Penang primed to prosper

 State leads the way in man­u­fac­tur­ing, ser­vices sec­tors

The state is strategically positioned to capitalise on long-term growth drivers such as artificial intelligence, advanced manufacturing and global supply-chain diversification.

PETALING JAYA: Penang has continued punching above its weight economically, contributing 7.6% of Malaysia’s gross domestic product (GDP) in 2024.

Anchored by its manufacturing (46.1%) and services sectors (48.1%), its growth has outpaced Malaysia over the long-term and continues to remain resilient.

As Malaysia’s premier semiconductor and electrical and electronics (E&E) hub, the state is strategically positioned to capitalise on long-term growth drivers such as artificial intelligence (AI), advanced manufacturing and global supply-chain diversification.

In 2024, Penang’s E&E segment contributed RM41.7bil to the state’s GDP.

RHB Banking Group recently hosted the Penang Economic Forum 2026 which brought together various stakeholders from across the board.

During the forum, multiple panel sessions were held which discussed topics surrounding Penang’s transition towards a higher-value economy, small and medium enterprise (SME) competitiveness, sustainable growth and funding accessibility.

“Panellists emphasised the need to move beyond the traditional low-cost manufacturing model towards higher value activities centred on 4T’s – talent, technology, things (product and services), and trademarks,” RHB Research said.

It added that supply chain diversification and geopolitical tensions have created opportunities for a technology transfer, collaboration and business relocation.

Another key topic discussed was how the state can unlock growth capital beyond just bank financing.

“Alternative funding channels such as venture capital, private equity and capital markets can support businesses at different cycles, so efforts to strengthen the funding ecosystem is important,” it noted.

As for SMEs and micro, small and medium enterprises (MSMEs), the panellists acknowledged that they remained a vital pillar of the economy, and have accounted for 96.1% of total business establishments while contributing RM652.4bil to the country’s GDP in 2024.

“Supported by more than 350 multinationals and over 6,500 manufacturing-related SMEs, Penang has developed one of Malaysia’s deepest industrial ecosystems, fostering technology transfers, capability upgrading, and innovation.

“Moving forward, SMEs are expected to play an increasingly important role in supporting higher value-added and innovation-driven industries.”

It’s worth noting that Penang ranks among the top four states in Malaysia for MSME employment, supporting approximately 469,900 jobs.

RHB Research said the state also generated RM91.5bil in MSME gross output, accounting for 7.2% of the country’s total MSME output.

The state has also continued to attract foreign direct investment despite global uncertainties – approved foreign direct investment (FDI) hit RM15.2bil in the first nine months of 2025, driven primarily by the the E&E, machinery and equipment and chemicals sectors.

“The United States remained the largest source of FDI, followed by China and the Cayman Islands.

“Subsequently, increasing investments in transport equipment and fabricated metal products are reflecting the broadening depth of the state’s manufacturing ecosystem,” RHB Research said.

Penang is also one of the main logistics hubs in the country, anchored by the Penang International Airport (PIA) and North Butterworth Container Terminal.

The state has continued to see an increase in tourists, supported by its diversity in offerings.

RHB Research said passenger traffic at PIA went up 10.5% in the first half of 2025 while cruise arrivals at Swettenham Pier grew 39.7% in 2024, reflecting improving travel demand and connectivity.

“Supported by Visit Malaysia 2026 initiatives, expanding international flight networks and the Malaysia-China mutual visa-free regime, Penang is well positioned to benefit from higher visitor arrivals and tourism spending, reinforcing the sector’s contribution to the state’s services economy,” the research house said.

Meanwhile, the Penang Economic Forum 2026 also highlighted how businesses need to be adaptive and resilient so that productivity and cash flows can be managed.

RHB Banking Group laid out potential key beneficiaries, among them included Pentamaster Corp Bhd State leads the way in man­u­fac­tur­ing, ser­vices sec­tors

The state is strategically positioned to capitalise on long-term growth drivers such as artificial intelligence, advanced manufacturing and global supply-chain diversification.

