GOVERNMENT'S ROLE AND ECONOMIC DEVELOPMENT

OFP~NAN6

Thesis Submitted To The Graduate School Of The Chinese University Of Hong Kong In Partial Fulfillment Of The Requirements Of The Degree Of Master Of Philosophy

By

KWONG Kam Kwan

Government and Public Administration Division

June 1996 o 9 MAY r197 ACKNOWLEDGEMENTS

If there is any merit to be found in this study, it is thanks to Dr CHANG Chak Yan, the honourable supervisor of my thesis, who has spent a lot of time, effort, and patience, in guiding me to organize and wri te this thesis. His opinions and guidances were invaluable in cUltivating my intellectual development throughout my past years of study in graduate school. It is worth noting that his supervision, patience, trust and assistance are the major factors that have motivated my efforts. I wish to take this opportunity to express my deepest gratitude to him and my sincere appreciation of the attention that he has spared me.

During the course of writing this thesis, I have become indebted to my supervisor, Dr CHANG, who is the core person in helping me to contact the officials of the PDC and to collect most of the important data which is not easily accessible. I would also like to express my gratitude to Mr CHEAH Lee Kooi, Head of the Public Affairs Unit of the PDC, who did his utmost to provide the data I needed; and my sincere appreciation should be offered to Miss NG Eliza who has striven to motivate me all the way round to complete this paper.

I have to say thank you to Miss Jacqueline Mau and Miss Alice Yeung of GPA Office of their assistance and effort in internal communication.

It only remains to say that I bear sole responsibili ty for any of the inadequacies or shortcomings of this thesis. ABSTRACT

The miracle of the Japan's economic development has captured the attention of the world. And with the rise of the Four Asian Newly Industrialized Countries (NICs) in the 70s the world has once again been witness to dynamic growth in Asia. In the late 80s and 90s, it is the turn of countries such as and Thailand to enter periods of rapid economic growth. In the course of economic growth in these countries, the governments have played a key role to motivate the public and private sectors to help boost the economy.

In , the state government has contributed a great deal to the construction of the state's economy since the early 1970s. The special point of this case is that the state government has shown significant awareness of the potential weaknesses of a government involving itself in the course of development, such as the inefficiencies and inertia implicit in hierarchical processes. In view of these considerations, the state government established a semi­ governmental institute -- the Penang Development Corporation (PDC) -- responsible for all activities concerning economic development, including the formulation and implementation of economic policy. The extent of the PDC' s power cause judged from examination of its personnel; its board members are maj or government officials fr?m the state and Federal governments, and the is the Chairman of the Board. These appointments reveal that the PDC policy is the policy of the state, and that the state is actually controlling the PDC.

Penang has enjoyed a rapid economic growth over the past 25 years. The role of the Penang government has been crucial to the course of this development.

II Table of Contents

Ac know 1 edgemen t s ...... · · · · . · · · · · · · · · · . · · · · · · · · · · : ~ Abs tract ...... · . · 11

Chapter 1 Research Design ...... 2 Introduction Research topic Research assumption Conceptual framework Data collection Footnotes

2 Historical Perspective ...... 12 Introduction The historical status of Penang The 1967 Crisis and changes in late 1960s The economic performance of Penang since 1970 The North Growth Triangle Footnotes Appendix A

3 The Role of the Penang Development Corporation in Penang's Development ...... 39 Introduction The Penang Development Corporation The indirect legislative role of the PDC The performance and achievement of the PDC in promoting Penang's economy The performance and achievement of the PDC in supporting Penang's infrastructure and economic construction The Organizational structure of the PDC The Northern Growth Triangle The development strategies of the PDC in IMT-GT Footnotes

4 Conclusion ...... 75 Review of the conceptual framework Findings Prospects Footnotes

Major Bibliography ...... ~ ...... 84 Chapter One

Research Design 1.1 Introduction

The study of the interrelationship between a government's role and the economic development of a given society is the study of political economy.

According to James Coleman The term "political economy" refers to, (a) an 18th century branch of the art of government concerned with directing governmental policies towards the promotion of the wealth of the government and the community as a whole; and (b) a modern social science dealing with the interrelationship of political and economic processes 1 . In f ac, t l't'1S c 1 ear th a t po 1 1 ' t 1CS ' an d th e economy are often closely intertwined. As Malenbaum found that economic growth is highly dependent on the given political structure, including its leadership, and seeks their attainment as explicit and major goals,

2 otherwise, economic growth will become impossible •

In other words,the econom1C development of a given

society is, to a large extent, influenced by its

government's policies. The examination of this issue

prompted the construction and design of this research

paper.

2 This paper consists of four chapters. Chapter one will describe the research design and research method of the paper, and chapter two will review the historical background of Penang, its present status and its future economical performance. Chapter three will study the case of the Penang Development

Corporation (PDC), which 1S a non-governmental institution responsible for boosting the economy. The final chapter will provide a conclusion and try to assess the prospects for Penang's economic development.

1.2 Research Topic

The remarkable success of the economic growth

of the East Asian Newly Industrialized Countries (NICs )

-- South Korea, Taiwan, Hong Kong and Singapore -- draws

the attention of political scientists, economists and

sociologists in examining, within their ownfields, the

cause and nature of this success. These are common

elements in the backgrounds of the four NICs: first,

they were once occupied as colonies. Second, they are

small, in geographic terms, when compared with other

3 This paper consists of four chapters. Chapter one will describe the research design and research method of the paper, and chapter two will review the historical background of Penang, its present status

and its future economical performance. Chapter three

will study the case of the Penang Development

Corporation ( P DC) , which is a non-governmental

institution responsible for boosting the economy. The

final chapter will provide a conclusion and try to

assess the prospects for Penang's economic

development.

1.2 Research Topic

The remarkable success of the economic growth

of the East Asian Newly Industrialized Countries ( NI Cs )

-- South Korea, Taiwan, Hong Kong and Singapore -- draws

the attention of political scientists, economists and

sociologists in examining, within their ownfields, the

cause and nature of this success. These are common

elements in the backgrounds of the four NICs: first,

they were once occupied as colonies. Second, they are

small, in geographic terms, when compared with other

3 countries in the region.

It is widely accepted that Japan, in Asia, performs the leading role in economic growth, followed by the four NI Cs in the second row, Thailand and

Malaysia in the third row, and the Philippines and

3 Indonesia in the fourth row. The successes of the four

NICs have a common origin in the proposition of a labour

intensive market at the beginning of a stage of Import

Substitution Industrialism(ISI), and a common

redevelopment has the transformation to transform to

a hi-tech, skills and serV1ce Export Oriented

Industrialism During this period of

development, the governments played a key role which,

influenced the pattern of development. In other words,

the success of economic growth is highly dependent on

the implementation of government policy.

Malaysia is now at the labour intensive market

stage (i.e. at the ISI stage) and it is likely that

it will develop into the transnational period. With

its thirteen separate states, each governed by its own

elected local government, Malaysia 1S a very

complicated case to study. Local government sometimes

faces the dilemma of whether or not to follow the

4 federal government's economic policy. The study of government and the economy is not a straightforward matter. Therefore, the scope of this research paper is defined by the development of the politico-economic aspects and geographical situations of the Asian Four

NI Cs and to what extent these elements relate to Penang

-- the only island state of Malaysia.

The topic of this paper lS then 'The

Governments' Role And Economic Development Of Penang' .

Its aim is to examine the role of Penang Government in the course of economic development.

1.3 Research Assumption

I assume that in the rapid growth of economic

development in Asia, the local government plays a key

role in economic development to the central government

which leads the central government to attain a economic

success.

5 1.4 Conceptual Framework

studying the government's role in Penang's economic development, I have considered the following:

(l)the proper roles of government regarding economic development; and (2) a suitable interpretative model to explore the pattern of development in Asia. Thus,

I try to use the concept of Robert Wade's discussion of the proper roles of a government. However, Wade's discussion cannot be tailored to meet the specific demands of the Penang case study, so I have also selected Chalmers Johnson's developmental state

theory in thi s paper to make the conceptual framework more persuasive and more complete.

( a ) The Proper Role of Government 5

Wade s ta te s tha t there are three type s 0 f ro le

namely a legislator, a promoter and a supporter, that

a government may properly play in the course of the

economic development of a country. Wade defines these

roles as follows:

[iJ as legislator - e.g. it creates tax

incentives, formulates and

enforces intellectual

property rights;

6 [ii] as promoter - e. g . it promotes industrial

policies for infant

industries; and

[iii] as supportere.g. by providing the

physical, social and

psychological environment

for investment.

Wade's assertion of these types of role are based on the classical view of the essential economic functions of government

[I] provide physical infrastructure, especially

that which has high fixed costs in relation to

variable costs, such as harbours;

[ i i ] supply public goods, such as basic research, and

market information;

[Ill] contribute to the development of institutions

for improving the markets for labour, finance,

technology, etc.;

[IV] offset or eliminate price distortions which

arise in cases of demonstrable market failure;

and

[v] redistribute income to the poorest in sufficient

measure for them to meet the basic needs.

7 6 (b) Developmental state Theory

Chalmers Johnson's developmental state model is based on the institutional arrangements prevailing in Asian developing capitalist countries, and includes the following features relevant to this paper

[I] the state is committed to the principles of

private property and the market and limits its

interventions to conform wi th this commi tment;

[ i i ] the state is engaged in numerous institutions

for consul ta tion and coordination wi th the

private sector, and these consultations are an

essential part of the process of policy

formulation and implementation; and

[iii] the top priority of state action, consistently

maintained, is economic development, and is

defined for policy purposes in terms of growth/

competitiveness goals is derived from

comparisons with external economies which

provide the 'state managers with models for

emulation.

8 1.5 Data collection

When Malaysia successfully detached itself

from British colonial rule and became an independent

country in 1957, there were many research papers

written on various topics concerning Malaysia.

Nevertheless, there seems to be a relative lack of

research concerning the development of Penang state.

It may be that scholars and researchers focus on

issues dealing with central government rather than

local government, and that the political conflict

contemporarily (s ee chapter two) attracted

researchers' interest to issues related to central

government. So, I decided to visit Penang State,

Malaysia in mid-1993 to collect primary data (if

possible) and carry out interviews with scholars,

government officials and members of poli tical parties,

trying to obtain different opinions and different

points of Vlew.

During my field research in Penang, I collected

a large amount of data in connection wi th the historical

and economic development of Penang State since her

founding in the 18th century. While secondary data

could be obtained comparatively easily in libraries

and local book shops, I managed to obtain through

9 different channels, an amount of primary "data,

including wri tten documents and personal interviews.

