Penang’s Chief Minister on Turning a Rich History Into a Dynamic Future

If, as the Greek philosopher Heraclitus posited, “the only constant in life is change,” then it follows that reinvention is the key to success. Few places have embraced this truth as fulsomely as Penang, the island-state nestled off peninsular Malaysia’s west coast that was synonymous with betel trees before the late 18^th century arrival of British colonizers heralded a new dawn as a flourishing trading post.

Over the decades, competition with freewheeling Singapore spurred Penang to refocus on tourism, services, and manufacturing, particularly backend semiconductor assembly and testing. Today, simmering trade and technology rivalry between the U.S. and China have contributed to another transformation for the city-state of 1.7 million: Penang attracted $12.8 billion in foreign direct investment in 2023 as tech companies across North America, Europe, and Greater China sought to “friendshore” operations, allowing Penang to move up the technology value chain.

Chow Kon Yeow, a former journalist who has served as Penang’s Chief Minister since 2018, has been key to harnessing this revival and ensuring that the island keeps evolving. Under his watch, Penang has developed a thriving medical tourism industry and has a burgeoning reputation for quality education, as well as a start-up hub. 

Challenges remain, of course; traffic is increasingly gridlocked, the climate crisis threatens low-lying coastal areas, and the influx of foreign cash and talent is causing grumbles among local people who feel priced out of the boom. Currently in his second and final term, Chow speaks to TIME about his ongoing efforts to turn Penang’s rich history into a rosy future.

This interview has been condensed and edited for clarity.

Penang's economy grew by 13.1% in 2022 and today your state is Malaysia’s top exporter. But how do you ensure recent economic success benefits all of Penang’s people?

The fruits of economic development must be shared by all citizens. MNCs [multinational corporations] typically benefit from 15-year tax holiday incentives and so the state government actually does not get a lot from MNCs in terms of tax revenues. It is employment opportunities and the catalytic impact of industrial development that can drive development in the commercial, residential, and leisure sectors, as well as all other social amenities and facilities.

That also helps uplift our infrastructure. We face a [infrastructure] bottleneck as we attract more investment. It also nurtures our small and medium-sized industry, because we have a strong ecosystem here; there are probably 350 MNCs in our industrial parks, but they need to be supported by local industry as well. So, the spillover effect is we get many thousands of small and medium enterprises in the supply chain. That will also impact the local economy and create more job opportunities.

Penang has long been an important hub for the manufacture and processing of microprocessors and is now moving up the value chain. How do you plan to capitalize on this key industry against the background of rising geopolitical tensions?

Because we are moving into hi-tech, high-value industries, the need for engineers and professionals must have more emphasis. So we are developing our talent pool to seize the opportunity for higher paying jobs.

For the past 50 years, we have been an important manufacturing hub in Malaysia, and current geopolitical tensions—“China Plus One,” and all these disruptions to the supply chain—opens a lot of opportunities for us. Suddenly we received a surge of interest. So, we need to ensure that we put in resources to benefit from the increased investment.

We are Malaysia’s second smallest state, so we need to also draw talent to come to work here from other parts of the country. That means other things are important: a liveable environment, sustainability, a good transport system. All this is, of course, a work in progress; I cannot say we are really there. Teething problems need to be resolved, talent developed, and also an emphasis on social welfare programs.

Given your low-lying island topography, Penang is also at the frontline of the climate crisis. How are you installing climate resilience into infrastructure?

We recognise that we are prone to flooding and in the mainland [section of the state of Penang] the local council has increased the platform of areas [for development] by around one meter [to mitigate the effects].

We also have the Penang Nature-Based Climate Adaptation Program, for which we received $10 million from the World Bank, for a pilot project implementing tree-lined streets, pocket parks, greening car parks, greening buildings, urban agriculture, stormwater management, a social resilient program, and institutional capacity empowerment. In conjunction with Earth Day on [April 22], Penang planted 1.2 million trees, setting a new Malaysian record. We lead the country in terms of environment [policy], we want to be a green state, we have a green agenda. But of course, the test is in implementation, getting funding and all that.

Two or three years back we started pushing this ESG [environmental, social, and governance] agenda in particular for local small and medium [enterprises]. I'm not worried about the MNCs, as I think they are embracing it, but one day ESG compliance will be a condition for us to be considered into their supply chain. If our local industry does not take measures to be ESG compliant, we may find ourselves left out of supply chains, then we will lose jobs, we will lose business opportunities. So it is challenging but we have to start working on this area.

In addition to big tech firms, Penang is fast becoming a hub for both medical tourism and international schools. How do you plan to further expand these sectors?

In the early days, Penang was probably more famous for the sun, the beach, and our hawker food. But for the past 20 years medical tourism has featured very prominently because of our many private hospitals. Across Malaysia, Penang captures about 50% of all medical tourism dollars thanks to competitive [pricing] and good reviews. And still new facilities and hospitals are coming in. Our biggest customer base comes from Indonesia thanks to direct flights.

