The Penang Institute:- “Making Ideas Work” for an International and Intelligent City

YAB Lim Guan Eng
Photograph: Daniel Lee /
Penang Economic Monthly

The world is currently undergoing the most significant foundational change since the advent of the Cold War. The tectonic plates of political and economic power are now shifting in a way that will soon render the prevalent system obsolete.

For the last four decades or so, Asia has been prospering by exporting primarily to the United States and, to a lesser extent, Europe. Yet at the way events are unfolding, high unemployment and spiralling indebtedness in America and Europe means that their consumption is fated to diminish. As a result, Asia will not only have to search for new markets, it will most likely have to create one from within.

In addition to the shifting economic structures, the last two decades has also seen the unprecedented advent of interconnectivity, linkages and technological advancements collectively housed under the roof known as globalisation. Or as the Danish political philosophers Hans-Henrik Holm and Georg Sorensen simply defined it as: "the intensification of economic, political, social and cultural relations across borders,"

Yet this phenomenon, in which unbridled flow of capital is potently combined with a widening income gap and widespread income stagnation, has severely wounded the global economy.

With the world now gravitating towards Asia, it is therefore a great opportunity for us, situated geographically between the rising giants of China and India, and culturally positioned as the heart of the Malay Archipelago, to play a more important role in the region.

Penang leads

In this context, Penang finds itself in a unique position. Once the centre of a thriving era of Asian trade, culture and travel, Penang prospered first as a port city, taking advantage of our position as the gateway into the Bay of Bengal and a pivotal point in the spice and silk trades, before slowly evolving and positioning itself as a benefactor of global industrialisation through export-oriented manufacturing. Today, we are a world heritage city, an electrical and electronics hub and a world-renowned tourist destination. However, new times introduce new challenges.

We are now faced with grappling issues such as brain drain, competition from emerging economies such as Indonesia, Vietnam and South China, in addition to the aforementioned consumer slowdown in Europe and America, traditionally our largest economic patrons.

Therefore, the question that lies before us is whether we can face these issues, reinvent ourselves and transform challenges into opportunity, in order to make the next leap into a high income and high value-added city economy in this nascent 21^st century.

To say that we are at a crossroads is to make an understatement. In a world that is furiously changing, where globalisation has meant that borders are now increasingly seamless and transparent, where cities around the world compete directly with each other, Penang is poised to make an important choice of paths; one that will either lead us on the road to international excellence, or forever confine us to the halls of mediocrity confined within the middle-income trap.

Suffice to say, the choice is an obvious one. Penang chooses once again, to lead.

In this respect, we have had much practice. Penang has always been a path setter, a direct reflection of the spirit of her people. We now lead our domestic economy, attracting RM12.2 billion in investments last year, the highest in Malaysia. We also charted the highest increase in passenger growth among all airports in our country. We also achieved the highest drop in crime index, and are now rated the most liveable city in Malaysia. We have even achieved the most success in reducing debt – slashing RM600 million out of RM630 million in the last three and a half years – a 95% reduction of debt, the highest amongst all states in Malaysia.

Good governance

Penang now leads on the political front as well. When our government first took power in 2008, we decided to make a clean break from previous practice. In a competitive world, cities that achieve greatness are cities that are consistent and efficient. And this cannot be achieved without first being clean and transparent.

Immediately after taking power, we introduced what has now become our state government’s motto: CAT (Competency, Accountability, Transparency). These CAT principles have been our guiding force in the last four years, through which we have also become the first state in Malaysia to introduce an open tender system for all public procurements and supplies.

This may seem trivial to the rest of the world where an open tender system is common practice, but it was ground-breaking in our country. We were faced with great challenges and opposition from those who feared losing their rice bowl. But we persevered and made it happen, because in a competitive world, there is no room for inefficiency. We were determined to consign patronage and rent-seeking to the bins of history.

The results since have been obvious. The state has produced record surpluses every year since 2008, allowing us to embark on a variety of social programmes, from eradicating hard-core poverty to cash handouts in the form of anti-corruption dividends, free upgrading of public housing and markets to providing free bus services within Georgetown and between the mainland and the island. It is amazing what a simple exercise of plugging the leakages can do. Not only has our open tender system benefited the state in terms of savings, it has also allowed genuine contractors to flourish in a competitive environment. Where previously the road to a government contract required political connections and “middlemen”, it now only requires an internet connection, as we have replaced “middlemen” with an online procurement system.

Our efforts in cultivating a more transparent process of governance have been rewarded by becoming the only state in Malaysia to receive praise from the global anti-corruption watchdog, Transparency International.

It is therefore clear that the underlying logic of policymaking in Penang is one that is based on competency, integrity and good governance. This crucial element has since become the hallmark of our administration.

A question that I get asked time and again, is what did I do to attract investment? How do I convince so many multinational corporations to choose Penang? These are companies who are often able to cherry pick from any number of locations. More often than not, they are also offered many other incentives such as waivers, exemptions, free land and even free facilities. So why do they choose us?

