Chuping Valley Development Plan
         The world’s supply of fossil fuels is expected to run out by 2088
         (Figure 4.5); at which point alternate resources will have to be relied
         upon. The continued depletion of fossil fuels has increased the need
         for nations to shift towards a ‘Green Economy’; defined as an
         economy that results in improved human well-being and social equity,
         while significantly reducing environmental risks and ecological
         scarcities6. Various countries have already made strides to try and
         achieve this. Green stimulus packages7 have been implemented in
         South Korea, China, Denmark, Germany and the USA to support
         ‘Green Economy’ development, having resulted in increased
         employment in new Green sectors, and the establishment of a
         competitive advantage; with these countries being seen as global
         leaders with regards to environmentally considerate national growth8.
         Given its finite supply, the Intergovernmental Panel on Climate
         Change (IPCC) has indicated that the world must end its reliance on
         fossil fuels such as coal, oil and gas by 2100 or the effects of climate
         change will be “severe, pervasive and irreversible”9. These findings
         indicate that it may be beneficial for countries to shift towards
         increased Green Technology adoption (if feasible)10. The development
         concept of Lembah Chuping is therefore in line with the creation of a
         ‘Green Economy’ for Perlis, possibly providing the state a competitive
         advantage over other states, and potentially other countries given that
         the adoption of Green technology is not yet widespread.
4.2 Summary of Industry Analysis
         There were 3 industries clusters proposed for the development of
         Lembah Chuping i.e. solar energy generation, green manufacturing
         and Halal industries. These clusters were proposed in line with the
         aspirations of the Federal and State Government to develop high
         value adding sectors (including Halal) which could meet the “Green”
         concept of Lembah Chuping, consistent with the requirements set out
         by NCIA in the Terms of Reference to the Consultants. Such
         aspirations were highlighted in the 10th Malaysia Plan and the
         Rancangan Struktur Negeri Perlis 2030. The proposal also considered
         the value chain support which could be provided to Lembah Chuping
         by the surrounding establishments in Kedah and Penang. Agreement
         has also been reached with the Perlis State Government and NCIA
         that these clusters would be the key areas of development in Lembah
         Chuping.
         Industries were assessed using the following six (6) factors (under the
         Porter Diamond model)11 to determine the viability of proposed
6 http://www.unep.org/greeneconomy/AboutGEI/WhatisGEI/tabid/29784/Default.aspx
7 Economic measures put together by the government to stimulate the adoption of green technology
8 http://www.oecdobserver.org/news/archivestory.php/aid/2928/The_green_growth_race.html
9 http://www.ibtimes.co.uk/ipcc-end-use-fossil-fuels-by-2100-climate-change-will-be-danger-world-1472729
10 http://blogs.lse.ac.uk/sustainability/2014/01/08/green_growth/
11 The Porter Diamond Model considers the relationship between different clusters in an industry’s
   ecosystem, where competitiveness is related to the performance of all firms in addition to micro and
   macroeconomic factors. This model is frequently used to evaluate the competitive advantage of nations.
   In the context of this study, it will serve as a framework in assessing the factors that can influence an
   industry’s success in a particular location, analysed through six (6) factors: Government, Factor
   Conditions, Demand Conditions, Market Structure and Rivalry, Supporting Industries, and Chance.
                                                                                                                 June 2015
                                                                                                                   Page 4-4
Chuping Valley Development Plan
         industries should they be located in Lembah Chuping. The factors
         are:
         i) Government: Considers relevant government policies affecting
                 the proposed industries, in terms of potential industry growth
                 and available incentives.
         ii) Market Structure and Rivalry: This factor considers the
                 potential competition faced by investors looking to invest in
                 these industries in Lembah Chuping.
         iii) Demand Conditions: An assessment of market conditions,
                 including both current and projected future demand.
         iv) Supporting Industries: Degree of support along the value
                 chain
         v) Factor Conditions: Refers to the availability and suitability of
                 resources to support industry development, such as human
                 capital and physical characteristics of the area
         vi) Chance: Risk factors which could hinder the growth of the
                 proposed industries
         An overview of the elements considered in our analysis for each
         industry is presented below. It should be noted that apart from the 3
         proposed clusters, the development of services/supporting industries
         clusters have also been considered in Lembah Chuping under private
         finance initiatives; however, the services/supporting industries clusters
         would not be covered under the industry analysis in this report.
         i) Solar Energy Generation
                   Solar energy generation is proposed as one of the industries,
                   leveraging on the physical characteristics of Perlis. Perlis
                   receives among the highest levels of solar radiation in
                   Malaysia (an average of about 24 MJ/m2/day)12, compared to
                   the national average of about 20MJ/m2/day. In terms of
                   government initiatives, the Renewable Energy Act 2011 has
                   schemes such as the Feed-in Tariff to allow private energy
                   producers to sell energy to Tenaga Nasional Berhad (TNB).
                   Furthermore, the 10th Malaysia plan highlights the plan to
                   reduce the country’s dependence on fossil fuels by shifting to
                   renewable energy alternatives13.
                            - This space intentionally left blank -
12 Megajoule per square metre per day (MW/M2/day)
13 Oil, Gas and Energy: Building Up Renewable Energy and Solar Power Capacity, Entry Point Project
   (EPP) 10, (10th Malaysia Plan)
                                                                                                                 June 2015
                                                                                                                   Page 4-5
Chuping Valley Development Plan
Table 4.1: Industry Analysis Summary - Green Energy Generation
                       Evaluation of Factors (Solar Energy Generation)
Porter Diamond         Points Indicating Industry’s Viability                             Points Indicating Industry’s
 Model Factors                                                                                        Nonviability
Government             • Effectiveness of Government Policies in Promoting
                           Renewable Energy
                                                                                          • Availability of Skilled Labour
                           The Renewable Energy Act 2011 and The Green
                           Technology Policy 2009 may have facilitated increased             With the development of the Lembah Chuping,
                           investments in Renewable Energy (RE) and Energy                   Malaysia’s proportion of skilled labour may not
                           Efficiency (EE); 40% increase from 2012 to 2013                   be adequate (28% of Malaysia’s workforce)
                       • Perlis Generates High Levels of Solar Radiation
                           Solar radiation on average in malaysia is 13-20mj/m2; Perlis
                           generates almost 24 mj/m2
 Factor Conditions     • Increase in Demand for Energy                                    • Lack of Supporting Electrical Infrastructure
Demand Conditions         Electricity demand expected to grow by 3% annually until
                          2030                                                               Distance from a viable power source and
                                                                                             electrical grid connection may inhibit a stable
                       • Effective Government Policies                                       supply of electricity
                           Government policies (5th Fuel Diversification Policy, 8th and
                           9th Malaysia Plans) may have contributed to the rise of        • Negative Effects of Government Subsidies
                           renewable energy (hydropower, biodiesel, biomass energy            Non-renewable fuel subsidies alone contributed
                           and biogas)                                                        to approximately 7.7% of the government’s
                                                                                              budget in 2015
                       • Domestic and Foreign Investment Facilitate Growth of             • Industry Maturity
                           Renewable Energy Industry
                                                                                              Presence of only six (6) firms in Malaysia’s solar
                           A total of 49 renewable energy projects were approved in           industry indicates a lack of market maturity
                           2013 with a total investment of RM1.7 billion; a 42% increase
Market Structure and       in investment from 2012
          Rivalry
                       • Lack of Competition
                           Only one solar park in the surrounding vicinity; taking up 25
                           acres with the capacity to generate 6 MW
Supporting Industries                                                                     • Lack of Supporting Services
                                                                                             Limited number of service providers may serve
                                                                                             as a challenge as support services are limited;
                                                                                             potential investors may have to perform all
                                                                                             operations along the value chain
ii) Green Manufacturing
         a) Green materials: Automotive components and building materials
         b) Electricals and electronics (E&E): Semi-conductors, light-emitting
              diodes (LEDs) and solar components
         Aligned with the “Green” theme of the park, Green material firms use
         renewable resources for value added manufacturing activities; while
         Green E&E firms have resource efficient processes to limit harm to the
         environment. In terms of government incentives, green technologies
         are promoted under the 10th Malaysia Plan14; in addition to a range of
         entry point projects (EPPs) promoting the E&E15 sector.