However, most of the documents I collected are not

abundant in statistical analyses, and the figures

concerned were not in fact available to the public at

all except for those announced in government

publications. Therefore, I shall, for the sake of

conveniently highlighting my points of argument, adopt

a quality approach rather than quantity approach in

writing this paper.

The trip was very successful in the sense that

a lot of data and interviews were collected in a limited

period of time. However, it was unfortunate that the

Chairman of ruling Parti Gerakan Rakyat Malaysia

(Malaysian People's Movement Party), the Chairman of

the PDC, Dr , and the Chairman of the

opposition , Mr Lim Kit Siang

were not in Penang state while I was there. This trip

would have been more complete and more useful if I had

been able to interview Dr Koh and Mr Lim. However, most

of the data collected during this trip is useful and

relevant.

10 1.6 Footnotes

1. James S. Coleman, " The Resurrection of Political Economy" in 'The Political Economy of Development', Norman T. Uphoff & Warren F. Ilchman (ed.), ( University of California Press, 1973, pp.31)

2. Malenbaum, Wilfred, 'Economic Factors and Poli tical Development' (The Annuals, March, 1965,pp.42-43)

3. Prof.Chan, Kwan Yiu, 'The Economic Prospects of the Asia Pacific Region and the China Circle' in the (Economic Review, Vol.2047, Nov.30 1987, pp.40-41)

4. Stephan Haggard, 'Pathways From The Periphery: The Poli tics of Growth in the Newly Industrializing Countries', (Connell University Press, Ithaca and London, 1991)

5. Robert Wade, 'Governing the Market: _Economic Theory and the role of Government in East Asian Industrialization', (Princeton University Press, Princeton, New Jersey, 1990)

6. Chalmers Johnson, 'MITI and the Japanese Miracle: The Growth of Industrial Policy, 1925-1975', (Stanford University Press, Stanford, California, 1982)

1 1 Chapter Two

Historical Perspective In Malaya, the threat to British rule came not from the Nationalists on the street, but from the Communists in the jungle. As the Empire winked, the power of Communism grew worldwide. Here in Malaya, the Communists launched their omni-major offensive against the Empire and was defeated.

End Of Empirc:Malaya, B.B.C.

2.1 Introduction

The rapid growth of the post-war anti- colonialism movement and the failure of the Dutch and

French colonial wars in Indonesia and Indochina respectively was a cause for concern for the British

Government regarding its colonial policy in South East

Asia. In Malaya, the most profitable British colony in South East Asia, calls for the abolition of colonial rule and the demands for independence were not as insistent as in neighbouring countries. In fact, the

Ma 1 ays needed Br i t i sh suppo rt ·and protect ion aga ins t the Chinese who controlled most of the maj or industrial production, and that their gradually expending population made the Malayan feared that the Chinese

1 would become the majority in Malaya .

13 Yet, the independence of Malaya, just like

the beginning of the British colonization ln this

tropical country, came from the unintentional and

incidental causes rather than the Crown's policy.

Firstly, the rebellion instigated by the Malayan

'Communist Party (MCP) against the British colonialists,

the Chinese capitalists and the Malay officials was

2 very important • The MCP guerrillas, who were formed

almost Chinese in peninsula Malaya, tried to fill up

the power vacuum left by the Japanese surrender after

the Second World War 3 . England was exhausted both

economically and physically by warfare on the one hand,

and the widespread of international communist movement

all round the world and in Malaya made her, on the other

hand, believe that the best way to safeguard herself

from the weakening colonial rule was to retreat from

the colony.

Secondly, the Chinese, and to an extent the

Indian population, wielded economic power and

in f 1 uence di sproport iona t e to the i r numbe r s . The

indigenous Malays, who called themselves Bumiputra

( son s 0 f the so i 1), we res t i mu 1 ate d by t his i mb a 1 an c e

which drove them to build up an indigenous Malays led

4 and controlled Malaya • In fact, the British had tried

14 to offer equal status to the Chinese as well as the

Malays in the local elections, but the proposal was forced to abandon in 1948. Furthermore, the United

Malay National Organization (UMNO) was established

after the Second World War by the middle class Malays

claiming to protect the Malay benefit. This kind of

political preference manifested itself in the Malays'

will to attain political and economic control during

the course of independence. However, the UMNO realized

that an antagonized racial status could not help to

maintain the operation of a new-born multiracial

country. So it successfully co-opted the Malay Chinese

Association (MCA) and the Malay Indian Association

(MIA) into the structure of the UMNO ln order to

maintain poli tical stabili ty. The UMNO won the

general election in 1955 and Malaya attained

independence in 1957.

The independent Federation of Malay had

experienced the enlargement of its national boundaries

when Singapore and Borneo (the latter made up of Sabah

and Sarawak) joined the Federation in 1963, and this

new country had renamed the Federation of Malaysia.

Although Singapore left the Federation and became an

independent nation in 1965, the status of the

Federation of Malaysia remained the same.

15 The Federation of Malaysia is a unique and complicatedcountry. While it is amultiracial country, the Malays are dominantly the Muslims. Malaysia is composed of thirteen states located in the East and

West Peninsula of Malaysia, and nine out of the thirteen states still retain a constitutional monarchy system.

The king of each state is called the Sul tan ( i. e. the

King) and the Kings of the nine states elect the Yang di-Pertuan Agong ( i.e. King of the Kings), to head

them in five years term. In 1976 the Agong became

. 5 entitled to be the Head of Islam In Ma 1 aysla

Nevertheless, the Agong is only a figure head of the

country, whereas the practical executive power is held

by the elected Prime Minister.

2.2 The Historical Status of Penang

Penang was for long time part of the British

Empire since the establishment of the British Strait

Settlement in the Strai ts of Malacca in the 17th century.

In fact, the British were not the first colonial power

in South East Asia. It was the Portuguese who in 1511

started to besiege and occupy the Malacca City in the

straits of Malacca so as to control foreign trade in

16 6 the East, especially spices • In 1611, the Dutch took over occupation of the Strai ts of Malacca, but the Dutch reign ended after the Napoleonic Wars. The Bri tish then

took their chance to start the Straits Settlement in

the Straits of Malacca.

In 1786, the British decided to safeguard

their merchants' trade route of India-China trade in

South East Asia, and to provide a port to the merchants

for servicing and replenishment of the merchant fleet,

so Captain of the British East India

Company was sent to ensure the provision of a port for

7 the British merchant fleet • Captain Francis Light

discovered Palau Pinang (i.e. the Betel Nut Island)

located at the northern entrance of the Straits of

Malacca. He successfully persuaded the Sultan of Kedah

to cede the Palau Pinang to Britain on 11 August 1786,

and Palau Pinang was renamed as . In 1800,

the boundary of Penang Island was extend to include

Province Wellesley, which was a piece of the peninsula

8 across from the island • ( see map 2.1

At the very beginning of the Settlement,

Penang was used by the British as a navy base. 9 But

with time its status changed. Gradually, Penang began

17 to serve as a British business port. It played the role of collection centre for produce from India and China, and became a disembarkation point for immigrant

' 10 labourers from Southern China and Sout h ern In d la.

In other words, it served as a port for importing and exporting goods, and a point of entry for a much-needed labour force. Thus developed Penang' s reputation as a free port.

2.3 1967 Crisis and Changes in Late 19609

When Malaya obtained independent from

British rule in 1957, its national currency was still

based on British sterling. During the first decade of

independence the Malayan government introduced a new

national currency, of which the value was based on gold

standard. For a transitional period, both these two

types of currency were effectively in use at the same

time. Thus when the British government devalued its

own currency in mid-November 1967, the Malayan

government in turn devalued its old currency that was

still in circulation. The old currency was devalued

by 15% which meant that it was worth less than the newly-

18 issued currency.

Due to the fact that most of the Malays held the old money because the government had failed to announce the timetable for currency change. In Penang, a city-state dominated by the Chinese majority, a hartal ( i.e. general strike) was called for by the

Chinese-dominated Labour Party to protest against the currency policy, and this led eventually to a challenge to the ruling party's authority and capability of

11 problem solving. They finally failed . Although the crisis was settled, Penang's chronicle free port status was undermined and diminished. However, this was not the sole reason of Penang's loss of its free port status. The 2% surtax imposed by the Federal government against the Indonesian goods re-exported

from Penang resul ted in the port losing its competi ti ve

advantage over the free . 12

The outbreak of the 1967 crisis in Penang

brought to the surface two potential fault lines in

the community: the possibility of ethnic conflict and

the inequality of wealth distribution. In 1969 riot

13 erupted in after the national general

election exposed the importance of these issues. In

19 the general election, the Gerakan Ra'ayat Malaysia

(i . e. Malays ian People's Movement) led by Dr Lim Chong

Eu won 16 out of 24 seats in Penang's state government elections, and consequently became the ruling party in Penang.

The 1969 Riot made both the Gerakan government and Federal government realize the importance of national restructuring in both social and economic terms. A Penang Master Plan study for the future development of the state was initiated in late 1969.

The study suggested that Penang nurture its manufacturing and general services sector as the main· engine of growth, and the Penang Development

Corporation (PDC) was then incorporated to carry out

this developmental strategy.14 Soon after, in 1971,

the Federal government proclaimed its New Economic

Policy (NEP) as part of its second Five Years Plan.

The main theme of the NEP was to call for 'the

eradication of poverty, irrespective of race and the

restructuring of society to eliminate the

identification of race with economic functions and

geographical location'. 15 It seemed that both the

Penang State government and Federal Government share

the same point of view regarding the remedial policy

20 necessary after the crises.

But a comprehensive analysis of the entire country's developmental policy is beyond the scope of this paper and therefore I have to focus on Penang state only. And it is manifested that the implementation of the state's economic policy is executed by the PDC, therefore, the functions and roles of the PDC in

Penang's economic development will be discussed in this paper too.

2.4 The Economic Performance of Penang

Since 1970

Following the introduction of the NEP in the

second Five Years Plan in 1970, the Gerakan government

tried its utmost to boost the economy in response to

the spirit of the NEPon the one hand, and, on the other

hand to re-bui Id the communi t y whi ch had been de s t royed

in the 1967 Crisis and 1969 Riot.

In fact, Penang's economic performance Slnce

1970 has been outstanding. In early 1970s, the Gerakan

government established the Free Trade Zones (FTZs) on

21 Penang Island, aiming to attract foreign investors to build a semi-production line in South East Asia, especially emphasized on the production of electronic chips. The cheap labours and good investment conditions provided by the FTZs did attract a large number of foreign companies to establish branches there ln' Penang. 16 That the introduction of FTZs was

successful can be judged from the changes in the

employment structure and economic transformation of

Penang (see table 1 and figure 1). Table 1 shows a

significant rise in the proportion of the economy

represented by manufactur ing, from 15% in 1970 to 29.6%

in 1990, while at the same time the primary sector (i.e.

the agricultural field) dropped from 24.3% in 1970 to

12.9% in 1990. Figure 1 very clearly displays this

transformation of the economy.

