Wednesday, February 8, 2012

The "bouncy" state of Penang

Folks remember this speech?

Penang Bounces Back With Bosch Solar’s RM2.2 Billion in Renewable Energy Plant at Batu Kawan Speech by YAB Tuan Lim Guan Eng, Chief Minister of Penang at Press Conference on Friday, June 24, 12 noon – 1 p.m. at Komtar, Penang Good afternoon, Penang achieves another milestone in the State’s history by landing the first fully integrated crystalline photovoltaic (PV) facility in the country.We are indeed very proud to be chosen as the location for Bosch Solar Energy because the competition was intense in that Penang had to compete with potential sites within and outside Malaysia, including manufacturing superpowers like China.

I was informed that Bosch Solar Energy initially explored and analysed forty-five (45) sites in twenty-three (23) countries. In Malaysia itself, Bosch evaluated over 10 sites. Bosch’s investment of RM2.2 billion is the first PV investment for Penang. The ground breaking ceremony for the intended site will be in September to October time frame this year while construction of the new facility is expected to start in December this year to ensure production to be fully ramped up by the end of 2013.

Bosch has quoted that Penang’s attributes that made it their choice location are the availability of a strong supply chain, excellent electrical & electronics clustering, good infrastructure support and strategic location of Batu Kawan, talented human capital, a livable city and a pro-business and pro-active government. As a world class industrial park, Batu Kawan has been assessed to meet the infrastructural requirements for industries, including PV, on energy, water and connectivity.

We ask ourselves how this investment can benefit Penang. Bosch Solar Energy’s operations in Penang are expected to further develop local suppliers of services and indirect materials, especially in the areas of consumables / replacement parts and components as well as automation As a fully integrated crystalline PV facility, Bosch’s manufacturing plant will encompass the entire process of crystalline PV manufacturing, i.e. from ingot growing, to wafer cutting, to cell manufacturing and finally to module manufacturing.

This new investment by Bosch will generate 2,000 new jobs, which will open up opportunities for our local human resource to be trained in various aspects of crystalline PV production. I understand that the skill sets required for manufacturing PV are similar to the skills needed by the semiconductor industry to fabricate and process silicon wafers. Penang, with its four decades of experience in the electronics industry has the talents to meet the skill sets required by Bosch, especially its human capital who are or have been involved in wafer fabrication lines in multinational corporations’ overseas facilities.

After nine (9) months of intensive evaluation with investPenang and PDC, the Board of Directors of Bosch Solar Energy has decided to locate their first offshore manufacturing facility for their crystalline photovoltaic (PV) business unit in Batu Kawan, Penang. Presently, Bosch’s crystalline PV production is in Arnstadt, Germany and Penang’s facility will be their second world site. When Bosch Solar Energy’s plant is running on full production capacity, it is anticipated to further facilitate Malaysia’s aspiration of becoming the second (2nd) largest producer of solar cells in the world in 2020, increasing its market share to 17%, after China.

We ask ourselves how PV production will benefit Penang. As an eco-friendly State, we fully support solar energy deployment that offers a sustainable pollution-free alternative to other energy sources such as fossil fuels like coal, gas and oil as well as nuclear. This will definitely help to reduce world’s carbon footprint and help propel Penang’s effort to be the first green state in Malaysia. Penang is grateful to have this opportunity to have a prestigious working relationship with Bosch.

A special project team will be formed, headed by myself and coordinated by investPenang to work with Bosch to ensure complete execution to facilitate and support Bosch Solar Energy’s project in Penang. Penang's success in attracting Bosch's PV RM2.2 billion investments in solar energy is an industrial milestone for Penang. Penang was left out of substantial investments in solar and renewable energy (RE) since the first investments flowed in 10 years ago. The failure to snare any RE investments was a big disadvantage and drawback as most companies in RE would want to go to states with existing industries, know-how and advantages.

Penang's efforts to claw back this drawback has finally borne fruit after sustained effort from the InvestPenang, PDC and the CM's office. We also wish to thank Tenaga Nasional Bhd and also MIDA for their close co-operation and also complementing our role. With this major success in attracting a world-played in the RE like Bosch, Penang is poised to be a small hub for RE. The Penang state government has made strenuous efforts to both diversify and multiply the types of industry in Penang apart from our world-famous electronic and electrical cluster. Over the past 3 years, Penang has had successes in attracting the aerospace, LED lighting, medical devices and bio-tech industry. This new RE industry will only add leverage and depth to Penang's attractiveness as a location of choice for high-tech, high-value added and green industries. Thank you. LIM GUAN ENG here

In the Proofyness post (here) I quoted a paper on FDI impact

"Although there is a widespread belief among policymakers that FDI generates positive productivity externalities for host countries, the empirical evidence fails to confirm this belief. In the particular case of developing countries, both the micro and macro empirical literatures consistently finds either no effect of FDI on host countries firms productivity and/or aggregate growth or negative effects" Source : FDI Impact to Economic Growth Harvard University Research paper (here)

Foreign money comes and goes.

Their investment decision is dictated by so many factors typically evaluated in their Regional or Head Office.

In the case of Malaysia, most of the policy level incentives are controlled at the Federal level by MIDA, state government have very little incentives that they can offer (perhaps faster processing of building permits maybe)

The Penang industrial cluster has been developed far longer than the CAT government...