PETALING JAYA: Penang has continued punching above its weight economically, contributing 7.6% of Malaysia’s gross domestic product (GDP) in 2024.

Anchored by its manufacturing (46.1%) and services sectors (48.1%), its growth has outpaced Malaysia over the long-term and continues to remain resilient.

As Malaysia’s premier semiconductor and electrical and electronics (E&E) hub, the state is strategically positioned to capitalise on long-term growth drivers such as artificial intelligence (AI), advanced manufacturing and global supply-chain diversification.

In 2024, Penang’s E&E segment contributed RM41.7bil to the state’s GDP.

RHB Banking Group recently hosted the Penang Economic Forum 2026 which brought together various stakeholders from across the board.

During the forum, multiple panel sessions were held which discussed topics surrounding Penang’s transition towards a higher-value economy, small and medium enterprise (SME) competitiveness, sustainable growth and funding accessibility.

“Panellists emphasised the need to move beyond the traditional low-cost manufacturing model towards higher value activities centred on 4T’s – talent, technology, things (product and services), and trademarks,” RHB Research said.

It added that supply chain diversification and geopolitical tensions have created opportunities for a technology transfer, collaboration and business relocation.

Another key topic discussed was how the state can unlock growth capital beyond just bank financing.

“Alternative funding channels such as venture capital, private equity and capital markets can support businesses at different cycles, so efforts to strengthen the funding ecosystem is important,” it noted.

As for SMEs and micro, small and medium enterprises (MSMEs), the panellists acknowledged that they remained a vital pillar of the economy, and have accounted for 96.1% of total business establishments while contributing RM652.4bil to the country’s GDP in 2024.

“Supported by more than 350 multinationals and over 6,500 manufacturing-related SMEs, Penang has developed one of Malaysia’s deepest industrial ecosystems, fostering technology transfers, capability upgrading, and innovation.

“Moving forward, SMEs are expected to play an increasingly important role in supporting higher value-added and innovation-driven industries.”

It’s worth noting that Penang ranks among the top four states in Malaysia for MSME employment, supporting approximately 469,900 jobs.

RHB Research said the state also generated RM91.5bil in MSME gross output, accounting for 7.2% of the country’s total MSME output.

The state has also continued to attract foreign direct investment despite global uncertainties – approved foreign direct investment (FDI) hit RM15.2bil in the first nine months of 2025, driven primarily by the the E&E, machinery and equipment and chemicals sectors.

“The United States remained the largest source of FDI, followed by China and the Cayman Islands.

“Subsequently, increasing investments in transport equipment and fabricated metal products are reflecting the broadening depth of the state’s manufacturing ecosystem,” RHB Research said.

Penang is also one of the main logistics hubs in the country, anchored by the Penang International Airport (PIA) and North Butterworth Container Terminal.

The state has continued to see an increase in tourists, supported by its diversity in offerings.

RHB Research said passenger traffic at PIA went up 10.5% in the first half of 2025 while cruise arrivals at Swettenham Pier grew 39.7% in 2024, reflecting improving travel demand and connectivity.

“Supported by Visit Malaysia 2026 initiatives, expanding international flight networks and the Malaysia-China mutual visa-free regime, Penang is well positioned to benefit from higher visitor arrivals and tourism spending, reinforcing the sector’s contribution to the state’s services economy,” the research house said.

Meanwhile, the Penang Economic Forum 2026 also highlighted how businesses need to be adaptive and resilient so that productivity and cash flows can be managed.

RHB Banking Group laid out potential key beneficiaries, among them included Pentamaster Corp Bhd, Cnergenz Bhd, Inari Amertron Bhd and QES Group Bhd.

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Rise of the machines in China

   

   

 When Sun Huihai first began working at a factory in the southern manufacturing belt of Guangdong some 13 years ago, his colleagues were all humans.