                       - This space intentionally left blank -
14 Business Services: Jump-starting a Vibrant Green Technology Industry, EPP 4 (10th Malaysia Plan)
15 Electrical and Electronics: Developing Integrated Circuit Design Firms (EPP3); Supporting the Growth of
   Substrate Manufacturers and Related Industries (EPP4); Growing Wafer and Cell Producers (EPP6);
   Developing LED Front-end Operations (EPP8); Expanding LED Packaging and Equipment (EPP9) (10th
   Malaysia Plan)
                                                                                                                 June 2015
                                                                                                                   Page 4-6
Chuping Valley Development Plan
             Table 4.2: Industry Analysis Summary – Green Manufacturing
                        Evaluation of Factors (Green Manufacturing)
Porter Diamond          Points Indicating Industry’s Viability                               Points Indicating Industry’s
Model Factors                                                                                          Nonviability
                        • Government Policies Promoting Green Industries                     • Barriers to Green Building
                           Plans, policies, financing schemes and tax incentives all            Top barriers include a lack of credit sources to
                           promoting the domestic adoption of Green Manfuacturing               cover the upfront cost, the risk associated with
                                                                                                investment
Government              • Promotion of Energy Efficiency via Cash Rebates
                           RM50.2 million invested into the Sustainability Achieved via
                           Energy Efficiency (SAVE); consumers who purchase
                           electrical appliances with a five-star EE rating will be given a
                           rebate of up to RM200
                        • Regional Trade                                                     • Availability of Skilled Labour
                           Thai border located 15km from Lembah Chuping; six (6)               With the development of the Lembah Chuping,
                           freight forwarding companies in Padang Besar could facilitate       Malaysia’s proportion of skilled labour may not
                           regional trade                                                      be adequate (28% of Malaysia’s workforce)
Factor Conditions       • Availability of Logistics Infrastructure
                           Presence of Ipoh-Padang Besar Railway and upcoming
                           construction of Perlis Inland Port (PIP) could facilitate the
                           import and export of goods
                        • Substantial Acreage
                           Given the average size of manufacturing facilities in Penang,
                           land allotted in Lembah Chuping is sufficient to develop
                           manufacturing activities
              Green     • Increase in Number of GBI Certified Buildings
             Building
             Materials     Green Building Index introduced in 2009, now there are 262
                           certified projects in Malaysia
 Demand
Conditions              • Trade Volume with Thailand
                           Thailand currently rely on the importing of building materials
                           from neighbouring countries
             Green      • Energy Efficient Appliance Trends
              E&E
                           Production of energy efficient home appliances by large
                           electronics manufacturers (Electrolux, LG, Hitachi) may
                           indicate domestic and regional markets for these goods
                        • Increased Adoption of LED Lighting
                           Malaysian companies set to respond to increased regional
                           demand for LED products from China and Thailand
  Market      Green     • Industry Maturity
 Structure   Building
and Rivalry  Materials     131 green construction focused companies in Malaysia; 42%
                           of which offer architectural building materials
                        • Complementary Nature of Surrounding Estates
                           Surrounding estates may be able to use green building
                           materials for maintenance/expansion of facilities
             Green      • Growth Potential of E&E Sector                                     • Potential Competition from Penang
              E&E
                           Increase in investment from 9% (RM2.6 billion) to 18% (RM            E&E products make up 60% of Penang’s
                           6.8 billion) of all domestic manufacturing investments               manufacturing output (43% of all investments)
Supporting    Green     • Potential Value Chain Support From Penang                          • Lack of Sustainable Design Services
Industries   Building
             Materials     Abundance of Electronic Manufacturing Service (EMS)                  A lack of sustainable design services may be
                           companies in Penang; offering component manufacturing,               hindering the mass adoption of green building
              Green        OEM, design, testing and distribution services                       materials
               E&E
iii) Halal Industries
         a) Pharmaceutical product manufacturing
         b) Food and beverages (F&B) product manufacturing
         The halal industry is a developing market, with strong global demand
         across a range of products. Halal F&B exports grew from 37.3% of
         total exports in 2012, to 40.8% in 2013. Sources of international
         demand include the Middle East and Africa16. Domestically, the halal
         industry is being promoted through the Halal Industry Master Plan
         (HIMP); initiatives include promotion of halal certifications through
         greater certification and brand recognition, in addition to halal
         research efforts17. Although halal industries may not be explicitly
         defined as being Green, a study done by UUM (Universiti Utara
16 http://epaper.chinadailyasia.com/asia-weekly/article-2105.html
17 Halal Development Corporation (HDC) website
                                                                                                                           June 2015
                                                                                                                             Page 4-7
Chuping Valley Development Plan
Malaysia) has found that certain criteria used by JAKIM to audit halal
companies are environmentally focused; a review of a company’s
waste management procedures and water (water supply and
drainage) processes in addition to its energy sources (products used
in lighting, ventilation and temperature control)18. This implies that
proposed halal industries could be in line with the Green criteria
outlined in Figure 4.6.
Table 4.3: Industry Analysis Summary - Halal Industries
Porter Diamond         Evaluation of Factors (Halal Industries)
 Model Factors
                       Points Indicating Industry’s Viability                             Points Indicating Industry’s
    Government                                                                                      Nonviability
 Factor Conditions     • Healthcare Focused Government Policies                           • Extensive Process for Attaining Halal
                         Among all the Entry Point Programmes (EPPs) under the              Certifications
                         healthcare sector, Malaysian pharmaceuticals are expected
                         to contribute to 48% of the healthcare GNI contribution in         7 step process to obtain a certification; average
                         2020 (among EPPs identified)                                       processing time is 3-6 months
                       • Elligibility for Additional HDC Incentives                       • Costs of Obtaining Incentives
                         Halal certified firms are eligible for additional incentives if    15% of firm workforce must be halal industry
                         firms are located within a HALMAS accredited park                  knowledge workers of which three (3) must be
                                                                                            compliance officers.
                       • Availability of Logistics Infrastructure                         • Availability of Skilled Labour
                          Presence of Ipoh-Padang Besar Railway and upcoming                With the development of the Lembah Chuping,
                          construction of Perlis Inland Port (PIP) could facilitate the     Malaysia’s proportion of skilled labour may not
                          import and export of goods                                        be adequate (28% of Malaysia’s workforce)
Demand Conditions      • Increase in International Demand for Halal Goods
Market Structure and      The global expenditure on halal food and lifestyle sectors is
        Rivalry           estimated to be worth USD1.62 trillion in 2012, and rise to
                          USD2.47 trillion by 2018
Supporting Industries
                       • Spillover Effects of Rising Incomes
                         Older population and rising incomes indicates that more
                         people are able to afford drugs and health supplements
                       • Lack of Competition from Surrounding Estates                     • Restrictions on Labelling of Prescription
                          None of the surrounding industrial parks are involved in halal     Drugs
                          pharmaceutical product manufacturing, but there are three (3)
                          parks involved in conventional pharmaceutical product              Logo for halal pharmaceuticals is only allowed
                          manufacturing                                                      to be placed on OTC products – could limit
                                                                                             market penetration
                       • Indsutry Effects of Company Research Agreements                  • Importing of Higher Value Added Products
                          Knowledge sharing by multinationals with local companies          Reliance on imports to treat contemporary
                          through internships, research and educational grants              diseases; 70% of local demand for
                                                                                            pharmaceuticals that treat these diseases
                                                                                            coming from international sources
                       - This space intentionally left blank -
18 Universiti Utara Malaysia: ‘Is a Halal Certification Process Green?’ (The Asian Journal of Technology
   Management, 2012)
                                                                                                                 June 2015
                                                                                                                   Page 4-8
Chuping Valley Development Plan
A summary of the relevant points relating to each industry’s viability
can be summed up in the following diagram:
                                                          Porter Diamond Model Forces
                                   Market Structure           Demand                Supporting                Factor                                     Overall Industry
                                                            Conditions              Industries             Conditions                                         Viability
                  Government       and Rivalry                                                                                      Chance
                                                           Demand for           Limited availability of   Physical                                      Government support, demand
                  Policies          Investments into      renewable energy      service providers in     Characteristics        Upcoming                conditions and market structure are
                  seem to be       the solar sector from  is present            the Northern Corridor    There is currently    foreign labour           favourable for developing a green
                  effective –      both domestic and                                                     a lack of adequate    restrictions may         energy sector, however the
Green Energy      there has been   foreign sources          However, fossil                              supporting            affect profitability in  possible lack of market maturity
 Generation       an increase in   increasing             fuel subsidies are                             electrical            the manufacturing        and supporting electrical
                  solar                                   hindering the                                  Infrastructure in     sector                   infrastructure may hamper industry
                  investment         Despite solar        adoption of                                    Lembah Chuping                                 viability in Lembah Chuping
                  over time        component              alternative                                                           Low quality of
                                   manufacturing          energy sources                                  Availability of      domestic                 Green Materials: Although
                                   growth increased                                                      Human Capital         education system         favourable government policies,
                                   production is in line                                                  Surrounding          may hinder               demand conditions and physical
                                   with government                                                       institutions of       graduate                 conditions support the development
                                   initiatives                                                           higher education      involvement in           of green manufacturing, a lack of
                                                                                                         and Perlis’ existing  high-value added         design services may be hindering
      Green       Policies         Green Materials:       Green Materials:      Green Materials:         workforce could       sectors                  demand for green building
Manufacturing     have been        A large domestic       Green building        Lack of Malaysian        supply talent                                  materials
(Green Materials  less effective   supply of raw          trends indicate       companies offering        However, skilled      The trend in
                  because of the   materials may help     domestic and          green building           labour may lack       government               E&E: Despite the presence of
      & E&E)      risk associated  to attract investors   regional              consulting/design        industry-specific     initiatives over the     promoted sectors in Penang,
                  with green                              demand                services                 expertise/training    past 15 years            favourable government policies and
                  technology       E&E:                                                                                        indicates a further      demand conditions support the
                                    Sector has high       E&E: Production       E&E: Penang offers        Logistics            increase in              development of these activities in
                                   growth potential       trends of energy      support services for     Infrastructure        sophisticated            Chuping Valley.
                                    Penang’s close        efficient appliances  E&E (midstream and       Existing and          initiatives and
                                   proximity could deter  and LED lighting      downstream)              upcoming              incentives               Although demand conditions are
                                   potential investors    indicate                                       transport                                      favourable, the lack of supporting
                                   from investing in      opportunities                                  infrastructure         The appeal of           industries and infrastructure in the
                                   Lembah Chuping         domestic and                                   could facilitate the  products from            form of logistics support, R&D
                                                          regional markets                               flow of human         established              capabilities could hinder industry
                                                                                                         capital and goods     industries               development.
                  Qualification     Market                Global halal trends    Lack of domestic        to and from           (construction
                  for a halal      penetration may be     and domestic          R&D capabilities         Lembah Chuping        materials, E&E and
                  certification    limited; illegal to    indicators indicate   despite increased                              pharmaceuticals)
      Halal       may increase     place halal logo on    demand                collaboration with                             may hinder the
Manufacturing     costs            prescription drugs                           large MNCs                                     mass adoption of
                  (compliance)                                                  (pharmaceuticals)                              new offerings
                                     Growing number                              Lack of Halal
                                   of halal F&B                                 Logistics companies in
                                   companies,                                   Malaysia
                                   indicating demand
Figure 4.6: Viability of Proposed Industries in the Lembah Chuping
It was found that the proposed industries were feasible given the
following
i) Advantages
              Support through government initiatives, as highlighted in
              the 10th Malaysia Plan and Entry Point Projects (EPPs)
              which target the growth of certain areas within the E&E
              industry
              Growth potential of industries, supported by current
              demand and future industry growth, both domestically and
              internationally
              Environmentally sustainable industries19 which promote
              environmental sustainability (limiting environmental effects
              of industries) alongside industry growth
         However, notwithstanding the above, there are several factors for
         consideration:
         ii) Considerations
                        The industries have room for further growth in Malaysia,
                        and are currently relatively undeveloped. Although this
                        means there is growth potential for the proposed industries,
                        it additionally means support industries along the value
                        chain are limited
                        Local infrastructure in Perlis and the Lembah Chuping
                        vicinity may need to be developed further (electricity and
                        water supply; transport infrastructure). To accommodate
19 Halal manufacturing firms with more Green processes can be selected for operation in Lembah Chuping
                                                                                                                 June 2015
                                                                                                                   Page 4-9
Chuping Valley Development Plan
                        the growth of new industries, an adequate and stable utility
                        supply needs to be provided to support both existing and
                        potential firms; in addition to supporting the inflow of
                        employees
         With that in mind, Chapter 5: Business Ecosystem will provide a
         review of the available value chain support from nearby industrial
         parks, as well as the available infrastructure support in the areas
         surrounding Lembah Chuping.
