Penang is proud to have the USD 80 million investments by NI, a global market leader of robotic software with annual revenues of USD 1.15 billion. With a headcount of 410 employees that is expected to increase to 1,500 in 10 years time, NI’s new facility here just feels like a carbon copy of NI’s headquarters in Austin Texas, which I visited in 2009.
Malaysia and Penang’s economy has shifted from extraction in the 1960s to industrialisation, from the export of raw commodities to manufacturing. In other words, Penang’s economy was factor-driven by relying on basic commodities before being efficiency-driven by relying on manufacturing. Penang needs to be not only efficiency-driven but also innovation-driven in manufacturing, services and even the public sector.
Penang wishes to learn from NI to upgrade our manufacturing industries and expand to services so that we can move up to the next level. The key to future economic success is not an over-reliance on one sector but to seek convergence of not only the manufacturing sector but also both the services and government sector. Services sector includes not only tourism, medical treatment and education but shared services such as finance, accounting and data processing.
The government plays an important role as an enabler between manufacturing and services sector. Government must also invest and innovate. The government must invest in infrastructure, people, incentives and subsidies. The government must also innovate with new policies that stresses on:-
- liberalisation of the existing rules and to reduce red-tape,
- divestment from non-core businesses or accept that the “business of government is to stay out of busines”,
- permit free and fair competition; and
- encourage human capital formation where human talent is now the new oil of the global economy.
There is no doubt that Penang has the necessary conditions to realise our potential as one of the 31 future Business Processing Outsourcing(BPOs) hubs of the future as predicted by KPMG international accounting firm. Two years ago, the state government embarked on a bold decision to focus on the services sector as they employ almost 100% local workers with high paying jobs.
I did not expect the good response from the service sector as Penang has almost run out of Grade A office space. Top companies which recently opened this year include Air Asia which moved their IT, procurement and human resources shared services from Bangkok to Penang. Wilmar, the global edible food giant with revenues of USD 45 billion just opened their shared services hub in Penang.
And Citigroup just opened their new process outsourcing for financial services. Employing more than 1,000 local employees to run their largest regional trade and cash processing centre for the transaction services business with an annual volume of 20 million transactions worth USD 5.8 trillion!
Penang’s successes in the services sector has even attracted First Solar, the world’s leader in solar energy, to set up their shared services outsourcing hub not in their factory in Kulim but in Penang. This gives us confidence that heavy investment by the Federal government in Kedah would also ultimately benefit Penang.
What we need to do is to ensure a partnership of equals between the 3 sectors of manufacturing, services and government. In other words, a partnership with capital, labour, innovators with the government as an enabler. Penang’s future prosperity depends on whether our manufacturing, services and government sector can be both efficiency-driven and innovation-driven.