Special Economic Zones in the OIC Region:
Learning from Experience
83
The relationship between the Penang FIZs and net inflows of FDI is less clear but there is a
noticeable increase in FDI inflows between 1972 and 1974 which coincided with the arrival of
the anchor tenants in Penang and the emergence of the electronics industry in Penang.73
Whilst it should be caveated that this growth cannot be wholly attributable to Penang’s FIZs, the
Malaysian electronics industry developed strongly over this period, with $12.7 billion over the
period 1996 to 2005,74 the majority of which were made within FIZs in Penang and Selangor.
Given this industry has been a significant contributor to Malaysian exports, this clearly
demonstrates the importance of these zones over this time period in localising inward
investments and promoting export activities within the E&E sector.
Box 30 – Penang SEZ Success Factors – Economic Strategy – PDC Interview
Skills and Training
The Penang Skills Development Centre (PSDC) was established in 1989 and was the first
industry led skills training centre to be established within Malaysia. The centre operates as a not
for profit organisation with a mission to pool resources amongst the 4 free trade zones and 4
industrial estate within Penang providing up-to-date industry specific training and educational
programmes in support of identified operational requirements.75
The PSDC is now recognised as a world model for partnerships between government, academia
and industry. It serves as a key broker between the needs of industry and higher education
73 Whilst this analysis has attempted to demonstrate the economic effects of the Penang FTZs on the domestic economy it
should be caveated that there may be a number of economic reasons for the performance of the indicators analyzed. A more
detailed econometric analysis would be required to isolate the exact impact of the Penang FTZs on the indicators observed.
74 Chai, Y and Im, O (2009) The Development of Free Industrial Zones – the Malaysian Experience.
75 Penang Skills Development Centre (2017) Available from:
The PDC make reference for the need to ensure that Penang’s economic resilience is
considered when implementing economic development strategies and defining the sectoral
focus for the FIZs and Industrial Estates. The PDC have undertaken a number of studies to
examine how Penang can diversify its economic base to reduce its reliance on the electrics
and electronics sector. The PDC identify recent projects such as the Bayan Baru Business
Improvement Distict which will include a new BPO facility as evidence of how they have
attempted to attract new sectors and industries to Penang. Diversification of the economic
base is identified as a key factor in ensuring Penang’s future economic success.