Let us relook at the "Complementing our Role" statement above

Media Statement : by Minister Of International Trade And Industry, Malaysia, RM2.2 Billion And 2000 Jobs In The Pipeline Dato' Sri Mustapa Mohamed welcomes Bosch's new investment

On 22 June 2011, Bosch Solar Energy AG announced its plan to setup a photovoltaic manufacturing plant in Penang. This will be a fully integrated manufacturing facility for monocrystalline solar cell manufacturing – comprising ingot, wafer, cells and modules. The investment is valued at RM2.2 billion and, upon completion of the facility in 2014, the company will create 2000 new jobs. I am pleased with this new development and welcome the announcement by Bosch. This, in essence, reflects the confidence investors have in the Malaysian economy.

I also welcome the fact that the company recognizes Malaysia's ability to offer a pool of highly skilled and qualified workers capable of undertaking high value manufacturing in the electrical and electronics industry. The early discussions regarding this proposed investment between Bosch and senior officials of MIDA were held in Malaysia and Singapore last year. Subsequently, the company presented its full proposal during my investment mission to Germany in March 2011. This proposal was considered by my Ministry and an agreement on a special incentive package for the company was approved on 22 June 2011. German companies have been one of Malaysia's major sources of foreign investment. As at 31 December 2010, the amount of realized investment in Malaysia totaled RM18.3 billion spread over 339 projects. Most of these investments are in the electrical and electronic industry, chemicals and petroleum products, machinery and equipment. This investment decision by Bosch adds to this illustrious list of high value projects which we in Malaysia warmly welcome.

Robert Bosch began its presence in Malaysia in 1923 as a trader, and began manufacturing activities in Penang in 1977. The group now has four companies undertaking sales, distribution and manufacturing activities. Last year, the Bosch group in Malaysia generated sales of Euro130 million and employed 2,300 people. This decision by the Bosch group to invest in this photovoltaic plant is particularly welcome because it is in tandem with Malaysia's plan to engage more actively in high value, technology intensive industries in industries related to new and renewable energy, pharmaceuticals, biotechnology, nanotechnology and advanced machinery and equipment.

We have already been successful in attracting a number of other leading solar photovoltaic manufacturers who have located their operations here.Total investment approved for the solar photovoltaic industry as at March 2011 was RM14.3 billion. Malaysia is currently ranked 5 th in the world in terms of solar megawatt output, and we expect it will not be too long before we will be positioned 3 rd in this ranking. The presence of Bosch will indeed help to spur the development of the solar energy industry in Malaysia. Malaysia's foreign direct investment in 2010 totaled RM29.3 billion. In the first quarter of this year, FDI topped RM11 billion. Based on current developments, I'm confident that Malaysia's FDI will exceed RM30 billion this year. I like to reiterate once again our pleasure in welcoming this decision by Bosch for choosing Malaysia after having considered various other locations. I wish the company many successful years ahead. Minister's Office Ministry of International Trade and Industry Kuala Lumpur, Malaysia 23 June 2011 Source here

So today I wonder what Mr Proofy will say about this news

Bosch freezes Penang solar plant By Yow Hong Chieh February 08, 2012 Solar panels are seen in a farm near Castelbuono, Italy, September 28, 2009. — Reuters pic KUALA LUMPUR, Feb 8 — Leading German engineering firm Robert Bosch GmbH postponed its €520 million (RM2.05 billion) Penang solar panel plant’s construction, which would have been the company’s largest, due to cost pressures. Solar energy division chief Siegfried Dais told the Frankfurter Allgemeine Zeitung yesterday that the company will need to “reorient” itself technically as it wanted to be among those making a profit from the industry.

“If you invest too early, you run the risk of possibly settling for a less advantageous technology path,” the German national daily quoted him as saying in an advance interview excerpt. Construction of the plant in Batu Kawan, Penang, which has a capacity of 640MW per year, was scheduled to begin at the end of last year, with production to start in 2013. Bosch’s decision to hold off on the fully-integrated manufacturing plant, which would have served its ASEAN operations, comes after the firm missed profitability targets last year as special charges ate into earnings. here
Over to you Mr CM since you are the Head of a Special team
"A special project team will be formed, headed by myself and coordinated by investPenang to work with Bosch to ensure complete execution to facilitate and support Bosch Solar Energy’s project in Penang"

Tell us how this would affect 2000 jobs expected to be created?

Tell us how this would affect the supporting industry?

I still wonder if Bosch actually quoted all the things that you said in your speech one day after the announcement by MIDA?

Pro-Business and Pro-Active Government?
Which Government?

They have been around since 1923 in Malaysia and since 1977 in Penang.....

You expect me to believe that your "sustained efforts" lead to this ?

This is Bosch actual official statement on June 22nd
Malaysia offers good conditions
The solar industry refers to the part of the world Malaysia is located in as the sun belt, as the level of solar radiation in countries located between the 35 th parallels of the northern and southern hemispheres is twice as high as in Germany. Market growth is expected to be particularly strong in this region. Moreover, Malaysia offers a qualified workforce in the fields of electronics and semiconductors as well as a good local infrastructure. The country's reliable power supply is also decisive, particularly since this is indispensable for the challenging and sensitive production processes in the field of photovoltaics. Bosch has been present in Malaysia since 1923The company is already quite familiar with the favorable conditions offered in Penang. With a workforce of 1,100 associates, Bosch Power Tools manufactures cordless drill/drivers, drills and measuring instruments there. Moreover, with 600 associates, the Car Multimedia division manufactures car radios and navigation devices in Malaysia. In 2010, Bosch generated sales of 130 million euros in Malaysia, and counted 2,300 associates in the country. here

Minds are like parachutes; they work best when open. -Lord Thomas Dewer