4.3 Projected Economic Impact: GNI Contribution and Job Creation
         Lembah Chuping is to be developed over two (2) periods of five (5)
         years each; from 2016 to 202520. In Phase 1 (2016-2020), about 870
         acres (54.5%) of total allocated land is to be developed; while the
         remainder will be developed in Phase 2 (2021-2025) (45.5%).
Table 4.4: Development of Proposed Industries According to Land Allocation
Phases  Proposed Industries                 Development (Acres)
             Development
                                                        670
Phase 1 Green Manufacturing                             200
              GSroelaenr Energy Generation              870
                                                         80
        Total Phase 1 (54.5%)                           300
                                                        345
Phase 2 Green Manufacturing                             725
              Halal Hub Industries
        SMEs
        Total Phase 2 (45.5%)
Total for all Phases (100%)                 1595
To estimate the direct impact of Lembah Chuping to the local
economy, two (2) parameters were considered:
i) Nominal Gross National Income (GNI): GNI is the sum of
         value added by all resident producers (gross domestic product
         or GDP)21, less primary income payable to non-residents, and
         plus primary income from non-resident units (from abroad)22
ii) Job Creation: Number of jobs created from the new
         industries, inclusive of all skill levels (low-skilled, semi-skilled,
         skilled labour)
20 This is in line with Rancangan Struktur Negeri Perlis 2030; a plan of developing Perlis up to 2030. As
   such, the development of Lembah Chuping may extend past the 2025, dependent on industry
   development. (Perlis State Government website)
21 Nominal GNI is GNI at current market prices. (United Nations Statistics website) (UNICEF Website)
22 In this report, GDP is assumed to be equivalent to GNI on the assumption of no remittances of income. .
   This is because the estimations are based on current industry figures (without actual knowledge of l
   resident or non-resident firms who will be located in Lembah Chuping.)
                                                                                                                 June 2015
                                                                                                                 Page 4-10
Chuping Valley Development Plan
         4.3.1 Estimated Gross National Income (GNI) Contribution to
                   Perlis
        Table 4.5: Breakdown of GNI Contribution from Proposed Industries
               Estimated Gross National Income (GNI) Contribution: Methodology
 Gross National Income (GNI) Approach
 GNI is the sum of value added by all resident producers (gross domestic product or
 GDP)23, plus net flow of primary income attributable to non-residents (from abroad).
 However, for our purposes, it is assumed that GNI is directly comparable to GDP, as the
 estimation is done assuming no international income remittances.
 GNI Estimation: Production Approach to obtain GDP
 The following GNI calculation was used, with the production approach used for GDP:
   GNI= [Value added (i.e. Value of Output – Intermediate Inputs)]24 + [Net International
                                                Income Remittances]
 Assuming the lack of net international income remittances, under this approach, the GNI
 (or GDP) contribution of a firm (or value add) is obtained by subtracting the value of
 intermediate inputs from the value of goods produced by one firm25. For the estimation of
 total GNI contribution of Lembah Chuping, the following steps were taken:
 Steps:26
 i) Estimate the value add produced per firm, from 2010 to 2025 A
 ii) Estimate no. of firms in Lembah Chuping (by industry), according to phases B
 iii) Total value add in any given year (GNI contribution) C =
                                 (Value add per firm x No. of firms in operation)
 Notes:
 i) The average value add per firm (by industry) was obtained from the average
            Malaysian manufacturing value add for 201027. To project future value add, the
            average nominal GDP growth rate of the Malaysian manufacturing industry
            (2005-2013)28 was applied to the 2010 manufacturing value add (year on year
            change)29. 1
 ii) The estimated no. of firms located in Lembah Chuping is based on land allocated
            for industries in the park30, divided by the average acreage of firms (by
23 Nominal GNI is GNI at current market prices. (United Nations Statistics website) (UNICEF Website)
24 GDP by Production Approach: A General Introduction with Emphasis on an Integrated Economic Data
   Collection Framework, Statistical Capacity Development in China and Other Developing Countries in
   Asia, United Nations Statistical Division (UNSD), Vu Quang Viet (2009)
25 Intermediate inputs are the cost of input goods or services used in the production process
26 Note that Solar energy generation used a different method of calculation to the other industries, as
elaborated in “Notes” of this methodology
27 Economic Census 2011 (Manufacturing), DOSM
28 Nominal GNI not used since it takes into account international income remittances, of which we assume
is zero (0)
29 Gross Domestic Product 2005-2013, DOSM
30 Land is assumed to be not 100% utilised for direct productive (manufacturing) purposes, to include non-
   productive uses (non-manufacturing such as parking spaces); a downward revision of 15% to allocated
   land is made.
                                                                                                                 June 2015
                                                                                                                 Page 4-11
Chuping Valley Development Plan
           industry)31 2 . Firms per phase is estimated based on planned land
           development32.
iii) For Solar Energy Generation 3 :
                Based on the Kuala Perlis solar farm capacity of 6 mega watt (MW) over 25
                acres33, it is assumed that Lembah Chuping could generate 40.8MW over the
                allocated land.
                1kilowatt (kW) of power can generate 1200kW-hours of energy (kWh) per
                annum.34
                Feed in tariff (FiT) rates are calculated based on an internal rate of return
                (IRR) of about 11%; meaning profitability to firms is about 11%.35
iv) SME GDP contribution is estimated to be about 45.84% less than large
           enterprises36. The GNI estimation for SMEs is based on large enterprise GNI
           contribution (RM2.22 bil), scaled based on acreage of allocated land (productive
           land)37 (293/1061.8) 4 38.
            Proposed Industries            A                                B                                   Value Add per Industry
Solar Energy Generation 3                                                                                                         Operation
                                              Value Add per Firm (RM '000)      Est. No. of Firms in Operation
                                                                                                                 As at End of
                                           1                                2 (Excluding SMEs)                      Phase 1
                                           2010    2020    2025             Phase 1             Phase 2               23,966
                                                   (40.8MW x 1000) x (1200kWh) x (RM0.55 x 89/100)
Electricals and Electronics (E&E)          49,668  89,791  120,728          12                      2 1,077,490
                                           7,372   13,327  17,919           18                      3 239,882
Green Materials                            4,815   8,705   11,704           0                       70
                                           3,064   5,539    7,448           0                       60
Halal Industries  Pharmaceuticals
                  F&B
SMEs 4                                                   (45.84%) x (2,217,066) x (293/1061.8)                  0
                                   Totals                                   30 48 1,341,338
        As mentioned, the development of Lembah Chuping will be in two (2)
        phases. The following tables show the estimated nominal GNI that
        could potentially be generated by each industry over the two (2)
        phases of development39:
31 Average acreage of firms is based on samples of the Malaysian manufacturing sector; differing sample
   sizes based on industry. (refer to appendix 1 for more information)
32 New entrant firms in each phase are assumed to enter in the first year of each phase
33 Cypark Resources Berhad (CRB) website
34 1kW is equals to 1200kWh/ kWp /year (based on SEDA FiT brochure). kWh is the kW produced per
   hour. kWp is the rate of generation at peak performance.
35 The FiT rate chosen was in the power productive bracket above 1MW, up to 10MW (RM0.5472 with no
   bonus FiT rates applied). Profit was assumed to be 11% (of the total 100% of revenue i.e. the FiT rate)
   (SEDA Website)
36 Based on SME GDP contribution against large enterprise GDP contribution (Small and Medium
   Enterprises 2005-2013, Department of Statistics Malaysia)
37 Land is assumed to be not 100% utilised for direct productive (manufacturing) purposes, to include non-
   productive uses (non-manufacturing such as parking spaces); a downward revision of 15% to allocated
   land is made
38 Note for SMEs, the calculation is for the beginning of Period 2; whereas the “As at End of Phase 2” figure
   is adjusted based on a yearly growth rate of about 6.3%
39 Solar energy generation is assumed to reach its maximum capacity by 2020(maximum usage of
   allocated land), after which expansion would not occur (same productive capacity of solar panels)
                                                                                                                 June 2015
                                                                                                                 Page 4-12
Chuping Valley Development Plan
                                                                                                                                            Electricals and Electronics (E&E)                                                                                                                                                       Green Materials
                                                                                                                                                                                                                                                                                         400
                                                                                                                               1800
                                                                   EEssttiimmaatteeddGGDNPI CCoonnttrriibuution (RMM mmiill))  1600                                                                                   EEstsitimmatatededGDGPNICCoontnrtiribbutuitioonn((RRMMmimli)l)     350
                                                                                                                               1400
                                                                                                                               1200                                                                                                                                                      300
                                                                                                                               1000
                                                                                                                                                                                                                                                                                         250
                                                                                                                                800
                                                                                                                                600                                                                                                                                                      200
                                                                                                                                400
                                                                                                                                200                                                                                                                                                      150
                                                                                                                                   0                                                                                                                                                     100
                                                                                                                                                 Phase 1:                              Phase 2:                                                                                                                   Phase 1:                             Phase 2:
                                                                                                                                                  RM 1.08 bil by 2020                    RM1.70 bil by 2025                                                                              50 RM0.24 bil by 2020                                          RM 0.38 bil by 2025
                                                                                                                                                  12 firms in operation                  14 firms in operation                                                                                                                                          21 firms in operation
                                                                                                                                                                                                                                                                                                                    18 firm s in operation
                                                                                                                                      2016 2017 2018 2019                            2022 2023 2024
                                                                                                                                                                                                                                                                                         0
                                                                                                                                                                         2020  2021                             2025                                                                              2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
EEssttiimmaatteedd GGNDIPCCoontntriribbutuitioonn((RRMM mmili)l)   30                                                                                                                                                 EEstsitimmatateeddGGDNPI Contrriibbuuttiioonn (RM mil)             400                                                SM Es
                                                                                                           Solar Energy Generation                                                                                                                                                       350
                                                                                                                                                                                                                                                                                         300
                                                                   25                                                                                                                                                                                                                    250
                                                                                                                                                                                                                                                                                         200
                                                                   20                                                                                                                                                                                                                    150
                                                                                                                                                                                                                                                                                         100
                                                                   15
                                                                                                                                                                                                                                                                                           50
                                                                   10                                                                                                                                                                                                                       0
                                                                                                                                                                                                                                                                                                        2021
                                                                   5 Phase 1:                                                                                                        Phase 1:                                                                                                                 Phase 2:
                                                                                            RM0.02 bil by 2020                                                                        RM 0.02 bil by 2020                                                                                                      RM0.36 bil by 2025
                                                                                            40.8MW capacity                                                                           40.8M W capacity
                                                                   0
                                                                                                                               2016 2017 2018 2019 2020 2021 2022 2023 2024 2025                                                                                                                              2022                          2023       2024                    2025
                                                                   90000                                                                    Halal Pharmaceuticals                                                                                                                        50000                                              Halal F&B
                                                                   80000                                                                                                                                                                                                                 45000
EEssttiimmaatteeddGGDNIPCCoonnttrriibbutuitioonn( (RRMM 'mi0l)00)  70000                                                                          Phase 2:                                                            EstEistmiatmeatdedGDGPNICCoontntrriibbuuttiioonn ((RRMM 'm0il0)0)  40000                      Phase 2:
                                                                   60000                                                                           RM0.08 bil by 2025                                                                                                                    35000                       RM0.04 bil by 2025
                                                                   50000                                                                           7 firms in operation                                                                                                                  30000                       6 firms in operation
                                                                   40000                                                                                                                                                                                                                 25000
                                                                   30000                                                                                                                                                                                                                 20000
                                                                   20000                                                                                                                                                                                                                 15000
                                                                   10000                                                                                                                                                                                                                 10000
                                                                         0                                                                                                                                                                                                                5000
                                                                                                                                                                                                                                                                                               0
                                                                                                                                      2021  2022                         2023        2024                  2025                                                                                   2021        2022                          2023       2024                    2025
                                                                                                                                            Figure 4.7: GNI contribution by Proposed Industry
                                                                                                                                      Overall, Phase 1 is expected to contribute about RM1.34 bil to
                                                                                                                                      nominal GNI by 2020, while Phase 2 contribution is estimated at
                                                                                                                                      RM2.58 bil by 202540. In period 1, the compound annual growth rate
                                                                                                                                      (CAGR) of industries is about 6.46%, and about 6.06% in period 2.