The relationship of economic structure to

Gross Domestic Product (GDP) as displayed in Table 2

and 3, provides a further index of the significant

transformation of the economy since 1970. The drastic

expansion of the secondary sector, from 250m (18.5%)

in 1970 to 2,838m (48.9%) in 1990 stands out when

compared to the shrinking of the primary sector, which

decreased from 266m (19.7%) in 1970 to 250m (3.8%) in

1990. There is no doubt that Penang's economic

22 performance since the introduction of FTZs has been outstanding.

Economic improvement can be associated with an all-round improvement in living standard of the community in which it takes place, in the areas of education, heal th, housing and other public facili ties.

(see Table 4)

23 Map 2.1 The Penang State. Malaysia

Asiaweek Graphic

24 Table 2.1 Penang Employment Structure

SECTOR 1970 % 1980 % 1990 % 2000 %

AGRICULTURE 51,853 24.3 43,459 13.5 51,903 12.9 54,537 10.4 MINING 576 0.3 600 0.2 522 0.1 519 0.1

MANUFACTURING 31,985 15.0 91,516 28.3 120,034 29.6 159,755 30.5

CONSTRUCTION 6,461 3.0 18,918 5.9 21,420 5.3 28,094 5.4

PUBLIC UTILITIES 2,210 1.0 439 0.1 584 0.1 662 0.1

TRANSPORT 15,743 7.4 14,818 4.6 20,199 5.0 28,493 5.5

WRHR 36,787 17.2 61,890 19.2 83,497 20.6 118,923 22.7

FIREBS 3,763 1.8 8,077 2.5 14,256 3.5 30,774 5.9

GOVERNMENT SERVICES 49,829 23.4 79,548 24.7 89,179 22.0 97,537 18.6 OTHER SERVICES 14,157 6.6 3,210 1.0 3,744 0.9 4,197 0.8

TOTAL 213,364 100.0 322,475 100.0 405,338 100.0 523,491 100.0

25 . ., ': figure 1: Penang's.economictrarisformiltion 1970~2000,(1978·prices,~. SmilliciilJ ' . '.

231

5,375

215 2000

2,838

1970

• Primary sector, comprising agriculture, livestock, forestry & fishing; and mining & quarrying D Secondary sector, comprising manufacturing and construction 11 Tertiary sector, comprising electricity, gas &water; transport, storage & communications; wholesale &retail trode,ihotels &restaurants; finance, insurance, real estate, business services; government services; and other services

26 Table 2 : PENANG'S'GDP (1978 price, $million)

1970 1980 1990 2000

Agriculture, livestock, forestry & fishing 264 223 189 209 Mining & quarrying 2 18 26 22 Manufacturing 172 1,399 2,668 5,894 Construction 78 143 170 254 Electricity, gas &water 42 68 116 229 Transport, storage &communications 101 313 648 1,387 Wholesale &retail trade, hotels & restaurants 361 565 731 1,531 Finance, insurance, real estate & business services 131 269 540 1,115 Government services 58 322 563 843 Other services 142 93 143 270

Total . 1,351 3,413 5,795 11 ,754

Table 3 . PENANG'S ECONOMIC STRUCTURE (as % of GDP) 1970 1980 1990 2000

Agriculture, livestock, forestry & fishing 19.5 6.5 3.3 1.8 Mining & quarrying 0.2 0.5 0.5 0.2 Manufacturing 12.7 41.0 46 .0 50.1 Construction 5.8 4.2 2.9 2.2 Electricity, gas &water 3.1 2.0 2.0 2.0 Transport, storage &communications 7.5 9.2 11.2 11.8 Wholesale & retail trade, hotels &restaurants 26.7 . 16.6 . . 12.6 .13.0 . Finance, insurance, real estate & business services 9.7 7.9 9.3 9.5

Government services .4.3 9.4 9.l 7.2. - .. Other services 10.5 2.7 2.5 2.3

TRENDS TO NOTE • The contribution of manufacturing to the state's GDP rose from 12.7 per cent in 1970 to 46.0 per cent in 1990 and is projected to reach SO per cent by the year 2000; • Agriculture's share of GDP dropped significantly (from 19.5 per cent in 1970 to 3.3 per cent in 1990). Asizeable drop was also experienced by the wholesale &retail trade, hotels & restaurants (WRHR) sector (from 26.7 per cent to 12.6 per cent). In line with development patterns elsewhere, agriculture's s~are of GDP is likely to continue to drop (to below 2 per cent of GDP) by the turn of the century, although its output in absolute terms will increase. The declining share of the WRHR sector will be checked in the course of this decode with on upturn in growth; • The shore of the finance, insurance, real estate &business services (FIREBS) sector has been maintained but this is due mainly to a robust real estate subsector; and • Finally, the share of government services in GDP, which hos risen the last two decades, will diminish in line with the general re-orientation to make the private sector the primary engine of growth.

27 Table 4 : PENANG'S QUALITY OF LIFE INDICATORS, 1970-1990

1970 1980 1990

GDP per capita (1978 prices) 1,7 47 3,789 5,021 Unemployment (%) 9.3 5.5 4.9 Inciqence of poverty (%) 32.3b 13.4d 8.99

POPULATION Crude birth rote (per thousand) 29.3 25.2 21.2 Crude death rate (per thousand) 7.3 6.1 5.5

EDUCATION Primary enrolment (%) na 80.7 84.4 e Secondary enrolment (%) na 51.2 59.1 e Students per teacher (primary) 34.0·, 29.8 21.79 Students per teacher (secondary) 25.0 23.1" -20".39 - Uterocy rote 59.8 75} na

HEALTH Infant mortality rate (per thousand) 25.4 19.9 10.2 Ure expectancy at birth (men) no 68.0c 69.5 Life expectancy at birth (women) na 72.9 C 73.9 Population per doctor no 2,778 2,309 Population per dentist 25/641 20,408 14,493 Population per nurse 1,295 762 678 Population per hospital bed 556 364 354

HOUSING ~verage persons per living quarter 6.9 6.3 6.3f . . . .Percentage houses with piped water 69.2 84.2 no : Percentage houses wHh electricity 74.9 88.2 na Percentage houses with flush toilets 29.7 36.6 no

FACILITIES Water consumption (cu metre per pe'rson) 76.0 0 84.4 102.5 Percentage population served with piped water 73 0 81 97 Telephone density per 100 population no 4.47 13.02

Notes: 0.1976 b.1977 L 1981 · d.1984 e.1986 f. 1988 9.1989

'. 28 2.5 The Northern Growth Triangle

Since the notion of economic integration took off after the Second World War, there are many transnational economic communities have been formed, for example the North American Free Trade Agreement

(NAFTA) comprising the United States, Canada and

Mexi co, and the European Communi ty 0 f twe 1 ve European count r i e s . The s ucce ss 0 f the s e communi tie s has stimulated the Malaysian government to form a similar economic region with her neighbour countries.

Malaysia's unlque geographical situation provides the opportunity for the formation of

17 multi-growth triangles with neighbour countries.

At the centre of the four states of northern Malaysia

(i. e. Perak, Kedah, Perlis and Penang) , Penang has been

at the centre of the Northern Growth triangle including

southern Thailand and northern Sumatra (see map. 2.2)

When Penang was chosen to assist Malaysia's

developing economy and international relations with

the North, details of the project were published in

the state's economic blueprint - "Penang into the 21st

Century". In this blueprint, Penang was designated as

29 a location to promote manufacturing in the region; to establish a regional technology centre; for promoting tourism; to serve as a business and services centre; to establish a medical centre; to develop local entreprises for global and regional outreach; to serve as a transportation and distribution hub; to be a support base for deep-sea fishing; and to develop as a centre for culture and the arts (see appendix "A"

for details) .

In fact, the Northern Growth Triangle (NGT)

has been put into the national agenda, and it is taken

seriously by the administration. 18 One may argue that

the countries involved in the NGT are also members of

ASEAN, and that their concern is to improve

international relations rather than to develop the

local economy since there are no major transnational

economic activities taking place between the member

countries of ASEAN. But in this case the difference

is that much preparatory work has been undertaken by

the NGT countries, which reveals that the NGT is not

only a political issue, but a economic issue too.

30 Map 2.2 The Northern Growth Triangle

Andaman t·,. Sea .' .. .

; I .. "

South I Chins ~ 51la r,.

J'~ ... . --. "

- ; '

I· ' " I IndIan, OC"fllln

.. i. , , ; " B,T map

source : Business Times 16-9-93

31 2.6 Footnotes

1. Brian Lapping, 'End Of Empire', (Collins, 1985, pp.193-4)

2. End of Empire:Malaya, B.B.C., 1986, OPe cit., and see also John Darwin, 'British and Decolonization:The Retreat from Empire in the Post-War World', (Macmillan, 1988, pp.202-206); and Lapping, p.186-235; JohnBastin & Harry J. Benda, 'A History of Modern :Colonization, Nationalism and Decolonization', (Prentice-Hall, Inc., Englewood, Cliffs, New Jersey, 1988, pp.173-4)

3. Bastin & Benda, p.173

4. Lapping, p.199-2I9

5. Tan Sri D a t u k Mo h d. and S a 11 e h bin Ab as, " Fe de r a 1 ism in Malaysia-Changes in the First TwentyYears" in, 'The Constitution of Malaysia and Its Development:1957- 1977', Suffian, Lee and Tridade (ed.) (Oxford University Press, 1977)

6. Lapping, p.187

7. PDC s 20th Anniversary Book, 'Penang:Looking Back, Looking Ahead 20 Years of Progress', (Penang Development Corporation Published, 1990, pp.2); and see also Chiang Hai Ding, 'A History Of Strait Settlements Foreign Trade 1870-1915', (published by the Singapore National Museum, 1978, pp.I)

8. Ibid.

9. Lapping, p.187; and see also James Low, 'The British Settlement of Penang', (Oxford University Press, 1972); and Chiang, p.1

10. PDC s 20th Anniversary Book, p.2

11. the crisis also caused a racial disturbance between the indigenous Malays and the Chinese. For details of the crisis, see Nancy L. Snider, 'What Happened in Penang?', (Asian Survey, Vol. VIII, No. 12, December 1968)

12. Ibid., p. 964-965

32 1 3. for de t ail 0 f the r i 0 t, see Bar bar a Wa t son An day a and Leonard Y. Andaya, 'A History of Malaysia', ( st. Martins Press, New York, 1982, pp.275-288); and see also Stuart Drummond and David Hawkins, 'The Malaysian Elections of 1969:An Analysis of the Campaign and the Results', (Asian Survey, Vol. X, No. 4, April 1970)