Now, they are joined by more than 200 robots which can work around the clock, seven days a week, to help produce air-­conditioners for home appliances giant Midea.

Rows of bright orange robot arms whir at all hours of the day, fishing freshly pressed plastic parts out of hot metal moulds and onto a long conveyor belt.

Driverless robots with blinking lights store these parts in a multi-­storey warehouse, and later take them to be assembled into units that are sold in China and around the world. 

The number of robots put to work on the factory floor increases every year, said Sun, 37, who heads the plant’s engineering department.

“Every day, we think about how to upgrade and make manufacturing here more intelligent,” he said.

Scenes like this have become more common across China, as the “factory of the world” turns to robotics to sustain and turbocharge its manufacturing juggernaut.

Over the past decade, the number of industrial robots on China’s factory floors has increased more than six times to over 1.7 million, as companies grappled with ri­­sing wages and a shortage of workers willing to staff production lines.

China now has the world’s third-highest density of robots in its manufacturing industry, trailing South Korea and Singapore in first and second place respectively, according to the International Federation of Robotics’ figures for 2023, the latest available.

Their deployment is poised to increase further as China conti­nues its transition from low-­value, labour-intensive production to advanced manufacturing – a national priority.

Policymakers in China, wary of the hollowing out of industries which can occur when countries get richer, have long pushed for greater automation to keep factories competitive.

Factories in China pumped out nearly 370,000 of industrial robots in the first half of 2025, up 35.6% from the previous year, according to figures from the National Bureau of Statistics.

But as robot adoption picks up pace, one question that arises is: What will happen to the more than 100 million workers whom China’s manufacturing sector employs?

Academics Nicole Wu and Sun Zhongwei, who interviewed and surveyed factory workers in southern China just prior to the Covid-19 pandemic, found that these individuals were not too concerned about robots just yet.

“Contrary to the more pessimistic assessments of automation, most manufacturing workers in Guangdong – who are buffered by steady increases in demand and a chronic labour shortage – appear to be unfazed by technological change at present,” they wrote in a paper published this year.

Back at the Midea factory, Wang Liangcai, 26, an engineer, believes that his job is safe from automation for now.

“Equipment still needs to be maintained, it can’t do so itself,” he said.

“But if you think about the long run ... we also don’t know how things will be.” — The Straits Times/ANN

Reated

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Robot consumer festival kicks off as China boosts tech consumption

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Govt urged to intervene as new US tariff brings jitters for businesses

 

Trying times: The tariff would significantly impact manufactures like those in Bayan Lepas, Penang. — CHAN BOON KAI/The Star

JOHOR BARU: The 25% tariff imposed by the United States on Malaysia has sent jitters through the manufacturing sector, with many warning of cancelled orders and a potential wave of business closures.

The furniture industry, for one, fears losing business to Vietnam, which faces a 20% tariff, while some other industries are even thinking of relocating.

Malaysian Furniture Council president Desmond Tan said Vietnam, Malaysia’s closest competitor in the global furniture market, produced a similar range of products and targets the same export destinations – especially the United States.

The tariff for Vietnam was reduced to 20% from the original 46%.

“Since the announcement was only made yesterday (Tuesday), it is still too early to gauge the full extent of its impact on order volumes but the council will continue to monitor developments closely,” he said.

Tan said the industry was also being squeezed by rising costs on the domestic front.

“These include the expanded Sales and Service Tax (SST), which now imposes a 5% tax on raw materials and directly drives up production costs. We also face higher labour expenses with the new minimum wage,” he added.

The new Employees Provident Fund contributions for foreign workers would add further strain while fuel and electricity prices had also gone up, he said.

The council is now urging Putrajaya to commence urgent talks with the United States to negotiate a reduction of the tariff.

He also appealed for a rethink on the new taxes and price hikes to lower production costs, and for export incentives to protect jobs.

The United States accounts for 60% of the country’s total furniture exports, totalling RM2.039bil in just the first four months of the year.

