Special Economic Zones in the OIC Region:
Learning from Experience
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The electronics industry was subsequently selected as the priority sector based on its significant
employment generation potential and compatibility with Penang’s role as a centre for tourism
as a ‘clean’ industry.
Development of the SEZ
The first Free Trade Zone (FTZ) within Penang opened in August 1972 andwas named the Bayan
Lepas FTZ. The zone aimed to attract businesses and investment within industries which
depended on the movement of materials and products by air-transport, including; electronics,
medical supplies and other precision and machining industries. The Bayan Lepas FTZ was
subsequently extended into three further phases.
In 1980, a second FTZ opened in Seberang Perai close to the sea port. Given its proximity to the
port, this zone was designed to attract industries producing bulk items such as household
electrical appliances.
Within close proximity to the FTZs, the PDC also developed five industrial estates which were
set up to accommodate supportive and ancillary industries related to businesses and industrial
activities within the FTZs. This requirement resulted in the creation of two categories of free
zones; the Free Industrial Zones (which replaced the original Free Trade Zones) (FIZs) and the
Free Commercial Zone (FCZ) which were created to cater for the needs of trading and services
businesses.61
Penang has undergone significant industrial transformation since the 1960s when trading and
agriculture were the dominant activities. Following the introduction of the FTZs and the
industrial estates Penang has fostered a strong manufacturing based economy. The following
figure outlines the transformational change within the Penang SEZs from basic assembly
functions to high value manufacturing and research and development activities.
61 Chai and Im (2009) The Development of Free Industrial Zones – The Malaysian Experience.