Penang: Getting back its mojo

After a slump, an early engine of globalisation is thriving again

IF YOU are going to have a heart attack, have it in Penang. So one might think, to the see the hospitals in George Town, the capital of this north-western Malaysian state. Patients are flocking in. Ted Mohr, the head of the venerable Penang Adventist Hospital says that he will admit 70,000 medical tourists this year. The hospital specialises in heart procedures and it will perform roughly 23,000 of them this year, including 550 open-heart operations. Such is the demand that the hospital is doubling its number of beds.

Mr Mohr gives two main reasons for Penang’s success with the coronary crowd. First, it is relatively cheap. Open-heart surgery that would set you back $100,000 in America costs only about $10,000 in Penang. Second, Penang’s hospitals are as well-equipped as many in the West.

The combination of low cost and high technology is the main reason why industries across the state of Penang, made up of the original island and a larger bit of the mainland, are prospering again after more than a decade of decline. Their revival is important to Malaysia’s economy—Penang and the surrounding region account for 21% of the country’s GDP. But the renaissance could also have important political consequences for the country. Since 2008 Penang has been one of only four states (out of 13) run by an opposition party. If its politicians can claim the credit for the recent success, that should greatly help the opposition in the next general election, expected within the year.

Penang was founded as a free port by the British in 1786. Occupying a position between India and East Asia, the island drew merchants and middlemen keen to make their fortunes. Chinese, Indians, Armenians, Arabs and more all traded alongside each other. With its racial and religious mix, and dedication to the pursuit of free trade, Penang was in many ways the first custom-made city of globalisation.

The island’s fortunes sank as it lost business to its arch-rival, Singapore. In the post-colonial period Penang fell victim to the rise of nationalism. The region’s freshly minted republics chose to develop their own ports. Penang enjoyed a revival during the 1970s with the setting-up of Malaysia’s first free-trade zone (a “free port” by another name); this attracted big names in electronics, like Intel and Bosch, which built some of the first offshore assembly lines. But this boom was founded on cheap labour, and as Malaysia became richer other emerging economies, such as China and Vietnam, drew the assembly work away.

To recover its prosperity, Penang has sought to reinvent itself. With the rise of India and China, Penang’s location again looks very handy to foreign companies as a place to invest, as in the 18th century. It is relatively close to both big markets—yet offers advantages that trump Asia’s giants’.

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