For international schools, I don’t think we are on the same level as Kuala Lumpur. But we have quite a number here and that is also attracting investors; when they want to relocate to a country or city, they will look at schools, housing facilities and social amenities, safety, public transport. For employees to be comfortable—their children, their wives, for them to be involved socially—schools are important as well.

George Town received UNESCO World Heritage site designation in 2008. Today, the city’s iconic shophouses are as much a draw for tourists as your palm-fringed beaches. How important was the UNESCO recognition to kick-start Penang’s cultural and business renaissance?

It didn't create much impact or interest for probably two or three years. In fact, property owners and developers saw strict heritage guidelines as a hindrance to development. In addition, we were also struggling with a lot of people turning their shophouses into farms for swiftlet bird nests [which are prized in traditional Chinese cuisine]. When you convert dwellings for bird nests, no human beings can stay inside, hollowing out the population.

We managed to control the problem with regulation, enforcement, and education to stop people playing music and renovating buildings to attract swiftlets. Then interest increased when suddenly the property prices became such that people recognised there is a value in heritage buildings. Today, we are very happy that we have been given this much attention.

The recognition of George Town as one of the most special places on Earth has encouraged us to continue empowering the multicultural community who work, live, use and visit the city. As a melting pot, Penang has always been home to people of diverse cultural, religious, and ethnic backgrounds. We even have a program to offer grants for property owners to refurbish their shophouses on condition that they allow tenants to stay afterwards on subsidized rent.

The Penang South Island (PSI) reclamation project has been controversial for its environmental impact and was recently reduced in scale from three islands to just one. Are you still confident that it will prove a success?

The plan was to reclaim three islands and use proceeds from land sales to partly support public transport projects like the Light Rail Transit (LRT). By concentrating our efforts on Silicon Island, we are poised to create a dynamic ecosystem that not only attracts investment but also nurtures local talent and spurs job creation.

Of course, [with] reclamation on such a scale—a total of 4,500 acres [now reduced to 2,300]—we have to deal with the local fisherman community. We never denied the fact that any reclamation project brings about environmental impact. The question and challenge is how to mitigate it.

We want fishing to continue so we offered to give them boats with high-power motor engines, so that they can go further out to the sea. Already, 96% of local fishermen have registered for the project’s social impact management plan to facilitate compensation. And if you look at [a news article in] The Star, the fishermen are very happy because they have doubled their catch, in fact, because the reclamation shelters [fishing grounds] from stronger waves.

Penang is seeing an influx of foreign money, particularly in the property sector. How do you balance the economic benefits with potential negative effects on local people such as inflation?

We welcome foreign money, particularly in the form of foreign direct investments, tourism spending, property investments, and expat living. These signify increased economic activity and growth opportunities. We firmly believe that restrictive measures in these areas are counterproductive. Instead, the key lies in enhancing the wages and productivity of our workforce, enabling them to enjoy a higher quality of life and to have greater purchasing power.

We have a policy to provide 220,000 housing units until 2030, with low pricing to cater to the local population and a much higher category for the open market. Foreigners have a restriction that they can only purchase property over 1 million ringgits [$214,000]. Most likely, local people will not be looking at property at that price level, so we are not taking away houses from the community.

For foreign citizens like those from Hong Kong, Taiwan, China or Singapore, property is still relatively affordable. And the private sector also needs these transactions.

The Mutiara LRT Line is due to finally begin construction this year. You first championed the project back in 2015 though it has remained stalled. How effective will this be to curb Penang’s increasingly clogged traffic?

Now that the federal government has committed to it, we [the state government] have limited power. But what was unexpected is the announcement to directly implement the cross-channel link to Butterworth [a port city on the mainland]. A project of such scale will take many years and there will be fine-tuning along the way. People are waiting for a long time now so kicking off the project as announced, in the third or final quarter of this year, would be something that we look forward to.

A single line LRT would not [solve Penang’s traffic problems]. But one line is necessary to start the network. The Penang Transport Master Plan has the first line as the backbone with future lines that connect to each other.

Your Penang2030 scheme includes a plan to modernize and diversify sustainable agriculture. Given recent global challenges, how important is it to engender food security at a local level?

Penang's agricultural sector, covering [over 100,000 acres], is crucial to our food security. COVID-19 reminded us of that. Within this sector, fisheries accounts for a significant 39% of the output, surpassing both crop production at 31% and livestock at 29%. A standout statistic is Penang's rice production, which has achieved Malaysia’s highest productivity per acre since 2018.

However, challenges such as water shortages, agricultural land conversion, and overfishing demand attention. Solutions are being implemented, including Agriculture 4.0 innovations, eco-friendlier fishing practices, and a push towards green aquaculture, bolstered by a proposed Aquaculture Seed Hub for research in this field.