My answer is simple. There are five factors that make Penang their choice, and I do not seek to take credit for the first four. Firstly, the ready availability of human talent. Secondly, Penang is a logistics hub with good linkages between our port, rail and air facilities. Thirdly, the existence of an ecosystem of supply services. Fourth, Penang is highly liveable. It is not a hard choice to make when you are faced with the prospect of living and working on a tropical paradise island with beaches, parks and a hill all within twenty minutes of each other. However, I would like to think that we are directly responsible for the last, but by no means least, factor. Good governance based on competency, accountability, transparency and the rule of law. You can have everything else, but if you cannot provide institutionalised stability and confidence, no one will invest in you. And this is why the largest corporations in the world and leaders of their fields are all choosing Penang.

Another element is trust and faith in the people. There is nothing magical in our formula for success. We simply just stepped out of the way and allowed the people to express themselves and do what they do best. Was it not Thomas Jefferson that said,

When the people

fear their government,

there is tyranny;

when the government

fears the people,

there is liberty.

The bedrock of our government is integrity and good governance based on our CAT principles, and through this we are paving the way forward not only for Penang, but also for the rest of Malaysia.

A Penang renaissance

Ladies and gentlemen,

A core attribute of a competitive city is its ability to attract talent. Talent, after all, is the new oil, and in order for oil to be mined successfully, it must be allowed to flow smoothly and unhindered. In other words, human talent requires space in order to express their creativity and cultivate ideas. This is the very essence of renaissance.

Democratic space is therefore key to progress and competitiveness. In this respect, the Penang State Government adopts a culture of freedom, benchmarking ourselves against the “Four Freedoms” as expounded by the great American President and statesman Franklin D. Roosevelt in his 1941 State of the Union address. These are: freedom of speech and expression, freedom of worship, freedom from want, and freedom from fear.

On the first pillar of freedom, there is no doubt that Penang not only allows freedom of speech and expression, but actively encourages it. Just a stone’s throw from here, we have established the country’s first “Speaker’s Corner”. It may just be a simple platform, but it stands symbolically as a milestone of democracy in this country. In Penang, we allow people to speak their minds, and guarantee that not only do they have freedom of speech, they also have freedom after speech.

On freedom of worship, one only has to look around. Besides according Islam its due place as the official religion of our country, this government deeply respects the right of each and every individual to express his or her belief in whichever way they see fit. The recognition of George Town as a UNESCO World Heritage City is a testament of our Penang’s past success, present prospects and future promise.

As for the third pillar, freedom from want, our government has taken a policy approach to ensure the livelihood of our people. It is meaningless if economic prosperity only benefits the rich capitalist class. Growth and development are only numbers if they cannot be translated into a rising tide to lift all boats. If wealth does not trickle down, then we have failed in our responsibility. As the great Mahatma Ghandi once said, “a nation's greatness is measured by how it treats its weakest members”.

In Penang, we eradicated hard-core poverty within a year of taking office. From next year onwards, we have a set a minimum benchmark of RM600 for household income. No family in Penang will earn less. By 2015, we aim to eradicate poverty altogether.

In the current climate of economic uncertainty, low wages and rising inflation, we are extending aid to our people through our welfare programmes, giving RM100 in annual benefits to senior citizens, single mothers and the disabled, RM200 for new-born babies, RM100 for school-going children entering Primary 1 and 4, and Secondary 1 and 4, and RM1,000 to those who are accepted into public universities. In addition, we are also starting the first CAT Dialysis centre in Balik Pulau, where we will provide subsidised dialysis at RM30 per treatment. These are just some of the measures that we have undertaken to ensure that in Penang, there is freedom from want.

Finally, and importantly, Roosevelt talks about freedom from fear. This is a basic foundation for humanity. No citizen of any country should live in fear, much less fear the very institutions that are supposed to protect them. Unfortunately in this country, not only do we lack freedom from fear, it also seems that we live in a climate of fear of freedom.

In July this year, tens of thousands of Malaysians walked the streets of Kuala Lumpur to demand clean, free and fair elections. This peaceful protest was met with violent resistance from the authorities, coupled with the indiscriminate detention of people, some even on the whimsical excuse of wearing yellow! Six were even detained without trial for 28 days under the Emergency Ordinance.

In the aftermath of public anger, the Federal Government appeared to back down, with the Prime Minister promising a host of reforms including the abolishment of the draconian Internal Security Act, which allows for detention without trial, and of which I have been a privileged guest, lifting the Emergency Ordinances, and establishing a Parliamentary Select Committee on electoral reform.

Most recently, a peaceful assembly bill was hurriedly passed in parliament, apparently presented to the world as a piece of progressive legislature. Unfortunately this peaceful assembly bill actually does more harm to civil liberty, because it has now outlawed street protests in toto! Suffice to say, we do not place much hope on the rest of the promised reforms, especially when we have also been told that the Internal Security Act would be replaced by two other acts that will still allow detention without trial.

On this front, Penang has a limited role in the national picture. However, as far as the local situation is concerned, we practise what we preach. Week after week, the disgruntled Opposition organises demonstrations and protests against our government, going so far as to organise not only street protests but even turning the streets of our city into an illegal racing circuit by having a motorcycle demonstration. Despite disrupting traffic and causing congestion all the way to the bridge, there is no question of reacting rashly by banning public protests, unlike our federal counterparts.

