.

"Today, a buzzword is 'reindustrialisation'," says a Penang Development Corporation (PDC) Deputy General Manager Iskandar Basha Abdul Kadir. "After playing an constituent purpose in a automation of Penang for 40 years, it is time for a PDC to facilitate a reinvestment as good as revitalisation which is currently being undertaken by many pioneer plants as good as facilities in a industrial zones.

"We cannot afford to distortion around idly by whilst a total universe is moving. Besides attracting new, value-added industries, you additionally need to revitalise as good as reenergise a 'old' ones so they can turn 'new' again."

According to Iskandar, a premise for a destiny of a Penang manage to buy is simple. "If you can successfully supplement worth to a existent production capacity, afterwards you will set off a chain of events which will furnish aloft worth services and, ultimately, aloft profitable jobs."

Penang's Intellectual Capital Center