◼ ECONOMICS Bloomberg Businessweek November 25, 201931PHOTOGRAPHS
BY
IAN
TEH
FOR
BLOOMBERG
BUSINESSWEEK
▲ The Aemulus factory
in Penangincrease in foreign direct investment in the first half
of 2019, to 9.2 billion Malaysian ringgit ($2.2 billion).
“This trade war, I think it’s a blessing,”
says Chuah Choon Bin, executive chairman of
Pentamaster Corp. Bhd., which makes equipment
for the manufacturing and semiconductor indus-
tries. The Penang-based company has added 10 cus-
tomers this year—a marked increase from the one
to three it says it picks up in a regular year. Seven of
its new clients are from China, which has ambitions
to become self-sufficient in chips. “This year we are
doing better than last year. And we know next year
we will be doing better than this year,” says Chuah.
Penang, like much of Malaysia, was grappling
with soaring unemployment in the late 1960s, when
local authorities drafted a blueprint to diversify
the economy away from rubber and agriculture.
The state went “all out to attract multinationals,”
says Loo Lee Lian, chief executive officer of Invest
Penang, a nonprofit that works closely with the gov-
ernment. The island became home to what was
then Malaysia’s first free-trade zone, drawing mul-
tinational heavyweights such as Advanced Micro
Devices, Hewlett Packard, and Intel. Their ranks
have grown over the years as new industrial parks
have cropped up in the state. Nowadays, Penang
boasts an unemployment rate of just 2.2%, more
than a full point below the national average.
Despite its early success, Penang’s importance
as an electronics manufacturing hub dimmed in
recent years next to that of up-and-coming Chinese
cities like Shenzhen. Now the U.S.-China trade war
has rekindled interest. Penang was the destination
for 35% of Malaysia’s approved foreign direct invest-
ment in the first half of 2019, according to Chow
Kon Yeow, the state’s chief minister.
“I like this kind of challenge,” says Hotayi
Electronic CEO Lee Hung Lung, who steered his
company through the 1997 Asian financial crisis
and the 2008 crash. These sorts of cataclysms can
generate opportunities for a business like Lee’s,
which sells its own products but also does man-
ufacturing for bigger companies. The opening
last year of a second Penang facility—a sprawling
campus with an artificial waterfall and mini-golf
course—was well timed: Hotayi Managing Director
Goh Guek Eng says sales are up as much as 40% this
year, about twice the norm.
The challenge is to make sure infrastructure bot-
tlenecks and skills shortages don’t become obsta-
cles to continued investment. Pentamaster’s Chuah
says it’s difficult to get engineers to come over from
the mainland. Authorities in the state are trying to
address a lack of transportation options through
an integrated plan that incorporates light rail,THEBOTTOMLINE Malaysia’sPenang,whichestablished
itself as an electronics hub in the 1970s, is seeing a new wave of
investments from companies looking to skirt U.S. and China tariffs.Ng Sang Beng, CEO of Aemulus Corp., a busi-
ness that supplies equipment to the semiconduc-
tor industry, says he has fielded five to 10 times
more inquiries this year than in 2018 from U.S.-
and China-based customers that are reconfigur-
ing their supply chains in preparation for what
he predicts will be a prolonged technological
Cold War. “The opportunities are just huge,” he
says. �Michelle Jamrisko and Anisah Shukry, with
Yantoultra Ngui and Yudith Homonorails, trams, ferries, and water taxis. But it will
take years for some of these to be up and running:
The first phase of the railway won’t begin operations
until 2027, according to a government website.
Penang’s efforts to lure fresh foreign capital
are getting a helping hand from Malaysia Finance
Minister Lim Guan Eng, who was previously the
state’s chief minister. The government’s approved
2020 budget offers foreign businesses a 10-year tax
holiday on certain types of investments in the elec-
tronics sector.