14. PDC s 20th Anniversary Book, p.10-11

15. Ibid., p.10

16. Prof. Chan, Huan Chiang of the Centre For Policy Research, University of Science of Malaysia (USM), Penang, stated that the emphasis on production of electronic chips decided by the Gerakan government in early 1970s was not made as a result of prudential analysis. In other words, the success of Penang's electronic chips manufacturing in absorbing foreign currency and creating job opportunities was merely fortunes since decision makers at that time could not clearly foresee whether the industry would work, especially in the context that the worsening economic environment brouhgt on by the 1973 oil crisis. Personal interview 14-5-1993, at the campus of USM

17. Beside the Northern Triangle, a growth triangle in the south is formed by Johor state with Singapore and Batam Island of Indonesia; and Sabah and Sarawak are formed with the Philippine in the East; ( Business Magazine, 14-9-1993, pp.4)

18. Mr. , Minister of Finance (presently the Vice Prime Minister) , Malaysia, led a working group to Thailand to attend a Nation Publishing Group Seminar on "Prospects for the Northern Growth Triangle" held in Hat Yai, Thailand on 12-9-1993

33 Appendix A

Strategic Thrust IV

TOVlards an enhanced role in regional development

Penang intends to become a regional centre wi th total business capabilities with the flexibility to cater for increasingly complex global business arrangements. \-Ve will take steps to establish the state as a centre for commerce and trade, finance and insurance, higher-order services as well as learning and training. vVe will also adopt a group of strategies for regional development to bolster our position as a regional centre in other areas such as technology, tourism, transport, fisheries, and the arts and culture. In its efforts to become a regional centre, Penang seeks to complement the development efforts of the other states and regions as well as work out mutually-beneficial means of cooperation. vVe would thereby spearhead the full development of the Northern Region of Peninsular Malaysia in line with Vision 2020 and promote the 'growth triangle' concept.

34 1 1. REGIONAL DEVELOPMENT STRATEGIES

Strategy 11.1: Specialising and niching in manufacturing In order to enhance its complementary role in regional industrialisation, Penang \vill: • Move into high-tech, higher value-added and capital- and skill­ intensive manufacturing; • Cooperate and coordinate with the other states to encourage the relatively labour-intensive industries to relocate their operations to the less-developed areas - this will help optimise the use of labour in the region; and • Assist in the development of the technical \vorkforce in the neighbouring states.

Strategy 11.2: Establishing Penang as the regional technology centre To establish Penang as the regional centre for technology, the measures to be taken will include: • Continuous upgrading of the state's technological capabilities, especially in the five key areas identified in the Sixth Malaysia Plan - automated manufacturing, advanced materials, biotechnology, electronics and infonnation technology; • Persuading new and existing companies to broaden their activities ' in such areas as production engineering, design, and R&D; and • Encouraging' international companies to set up their regional engineering and technical centres in the state to provide construction, industrial, technical consultancy, inspection and testing services.

Strategy 11 .3: Promoting Penang as a regional centre of excellence in education and human resource development Penang is well-positioned to play the role as a centre of excellence in

3S education and human resource development for the entire Northern Region. It will place emphasis on a pro-learning policy which will take into account the needs of the region. For example, Penang will look into the possibility of establishing branches of learning instirutions in the northern states and assisting them to set up their own skill development centres.

Strategy 11 .4: Promoting regional cooperation in tourism The Penang government will work with the other states and the countries of the region to promote cooperation in tourism. Among the measures to be considered are: • Drawing up an action plan to outline regional tourism development; • Promoting the region as a tourist destination in an aggressive and coordinated manner; and • Cooperating in physical development as well as in spatially spreading 0D:t tourist attractions.

Strategy 11.5: Revitalising Penang as a regio"nel business and services centre Penang's position as a regional business and services centre will be revitalised by re-establishing the state as a regional centre for commerce and trade (Strategy 2.1), building it into a regional finance and insurance centre (Strategy 2.2) and promoting it as a centre for higher-order services (Strategy 2.3).

Strategy 11 .6: Establishing Penang as a regional medical centre Major international and regional hospitals will be encouraged to set up their centres in Penang to cater to the region. These centres should be equipped with state-of-the-art equipment to provide a comprehensive range of diagnostic and treatment services.

36 Strategy 11.7: Developing local enterprises for global and regional outreach The challenge for the 1990s is for local enterprises to be innovative and gro"- into strong and globally-competitive companies. As these companies expand their operations, there \\'i11 be spillover effects into the neighbouring region. As such, Illoves \vill be 111ade to dra\v up a programme to set the direction as \\-ell as to ensure a comprehensive mechanism to encourage innovation among local enterprises.

Strategy 11.8: Making Penang a transportation and distribution hub In addition to upgrading its transportation and distribution infrastructure, Penang aims to: • Encourage freight service providers and transport companies to locate major distribution hubs in the state; • Urge 111ultinational corporations \vith manufacturing plants in the region to set up their distribution centres in the state; • Play a key logistics role for the c0111panies to develop channels for quick and reliable delivery of finished products and COlnponents to customers \vorld\vide as well as to the manufacturing plants in the region; and • Revive its traditional entrepot trade with northern Sumatera, south Thailand and i\'ivanmar ~ ,ith the establishnlent of free trade areas for \varehousing, bulk breaking and redistribution of goods.

Strategy 11.9: Making Penang a staging and support base for deep-sea fishing Penang \viU strive to be a staging and support base for deep-sea fishing in the Indian Ocean. For a start, initiatives ,vill be made to set up a mechanism for cooperation and collaboration in fishing with south Thailand and northern Sumatera.

37 Strategy 11. 1 0: Developing Penang as a centre for culture and the arts Penang aspires to be the regional centre for creative activities such as the perfonning arts, fine art, exhibitions, and musical and film production.

Strategy 11. 11: Reviewing the institutional mechanisms for regional cooperation For regional cooperation to flourish, the authorities of the various states would have to revie\v some of the mechanisms for working together. vVith regards to industrial development, there is a need to rationalise industrial activities among the various states to maximise the use of resources and to provide basic infrastructural services. vVith the anticipated acceleration of industrial grO\vth, fOf\vard planning is critical. The acceleration of the privatisation programme under the Sixth Malaysia Plan will see major infrastructural projects in the -region being privatised. The northern states could jointly hold equity in these projects. A regional econo'nzic cooperation committee of the four northern states, with working committees for the various sectors, has been established and its functions will be funher enhanced to: • Jointly examine areas and issues of common interest; • Exchange information on planning and implementation; and • Hold joint promotional activities for industrial, trade and tourism development in the international market. The proposed triangle of grawth involving the Northern Region of Peninsular Malaysia, south Thailand and northern Sumatera possesses great potential for complementarity and cooperation to achieve synergy. For the next 10 years, a loose an9 unstructured mechanism - such as a regional business promotion council of public- and private-sector representatives - may be established. It would identify potential areas and propose mechanisms for enhanced economic cooperation. Further expansion of this grO\vth triangle concept can be pursued amongst the three central governments of Indochina and Malaysia.

38 CHAPTER THREE

THE ROLE OF THE PENANG DEVELOPMENT CORPORATION IN PENANG'S DEVELOPMENT 3.1 Introduction

In many countries, the official institution which functions as the core centre to promote the national economy and to implement national economic policy is largely

dependent on the Ministry of International Trade and Industry

(MITI). While the MITI often plays a clear role in the

developmental strategy of a nation, it is an institution of

the central government. In other words, it is responsible

to carry out the wishes and policies of the central

government.

In a federal country, a conflict of interest may

develop among the local governments when the priority of

development in the local economy is criticized as unfair and

is disputed. Such a conflict of interest may occur when the

interests of local government are neglected in favour of the

priorities of national development. On the other hand, it

may appear to be a question of whether the central government

can effectively distribute national resources to local

governments. Whether it is the former or latter case, the

interests of local government are bound by the policy and

administration of the central government. Nevertheless,

there is still some room, in a minimum degree, for local

government actively to maintain economic acti vi ties in order

40 to boost the local economy.

In Penang, the elected state Government is given a high degree of autonomy in planning and implementing its economic strategies. The semi-governmental institution - the

Penang Development Corporation - was established to play a

key role in carrying out these functions.

In this chapter, I shall explore the role of the

Penang Development Corporation, and its influence on the

economic development of Penang, in view of its functions and

achievements.

41 3.2 The Penang Development Co~oration

After Penang experienced monetary crisis in 1967 and racial conflict in 1969, the government became aware that a fair and unprejudiced economic policy was very important to the State. So the Gerakan government adopted the decision of the Penang Master Plan Study to carry out a new economic policy.l It thus established an institution -- the Penang

Development Corporation -- as a major development agency to help organize and promote the economic strategies of the

State.

The Penang Development Corporation (PDC) was incorporated on 17 November, 1969, according to the findings of the Penang Master Plan to co-ordinate the economic growth 2 of the State . The ambitious objectives of the aimed at:-

(a) creating employment at a rate sufficient to reduce

current levels of unemployment, leading eventually to

full employment of the labour force;

(b) expanding the income and producti vi ty of people engaged

in low productivity occupations by increasing their

access to better economic activities;

42 (c) encouraging those engaged in low productivity

occupations to move to more productive endeavours;

(d) reducing existing inequalities in the distribution of

income between income groups and racial groups;

(e) modernizing rural life, particularly in the

agricultural sector, as well as improving the living

conditions for the poor through social services

including public housing, other basic infrastructural

services and civic social amenities; and

(f) creating a commercial and industrial communi ty amongst 3 the Malays and other indigenous people.

In order to meet these aims, the PDC started to conduct actively many development projects. The ambitious and comprehensive range of projects included industrial development and planning, new township development, urban redevelopment, promotion of tourism, investment, and land 4 development and reclamation . From the functions it performed, it is clear that the tasks of PDC cover a wide

range of social and economical activities, and most

importantly, the promotion of local development and foreign

investment.