                                                                                                                                      This can be compared to the average GDP growth rate of Perlis
                                                                                                                                      (2005-2013)41 at 5.9%; Lembah Chuping could assist in boosting the
                                                                                                                                      Perlis economy to a rate greater than the current growth.
                                                                                                                                                                               - This space intentionally left blank -
40 The estimated contribution of the park is based on the assumption that the park will be fully utilised for
   the proposed industries; realising the potential of the park.
41 Gross Domestic Product 2005-2013, DOSM
                                                                                                                 June 2015
                                                                                                                 Page 4-13
Chuping Valley Development Plan
                                      3000                                                                                                      Phase 2                         RM 2.58bil
                                                                 Phase 1                                                     CAGR: 6.06%                                              RM0.358 bil
                                                                                                                                                                                      RM0.024 bil
Estimated GNI Contribution (RM mil))  2500                                                         RM 1.34bil                                                                         RM0.045 bil
                                                                                                                                                                                      RM0.082 bil
                                      2000                                                                      RM0.024 bil                                                           RM0.38 bil
                                                                                                                RM0.24 bil
                                      1500 CAGR: 6.46%                                                                                                                                RM1.69 bil
                                                                                                   RM1.08 bil
                                      1000
                                       500
                                      0                 2017             2018                2019  2020                          2021     2022                     2023   2024  2025
                                                  2016
                                      Electricals and Electronics (E&E)  Green Materials  Halal Pharm aceuticals  Halal F&B            Solar Energy Generation     SM Es
                                      Figure 4.8: Estimated GNI Contribution of Lembah Chuping by 2025
                                                        Table 4.6: GNI Contribution of Proposed Industries
                                                                         Est. No. of Firms in Operation (Excluding SMEs) Value Add Per Industry (RM '000) in Operation
                                      Proposed Industries
                                                                         As at End of Phase 1 As at End of Phase 2 As at End of Phase 1                                   As at End of Phase 2
Solar Energy Generation                                                                   Solar farm capacity: 40.8MW                           23,966                          23,966
Electricals and Electronics (E&E)                                                         12                                 14                 1,077,490                       1,690,195
Green Materials                                                                           18                                 21                 239,882                         376,290
                 Halal Pharmaceuticals                                                    0                                  7                                  0 81,930
   Halal                                                                                  0                                  6                                  0 44,686
Industries Halal Food & Beverages
                 (F&B)
SMEs                                                                     SMEs productivity: 45.84% of large enterprises                                         0               358,052
Total                                                                                     30                                 48                 1,341,338                       RM2.58 bil
                                      Of the proposed industries, green manufacturing (includes E&E and
                                      green materials) is expected to contribute the most to GNI; 80.2% of
                                      GNI generated by Lembah Chuping (total of RM 2.07bil generated),
                                      with 47.0% of total land allocation for proposed industries. This is thus
                                      expected to be the largest industry in Lembah Chuping.
                                      As of 2014, Perlis generated about RM3.6 bil42 in nominal GDP; this
                                      translates to about RM17,800 GDP contribution per acre of Perlis
                                      land (total is about 202,456 acres)43. Based on allocated land and
                                      estimated nominal GNI, Lembah Chuping could contribute about RM
                                      1.76 mil nominal GNI per acre. Thus, the presence of the Lembah
                                      Chuping is expected to boost the overall productivity in Perlis, in terms
                                      of land use; whilst considering the preservation of the state’s
                                      ecosystem.
                                      Comparing the estimated GNI contribution of Lembah Chuping by
                                      2020 (RM1.34 bil) to the estimated cost of infrastructure (RM 0.57 bil),
                                      the GNI contribution for every RM of development cost (return on
                                      investment or ROI) is about 2.33. This can be compared to other
                                      projects around Malaysia. The Taman Industri Halal Gambang
42 KDNK Mengikut Negeri 2005-2013, DOSM
43 Rancangan Struktur Negeri Perlis 2030
                                                                                                                                                                                June 2015
                                                                                                                                                                                Page 4-14
Chuping Valley Development Plan
         (Pahang) is expected to have an ROI of 0.32 by 2020; the integrated
         bio-methionine & thiochemical plant in Kertih Biopolymer Park at 0.88
         by 2020; Taman Industri Malaysia-China Kuantan (MCKIP)
         manufacturing higher value products at an ROI of 0.67 by 202044. As
         can be seen, the development of Lembah Chupping can yield a
         significant return on investment to the state; keeping in view that 2020
         is midway through the development of the industrial park45.
         4.3.2 Estimated Job Creation in the Perlis State
                        Table 4.7: Methodology for Estimation of Job Creation
                                   Estimated Job Creation: Methodology
 Job creation of Lembah Chuping was calculated based on four (4) variables:
 A) Allocated land (acres): A downward revision of 15% was made to the allocated
            land, as land is assumed to be not 100% utilised for direct productive
            (manufacturing) purposes; includes non-productive uses (non-manufacturing e.g.
            parking spaces)
 B) Average land per firm (acres)46 : Based on samples from the Malaysian
            manufacturing sector; sample sizes differ based on industry
 C) Estimated no. of firms in Lembah Chuping: This is the number of firms that can be
            accommodated in the park, based on average land size (per industry), and allocated
            land in the park. An average was taken for solar components and E&E
 D) Average employment per firm47
 To calculate job creation, the following steps were taken (refer to table for details):
 i) Estimate the no. of firms that will be operating in Lembah Chuping based on the
            amount of allocated land and the average land taken up per firm: (A/B=C)
 ii) Obtain an estimate of the average no. of workers employed per firm (based on
            each individual industry): (D)
 iii) Job Creation= No. of firms in operation (C) X average employment per firm (D)
 Note: the estimation for solar energy generation and SMEs was calculated using a different
 method:
 i) Solar energy generation: the Sustainable Energy Development Authority (SEDA)
            estimates 15 jobs are created per 1MW capacity, and the Kuala Perlis solar farm has
            a capacity of 6MW over 25 acres.
 ii) SMEs: According to the SME Master Plan 2012-2020, the productivity of a large
            enterprise is about 3.15 times more than an SME. This could be attributed to the
            fact that on average, SMEs are more labour intensive (which is less productive) as
            compared to larger enterprises who employ a higher degree of capital. The SMEs at
            Lembah Chuping are assumed to be in roughly the same industries as the proposed
            industries, hence job creation estimates are based on the main proposed industries
            (6781 jobs); which is scaled to the productive land size allocated for SMEs
            (293/1354.8)
44 Pemandu website, ECERDC website, ECERDC annual report 2013
45 For the development of Lembah Chuping, 2020 is end of Phase 1; 2025 is end of Phase 2
46 Based on samples from the Malaysian manufacturing sector; sample sizes differ based on industry (refer
   to appendix 1 for more information)
47 Refer to appendix 1 for more information
                                                                                                                 June 2015
                                                                                                                 Page 4-15
Chuping Valley Development Plan
                                              Job Creation Methodology: Industries and SMEs
                                                       Land (Acres)                              Firms
                                              AB                                   C                            DE
No                                                                                    Est. no. of Firms in
 .
    Industries                                                                     Operation in Lembah            Average             Total
                                                                                          Chuping               Employment        Employment
                                                                 Average Land per
                                              *1 Allocated Land     Firm (Acres)   Phase 1 Phase 2                per firm
                                              (Acres)
1 Solar Energy Generation                     170.0                        *2 [6 MW per 25 acres; 15 jobs per MW]                 612
                   Solar Components           85.0                    81.0
                         Waf er               42.0                    19.0
                   Fabrication                85.0
                   E                           0.8                                       12 14                               231  3242
        Green      & Substrate                424.0
2   Manufacturing  E Manufacturing                                    25.0
                   IC Design                                          0.1
                   Green Materials                                    20.0               18 21                               111  2331
                             Pharmaceuticals  85.0                    12.0 0 7                                               50   350
3 Halal Industries                            170.0                   26.0 0 6                                               41   246
                                               293                                                                                5892
                                    F&B                                         (3.15) x (6781) x (293/1061.8)
4 *3 SMEs
                                              Total job creation of Industries
                                              Steps: i. (A/B)= C                                                                  12,673
4 Job Creation of Industries                  ii. (C x D)= E
                                              Development Phases - Phase 1:2016-2020; Phase 2: 2021-2025; Total: 2016- 2025       Phase 1: 5,389
                                                                                                                                  Phase 2: 7,284
                                                                                                                                  Total: 12,673
*1 Land is assumed to be not 100% utilised for direct productive (manufacturing) purposes, to include non-productive uses (non-manufacturing such as parking spaces); a downward
     revision of 15% to allocated land is made
*2 Assumption based on SEDA estimates of 15 jobs created per MW, and Kuala Perlis solar farm capabilities of 6MW over 25 acres
*3 According to the SME Master Plan 2012-2020,the productivity of a large enterprise is about 3.15 times more than an SME; implying SMEs possibly use less machinery and are more
     labour intensive (which is less productive). The SMEs at Lembah Chuping are assumed to be in the same industries as the proposed industries, hence job creation estimates
     are based on the main proposed industries (6781 job creation); which is scaled to the land size allocated for SMEs (293/1354.8).
