Malaysians call it Silicon Island. Once a sleepy tropical outpost of the British empire, Penang boasts nearly 700 factories owned and operated by a who's who of global electronics players, from Dell Computer (
DELL) to Intel (
INTC) to Sony (
SNE) to Seagate Technology (
SEG). Its tidy
industrial parks have generated jobs for nearly 200,000 people and have spearheaded the country's phenomenal export-led growth.
For those who doubt that globalization can transform poor nations, there's no better example than Malaysia's two-decade ascent. Its economy, which used to rely on fickle commodities such as tin and palm oil, is now powered by high-tech electronics.
True, Malaysia was clobbered along with the rest of Southeast Asia in the 1997 financial shock, and Prime Minister Mahathir Mohamad has been one of global capitalism's feistiest critics. But make no mistake: Malaysia's success as a multinational production base is the biggest reason that it has been able to ride out the storm better than most of its neighbors. And with real annual wages of $4,500--a 309% increase since 1973--Malaysia's workers still make it into the global middle class.
As with many other East Asian nations in the past three decades, Malaysia's development has been underpinned by good educational standards, high savings rates, sound economic policies, and a relatively fair distribution of wealth, which has allowed average citizens to own their own homes. But what really separates Malaysia from its struggling counterparts in other regions is the smart, business-friendly policies of local governments. In Penang's case, perhaps most important has been its strategy of constantly upgrading the skills of its labor force through partnerships with multinationals. That has enabled the island to achieve impressive productivity gains as well as huge hikes in income.
As a result, Penang's foreign-owned plants are filled with workers such as Anchale Ahilandam. In 1972, when she was 20, Anchale began work as a die inspector earning 80 cents a day at Intel Corp.'s semiconductor plant. She has been working her way up ever since. Today, Anchale is an administrator in the engineering order-change department at Intel's sprawling 5,500-worker campus. She drives to work in her own car, is buying a second apartment, and has taken several holidays in India.
Thousands of Penang workers such as Anchale have benefited from managerial and technical training provided by their companies and by the Penang Skills Development Center, a well-funded training institute run by the local government with the help of German, U.S., and Japanese multinationals. The center was a key facet of Penang's shrewd move in the late 1980s from simple assembly to more sophisticated, higher-margin operations. That's when other low-cost manufacturing centers, such as China and Thailand, began competing vigorously for investment--and the city began running low on skilled labor. ''We had no other natural resource to fall back on,'' says Penang Chief Minister Koh Tsu Koon.
Officials asked companies such as Intel, Hewlett-Packard (
HWP), and Robert Bosch Group to help it tailor training programs to their needs. The companies obliged by donating equipment for laboratories and machine shops and helping to design curriculums. Since the center opened in 1989, it has trained more than 60,000 students and continually revises its courses to keep pace with changes in technology. The skilled labor force has encouraged many investors in Penang to plow new cash into its industrial parks, including more than $2.5 billion since the mid-1997 financial crash.
Today, students at the center are learning about radio-wave technology, which is used for wireless phones and Web access. That's just the kind of foresight that is needed to prepare for future shifts in the global economy.
Copyright 2005, by The McGraw-Hill Companies Inc. All rights reserved.