43 As in other Import Substi tution Industrialization

(ISI) countries, the PDC, after the loss of Penang 's entrepot status, followed the free trade policy typical of this development trajectory as its core policy as it started to promote the state's economy. Stephan Haggard explains that in the four phases of the ISI transitional period, the introduction of free trade and foreign investment are the core policies whereas the economic structure includes raw materials or food export, traditional agriculture

5 handicraft production, and limitedmanufactures • (see table

3.1)

44 Table 3.1 Import Substitution Trajectory

Phase Economic structure Core Policies (a) Primary-product Raw materials or food Free trade and Export (PPE) exports, Traditional foreign agriculture, handicraft investment, production and limited gold-standard manufactures exchange-rate policy

(b) Import Growing manufacturing Protection, Substi tution acti vi ty, particularly fiscal and Industrialization 1 consumer goods financial (ISI 1) supports to industry

(c) Import Industrial deepening in Same as ISI 1, Substi tution consumer durables and plus new role Industrialization 2 intermediates for state-owned (ISI 2) enterprise and multinationals

( d) Import Continued industrial Same as ISI 2, Substitution deepening, including plus new Industrialization 3 capital goods, increased incentives to (ISI 3) manufactured exports export, and increased borrowing

45 3.3 The Indirect Legislative Role of PDC

In modern democratic politics, the power to make laws lies with the Congress or the Parliament, and the doctrine of delegation of power may allow local government to make laws depending on local circumstances. In the case of the Federation of Malaysia, the state government enjoys 6 a much greater level of autonomy in legislature.

Although the PDC is only a semi-governmental institute, there is evidence to show that the PDC is indirectly participating in making law. Firstly, the Penang strategic Development Plan formulated and implemented by the PDC allows the PDC to influence the state government to make laws concerning economic development. 7 strategic thrust fifth, for example, enhances the role of the PDC not only in local, but in regional development of the state, that it makes the state to gain more legal power in order to

implement the development plan smoothly. Under such

circumstances, the state government will enact policies and

carry out economic reform, including law making, in respond

to the development plan. 8

Secondly, although the State government is

empowered by the Constitution to make a large amount of laws,

46 9 it is still financially dependent on the Federal Government.

In order to gain the Federal government's co-operation in finance and in legislature, the state government can

influence the Federal government via two channels: the

government channel and the party channel. And the foundation

of these channels is based on the personnel structure of the

Chairmen of the Board of the PDC (to be discussed later) .

It is because the Chairman of the Board is the Chief Minister

of Panang state, and also a member of the National Front ( the

Federal Government ), that it is possible to influence the

Federal government ( National Front ). to make laws in response

to Penang's specific needs. Using the government channel,

the Chief Minister will make request on behalf of Penang,

and the NF will respond by means of financial assistance or

legislation. This relationship can be depicted as follows:

input ..., PDC output (needs) input State output Federal ......

As for the party channel, since Penang's ruling

Gerakan Party is one of the major parties within the NF, it

can make good use of its influence to urge the NF to help

Penang to achieve its goals. This relationship 1S similar

to that of the government channel.

47 3 . 4 The Performance and Achievements of the PDC in

Promoting Penang's Economy

When the PDC first established the Free Trade Zones

(FTZs) in early 70s, it made a priority of the manufacturing of electronic chips and other semi-finished products as its major mode of industry to attract foreign investment. And

Penang had the potential to exploit this strategy. First, there was a lot of cheap labour in Penang. Second, the cheap labours were pretty intensive. Third, the political environment regarding neighbouring countries was comparatively stable. Over a period of twenty-five years, the FTZs were proved to be successful in terms of economic transformation and the increase of Gross Domestic Product

( GD P). ( see tab 1 e 3. 2 )

In table 3.2, the manufacturing and construction

sector increased from 18.5% in 1970 up to 57% in 1994, while

the agriculture sec~or shrank from 18.5% in 1970 down to 2.3%

ln 1994. GDP climbed rapidly from US$O. 5b in 1970 up to US$4b

in 1994, and the growth rate reached 12% in the last five

years (it actually enjoyed a higher rate in the past fifteen

years. In table 3.3, we can see the rise of employment from

3,000 in 1970 to 174,000 in 1994, and total paid-up capital

reached US$4. 3b, from which it was created through the

48 economic transformation.

The introduction of the FTZs and the ensuring economic transformation meant that Penang absorbed a fair amount of foreign investment and technology, and earned a pretty good amount of foreign currency. Al though the successful introduction of the electronic chip industry was criticized as lucky and unintentional 10, it was later to become the state's major industry (see Table 3.4). In table

3.4, the electronics industry is ranked highest, and is shown

to have created a total of 89,402 jobs. If we compared it

wi th the fabricated metal products industry which was ranked

second, it created only 11,078 jobs. In other words, the

electronics industry created over eight times more jobs.

The PDC has now established a total of six

industrial parks and FTZs located in the heart of Penang (see

map 3a for the allocation of the Parks and see Table 3.5 for

the special facilities and t ,ypes of industry respectively) .

Map 3a also shows that all the six industrial parks are covered

and linked up by major transportation networks, providing

geographical ascendancy that helps make Penang to be the

industrial centre of Malaysia.

49 Table 3.2

Economic Transformation of Penana- (1970-1994)

I' \': \ SECTOR 1970 1990 1994 ....I)OOO':~ ~ ...... I. I 01 % % /0 0/0 . I:

...~griculture 19.7 ,3.8 2.3 2·... .0

. TYlanufacturing & 18.5 49.0 57.0 52.3 . Construction .' . " .. l· .. ' ...... :. Trade I Se'rvices ...:. . > .. .. ::.. ..:: '61.8 47.2 40.3 '45.7 . . f...... ~. '...... ' . . ~.: .. :: .. , ......

. GDP V.A.-LUE (US$) ' . O.SB· 2.3B 4.0B ·· 4.6.B .

I (1978 Prices)

GDP Current Frtce 7.2B

(US$) . ' : .. =. ======..=. = . =. .=====- ......

. , ' . . . . " ~ .::',',' . . . . . " ..

* Targets set i:t:l: '1.990.'>" ':": ' , , ' , . :'

:. , " ' ': . . . .,. . .' .

50 Table 3.3

Industrial Transformation of Penang (1970-1994) I Jan July Increase 1970 1990 1994 Ir ~90 - '9 ' ~ I I: I 1 \' . , 1 . ~O/.O·· I No. of Factories 31 430 656: ...J~,I (in PDC Industrial Parks)

~mploYITIent 3,000 100,OOC\ 174,000 74%

. .. ' . .' ...... •. Y'Paid-UpCapital < :< :·. •...... •..... / . •• - ...•. 1.2B :~· ,4.3B :: ' .. . . :'::,<';':, :·: J~ ,:, US$r ",.<: .. : :,--';;' ":':-,<~" ,,: ,.. >\: ,:,/,,':<: " ' ,., , , ......

' . . . ' .: . , "

..... : , " "': Land Area , 668.2ha 925.6ha '.' ' 38~/o

51 Table 3 .. 4

EMPLOYMENT BY INDUSTRY IN PDC INDUSTRIAL AREAS AS AT JUNE 30, 1993

NUMBER

OF ?:.CF:3S:CNAL SUFE;'/ISORY C'-:;iC~.L r,l,CTCRY 'NORKE?S TOTAL iYPE OF ;::'·iC.=.,lL ~ ~ iNDUSTRY ~ .)Ir:·:·::~ r:,!.C7CF.lcS \;! .~ ~' L!. ,3 :\!E>iT 7: · ::~N1C;. L S~. !_:3 ,II..- , ",_, ,;) S~;L~:: i~>lS:

ELECTRONICSi

.,..-. /~ / ..... ,... ELECTRICAL I"'~ SA27 i 1.300 3.3i 7 2.352 37.710 89 ,.102 ! I TEXTILES;

I ?-~ I GARMENTS 23 _/0 i.741 75i 4S6 7.203 2.551 13.C23

\ BASIC METAL ~ ... , ... .., .. \ 'f'I 01<; I INDUSTRIES I~ li3 352 ,~'O ~':;jl 280 2.102 ! I I FABRICATED METAL -1~ \ PRODUCTS '07 584 i.5Sd I~o S71 .!.276 3.3S~ 1i ,078

I MACHINERY 29 272 dd9 212 103 663 7S7 2.495

\ NON-METALlC MINERAL I -.., 173 .189 !62 1.077 I PRODUCTS 11 37 143 FOOD PROCESSING! CANNING 31 109 253 205 300 1.071 1.284 3,233

PROCESSING OF AGRICUL TURAL PRODUCTS 15 122 321j 1311 98 2"'~':)0 50 996

1A FEEDMEALS 5 34 51 72 ",", 25 105 320

CHEMICAU FERTILISER 47 415 993 476 187 575 923 3,569

RUBBER-BASED 26 198 654 537 201 882 3.836 6,307

PLASTIC & PLASTIC PRODUCTS 62 303 1,070 498 735 1.275 2.i97 6,678

WOOD & WOOD PRODUCTS 17 30 112 70 4i8 178 358 1,167

PAPER & PAPER PRODUCTSI PRINTING WORKS 43 270 442 497 609 1,185 1.268 4,272

PROFESSIONAL, SCIENTIFIC, MEASURING & CONTROLLING EQUIPMENT & OPTICAL GOODS 6 83 468 181 69 1,421 1,633 3,854

TRANSPORT EQUIPMENT 17 198 291 151 117 639 ',146 2.543

OTHERS 32 159 385 200 114 878 3,005 4,740

TOTAL 637 8,695 20,597 8,845 7,470 58,715 52,539 156,861

- .. _- . - . ---.. _- --- - .. - . ... --.. 52 Table 3.5 Industrial Parks and FIZs 1n Penang

Name Of Distance From Type Of Industrial Park Nearest Town Sp ecial Facilities Industries 4. 8ayan Lepas 2km from (a) Localed 2km from Ihe Light and Localed 4km lrom Induslries 1. Prlli Induslrial 5km lrom (a) Induslrial Park 8andar [3ayan Airport Supporting Bullenvorlll requiring sea P(lIk 8ullcrworlll Saru Induslry and rail Iran· Conlainer PorI (b) Localed next to Ihe . sportalion. 14km from Sayan Lepas FIZ noad/Raillinks 10 Suilable lor (0) Georgelown which houses a resl 01 Peninsula bolh export· number of large alaysiaffhailandl orienled or M MNCs in electronics! IOgapore Import . S hard disk induslry (c) Good suppor lingl subslilulion ancillary indllslry manulacluring 5 5km from (a) Located 4km from Suitable for aclivilies. back ·up bolh export --_._----_. Induslrial Park Bullerworth Sullerworth Conlainer Pori and rail oriented or Various Iypes 2. 811kilT cngi1h 8km lrom (2) Localcd 7km Irom !ransporta lion imporl Indllslrial Park Bullerworlh 8ullen"lorih Port subslilulion (b) Road/Raillinks wilh manu(acluring si 01 Peninsular re aclivilies MalaysiafThailandl II1gapore S Bayan Lcpas 2krn lrom (a) Close 10 Oayan Lepas Export- 1------_·_··· ------.- .---- 6. FIZ Sandar Bayan Inlernational orienled caled 9km 10 Various Iypes 3. 8ukil Minyak 10km from (3) La Baru induslry Induslrial Park 8ullerworth Bl Illerworth Port requiring air (b) Cl osc 10 Ihe Norlh· 14km from (b) Good supportive Iransportalion So ulh Highway Georgelown ancillary induslries link ing Singapore 10 Soulh Thailand Prai FIZ and Industrial Eslale have been (c) Ra ad-rail links 10 fully developed and alllhe land have been sold. res I 01 Ihe counlry '-----_._----_._-_ ._ - _ . FIZs and Major Infrastructure of Penang

I I I I I I I I I ! I I

Ii I

PERAK Industrial ParIeS and FTZ

54 3.5 The Perfor.mance and Achievement of the PDC .in Supporting Penang' s Infrastructure and Economic Construction

In the experience of economic reform in China, one of the major obstructions which restraining economic growth is limited infrastructural development. It is simply because infrastructure provides the basic services needed to deliver goods, products and materials to and from the 11 manufacturing sites . In the case of Hong Kong, although the colonial government maintains a non~interventionist economic policy in principle, but, on the other hand, she puts a very large effort to intervene the market in terms 12 of constructing infrastructure .