    The estimated number of jobs created by the industries in Lembah
    Chuping is 12,673 by 2025. The development of Phase 1 is estimated
    to create about 5389 jobs (42.5% of total job creation) across a range
    of skill levels. The majority of jobs created are to be from the green
    manufacturing industry (green E&E and green materials) at 44.0%.
    Table 4.8: Job Creation of the Lembah Chuping Development Phases
                   Proposed Industries                                             No. of Jobs
                                                         Phase 1                     Phase 2         Total
                                                       (2016- 2020)                (2021- 2025)  (2016-2025)
                   Green E&E                                     2,779 463 3242
                   Green Materials                               1,998 333 2331
                   Solar Energy Generation                       612                  0                         612
                                F&B                              0                 246 246
                      Halal                                      0                 350 350
                   Industries
                                Pharmaceuticals
                   SMEs                                          0                 5,892                    5892
                   Total 5389 (42.5%) 7284 (57.5%) 12673 (100%)
                                                                                                                                  June 2015
                                                                                                                                  Page 4-16
Chuping Valley Development Plan
The new proposed industries are expected to offer new jobs in a
range of manufacturing roles, and in relatively high value added
industries. Employees will learn new relevant types of skills, in line
with the Malaysian government’s push in these sectors48. This implies
growing relevance of skills learnt from these industries, as the
industries grow.
As of 2012, the number of employed persons in the manufacturing
sector in Perlis was about 659549. Rancangan Struktur Negeri Perlis
2030 is set on pushing for industrial growth through industry
clustering, with certain industries stipulated (e.g. chemicals and
plastics at the Jejawi industrial zone); the industries are targeted to
create about 13 jobs per acre by 202550.
Lembah Chuping is estimated to create an additional 6169 jobs in the
manufacturing sector (excluding SMEs and solar energy) by 2025,
over about 1050 acres (excludes solar energy generation and SMEs);
which translates to about six (6) jobs per acre. The park could
contribute towards reaching the employment target, and creating new
jobs for the local workforce.
                        14,000  5573 Jobs         612 Jobs      596 Jobs             5892 Jobs
                        12,000    (44.0%)          (4.8%)        (4.7%)                (46.5%)
                        10,000
Estimated Jobs Created  8,000
                                                                                                12,673
                        6,000
                                2,331
                        4,000
                                                                                     5893
                        2,000   2,815
                        0 427                           612            246           SM Es      Total
                             Green Manufacturing                       350           SM Es
                                                  Green Energy  Halal Industries
                                                   Generation
                                                                   Halal
                                Solar energy      Solar energy     pharm aceuticals
                                com ponents       generation       Halal F&B
                                E&E components
                                Green materials
                        Figure 4.9: Total Job Creation of Proposed Industries by 2025
Based on the job composition of the Malaysian manufacturing industry
in general, the number of skilled jobs expected to be created is about
48 National initiatives such as the promotion of the E&E sector and pharmaceutical sector (entry point
   projects or EPPs in the 10th Malaysia Plan) show the Malaysian Government’s push for growth in these
   key sectors (10th Malaysia Plan)
49 Report on the Survey of Manufacturing Industries (2012), DOSM
50 An average was taken between the 2020 and 2030 employment per acre estimates, to obtain 2025
   (Rancangan Strucktur Negeri Perlis 2030)
                                                                                                                 June 2015
                                                                                                                 Page 4-17
Chuping Valley Development Plan
         1140; semi-skilled labour about 2154; and low-skilled at about 937851.
         This means majority of jobs are that of low-skilled or semi-skilled.
         However, this may not be a reflection of the composition of skilled
         labour for Lembah Chuping, as the proposed industries are expected
         to generate higher value added over time, and so may require more
         skilled labour. Thus, the proportion of skilled labour generated may be
         higher than the national average of 9%.
                                                                                                       9%
                                                                                                                        17%
                                                                        74%
                                        Skilled Labour
                                        Semi-skilled Labour
                                        Low -skilled Labour
               Figure 4.10: Lembah Chuping Skill Levels of Created Jobs
         The development of Lembah Chuping could grant the state significant
         benefits, in terms of GNI contribution and job creation. The promotion
         of higher value added industries in the proposed manufacturing
         industries and solar energy generation could grant the state growth
         through diversification while positioning itself in line with national
         initiatives. Additionally, growth would be achieved while limiting the
         environmental effects of industries; in protecting environmentally
         sensitive areas; business and environmental sustainability could be
         achieved.
         Future growth would also assist in job creation. Diversification of
         industry implies introducing a new skill to the workforce; in this case,
         skills in higher value added industries. Job creation also brings
         spillover in terms of economic growth to the state; as higher income
         levels mean increase consumption52 that benefit local businesses
         (such as supporting industries like F&B outlets and healthcare
         services) and promote positive spillover effects to bring a higher
         quality of life for the people (positive externalities such as roads built
         to accommodate new industries).
51 Skilled labour includes managers, professionals and executives; semi-skilled labour includes technicians
and associate professionals, clerical and related occupations; low-skilled labour includes elementary
workers, and plant & machine operators and assemblers. Economic Census 2011 (Manufacturing)
52 Growth Spillover Effects and Regional Development Patterns: The Case of Chinese Provinces, Xubei
Luo (2005)
                                                                                                                 June 2015
                                                                                                                 Page 4-18
Chuping Valley Development Plan
4.4 Key Salient Points
         The Rancangan Struktur Negeri Perlis 2030 highlights the Perlis State
         Government plans of developing the state towards greater productivity
         and innovation. Development is targeted to utilise state resources and
         physical characteristics effectively, while ensuring the environmental
         sustainability of industries. These state goals are aligned with
         Malaysia’s goal of positioning the nation towards continued
         development, while ensuring the environment is being conserved for
         future generations53.
         Lembah Chuping: Green Technologies and Green Processes
         As such, the proposed industries of Lembah Chuping are to utilise/ be
         involved in Green technologies and Green manufacturing processes
         (along the value chain). Together with Malaysia, other countries (e.g.
         South Korea, Denmark) are moving towards greater recognition of
         Green initiatives, with the implementation of Green stimulus packages
         (e.g. tax incentives). These incentives are to reduce reliance on fossil
         fuels, as the supply of fossil fuels is expected to be depleted by
         208854. Additionally, research has shown that energy efficient
         processes (more efficient use of resources) can save costs for
         industries (as seen from figure 4).The following three (3) main
         industries are proposed for Lembah Chuping:
         i) Solar Energy Generation:
                        Solar energy is proposed as Perlis receives among the
                        highest levels of solar radiation in Malaysia55
                        Presence of Government initiatives that promote the
                        industry such as the 10th Malaysia plan and the Renewable
                        Energy Act 201156.
         ii) Green Manufacturing
                   a) Green materials: Automotive components and building
                        materials
                   b) Electricals and electronics (E&E): Semi-conductors, light-
                        emitting diodes (LEDs) and solar components
                        Aligned with the “Green” theme of the park, Green material
                        firms use renewable resources; while Green E&E firms
                        have resource efficient processes
                        Presence of Government incentives that promote green
                        technologies under the 10th Malaysia Plan57 as well as a
                        range of entry point projects (EPPs) for the E&E58 sector.
53 10th Malaysia Plan. The 11th Malaysia plan has a dedicated Green section “Moving Towards Green
   Growth Section” to target growth in the Green sector
54 Adeco Solar website
55 An average of about 24 MJ/m2/day
56 Schemes include the Feed-in Tariff (FiT) which allows private producers of renewable energy to sell
   energy to Tenaga Nasional Berhad (TNB)
57 Business Services: Jump-starting a Vibrant Green Technology Industry, EPP 4 (10th Malaysia Plan)
58 Electrical and Electronics: Developing Integrated Circuit Design Firms (EPP3); Supporting the Growth of
   Substrate Manufacturers and Related Industries (EPP4); Growing Wafer and Cell Producers (EPP6);
   Developing LED Front-end Operations (EPP8); Expanding LED Packaging and Equipment (EPP9) (10th
   Malaysia Plan)
                                                                                                                 June 2015
                                                                                                                 Page 4-19
Chuping Valley Development Plan
       iii) Halal Industries
                a) Pharmaceutical product manufacturing
                b) Food and beverages (F&B) product manufacturing
                Strong global demand, with sources of international demand
                including the Middle East and Africa59
                Promoted in Malaysia through the Halal Industry Master Plan
                (HIMP); with initiatives including promotion of the halal
                certification brand recognition60.
                Promoted through the 10th Malaysia Plan (pharmaceuticals), to
                increase the local firm development and partnerships.61
       GNI Contribution and Job Creation
                                             No. of Jobs                GNI Contribution (RM mil)
   Proposed Industries           Phase 1       Phase 2         Total    As at End of  As at End of
Green E&E                      (2016- 2020)  (2021- 2025)  (2016-2025)     Phase 1       Phase 2
                                   2,779          463          3242     (2016- 2020)  (2021- 2025)
                                                                        1077.5        1690.2
Green Materials                1,998         333           2331         239.9         376.3
Solar Energy Generation        612           0             612 24.0 24.0
              F&B              0             246 246 0.0 44.7
   Halal                       0             350 350 0.0 81.9
Industries
              Pharmaceuticals
SMEs                           0             5,892         5892         0.0 358.1
Total                          5389 (42.5%) 7284 (57.5%) 12673 (100%) 1341.3          2575.1
Figure 4.11: Total Job Creation and GNI Contribution of Proposed Industries
       The resulting direct economic impact of these industries in Lembah
       Chuping to Perlis was assessed through an estimation of nominal GNI
       contribution and job creation. The main industries of the Lembah
       Chuping are proposed to be developed in two (2) phases:
                As at end of Phase 1 (2016-2020): RM 1.34 bil GNI
                contribution by 2020 (total 870 acres)62
                As at end of Phase 2 (2021-2025): RM 2.58 bil GNI
                contribution by 2025 (total 1,595 acres)
       In Phase 1, the Green Manufacturing (89% of industry-specific
       allocated land) and Solar Energy Generation (100% of industry-
       specific allocated land) industries are to be developed. By 2020, the
       GNI contribution is estimated to reach about RM1.34 bil; to about
       RM2.58 bil by the end of Phase 2 (2025). These higher value added
       industries are expected to lead the growth of the state in these
       sectors; achieving both environmental and economic sustainability, in
       line with state and national goals.
