Penang new wave Part 2: Learn from Korean rebranding

华商与经济转型系列71——槟城经济新浪潮（下）：学习韩国重塑品牌

夏伟文 & 陈薛卉

Service sector is an important engine of growth for many countries including Malaysia. However, to make a wave out of Penang’s service sector, rebranding is needed. Recently, none has done global branding in such spectacular style than South Korea. Thus, their Korean Wave success can be a good model for the making of Penang Wave.

Korea Wave swept the world but it is not by coincident or luck. Started in the 1970s, the wave focused on export and industrialization which see industrial products of Samsung, LG and Hyundai marketed successfully across the world. After this first wave fading fast since 2006, their Ministry of Cultural, Sport and Tourism invested US$216 million to rejuvenate Korean Wave by transforming traditional Korean culture (jeontong munhwa) into global “cultural industry”. Six aspects are developed, namely language (Hangeul), food (Hansik), cloth (Hanbok), house (Hanok), mulberry paper (Hanji) and music (Hanguk Eumak).

Two Lessons from Korean Wave

Lesson for us is that first, monetary investment and very serious effort are needed for great success. In term of monetary investment, state and federal government need to cooperate. The US$216 million South Korea spent is equivalent to about RM654 million at an estimated exchange rate of RM3.03/US$. Yet, this is merely 1.4% of an estimate of RM46 455 million of Penang’s Gross Domestic Product (GDP) in 2010.

Another Korean Wave strategy is making “Korea” itself as a brand. Previously, Malaysia Incorporated Policy has tried to brand the country as a “private corporation with efficiency and friendly to other private companies”. Besides that, branding the country is limited to tourism. Latest tourism branding carries the theme of “Malaysia, Truly Asia”. However, promotional efforts are commonly assigned to tourism related agencies only. Meanwhile, Korean Wave branding covers much wider aspects where their citizens, companies and embassies in foreign countries collectively act as their “brand ambassador”. These are good branding model that Penang or Malaysia should follow.

Penang’s manufacturing ranged from packed food and canned beverages to furniture, uniform, steel, elevator, cable, machinery and electronic products. Among top well known international companies at Penang are Dell, Intel, Motorola, Agilent, Bosch and Seagate. All these manufacturing products and international companies can play their roles to promote “Penang-brand” through their product label display, websites, marketing and other ways. Thus, their exports also help do promotion for variety aspects of Penang service industry from tourism to hotel, retail, financial and other services. Therefore, a Penang Freeport will create a tax-free heaven to booths export-import of manufacturing and services as well as marketing Penang as a “global brand”.

Second lesson is that not all but selective aspects of service sector needed to be identified for global branding. South Korea has identified only six aspects of their culture to be developed and industrialized. Malaysia can select its potential service sector using the four quadrant diagram analysis. Nonetheless, data from Statistical Department of Malaysia is not in detail. It broadly categorizes Penang’s service industry into only five sub-sectors only as compare to Bank Negara Malaysia’s more detail categorization of Malaysia service industry into nine sub-sectors. This is a limitation to our analysis and thus, choice of potential service sub-sectors.

Figure 1: Penang’s Service Sub-sectors Annual Growth vs. Share to GDP for Year 2010

Source: Statistical Department of Malaysia

Notes: (a) is “utilities, transport, storage & communication”, (b) is “wholesale & retail trade, accommodation and restaurants”, (c) is “finance, insurance, real estate and business services”, (d) is “other services”, and (e) “government services”.

Figure 1 shows that “Wholesale & Retail Trade, Accommodation and Restaurants” sub-sector has relative high annual growth and high share to GDP, thus is a “superstar” in service sector. Thus, priority should be put at that sub-sector. Besides, Penang has a “rising stars” of high growth but not yet contribute highly to GDP located in the top left quadrant. It is the “Finance, Insurance, Real Estate and Business Services” sub-sector. Thus, these two sub-sectors have potential but we will focus on the former. The quadrant analysis is consistent even though outlier point (government service) is deleted. Refining the broad categorization of service sector, Penang Wave could focus on the following areas.