Malaysia also exports furniture to Singapore, Australia, Japan and the United Kingdom, among others.

Muar Furniture Association president Steve Ong said the new tariff was a major blow, as Muar supplied more than RM4bil worth of furniture to the United States in 2024.

It made up 67% of Malaysia’s total furniture exports there, he said.

“The 25% tariff will likely lead to clients cancelling orders and local manufacturers scrambling to stay afloat. This is an urgent crisis,” Ong said.

Another industry player urged the government to act swiftly.

“If nothing is done, a globally competitive industry like ours could shrink or even collapse,” said Goh Song Huang.

“At a time like this, we need clear, steady policies and a government that understands and responds to the real pressures we face.”

In Penang, local industries are bracing for reduced demand with some considering relocation.

“Companies in Malaysia may be forced to shift parts of their production to countries with lower tariffs,” said Malaysia Semiconductor Industry Association (MSIA) president Datuk Seri Wong Siew Hai, adding that higher prices driven by import tariffs tend to suppress global demand.

“When the cost of imported goods rises, demand naturally falls. In the end, everyone along the supply chain, especially buyers of raw materials, will be affected,” he said.

Earlier, it was reported that semiconductor exports would be exempt from the tariffs but it is unclear whether exemptions will remain under the new tariff regime.

“Vietnam’s tariff is at 20%, which gives them a pricing advantage. US buyers may look for cheaper alternatives, putting Malaysian exporters at a disadvantage,” he said.

Federation of Malaysian Manufacturing (FMM) Penang chapter chairman Datuk Seri Lee Teong Li said the 25% tariff would significantly impact exporters to the US.

“It’s a substantial amount. For local manufacturers shipping to the US, it will reduce profit margins. Costs will rise, and customers may start sourcing from other suppliers.

“Even when the 24% tariff was announced in April, it was already a heavy blow. We had hoped for a reduction, not an increase,” he said.

He noted that for now, the strategy was to ship out as much as possible before the Aug 1 deadline.

Meanwhile, the Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) is urging the government to temporarily lower the expanded SST to 4% to ease the financial burden on businesses and preserve Malaysia’s competitive edge.

Its president Datuk Ng Yih Pyng said the government should reduce the expanded SST rate from the current 6%-8% for the first two years of implementation.

He said businesses, already grappling with higher operational costs driven by multiple government-imposed measures, would now have to face the the tariff headwinds and global uncertainties as well.

Source link

https://www.thestar.com.my/news/nation/2025/07/10/govt-urged-to-intervene-as-new-us-tariff-brings-jitters-for-businesses

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US dollar’s monopoly in payments will soon be over

 

Safe asset: US dollars being displayed at the Vietnam International Bank in Hanoi. The risk is rising that the greenback’s monopoly in payments is headed for the history books. — Reuters

THE social-media video where Donald Trump’s artificial intelligence (AI) avatar is making Nike sneakers may be just a spoof on the United States president’s quixotic bid to re-industrialise America by eliminating bilateral trade deficits.

But the meme contains a kernel of truth.

The world’s farmers, fishermen, and factory workers labour hard to earn the US$100 bill that the US Federal Reserve (Fed) prints at no cost.

This exalted status, which a French politician from the 1960s termed as the US dollar’s “exorbitant privilege,” has been taken to a breaking point by the tariff war.

No matter what happens in the long run to the United States currency’s value or its role as a safe haven for central banks and private investors, one thing is clear: The greenback’s monopoly in payments, whereby it’s exchanged in 88% of all trades, is headed for the history books.

A weekend trip to Vietnam brought that home to me.

In Hoi An, a 15th-century trading port repurposed as a tourist attraction, tailors and shoemakers pay for visitors’ taxi rides to their shops and shell out commissions to hotels for directing guests their way.

If they didn’t have to charge customers a 3% credit-card fee, they might be able to do more to nudge inveterate shoppers.