59 http://epaper.chinadailyasia.com/asia-weekly/article-2105.html
60 Halal Development Corporation (HDC) website
61 Healthcare: Malaysian Pharmaceuticals (EPP3), 10th Malaysia Plan
62 Note that these estimations are based on nominal GNI figures
                                                                                      June 2015
                                                                                      Page 4-20
Chuping Valley Development Plan
In terms of job creation, the following number of jobs across a range of
skill levels is to be created:
         As at end of Phase 1 (2016-2020): 5389 jobs by 2020
         As at end of Phase 2 (2021-2025): 12673 jobs by 2025
The skills required would be in the new proposed industries, and the
relevance of these skills would increase as the industry grows.63 This
is in line with the Rancangan Struktur Negeri Perlis 2030, which aims
to improve the level of human capital and skills of the people.
The development of Lembah Chuping would introduce new industries
to Perlis; to bring economic benefits through estimated job creation
and GDP contribution. Lembah Chuping would achieve an effective
utilisation of land as targeted by the Rancangan Struktur Negeri Perlis
2030; in addition to being in line with National initiatives to promote
growth Green industries. Furthermore, these industries could promote
positive economic spill over effects (e.g. growth of supporting
industries such as healthcare and F&B services).
SUMMARY
i) The industrial development of Lembah Chuping should be positioned
     towards a green theme to minimize the potential impact on the
     environment
ii) This concept is in line with the government’s Green initiatives (Malaysia
     Plans, Green Technology Policy)
iii) Based on the above, focus is recommended to be on three (3) industries:
     solar energy generation, green manufacturing (green materials and
     E&E), and halal industries (F&B; pharmaceuticals); as they would also
     be in line with the respective EPPs of the ETP64, and the Halal Industry
     Master Plan
iv) Matching the GNI contribution against the cost of investing is tabulated
     as follows:
Description          As at end 2020    As at end 2025
Investment in
Infrastructure        RM 706 million   RM 1,171 million
                     RM 1,340 million  RM 2,575 million
GNI Contribution
GNI Contribution to      1.90 times        2.20 times
Investment Ratio
63 Calculated based on an average across the Malaysian manufacturing industry. Note that the skill-level
   requirements of the industries may not be reflective of the skilled labour requirements of the Lembah
   Chuping, and may require more skilled labour to provide for the higher value added industries (Report on
   the Survey of Manufacturing Industries 2012, DOSM)
64 Electricals and Electronics (E&E) sector: Solar component manufacture- EPP6; LEDs- EPP8 and EPP9;
   semi-conductors- EPP3 and EPP4
                                                                                                                 June 2015
                                                                                                                 Page 4-21
Chuping Valley Development Plan
- This page intentionally left blank -
                                                                             June 2015
                                                                              Page 4-22
Chuping Valley Development Plan
5.0 BUSINESS
         ECOSYSTEM
Chuping Valley Development Plan
5.0 BUSINESS ECOSYSTEM
5.1 Introduction
         The goal of this Chapter is to develop a sustainable model in which
         the proposed industries in Lembah Chuping, relevant supporting
         functions, surrounding industrial estates, and Institutions of Higher
         Learning (IHLs) will co-exist as part of a mutually beneficial network.
         The ecosystem proposed seeks to facilitate the socio-economic
         advancement of Perlis through higher value added activities and the
         creation of job opportunities of various skill levels. The creation of the
         ecosystem entails three (3) distinct steps (Figure 5.1):
            Figure 5.1: Approach to Building Lembah Chuping’s Business
                                                 Ecosystem
         Step 1: Propose Core Industries
         As outlined in Chapter 4, three (3) core industries are proposed for
         Lembah Chuping; namely solar energy generation, Green
         manufacturing (Electrical and Electronics (E&E) and Green materials)
         and Halal industries. In addition to our research, a focus group
         discussion was also held on the 4th of March 2015, at the Georgetown
         City Hotel in Penang to validate the feasibility of Lembah Chuping’s
         concept. Attendees included representatives from relevant
         government bodies, institutions of higher learning (IHLs), and the
         private sector. A detailed list of attendees, description of our
         methodology and survey results can be found in Appendix 6.
         Step 2: Develop Industrial Park Support Functions
         Having identified the core industries for Lembah Chuping, the next
         step is to detail the development of services and systems that could
         support the operations of the proposed industries; both internal (within
         the industrial park) and external (in the vicinity) (Figure 5.2).
                                                                                                                 June 2015
                                                                                                                   Page 5-1
Chuping Valley Development Plan
           Figure 5.2: Industrial Park Supporting Functions
The supporting functions can be broadly categorised into four (4) main
areas:
  i) Lifestyle Infrastructure: Essential services (e.g. healthcare,
         financial), and housing
  ii) Transport Infrastructure and Services: Transport systems
         and connectivity
  iii) Human Capital Development and Requirements: Industry-
         academia collaborations and human talent development
  iv) Other Supporting Functions: Business matching and
         advisory, as well as utilities
Step 3: Surrounding Institutions/ Establishments
Once park supporting functions have been analysed, relationships
between surrounding institutions/ establishments will be examined.
These establishments will be evaluated based on their ability to
complement industry operations in Lembah Chuping. This will be
measured based on their ability to provide value chain support to the
industries in Lembah Chuping (Figure 5.3). Value chain support will be
defined as the provision of upstream1, midstream2 and downstream3
support.
1 R&D, component production, procurement of raw materials, inbound logistics
2 Material processing, testing, packaging, manufacturing and assembly
3 Outbound logistics, sales, marketing and distribution (component or end product)
                                                                                    June 2015
                                                                                      Page 5-2
Chuping Valley Development Plan
                 Figure 5.3: External Ecosystem - Surrounding Institution
5.2 Park Supporting Functions
         This Chapter explores the development of services and systems
         (through an analysis of benchmarked industrial parks) which could
         support the operations of the proposed industries; both internally
         (within the industrial park) and externally (the vicinity). The following
         benchmarked parks were chosen given the following criteria:
         i. Techpark @ Enstek (Malaysia)
                   Largest no. of halal manufacturers in Malaysia
         ii. Kulim High Tech Park (KHTP) (Malaysia)
                   An established tech park with achievements in solar energy PV
                   manufacturing
         iii. Singapore Science Park (Singapore)
                   Efficient use of available resources to maximise use of limited
                   land area
         iv. Hsinchu Science and Industrial Park (Taiwan)
                   One of the oldest tech-based parks in Asia, with substantial
                   government involvement
         v. Eco World Styria (Austria)
                   One of the most established parks in Europe, with a proven
                   record of implementing green technologies
         5.2.1 Lifestyle Infrastructure
                   Lifestyle infrastructure is an important consideration in
                   determining standard of living
                   Lifestyle infrastructure supports the well-being of the
                   population, and includes basic necessities. To assess lifestyle
                   infrastructure, two (2) factors were analysed:
                   i) Housing
                   ii) Lifestyle services (e.g. healthcare services)
                   The need for housing is an important factor when addressing
                   the needs of the workforce in an area; including attracting
                                                                                                                 June 2015
                                                                                                                   Page 5-3
Chuping Valley Development Plan
                   human talent4. Housing should be within an adequate distance
                   to enhance the well-being of employees to be accessible5.
                   Lifestyle services also enhance the liveability of an area; they
                   improve the quality of life of an area, and are an important
                   factor for businesses considering where to locate their
                   operations (especially when firm performance is less
                   dependent on location of operations, such as R&D labs)6. In
                   addition to attracting firms, the quality of life in an area also
                   assists in attracting and retaining skilled knowledge workers7.
                   Lifestyle services should be both accessible (in terms of
                   distance) and available (in terms of numbers) to cater to the
                   needs of consumers in the area.
                   Lifestyle services consist of four (4) main categories:
                   i) Financial services: includes banks and automated teller
                           machines (ATMs)
                   ii) Educational services: includes primary, secondary and
                           tertiary education, language institutions, kindergartens,
                           etc.
                   iii) Health services: includes clinics, hospitals, dental
                           practices, pharmacies, etc.
                   iv) Food and beverage (F&B) services: restaurants, cafes,
                           snack shops, etc.
                  Methodology: Availability and Accessibility of Lifestyle Services
 1. Identify centrally located businesses and services
            i) Benchmarked industrial parks: Hsinchu Science Park, Singapore Science Park,
                  Ecoworld Styria, Kulim Hi-Tech Park, Techpark@Enstek
            ii) Businesses in the benchmarked industrial parks were identified through the
                  use of business directories, and other relevant sources.
            iii) Central areas (focal points) were chosen based on density of companies and
                  businesses. Multiple focal points were chosen for an industrial park if the park
                  was extensive (multiple phases spread over a large area), and an average was
                  calculated.
 2. Calculate average distance of lifestyle services to central areas
            i) Based on the proximity of the closest 20 (if available) businesses and services
                  (sorted according to type of lifestyle service) to central areas, an average was
                  calculated across benchmarked industrial parks
 3. Apply the average distance calculated to central areas to obtain number of
            lifestyle services
4 Attracting and Retaining Knowledge Workers in Knowledge Cities, Journal of Knowledge Management
   11(5), Yigitcanlar et al.
5 The distances from benchmarked industrial parks to the central area of nearby towns were assessed. It
   is assumed that the population of the towns include employees of the industrial park (due to proximity),
   and could assist in catering for existing and future employees of the park.
6 The Importance of Quality of Life in the Location Decisions of New Economy Firms, Centre for Urban
   and Regional Studies, University of North Carolina at Chapel Hill, David Salvesen and Henry Renski
   (2003)
7 Residential Location Choice of Knowledge-Workers in a “Startup Metropolis”: The Role of Amenities,
   Workplace, and Lifestyle, Edward Bendit, Sigal Kaplan et al. (2011)
                                                                                                                 June 2015
                                                                                                                   Page 5-4
Chuping Valley Development Plan
i) For each industrial park, apply the average distance of lifestyle services to
obtain the number that fall within the range; as a gauge for availability of services
that are centrally located
1 Identify Businesses            2  Calculate Average                 3. Apply Average
                                          Distance
              # Industrial Park                                                                     No. of
                  Businesses     Healthcare        Education                                      services
                                                                                                  that fall in
                                             F& B  Financial
                                                                                                      the
                                                                                                  distance
                                                                                                    range
Figure 5.4: Methodology for Availability and Accessibility of Lifestyle Services
Kangar can be a source of lifestyle infrastructure...