In Penang, when the state government was faced wi th physical problems in relation to economic reform in the early

70s, the government demonstrated insight in initiating a

large amount of inf-rastructural development. The

infrastructural developments in Penang, which were co-j oint by the PDC, included in the area of land, sea and air, such

as the prestigious , highway, ports and airport,

railways, cargo terminals and piers. The major

infrastructures in Penang are sorted out and categorized in

table 3.7A - 3.7B.

55 Table 3.7 Penang's Major Infrastructure

(A) Road, Bridge and Railway

Infrastructure Area

Penang Bridge 13.5 Km long; linked Penang Island and Province Wellesley together.

Railway From Butterworth in Province Wellesley to the South of the country up to Singapore and to the North up to Bangkok, Thailand. Along with Singapore, Kuala Lumpur and Ipoh, Butterworth in Province Wellesley is the principal rail terminus of the Peninsular Malaysia rail network.

East-West Highway Started from Butterworth to the northern Malaysia.

~orth-South Highway Linked Kedah in the North with Thailand and Johok in the South with Singapore.

56 (B) Port and Airport

Infrastructure Area

Port of Penang The second largest port in Malaysia. It provides complete and modern facilities for both international and coastal vessels. Entrance to the port is via the North Channel which is 9.7 metres ACD and the South Channel which is 5.8 metres ACD. Pilotage is provided round the clock by Penang Port Commission and is compulsory for vessels over 600 GRT. The Port is equipped to handle general cargo, dry and liquid bulk cargo and containers.

Butterworth Wharves Comprising three conventional berths totalling 549 metres in length.

Swettenham Pier Provides two linear berths totalling 366 metres; 10 metres ACD deep and supported by two transi t shed wi th a storage area of 4,464 sq. metres and five storage godowns of 10,661 sq. metres. It caters for both conventional cargo vessels and passenger liners which frequently call at the .Port of Penang.

Bulk Cargo Terminal Built to serve dry bulk carriers and liquid bulk tankers. The storage area is linked to the berth by a 1, 219 metres access bridge. An area of 30. 6 hectares forms the back-up for the storage sheds, open stockpile area and tanker farms.

57 ~orth Butterworth Container Provides a total combined Ter.minal capacity of 482,500 TEUs. It has a 350 x 60 metres wharf of 12 metres depth, a container yard of 104,000 sq. metres and a Container Freight Station of 6,000 sq. metres.

The International One of the six international ~rport of Penang airports in Malaysia. It is located about 20 Km from Georgetown in the south-east of Penang Island. As the second most important airport in Malaysia, it is the mainline terminus for the Malaysian Airlines (MAS) West Coast domestic route, and is an international airport with direct services to Singapore, Bangkok, Medan, Haadyai, Madras, Taipei and Hong Kong. It is equipped with a 3,353m long by 46m wide all-weather runway and a 18,500 sq. metre airport terminal.

It must be emphasized that the elements of table

3.7 (A) provide a complete transportation network (via land) which allows any type of conveyances from Penang to reach any part of Peninsula Malaysia, as well as providing convenient links to Thailand and Singapore via the

North-South Highway and to the northern Malaysia via the

East-West Highway. The Penang Bridge, which was planned and implemented by the PDC, is the most important and remarkable piece of physical infrastructure in Penang, linking Penang island with the peninsula and South East Asia. It is the main gateway linking Penang with the mainland.

58 Al though Penang's infrastructural network fulfills one of the prerequisites of economic development, another key factor that investors look far is the financial support ava1. 1 a bl' e 1n a glven. reg10n . 13 . In V1ew. 0 f th'1S prac t lca . I reality, the Bank Negara Malaysia (the Central Bank of

Malaysia) has stepped in to provide a wide range of financial support facilities. Table 3.8 presents the major financial support schemes in detail.

Besides the financial supporting schemes shown in table 3.8, the Malaysian Industrial Development Finance

Berhad (MIDF), a private sector financial institution, also provides the following financial support services for the start-up and operations of manufacturing businesses in

. 14 Ma 1 aysla :- a) Project loans; b) Machinery loans;

c) Factory mortgage loans;

d) Lease financing;

e) Consortium loans;

f) Equity participation; and

g) Advisory services

59 Table 3.8 . Financial Supporting Scheme

Scheme Objectives

Export Credi t Refinancing Scheme by As an incenti ve for the manufacturing the Bank Negara sector, direct and indirect exporters of eligible manufactured goods and selected primary commodi ties can obtain short-term post-shipment and pre-shipment financing from commercial banks at competitive rates of interest of 7% per annum. There is also special dispensation available on a case­ by-case basis for companies that do not meet the cri teria of the scheme.

Export Credit Insurance and A variety of insurance and guarantee Guarantee Schemes schemes provided by the Malaysian Export Credit Insurance Berhad. Its objective is to supplement national export promotion policies. All locally-incorporated companies that export goods - wholly or partly produced or manufactured within Malaysia are eligible to apply for these insurance facilities.

Principal Guarantee Schemes Introduced by the Credit Guarantee Corporation Malaysia Berhad to assist the small-scale enterprises without collateral or with inadequate collateral to obtain the required credit facilities from the commercial banks and at the same time, lessen the banks' risk in lending to this priority group.

Industrial Technical Assistance . . Provldes grants to small- andmedlum- Fund scale, industries which participate in its (1) Feasibility study scheme; (2) Product development and design scheme; (3) Quali ty and producti vi ty improvement scheme; or (4) Market development scheme.

60 Penang's awareness of the importance of human resource development has demonstrated when in mid-1986, it was announced that the PDC undertake an ambi tious development proj ect further to develop Penang into a maj or regional centre at trade and commerce 15 In 1989, the Penang Skills

Development Centre (PSDC) was established with the aim of providing application-based training for the workforce. It was the result of a joint effort by manufacturing industry, the Penang State Government and the PDC, with support from academia 12. Recently, the PSDC has carried out various human resource training schemes to meet the objectives of a wide range of clients including 58 multinational corporations and firms, the Federal Government, the State Government and the

PDC itself. It includes another human resource development institution - Penang International College - which conducts a twinning program with Sydney University aiming to train personnels from the PDC and the private sector.

61 3.6 Organizational Structure of PDC

The organizational structure of the PDC is divided into five hierarchies. As its head is the Chairman of the

Board assisted by the General Manager who is the Chief

Executive Officer (CEO) of the corporation. The CEO has two

Deputy General Managers to help him lead ten Divisions and six Units (see chart one) .

The Board Chairmen constitute the decision-making apparatus. There are eleven Board Chairmen - three principal local government officials (i .e. the Chief Minister of Penang, the Penang state Secretary and the Penang State Financial

Officer), six senior members of the Penang state Executive

Council, and three members of the Malaysian Federal

Government. In this unique form of formulation, it is significant to see that the core power of the PDC is made up of elements of the highest decision-making bodies of the

state and delegates from the Federal government. This guarantees the smooth and efficient implementation of policy devised by the board. The participation of the Federal

government at this level enables the development of consensus politics, including both local and federal government voices,

and drawing in federal government support for policy

decisions made by the Corporation.

62 Second, the dual identity of the Chairman (i.e. the

Chairman of the Board and Chief Minister of the State) gives the PDC further influence and authority. Due to the fact that

PDC is the sole semi-government agent governed by the ruling party of the State, it can logically be asserted that the decisions and policies made by the Corporation are pertinently the policies of the State, and also the country.

The division of labour within the PDC Executive is simple and straightforward. The General Manager under the

Board Chairman is the Chief Executive Officer (CEO) directly in-charge of 4 Divisions and 4 Units. The CEO is assisted by 2 Deputy General Managers which each in-charge of 3

Divisions and Units (see chart 3.1). The difference between a Division and a Unit is size, in terms of manpower and scope 16 of duty, with a Unit being smaller than a Division.

The professional tract record of the PDC managerial personnel is outstanding. ' The PDC managerial group are all degree holders in various fields from arts to management and planning, architecture and engineering. With backgrounds in various disciplines and experience of studying abroad as well as in Malaysia, the managers of the PDC have been exposed to local and international training and they are a group of 17 well-rounded and very capable individuals.

63 Chart 3.1 Organisational Structure of FDe

Chief Minister of Penang 6 senior members of the (Chairman of the Board) ~ Penang state Executive Council Penang state Secretary BOARD CHAIRMAN Penang state Financial Officer members from the Malaysian Federal Government

GENERAL MANAGER

TECHNICAL PLANNING & POLICY

DEPUTY GENERAL DEPUTY GENERAL MANAGER MANAGER

LMANAGEMENT ' ;. ·fINANCg ;;.:·. . ; '·i ... :.:: 'j"· .: ._ , ;" SERVI cEs ;: .:

EDIVISION ! .' DIVISION ',:,

ESTATE BUMIPUTRA LEGAL PUBLIC AFFAIRS INTERNAL HIGH

MANAGEMENT & SERVICES UNIT UNIT AUDIT TECHNOLOGY

SERVICES UNIT UNIT UNIT

65 In addition to the government grants and budget

allocation, the PDC's financing comes from various other

sources. As well as the commercial loans the PDC arranges,

the PDC also generates funds from the development and sales of industrial lands, construction and sales of commercial

and housing units, and investment in various companies and

proJec. t s. 18 In ot h er wor d s, PDC creates 1. t s own sources 0 f

finance like any other normal business operation.

Over more than two decades of successful operations

the PDC has achieved much in various fields. In the next

section of this chapter, I shall explore a very important

project the Northern Growth Triangle -- that the PDC has

undertaken.