And neither will we be cowed. In Penang, we believe in the principles of freedom and democracy, two virtues that will provide the catalytic inspiration for a new renaissance that will catapult us into an international and intelligent city of the future.

Decentralisation

Ladies and gentlemen,

The debate on public policy in Malaysia is one that cannot escape the question of decentralisation. If we agree that cities and regions are increasingly more important as units of governance and economic development, then it follows that there should be less dependence on the central authority.

And this is quite clear if one were to take for example the democratisation process that has occurred in Korea, Taiwan, Indonesia and many other countries, all of which have been accompanied by a devolution of powers from the national government to the city or provincial governments.

Yet in Malaysia, despite being a federation of states, power and authority has been increasingly centralised at the national level. As an example, in 1990, the combined total of all the state budgets made up 25 per cent of the federal budget. Today, it is less than 9 per cent.

In constrast, let us look at the Taiwanese example. Taiwan’s GDP per capita is double that of Malaysia's, yet their national budget is smaller than ours. Taiwan’s national budget for 2012 is RM195 billion whereas Malaysia's is RM 232 billion. However, the Taipei City Government runs on a budget of RM19 billion while the Selangor Government, the largest state in Malaysia, has recently announced a budget of only RM1.6 billion. Kaohsiung, Taiwan’s second city, runs on a budget of RM13 billion whereas the Penang State Government, our country's second state, has a budget of RM750 million. The marked difference is by no means justifiable!

As time goes by, it would appear that even more control is centred around the Federal Executive. This is even happening within the Federal Government itself, which has seen the emasculation of federal ministries with more and more power placed under the Prime Minister's Department, usurping the roles of other ministries. This is happening despite the bold and reformist rhetoric of the New Economic Model, a document that was released by the Federal Government last year, which states that:

“Malaysia is well-governed when government institutions are dynamic, flexible and held accountable to performance-based outcomes. There should be ample opportunities for locally empowered economic ecosystems to operate through appropriate decentralisation of functions and processes.”

We have heard such wonderful rhetoric time and time again. It was the same when we were promised electoral and democratic reforms. And sure enough, it has not been delivered.

The time of National Government knows best is over. Housing, transportation, garbage collection, sewerage, health and even education services should be devolved to the state government. It makes no sense for someone sitting in Putrajaya to be able to understand and comprehend the road and transportation needs of George Town or Butterworth. How can the Federal Government meet the housing needs of the people when land is a state matter?

It is high time for the devolvement of fiscal and political power to the states. If cities are to be catalysts of growth, then they need to be given enough autonomy in order to achieve it.

Conclusion

Ladies and gentlemen,

WE feel that sustainable growth is the way forward for Penang to escape the middle-income trap. We must create new eco-systems or adapt to new ones to connect and reconnect with qualities of hard work, openness, and innovativeness.

Sharing is the watchword to generate a virtuous cycle of innovation and learning rather than secrecy. Material resources are easily depleted when used, but information and knowledge can only grow through application and sharing.

The recent Malaysia Economic Monitor report by the World Bank reinforces the concept of cities as engines of growth. We fully agree, and intend to move forward within this framework. The challenge for Penang in this regard, is how we balance urban development with sustainability, in our bid to create an international and intelligent eco-city of the future.

To achieve such a goal is not an easy task. For good governance to be effective, for economic development and democratisation to benefit everyone, and for decentralisation to materialise, we require not only political will and imaginative ideas, but also cogent policies in order to translate these ideas into reality. In other words, we need ideas, and we need to make them work. Hence the new tagline of our institute: "making ideas work". That in a nutshell, is the role of the Penang Institute, which we are here to celebrate today.

As some of you may know, the Penang Institute was formed in 1997 as the Socio-economic and Environmental Research Institute, or SERI. After my appointment as Chairman of the Board in June 2011, we decided to change the name of the institute to the Penang Institute on 1st August 2011 to reflect not only a stronger identity with our beloved state, but also to signal our aspiration to make Penang an important intellectual centre of an ever more important Asia.

The State Government has also committed to allocate a significantly larger amount of funds for the Penang Institute in order to achieve its ambition of fostering ideas for the continued improvement of Penang and beyond.

Towards this end, I would like to take this opportunity to announce that Professor Datuk Dr. Woo Wing Thye, Professor at the University of California at Davis and Senior Fellow of the renowned Brookings Institute, will be leading the Penang Institute from March 2012 onwards as its Executive Director. For Penang, Professor Woo's return to lead the Penang Institute is akin to the grand doyen of Chinese literature and diplomacy, Huh Shih's return as President of the Academia Sinica in 1958.

Professor Woo will be taking over from YB Liew Chin Tong, who has devoted two years of his time in that position and three years on the Board. I trust Professor Woo Wing Thye will bring it to the greater heights.

Thank you.

Ladies and gentlemen, may I present to you, the Penang Institute.

* This is the text of the keynote address by the Chief Minister of Penang, YAB Lim Guan Eng at the inauguration of the Penang Institute, 9 December 2011

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