The Kangar district is the state capital of Perlis, with Kangar
town being the most populated town in the state. As such,
Kangar town contains about 62% of residences8 among major
towns in the state9. Containing both a relatively large
proportion of residential properties and the population among
larger towns, Kangar town is the most developed town in the
state.
                                                                                4%
                                                                    5%
                                                    9%
                                 10%               Total Residences
                                      10%          of M ajor Tow ns:
                                                           5290
                                                                      62%
                                 Kangar Town       Simpang Empat Pauh
                                 Arau              Padang Besar Kuala Perlis
Source: Population and Distribution by Local Authority Areas and Mukim 2010, DOSM
Figure 5.5: Number of Residences, Perlis (2010)
Located about 20km away from Kangar town, the Chuping
area is mostly used for planting sugar cane crops10;
developments are scarce, indicated by having only about 2.2%
of total registered existing residential properties11 in the state.
8 Residences are living quarters, inclusive of detached/semi-detached/link housing, townhouses, flats,
   improvised huts, hostels, etc.
9 A point to note is that unregistered (squatter) housing is not reflected in this statistic
10 The Star Website (http://www.thestar.com.my/News/Nation/2014/07/30/Sweet-news-for-hot-Chuping-
   New-growth-centre-in-land-of-sugarcane-and-tasty-mangoes/)
11 Residential Property Stock Table (2014), Property Stock Report (2014), Pusat Maklumat Harta Tanah
   Negara (NAPIC), Jabatan Penilaian & Perkhidmatan Harta (JPPH)
                                                                              June 2015
                                                                                Page 5-5
Chuping Valley Development Plan
                   There is a planned PR1MA project12 in relatively close
                   proximity to the Lembah Chuping (about 3km away), over 20
                   acres and includes 231 terrace houses, and lifestyle facilities
                   such as a kindergarten, but it may be insufficient to cater to the
                   total workforce of the Lembah Chuping. Kangar can be a
                   source of housing for employees of Lembah Chuping,
                   since there is a lack of housing in the Chuping area.
                             Planned PR1M A Housing:
                             i. 231 units of terrace housing
                             ii. 20 acre development
                             iii. Proposed facilities to include a mosque, playground and
                                   kindergarten
                         Source: Perumahan Rakyat 1Malaysia (PR1MA) Website
           Figure 5.6: Planned Perumahan Rakyat 1Malaysia (PR1MA) Housing in
                                             the Chuping Area
                   Also, comparing the accessibility and availability of lifestyle
                   services across benchmarked industrial parks (average)13 to
                   Kangar town, it can be seen that there is a relatively high
                   number of centrally14 located lifestyle services in Kangar, more
                   than the average (with the exception of health services) of
                   benchmarked industrial parks15.
12 PR1MA housing pre-requisites for purchase include being a Malaysian citizen, being above 21 years of
   age, earning within a certain age bracket and not owning more than 1 property. Eligible candidates are
   then chosen through a balloting system.
13 Taking the 20 closest lifestyle services from the central areas of the benchmark industrial parks, an
   average distance was calculated per lifestyle service. The average was then applied to the benchmark
   industrial parks to obtain the number of lifestyle services that were within the average distance range.
   (Refer to appendix 2 for more information)
14 Central areas (focal points) were chosen based on density of companies and businesses. Multiple focal
   points were chosen for an industrial park if the park was extensive (multiple phases spread over a large
   area)
15 Note that the average was for calculated for industrial parks, whereas Kangar is a town.
                                                                                                                 June 2015
                                                                                                                   Page 5-6
Chuping Valley Development Plan
                                      No. of Lif estyle Services      50
                                                                      45
                                                                      40                                                Health Services  F&B Services
                                                                      35
                                                                      30
                                                                      25
                                                                      20
                                                                      15
                                                                      10
                                                                       5
                                                                       0
                                                                               Financial Services Educational Services
                                                                      Kangar Lifestyle Servies  Average No. of Lifestyle Services
                                                                                                (Industrial Park Average)
                                                                      Figure 5.7: Kangar Lifestyle Services
                            ...However, the distance of Kangar from Lembah Chuping
                            may limit accessibility
                            In terms of accessibility of housing, distances of residences to
                            industrial parks were observed to obtain an average across
                            benchmarked parks; the average was found to be about 9.9km
                            (adequate distance). Kangar might have an adequate level of
                            residences to support park employees, but a relatively close
                            proximity may be an important factor as well (accessibility to
                            housing). Compared to other industrial parks, Lembah Chuping
                            is located the farthest from the nearest town (Kangar), nearly
                            double the average distance of benchmarked parks (19.4km
                            against 9.9 km average)
                25.0
Distance (KM )  20.0
                                                                                                                                                                                 19.4
                15.0                                                                            15.0 15.0
                         Average: 9.9km
                10.0
                                                                 9.0
                 5.0 6.5
                                                                      4.0
                0.0
                      Hsinchu Science Singapore Science Ecow orld Styria                         KHTP                   Techpark @Enstek Lembah Chuping
                                                                                                (Kulim )
                      Park            Park (Graz)                                                                       (Nilai)          (Kangar)
                      (Hsinchu City)  (Bukit Merah,
                                      Queenstow n)
                      Figure 5.8: Average Distance of Industrial Parks to Nearby Towns
                                                                                                                                         June 2015
                                                                                                                                           Page 5-7
Chuping Valley Development Plan
                   Source: Google Maps, KPMG Analysis
                    Figure 5.9: Distance of the Chuping Area to Kangar
                   Lifestyle infrastructure to be developed in the Lembah
                   Chuping should consider both accessibility and
                   availability
                   Based on the average distance of lifestyle services to central
                   areas16, an adequate distance was obtained for each type of
                   lifestyle service (e.g. 4.1km for financial services); the number
                   of services within this range was averaged across industrial
                   parks (e.g. average of 16 for financial services). More services
                   within the average range means a relatively higher availability
                   of accessible services.
                                 - This space intentionally left blank -
16 Refer to the appendix 2 for more information, including methodology, and sources of information.
                                                                                                                 June 2015
                                                                                                                   Page 5-8
Chuping Valley Development Plan
                                          Financial Services                                                                                                                 40   Health Services
                           30                                                                                                                                                                          Average: 16
No. of Lifestyle Services                                                                                                                   35                                                                      Average distance: 3.6km
                           25
                                                                                                                                                  No. of Lifestyle Services
                                                                                                                                                                             30
                           20                                 Average: 16                                                                                                    25
                           15                                 Average distance: 4.0km                                                                                        20
                                                                                                                                            15
                           10
                                                                                                                                            10
                            5
                                                                                                                                              5
                           00
No. of Lifestyle Services                Educational Services                                                                                     No. of Lifestyle Services  120  F&B Services
                                                                                                                                                                             100
                           40                                                                                                                                                                          Average: 38
                           35                                                                                                                                                                                     Average distance: 3.3km
                           30
                           25 80
                                                                   Average: 19
                           20 60
                                                                                               Average distance: 3.5km
                           15
                                                                                                                                                40
                           10
                           5 20
                           00
                           Hsinchu Science Park               Singapore Science Park
                           Eco World Styria                   Kulim Hi-Tech Park
                           Techpark @ Enstek
                               Figure 5.10: No. of Central Lifestyle Services of Industrial Parks
                                                          45
                                                          40
                                                          35                                                                                                                                      38
                                                                                                                                                                                               (3.3km)
                               No. of Lifestyle Services  30
                                                                                                                                                                                           F&B Services
                                                          25
                                                          20                              19                                                                                         16
                                                                                       (3.5km)                                                                                    (3.6km)
                                                          15
                                                                             16
                                                          10 (4.0km)
                                                          5
                                                          0
                                                                Financial Services Educational Services Health Services
                                                              Adequate distances
                                                                    in brackets
                           Figure 5.11: Level of Lifestyle Services Lembah Chuping Should Achieve
                               Based on the average level of centrally located services
                               calculated from the benchmarked industrial parks, the above
                               chart shows a possible appropriate level of central lifestyle
                               services which should be provided for employees in Lembah
                               Chuping. It should be noted that the number of lifestyle
                               services above merely provide an indication, based on what is
                               provided in other parks without taking into account the size of
                               the population in surrounding areas. Another point to note is
                               that the above is to be developed over the time; i.e. the two
                               development phases of the project. In terms of accessibility, it
                               is found that on average, these services are located either
                               within the park, or within a distance of 4km away from the park.
                                                                                                                                                                                           June 2015
                                                                                                                                                                                             Page 5-9
Chuping Valley Development Plan
        5.2.2 Transport Infrastructure & Services
           Public Transport: Importance of Convenience and Accessibility
In the study “Valuing Convenience in Public Transport”17, a convenient public
transport is defined as a service to take commuters where they want to go, when
they want to travel, while providing reliable services and comfort for passengers.
Convenience was analysed through 6 factors, and the relative level of importance
was compared:
• Waiting /walking in          Intermediate         • Having to transfer
  crowded areas                 Importance            during a journey
• Walking requiring high  • Walking and waiting in  • Provision of transport
  effort levels             non-crowded situations    information
• Punctuality of service  • Standing w hile                   Least
                            travelling                    Importance
        Highest
      Importance          • Travel time of service
Source: Valuing Convenience in Public Transport, Richard Anderson et al. (2014),
International Transport Forum, OECD
              Figure 5.12: Public Transport Convenience Factor Ranking
As seen by the transport convenience factors of highest importance, ease of access
to and from transport services is a major factor. The first last mile problem is the
issue a commuter faces when travelling to and from a transport station, en route to
the final destination; a destination relatively far away might mean walking is not an
option, so other modes of transport must be found. This implies the requirement for
public transport connectivity to be extensive (within 1km of end destinations) to cater
for commuter needs.
First M ile               PublicTransport Use       Last M ile
                                                     Total Commuter Journey
Source: First Last Mile Strategic Plan & Planning Guidelines, Los Angeles County Metropolitan
Transportation Authority, Southern California Association of Governments (2014)
            Figure 5.13: First Last Mile Problem for Public Transportation
17 Valuing Convenience in Public Transport, Richard Anderson et al. (2014), International Transport Forum,
OECD
                                                                                                                 June 2015
                                                                                                                 Page 5-10
Chuping Valley Development Plan
  Benchmarked industrial parks place emphasis on
  accessibility and connectivity to transport networks.
