Penang as an ‘entrepreneurial state’

IN a speech at the Blavatnik School of Government, Oxford University, Chief Minister Lim Guan Eng shared with the Masters in Public Policy (MPP) students his experiences leading the state over the past seven years and in particular some thoughts on how his administration put in place an “entrepreneurial state” in order to achieve the status of a high income economy through inclusive growth.
“Though the second smallest state in Malaysia, with no natural resources, Penang has progressed to achieve high-income economy status through good governance, rule of law, integrity in leadership and sheer human talent,” he said.
However, Lim explained that the drop in the ringgit value due to extraneous factors such as the 1MDB RM42 billion financial scandals on world currency markets, makes Penang technically not a high-income economy this year.
“Instead of RM40,841 as the benchmark to achieve high-income status, the drop in the ringgit means that the benchmark has been increased to RM50,000. Of course should the value of the ringgit recover, hopefully by next year when all the political and financial scandals are resolved, then Penang can be restored to our rightful status as a high-income economy.” He added.
Commenting on the term “entrepreneurial state”, which is associated with well-known economist Mariana Mazzucato, Lim said Penang is shaping a progressive economic policy that is investment-led, inclusive, and sustainable to create wealth through a public-private partnership that drives long-term growth and productivity.
“In many respects Penang is an entrepreneurial state except that we do not believe in becoming involved in market outcomes, especially competing with business in accordance with our mantra of ‘the business of government is not to get into business’,” he added.
This is a strong counterpoint to the current mainstream thinking that those who govern best govern least and let the private sector do its job.
Giving an example, Lim cited the RM1.2 billion fishing industry which benefited from reinventing government
“It would surprise you to learn that this industry grew from basically nothing in 2008 to a RM1.2 billion (180 million pounds) industry seven years later!  Much as I would love to claim credit, this amazing transformation was done without spending a single penny but merely dependent on reinventing government.
“The previous government benefitted its cronies with one or two chosen individuals being given thousands of hectares of sea, which they then sub-let to genuine operators under the classic rentier system. This is described by some as predatory capitalism,” he added.
Lim also spoke on Penang’s low unemployment rate, being consistently rated one of the most liveable cities in Asia – the 8th in Asia according to ECA International and of course the most liveable in Malaysia.
“We have the best street food in the world. We have a Unesco World Heritage site in George Town. We are committed to making Penang the first bicycle and green state in Malaysia en route to being the premier destination to invest, learn, work, play and eat,” he added.

“ The present debt crisis have shown that income inequality cannot be solved by free markets. Free markets are said to be better than the state in provision of goods and services except a pro-market ‘rule of law’.
“However, investment on public goods such as infrastructure, basic social services, research and development, innovative technologies can only be done by the ‘entrepreneurial state’, provided that the state exits at the earliest opportune moment to prevent undue interference.
“We are still learning to grapple about when to exit so as not to throw good money after bad or divert resources for other worthwhile ventures,” he said.
In conclusion, Lim invited the MPP students to Penang to see for themselves what the state has achieved.
Lim’s invitation to speak at Oxford University was made possible by CIMB chief, Datuk Seri Nazir Razak.