66 3.7 The Northern Growth Triangle

Transnational production has been seen as a key 19 trend in the global economy since World War 11 . It is observable that this trend has not been changed. Albert

Hirshman found that in order to lift itself to higher income levels, an economy must and will first, develop within itself one or several regional centres of economic strength 20 . Since the international and interregional inequality of growth is an inevitable concomitant and condi tion of growth itself, the emergence of regional growth

21 is vital to the course of the development process . Meanwhile,

Amitav Acharya argues that this kind of regional economic co-operation can serve as a means of maintaining regional security and stability, and it may create a theatre of economlC. opportunl. t y 22

In the past decade, the term of transnational production is visible and prevalent in South East Asia in terms of Growth Triangles (GTs). There are good reasons for the widespread growth of GTs. The GTs serve an important developmental purpose as they can help transmi t and promote industrial dispersal and diffusion to less developed parts of countries and at the same time reduce industrial congestion in and around large cities 23. Prof. Ariff further explains

67 that a GT may act as a production bloc within which labour, capital and technology move freely. The main goals are to minimize costs and maximize returns, to render the triangle an attractive centre for investment and to ensure that its

24 products are internationally competitive • In this part of the chapter, I shall explore the PDC's efforts to push the economic development of Penang state in the context of the

Indonesia-Malaysia-Thailand Growth Triangle.

68 3.8 The PDe' s Development Strategies in the IMT-GT

The development of the Indonesia-Malaysia-Thailand

Growth Triangle (IMT-GT) was not a hasty decision on the part of the Penang Development Corporation (PDC). In fact, the prerequisites for the development of the growth triangle were gradually formulated and can be traced back to 1988.

Firstly, on 7 April, 1988, the first meeting of the North

Malaysian Regional Development Co-operation Joint Committee was held in Penang. The North Malaysian Region is made up of four states: Penang, Kedah, Perak andPerlis. Members of the committee included the Chief Minister of Penang and

Chairman of the PDC, Dr , and senior government

25 officials representing the other three states • The Meeting confirmed that through co-operation the four states would strive for balanced development, and that they would thereby avoid mutual competition, duplicating development planning, 26 and the waste of human resources

Secondly, in the Malaysia - Taiwan Trading Seminar held on 8 May 1988 in Penang, the Deputy General Manager of the PDC revealed that Penang would be rapidly industrialized and promoted as an investment centre, and that Penang state government would emphasize four categories of industry in the coming decade: (A) small-scale and medium-scale industry;

69 (B) affiliated and supportive industry; (C) resources applied industry; and (D) Hi-tech industry27. If this development strategy continues as forecast, the PDC would achieve three things: first, co-ordination with the private sector by means of providing good conditions and a good environment for investment. Second, the State government would play a role in the economic development of the Pacific rim. Third, rapid industrialization would improve opportunities for the economic development of the country 28 as a whole .

When Dr Koh Tsu Koon succeeded the Chief Minister of Penang (and the Chairman of PDC) in early 90s, he further emphasized the notion of regional co-operation by promoting

the North Growth Triangle (NGT). As formulated by the North

Malaysian Regional Development Committee, the NGT spans

Northern Malaysia, Southern Thailand and the Northern

Sumatra (see Map 3b for the geographical location of the

IMT-GT). In map 3b, it. is clear that Penang has the

geographical advantage of standing at the centre of the growth

triangle. In fact, Penang has for a long time tended to be 29 the centre of development and investment in the region .

70 Map 3b The Geographical Location of the IMT-GT

I I I t I ;

i, I ANDA~1AN ! SEA I GULF OF I I THAILAND

i; I I I I " I I

STRAIT OF MELAKA

AREA ACREAGE POPULATION (Sq,Km~) {Million)

North l\Aalaysia 32.,60D 5J) North Suma~ 13U,00D 13,7 (Indonesia)

SQyth Th~H~nd 2D,OOO 2)~

Total 132,600 21.5

71 In short, the PDC's success in developing the domestic economy of Penang in the past years has led the PDC to found ways of expanding Malaysia's economy into neighbouring countries in the form of the growth triangle.

The speech made by the Chief Minister at the conference suggests that Penang is prepared to play a major role in the

IMT-GT, and that the PDC would play an acti ve role in promoting the economy and, no doubt, the relevant economic policies of the state.

72 3 . 9 Footnote

1. The Penang Master Plan was undertaken and formulated by an American-based economic consultancy, which was appointed by the Federal Government in 1969, firm to study the future economic development of the state.

2. The PDC's 20th Anniversary Book, p.10, PDC print, 1990.

3 . Ibid., p. 11

4 . Ibid. ,

5. Stephan Haggard, 'Pathways From The Periphery:The Politics of Growth in the Newly Industrializing Countries', (Cornell University Press, 1990)

6. see' The Consti tution of Malaysia and Its Development:1957-1977', Tun Mohamed Suffian, H.P. Lee and F .A. Trindade (ed.) (Oxford press, 1979)

7. letter correspondence with Mr Cheah Lee Kwai, Head of Public Affairs Unit of PDC in January, 1996 ; and see also 'The Vision to 2020'

8. Kuang Huang Daily, 4-12-1991

9. Suffian, Lee and Tridade, P. 170

10. Personal interview. Dr. Chan Huan Chiang of centre for Policy Research, University of Science of Malaysia on 14 May 1993

11. Bittel, Birke and Bilbrey, 'Business in Action' (McGraw-Hill International Editions, 1989).

12. see Edward K.Y. Chen, 'The Economic Setting' ln, The Business Environment in Hong Kong ( 2nd. ed. ) , David Lethbridge (ed.), (Oxford University Press, Oxford, New York, Melbourne, 1993).

13. Business in Action, pp. 406-480

14. Investment ~n Penang Malaysia, (PDC press, 1993), pp.14-15

15. "PDC's 20th Anniversary Book", pp. 44

73 16. Letter correspondence with Mr Cheah Lee Kooi, Head of Public Affairs Unit, 16-1-1996

17. Letter correspondence with Mr Cheah Lee Kooi, Head of Public Affairs Unit, 16-1-1996

18. Ibid.

19. see Robert w. Cox, 'Production, Power and World Order: Social Process in the Making of History', ( Columbia University Press, 1988)

20. Albert o. Hirshman, 'Interregional and International Transmission of Economic Growth' in John Friedmann and William Alonso (ed.), 'Regional Policy: Readings in Theory and Application' (The MIT Press, 1975), pp.141

21. Ibid., pp. 141-2

22. see Ami tav Acharya, 'Transnational Production and Securi ty: Southeast Asia's "Growth Triangles"', (Contemporary Southeast Asia, Vol. 17, No. 2, Sept. 1995)

23. Prof. Mohamed Ariff, 'Growth Triangles - Theory and Practice', paper presented at the Seminar on the Prospects of Northern Growth Triangle, organized by the Nation Publishing Group, Thailand, 12-9-1993, pp. 5

24. Mohamed Ariff, 'Growth Triangles, a New Competi ti ve Force', (the Star Post, 16-9-1993), pp.20

25. Nanyang Business Post, 8-4-1988, pp.11

26. Ibid.

27. Kuang Huang Daily Post, 9-5-1988

28. Ibid.

29. see for exampl e, the former Chie f Mini s ter, Dr Lim Chong Eu had called for Penang to be the major investment centre in the region announced in his speech in the opening ceremony of the Penang Skills Development corporation held in the Malaysian University of Science, (Kuang Huang Daily Post, 15-6-1988); and the press interview of the Chief Minister, Dr Koh Tsu Koon on the present and future of Penang, he showed his anticipation to make Penang as the regional centre of north Malaysian regions and the IMT-GT.

74 Chapter Four

Conclusion 4.1 Review of the Conceptual Framework

A large number of books dealing with the government's role (s) in economic development have been written, but most of them spend a lot of time discussing the performance of a government rather than discussing the concrete "role(s)" of a government.

The word "role" used in this paper refers to the specific identity of a government in the course of operating economic activities, and the identity of the government may be singular, or plural identities.

Robert Wade has identified three proper roles for a

government: legislator; promoter; and supporter. And

these three kinds of role can normally be found in Asian developmental states. The question here is whether all

the above three kinds of role are applicable to the

Penang Government.

These three kinds of role can be further

explained in view of the functions that the government performs. I explained in chapter one that the functions

of a government are to

(a) provide physical infrastructure, such as

harbours;

(b) supply public goods, such as basic

research;

76 (c) contribute to the development of

institutions for improving the markets

for labour, finance and technology, etc.;

(d) offset or eliminate price distortions

which arise in cases of demonstrable market

failure; and

(e) redistribute income.

The second thing to be identified is the features of a developmental state so as to project an idea of what a developmental state would do in the course of development. There are three types of features that characterize the developmental state in this paper :

(a) the state is committed to the principles

of private property and the market and

limits its interventions to conform with

this commitment;

(b) the state is engaged ln numerous

institutions for consultation and co­

ordination with the private sector, and

these consultations are an essential part

of the process of policy formulation and

implementation; and

(c) the top priority of state action is

economic development.

77 Using these features, Penang can be determined a developing state, and that I can mingle the two concepts mentioned above to find out that, Penang state, which is now a developmental state, government's roles in economic development.

4.2 Findings

Penang has been experiencing outstanding economic growth since the Gerakan govern~ent decided to establish the Penang Development Corporation to boost the economic development of the state twenty-five years ago. In fact, the PDC serves as the sole

(semi-government) institution enhancing and implementing the state's economic policies. Firstly, it bears the responsibility for the planning and construction of all major infrastructure in Penang, for example, the Penang Bridge and the ports. Secondly, it is responsible for attracting investment, thus the establishment of the Free Trade Zones. Thirdly, it is responsible for the organization and supply of basic investment support, for example, the Penang Skill

Development Centre and the various financial supports.

Fourthly, it bears respons ibi 1 i ty for the improvement of domestic construction, for example, the re-

78 urbanization and the building of the well-known office complex KOMTAR (Complex Tun Abdul Razak). And finally, it takes on a watchdog function to urge the state government, or the federal government through the state government, to enact laws regarding the necessity of economic development of the state.

Thus, the roles of the PDC in the economic development of Penang are: (i) (indirect) legislator,

(ii) promoter and (iii) supporter.

The personnel structure of the Board of the

PDC shows clearly that the PDC is actually a semi­ governmental institution owned and controlled by the state government. The policies and strategies it implements are actually the policies and strategies of the state government. Therefore, it follows that the roles of the PDC in economic development are the roles of the Penang Government in economic development.

And it will be much cl~ar to say that the Penang

Government's role in economic development are : (I) legislator (directly in state level and indirectly in

Federal level), (11) promoter, and (Ill) supporter.