For instance, they could raise their prices by 1% and still throw in a dinner voucher for high spenders – if they purchase one more linen shirt. The buyers will be richer, as will the sellers.

The reason they can’t fund such sales promotions is the US dollar.

Or, to be more precise, a financial architecture built around the idea that a payment made on a foreign credit or debit card must set off a chain of expensive activity underpinned by the greenback.

For 18 major global currencies that settle without much friction, those costs are negligible.

But for the Vietnamese dong, and most other Asian currencies, they’re a burden, which a highly competitive apparel and footwear industry working on tight margins can’t absorb.

So it passes on all of it – and sometimes more – to a buyer who would much rather take the free meal.

Take my example. To pay the tailor in Hoi An, my bank had to obtain the local currency, which doesn’t have a liquid market outside Vietnam.

So my money most probably got converted into US dollars in Hong Kong. After reaching Vietnam, the funds got exchanged again into Vietnamese dong.

Almost 40% of the greenback’s US$7.5 trillion daily turnover comes from its role as a vehicle of value. Neither the buyer nor the seller has any direct interest in it. Yet they can’t transact without it.

Trump is aware of America’s special status: He has even threatened countries looking to come up with alternative global reserve currencies with 100% tariffs.

A high-profile disengagement with the US dollar – for instance, when it comes to Saudi Arabia’s invoicing of its oil – may not go down well with Washington.

What the White House can’t control, however, are low-profile shifts in the engine room of the payment industry.

Even before Trump’s inauguration, I noted that the world of money was splintering into Western and Eastern blocs.

The trade war may have accelerated the schism, though the separation is now more likely to be along a US/non-US axis than a West/East split.

I can already pay a Thai merchant in baht from my Hong Kong bank account by scanning a QR code.

Vietnam plans to establish similar connectivity with Singapore.

These links are between commercial institutions, with third parties providing foreign-exchange services.

However, some central banks in Europe are working with their counterparts in Asia to explore automated conversion using blockchain technology.

If the pilots succeed, there may be no room for middlemen – software embedded in digital representations of fiat currencies will act as money changers.

Ergo, there may be no need for the US dollar to act as a go-between in transactions that don’t involve Americans.

This is just one of the many experiments underway to boost the efficiency of cross-border retail payments. They’re underpinned by US$800bil in remittances by overseas workers.

And then there’s what tourists spend. In Asia, they’re staying 7.4 days on average, 1.3 days more than before the pandemic, according to Mastercard Inc’s latest data.

For a small business in a lesser-known beach town competing against larger firms in more popular holiday destinations, each hour is valuable – and an expensive payment system an irritant.

It has been tolerated so far because nothing cheaper was available, and Asian policymakers’ focus was on shipping goods to the United States, a much larger opportunity.

But everything has changed since the April 2 reciprocal tariffs.

Chinese President Xi Jinping was about to arrive in Vietnam just as I was leaving.

Beijing has been pushing the so-called mBridge initiative in which financial institutions can swap digital currencies issued by their central banks to settle cross-border claims.

If the Trump administration is going to upset friends and foes alike to pursue a chimerical vision of labour-intensive industrialisation, then it has to be prepared for geopolitical realignments, and an erosion of at least one form of America’s exorbitant privilege.

Those who still view the US dollar as a relatively safe asset may want to hold it, as long as the United States remains the world’s predominant superpower.

But for tourists buying shoes or shirts in Vietnam, the 3% extra charge on payments is an avoidable, anticlimactic loss after haggling for – and winning – a nice discount on the merchandise.

Rather than incurring outsize fees to Visa Inc and its partner banks, a dinner at Hoi An’s Morning Glory restaurant seems like a fairer use of my money – while I wait for the last buttons to be sewed on. — Bloomberg

-  Andy Mukherjee is a Bloomberg Opinion columnist covering industrial companies and financial services in Asia. The views expressed here are the writer’s own.

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