GEORGE TOWN: Four major investments with initial combined funds of about RM5 billion in the manufacturing sector, together with a growing outsourcing and services industry, are expected to cushion the impact of less-than-ideal external economic factors on the state this year.
The major investments are from four multinational corporations which are in the midst of finalising approvals with the authorities and are expected to set base in the state by year end, investPenang director Datuk Lee Kah Choon (pic) told reporters at the Penang economic briefing for 2015 yesterday.
“The investment horizon is very good for Penang because of these four investors, who will create about 2,000 jobs for engineers, clerical and ground staff. Two have already sourced for factories and are hiring workers,” he said.
He declined to name the investors but said they are listed companies from China, Europe and the US and are corporations in the electrical and electronics (E&E) sector.
He said though the world economy was slowing down due to oil price slump, which is impacting Malaysia and weakening the ringgit, Penang is somewhat “shielded” from external forces so far.
Between 2008 and 2013, Penang was the top capital investment receiver in the country with an average 13% of investments in Malaysia going to the state, Lee said, adding that between January and September last year, a total of RM6 billion investments was recorded.
He said the figure for capital investment in 2014 — of which RM2.7 billion is from domestic investors and RM3.3 billion from foreign investors — has already exceeded the RM4 billion that the state attracted in 2013.
He expects property investment in the Bayan Baru area in terms of office rentals and purchases to contribute to the state’s economy in the future as the RM11.3 billion Business Processing Outsourcing Hub is expected be up by 2024.
Lee also anticipates that investments in the services sector would expand on the back of a slowly shrinking manufacturing sector.
“The manufacturing sector is very important to Penang but it will slow down. We believe it will stabilise in future. When we expand the services sector, a large portion of it will be in support of manufacturing,” he said.
The manufacturing sector accounted for 48% of the state’s total output of RM55 billion in 2013, with the services sector following closely at 47%, he said.
The state is also expecting more global shared-services such as Citigroup Transaction Services Malaysia, Wilmar International Ltd, Air Asia Bhd, First Solar Global Service and IHS Inc to locate here, he said.
He said the manufacturing sector, particularly in the electrical and electronics segment, benefitted from the weakening ringgit because exports would increase and stabilise the industry.
“We saw trade surpluses in 2014 and we expect Penang to continue contributing to surpluses this year because of the weakening ringgit. The state budget is also expected to remain in surplus this year,” he said.
He stressed that though the weakening ringgit and low crude oil price were not exactly good for Malaysia, they have a positive effect on Penang as it is an export-orientated state.
“The E&E sector will benefit from the falling ringgit, along with the US economy rebounding. We will continue to get foreign direct investments, although we are mindful of the human resource situation here. We are working hard to balance it up.
“Tourism and medical tourism are expected to increase with Visit Penang Year this year,” he said, adding that the tourism sector contributed more than a third of the state’s gross domestic product (GDP).
According to estimations by the Penang Institute and extracts from the Department of Statistics Malaysia’ Economic Report 2014/2015 for Penang and Malaysia, Penang is expected to see a GDP growth of 5.4% to the nation’s 5.5% this year.
This article first appeared in The Edge Financial Daily, on January 29, 2015.