It is quite interesting to discover that the functions of the PDC include administrative guidance, very similar to the practice of Japan's Ministry of

79 Administrative guidance is defined as an

administrator's action, without any coercive legal

effect, which encourages related parties to act in a

specific way in order to realize some administrative

. 1 alm. Three points need to be clarified. First,

administrative guidance does not have a coercive legal

effect; it influences the related party only on a de

factobasis. Second, it is implementedwithout specific

legislative jurisdiction. And third, it needs to be

a legitimate act of an administrative agency, i.e.,

important administrative guidance is made pursuant to

the decisions made at the Ministry's Board meeting,

and less important guidance is made at the discretion

of the Director-General or division heads

responsible. 2 The PDC practice fulfill these cri teria.

Further investigation which leads to the conclusion

that the PDC serves the function of a MITI for Penang;

however such an investigation is not part of the present

discussion.

80 4.3 Prospects

The PDC has accomplished a great deal for

Penang's economic development over the past twenty-five years. Although Penang was once deprived of its entrepot status, the state has achieved an economic miracle. The PDC's part in this cannot be underestimated. The Chief Minister and the Chairmen of the Board of the PDC, Dr Koh Tsu Koon has stated again and again that Penang will go forward into a post- industrial stage of development with the promotion of hi-tech and information industries, and PDC will play an important role in this period of chang. 3 Such speeches are encouraging and help plot the future development of the PDC. The role of the PDC in Penang' s economic development will, without a doubt, be much more important in implementing economic policy on behalf of the State government.

The formation of the IMT-GT implies that Penang will take a major part in the development of northern

Malaysia. Penang's geographical advantage will allow the island to serve as a beach head for Malaysian to spill over to the north of Malaysia, the south of

Thailand and the north Sumatra. If this project continues in line with the proposal described in the

Vision 2020 blue-print, the Penang' s role will be much

81 more crucial politically, economically and strategically than ever before.

Looking back at the past twenty-five years of development, Penang has experienced marvellous changes, the consequences of which are as yet hard to estimate.

Looking forward to the future twenty-five years of development, the "Vision 2020 strategic Plan" has guarantees that the pace of development will continue smoothly towards a post-industrial period and help the country to become a developed country. The priority now for Penang is the training of sufficient human resources to enable development to proceed as envisaged by the blueprint.

82 4 . 4 Footnote

1. Takashi Wakiyama, "The Implementation and Effectiveness of MITI's Administrati ve Guidance", in 'The Government­ Industrial Relations', Stephen Wills and Maurice Wright ed., Oxford, 1991, p. 210

2. Ibid., p. 210-213

3. Kuang Huang Daily, 4-12-1991 and speech presented at the International Conference on Malaysia-Thailand-Indonesia Growth Triangle on Dec. 15, 1994 at Kuala Lumpur, Malaysia.

83 Major Bibliography Primary documents

Ariff, Mohamed, Faculty of Economics & Administration, Universiti Sains Malaysia, 'Growth Triangles - Theory and Practice', paper presented at the Seminar on the Prospects of Northern Growth Triangle. Commemorative Publication for the 88th Anniversary of the Penang Chinese Chamber of Commerce (PCCC), (printed by PCCC) Goh Ban Lee, Centre for Policy Research, Universiti Sains Malaysia, Penang, ' Co-operation in Industrial Development: The Case of Malaysia' , paper presented by , at the Seminar on "Co-operation in Development: Sharing of Experiences" held in Tokyo, 1986 'Development Strategies for Penang in 1990s', paper --- presented at the Seminar on Development for Uni ty on 25 March, 1990, Penang Ibrahim, Anwar, Minister of Finance of Malaysia, 'The Prospects of a Northern Growth Triangle', Luncheon address held on 12 September, 1993 in Hai Yai, Thailand Koh Tsu Koon, Penang Cheif Minister, 'Penang's Role In The IMT Growth Triangle', special luncheon address at the International Conference on Indonesia-Malaysia­ Thailand Growth Triangle on 15 December, 1994 in Penang Newspaper cuttings (1980-1993) provided by the Kuang Huang Daily Post Information Centre, Penang 'PDC's 20th Anniversary Book', (PDC Press, 1990) 'Penang Into The 21st . C'entury:a strategic plan to build a fully-developed, post-industrial society', (PDC press, 1992) 'Policies, Incentives & Procedures of Penang, Malaysia', (printed by PDC) Speeches and working papers presented by various officials and scholars in the 2nd Malaysian Chinese Economic Congress on between 18-19 August, 1992 'Statistics of Penang, Malaysia', (printed by PDC)

85 Interviews a). Scholars - Goh Ban Lee, Prof., Centre for Policy Research, Universiti Sains Malaysia, Penang - Chan Huan Chiang, Dr., Centre for Policy Research, Universiti Sains Malaysia, Penang

- Loh Kok Wah, Prof., Uni versi ti Sians Malaysia, Penang

- Loh Cheng Sun, Mr., research fellow, Malaysian Chinese Resource & Research Centre b). Government Officials - Cheah Lee Kooi, Head of Public Affairs Unit, PDC

- Manickam, Murugappan, Senior Asst. Manager, Housing & Urban Developmant, PDC

- Yeoh Liew Pheow, Executive Secretary/Commissioner for Oaths, Penang Chinese Chamber of Commerce c). Politician - , Legislator, Member of Opposition Democratic Action Party and Member of Penang State Legislative Assembly

86 Books

Acharya, Amitav, 'Transnational Production and Security: Southeast Asia's "Growth Triangles"', Contemporary Southeast Asia, Vol. 17, No. 2, sept. 1995 Aminuddin,Marilyn, 'Malaysian Industrial Relations' , ( McGraw Hill, 1990) Andaya, Barbara Watson and Andaya, Leonard Y., 'A History of Malaysia', (st. Martin s Press, New York, 1982) Ariff, Mohamed, 'Growth Triangles - Theory and Practice' , (unpublished paper, 1993) Bastin, John & Benda, Harry J., 'A History of Modern Southeast Asia:Colonization, Nationalism and Decolonization', (Prentice-Hall, Inc., Englewood, Cliffs, New Jersey, 1988) Bittel, Birke and Bilbrey, 'Business in Action' , (McGraw-Hill International Editions, 1989) Bowie, Alasdair, 'Crossing The Industrial Divide:States, Society, and the Politics of Economic Transformation in Malaysia', (Columbia University press, New York, 1991) Chan, Edward K. Y ., Ngan Mee-Kau and Wong, Te'rasa Y. C. (eds.), 'Industrial and Trade Development in Hong Kong', (Centre of Asian Studies, HKU, 1991 Ch an Kwan Yiu, 'The Economic Prospects of Asia Pacific Region and the China Circle' , Economic Review, Vol. 2047, Nov. 30 1987) Chiang Hai Ding, 'A History Of Strait Settlements Foreign Trade 1870-1915', (published by the Singapore National Museum, 1978) Cox, Robert W., 'Production, Power and World Order: Social Process in the Making of History', (Columbia University Press, 1988) Darwin, John, 'British and Decolonization:The Retreat from Empire in the Post-War World', (Macmillan, 1988) Deyo, Frederic C., (ed.), 'The Political Economy of the New Asian Industrialism'-, (Cornell, 1987) Drummond, Stuart and Hawkins, David, 'The Malaysian Elections of 1969:An Analysis of the Campaign and the Results', Asian Survey, Vol. X, No. 4, April 1970 Friedrnann, John and Alonso, William, (ed.), 'Regional Policy: readings in Theory and Application', (The MIT Press, 1975) Goh Ban Lee, 'Co-operation in Industrial Development: The Case of Malaysia', (unpublished paper, 1986) , Haggard, Stephan, 'Pathways From The Periphery: The Poli tics of Growth in the Newly Industrializing Countries', (Cornell University Press, Ithaca and London, 1991)

87 Johnson, Chalmers, 'MITI and the Japanese Miracle: The Growth of Industrial Policy, 1925-1975', (Stanford University Press, Stanford, California, 1982) Lethbridge, David, 'The Business Environment in Hong Kong' , (2nd. ed.), (Oxford University Press, Oxford, New York, Melbourne, 1993) Liao Kuang-sheng (ed.), 'Politics of Economic Cooperation in the Asia-Pacific Region', (Hong Kong Institute of Asia-Pacific Studies, CUHK, 1993) Lim Choon Sooi (ed.), 'Towards The Future:Selected Speeches and statements of Lim Chong Eu', (Oon Chin Seang, 1990) Low, James, 'The British Settlement of Penang', (Oxford University Press, 1972) Malenbaum, Wilfred, 'Economic Factors and Political Development', The Annuals (March, 1965) Milue, R.S. and Mauzy, Diana K., 'Politics and Government in Malaysia', (Federal Publications, Singapore, Kuala Lumpur, Hong Kong, 1978) Narayanan, Suresh, (ed. ) , 'Changing Dimensions of the Electronics Industry in Malaysia: The 1980s and Beyond' , (Malaysian Economic Association and Malaysian Institute of Economic Research, Penang and Kuala Lumpur, 1989) Norris, M. W., 'Local Government in Peninsula Malaysia', ( Gowe r , 1980 ) Snider, Nancy L., 'What Happened in Penang?', Asian Survey, Vol. VIII, No. 12, December 1968 Suffian, Lee and Tridade (ed.), 'The Constitution of Malaysia and Its Development:1957-1977', (Oxford University Press, 1977) Suffian, Tun Mohamed, Lee, H. P. and Trindade, F .A. (ed.), 'The Consti tution of Malaysia and Its Development: 1957-1977' , (Oxford University press, 1979) Uphoff, Norman T. and Ilchman, Warren F. (ed.), 'The Political Economy of Development' , (University of California Press, 1973) Vogel, Ezra F., 'The Four Little Dragons:The Spread of Industrialization in East Asia' , (Publications (Holdings) limi ted, -Chinese edi tion, 1991) Wade, Robert, 'Governing the Market: Economic Theory and the role of Government in East Asian Industrialization', (Princeton Uni versi ty Press, Princeton, New Jersey, 1990) Wills, Stephen and Wright, Maurice (ed.), 'The Government-Industrial Relations', (Oxford, 1991)

88 Journals

Asian Survey Issues and Studies China Quarterly Contemporary South East Asia The Annuals

Magazines

Asiaweek Business Review Far Eastern Economic Review Time

Newspapers

(Penang) star Post Business Times £rfHB$~ f¥j 1-F ftij ~~ Jf6*B~~ ~rif~B$~ rtJ~y~

(Hong Kong) Eastern Express Hong Kong Standard South China Morning Post ly:j¥~ !iJ~B¥~

89

CUHK Libraries

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