Wholesale and Retail

At national level, ETP has identified 13 Entry Point Projects (EPP) planned for this sub-sectors. Yet, it is surprising that Northern Corridor Economic Region (NCER) blueprint did not have a stand out chapter or strategic plan for wholesale and retail service specific to northern states including Penang. This service sub-sector merely included as small part in tourism despite number of employed person in this industry category is highest among service sub-sector in Penang at 122.2 thousand people. Its output value is second highest.

In term of wholesale, Penang has the well known Macallum Street Wholesale Market that sells in bulk particularly food items as well as clothing and others. In retailing, among biggest shopping centers are Queensbay Mall, Straits Quay, Gurney Plaza, Paragon Mall and Prangin Mall. Other unique and popular shopping destinations include Batu Feringhi Night Market, Chowrasta Bazaar, Little Penang Street Market, Penang Batik Factory, Auto-City, Komtar, One-Stop Midlands Park Centre.

A tax free zone for Penang will drive down the price of many items sold at these places, thus decreasing cost of living for the locals and creating attraction for the tourists. Unfortunately, there is no empirical result done on the specific impact of tax abolishment to Penang’s social economy. Nonetheless, Freeport area is compatible with Economic Transformation Program (ETP) on tourism. Its first Entry Point Projects (EPP1) aims to position Malaysia as a duty-free shopping destination for tourist goods. While EPP2 and EPP3 respectively plans to designated KLCC-Bukit Bintang as vibrant shopping precinct and establishment of premium outlet at Johor, the same can be applied to Penang such as Gurney area and the classy shopping center of Straits Quay.

Tourism, Restaurant and Local Food

Strengthening tourism is one of the two trusts specific for services aspect. Targeted main types of tourism are world class resorts and spas, long-stay vacation and medical tourism. Key performance indexes (KPIs) for NCER to be achieved by 2020 are RM5214 average spending per visitor and annual expenditure on medical tourism at RM712million. UNESCO heritage status and medical cost advantage over Singapore are seen as Penang’s strength. However, in the micro level, a combination of Penang Port, cruise and local foods could be as important. 

Completion of new Swettenham Pier Cruise Terminal in November 2009 enables large cruise vessels with more than 2000 passengers. According to Penang Port 2011 Annual Report, the terminal has recorded the arrival of luxury ocean liner Queen Elizabeth, Clipper Odyssey and Seabourne Sojourn on their maiden voyage while Logos Hope had a floating book fair in 2011. In the same year, Penang Port also transported 1.92 million of pedestrian passengers, 1.47 million motorcycles and 0.91 million cars.

Role of local foods as tourist attraction should not be ridiculed. A research in 2006 by Ministry of Cultural Korea revealed that 50% of tourists in South Korea choose Korean foods as their main reason to visit the country. Korea Trade-Investment Agency estimated Korean food market worth US$45.7 million in 2012. Their kimchi and bibimbap have won numerous of prestige international awards.

Penang certainly does not lack of specialties in food. Among famous and unique local foods include fried kuey teow Penang-style, laksa, Tambun seafood and prawn mee (known as “Hokkien mee” in Penang). However, can these local cuisines be as successful as the Korean foods?

Conclusion

Korean Wave is a very successful global branding. Perhaps, more research should be done to reveal its secret and applicability to Malaysian context or specifically into making of a Penang Wave. Taping the local tourism attractions (seaside, food and shopping), possible advantages from a Freeport as well as incentive and efforts from ETP and NCER, Penang Wave could uplift the social economy of this Pearl of Orient state.

[Chinese version published at Nanyang Press, 28th January 2013. Available online at http://www.nanyang.com/node/529486. This English version may be slightly different from the Chinese/ newspaper version]