  The Singapore Science Park is located strategically between
  two (2) major road routes, the Ayer Rajah Expressway (AYE)
  and the West Coast Highway. The park offers a free shuttle
  bus service that operates within and connects the two (2)
  phases of the park. In line with the emphasis on ease of
  access, the shuttle bus stops in the park are within 1km of the
  facilities and developments as shown in the figure below. Bus
  arrivals are every 15 minutes throughout the day, to promote
  availability and ease of access in the park.
                                          Singapore
                                       Science Park 1
                                                                       Singapore
                                                                    Science Park 2
                                                                                                 Singapore Science Park 1
                                                                                                 Singapore Science Park 2
                                  Singapore M ass Rapid Transit (M RT).
                                  Located w ithin 1km proximity of Singapore Bus Service (SBS) stops;SBS
                                  buses run operate in and around the science park (fee charged)
                                   Singapore Science Park shuttle bus service
               Source: Singapore Science Park Website
Figure 5.14: Singapore Science Park Mass Transport Connectivity
  To further bolster transport connectivity, the Singapore Bus
  Service (SBS) operates within and around the park, although a
  fee is charged for use. The SBS system links the park with the
  nearby Mass Rapid Transit (MRT) stations; both SBS and
  MRT transport services connect employees of the park to other
  areas of the country.
                                                                                           June 2015
                                                                                            Page 5-11
Chuping Valley Development Plan
Legends
Shuttle Bus Route  Red Line
                   Green Line
Transport Hub: City Bus; Shuttle Bus;
Intercity Coaches
Shuttle Bus Stop
City Bus Connection: Link to Hsinchu City
Source: Taiwan Tourism Board website, Hsinchu Science Park website
Figure 5.15: Hsinchu Science Park Shuttle Service Connectivity
The free Hsinchu Science Park shuttle service runs throughout
the park, shown by the Green and Red service lines. The
shuttle bus stops throughout the park are extensive, within
1km of each other. The shuttle bus service links commuters to
the Citybus, which is connected to Hsinchu City, Taipei, and
other districts/cities18; the Citybus is also connected to the
Taiwan Railway.
The centrally located transport hub is a major transport station,
linked by the shuttle bus, the Citybus and intercity coaches.
Additionally, the transport hub is located next to the Sun Yat-
Sen Freeway; a major road connecting North Taiwan to the
South19. Similar to the Singapore Science Park, there is
emphasis on transport connectivity between cities/districts, and
integration of different transport networks.
The Cyberjaya Flagship Zone (CFZ) in Cyberjaya is a 7000
acre hub for the local information and communication
technology (ICT) industry; to promote growth of the local ICT
industry while attracting foreign ICT firms20. To improve upon
the ease of access to and from Cyberjaya, the Cyberjaya
Dedicated Transportation System (DTS) was introduced in
2007; a shuttle bus service with daily 24-hour operations, with
bus arrival frequency every 15 to 45 minutes. The Cyberjaya
18 Hsinchu City Bus website; Hsinchu City Government Bureau of Tourism website
19 Taiwan Area National Freeway Bureau website
20 Multimedia Super Corridor (MSC) website
                                                                                June 2015
                                                                                Page 5-12
Chuping Valley Development Plan
DTS is a form of mass transport, being comparable to public
transport21.
                                    Route 2
                           Route 1
                  Route 9
Route 8
Route 7
                                             Route 3
                                             Route 4
         Route 6                    Route 5
        Located in close proximity to train station (LRT/KTM )(w ithin 1km)
        Located in close proximity to other bus stop routes (w ithin 1km)
Source: Cyberjaya DTS website
      Figure 5.16: Cyberjaya Dedicated Transportation System (DTS)
                               External Connectivity
The service offers a non-crowded service (standing not
allowed), with each bus installed with a GPS device for
tracking punctuality. The service consists of 9 routes sourcing
from a range of locations; locations are in close proximity
(within 1km22) to either a train station (KTM/LRT) or with other
bus routes, or both. The Cyberjaya DTS is designed to connect
with other transport networks, with connection to bus/train
stops for transit stops to other bus/train routes, as well as
connection to transport hubs such as KL Sentral, and Terminal
Bersepadu Selatan23.
21 Public transportation is defined by the American Public Transportation Association (APTA) as a form of
   mass transport offered to the general public on a regular ongoing basis, owned privately or publically.
   The Cyberjaya DTS service is owned by Cyberview Sdn Bhd, a government- majority held private
   company, whose mass transport service is offered on a regular basis. However, a point to note is the
   service being offered to only members of the public who have signed up with the service prior to use; fee
   of RM250 a month charged (APTA website) (Cyberview website)
22 The first-last mile problem is the difficulty of passengers getting to and moving from transport stations.
   The maximum suggested distance a passenger is willing to walk to and from the station is about 1km.
   (The Half Mile Circle: Does It Best Represent Transit Station Catchments?, Eric Guerra et al., Institute of
   Transportation Studies, University of California, Berkeley (2011))
23 These transport hubs are major transit stations for both the Rapid Bus and Rapid Rail (LRT) network
                                                                                                                 June 2015
                                                                                                                 Page 5-13
Chuping Valley Development Plan
     Businesses, universities, public services w ithin 1km of bus stops
     Destinations exceeding 1km of bus stops
# Bus stop for outgoing route $
# Bus stop for incoming route
Source: Cyberjaya DTS website
Figure 5.17: Cyberjaya Dedicated Transportation System (DTS) Inner-
                                park Connectivity
        The transport system in the Lembah Chuping vicinity is
        currently limited, but there are existing transport networks
        which could be expanded on
   1 Transport Netw ork in Perlis:
                                        1. Intercity rail
                                        2. Intercity coach
                                                2
                                                                                                                                        Kangar Express
                                                                                                                                         Bus Terminal
Keretapi Tanah                                      Intercity Bus
M elayu Berhad                                      Terminals
(KTM B) Intercity
Stations
Source: Google maps, Express Bus Malaysia website, MYPublicTransport website,
Keretapi Tanah Melayu Berhad (KTMB) website, KPMG Analysis
Figure 5.18: Existing Transport Networks in Perlis
The existing inner-state transport networks in Perlis are
currently limited. However, there are inter-state networks in
place, although the extensiveness of the services could be
expanded. The Keretapi Tanah Melayu Berhad (KTMB)
                                                    June 2015
                                                    Page 5-14
Chuping Valley Development Plan
Intercity rail service currently has only two (2) stations in Perlis,
and there are two (2) bus terminals for interstate travel located
near Kangar and Kuala Perlis.
Inner-state public transport could assist in alleviating the need
for residential properties in close proximity to Lembah
Chuping, as other areas of the state would be more easily
accessible.
In line with the Green Industrial Park concept, a shuttle
service could aid in improving park accessibility, while
reducing total emissions
Transport accessibility is an important factor when considering
the needs of employees, which is in turn a key consideration in
the development of Lembah Chuping. This could be achieved
by having a shuttle service (dedicated mass transport system)
in and around the park. Based on benchmarked parks, four (4)
key elements in transport infrastructure were identified:
i) Shuttle bus stops are within 1km apart and less than
         1km from major businesses/ facilities
ii) Minimal fees are charged for use, to promote use of
         public transport
iii) Bus services operate throughout the day at frequent
         intervals (15-45 mins apart)
iv) Presence of a central transport hub in the park that
         links to other major external transport networks
  Accessible bus   Frequent shuttle
  stops (close to        arrivals
major businesses)
 Proposed
Shuttle Bus
   Service
M inimal fees      Transport hub
                   located in park
Figure 5.19: Key Characteristics of Proposed Shuttle Bus
                                    Service
                                     June 2015
                                     Page 5-15
Chuping Valley Development Plan
5.2.3 Human Capital Development and Requirements
         While institutions of higher learning (IHLs) in the Lembah
         Chuping vicinity can support the human capital
         requirements of the proposed industries; a service
         matching supply and demand of human talent could be of
         assistance...
         The courses offered in institutions of higher learning in the
         Lembah Chuping vicinity were observed to assess the
         adequacy of graduates in meeting the human capital
         requirements of manufacturing firms (and solar energy
         generation) in the relevant industries24. It was found that the
         surrounding IHLs offer courses that can cater to the proposed
         industries.
No. of Relevant Courses      100                       49
                              90 95                                                      30
                                                                                                                            20
                              80
                                                        Halal Industries   Green Materials  Solar Energy
                              70                              (F&B,                          Generation
                              60                       Pharm aceutic als)
                              50
                              40
                              30
                              20
                              10
                                0
                                                  E&E
                         * Courses include both
                         undergraduate & post-
                            graduate courses
                         Figure 5.20: Industry Human Capital Requirements & Education
                                                   Courses near Chuping Area
                         For the proposed electrical and electronics (E&E) industry in
                         Lembah Chuping, only certain areas of the E&E value chain
                         are to be focused on25; which are wafer fabrication, substrate
                         manufacturing, integrated circuit (IC) design, and solar energy
                         components. Hence, the courses relevant to the areas above
                         are examined:
24 The courses related to halal industries were engineering (i.e. manufacturing, product design,
   biotechnology), food technology, medical, bio and health sciences, chemistry; green materials were
   engineering (i.e. materials, environmental); solar energy generation were engineering (E&E, electrical
   systems, environmental). Refer below for E&E course criteria. Refer to appendix 8 for methodology and
   sources of information.
25 Refer to the “Value Chain Support and Competition” Chapter for more information
                                                                                                                 June 2015
                                                                                                                 Page 5-16
Chuping Valley Development Plan
                                  35
No. of Courses Applicable to E&E  30
                                  25
                                  20
                                  15
                                  10
                                  5
                                  0                                    Wafer Fabrication     Assembly, Packaging & Testing
                                                          Chip Design
                                  UniMAP, Perlis                       USM, Penang           UUM, Kedah            * Courses include both
                                  AIMST University, Kedah              KDU College, Penang   Segi College, Penang  undergraduat e & post-
                                  UiTM, Perlis                         PTPL College, Penang
                                                                                                                      graduate courses
Figure 5.21: Breakdown of E&E Relevant Educational Courses near Chuping
                                                   Area
                                      Similarly, it was found that a range of courses were applicable
                                      to the E&E sector human capital requirements (according to
                                      the proposed value chain involvement). However, even with
                                      the availability of courses offered at IHLs, the supply (IHLs)
                                      and demand (firms) for human talent still should be matched
                                      (i.e. matching human talent to human talent requirements). An
                                      industrial park talent matching service to match IHLs to firms in
                                      the park could help firms source human talent according to
                                      needs, while expediting the flow of human talent into the
                                      workforce. The Singapore Science Park offers a talent
                                      matching service, which works together with recruitment firms
                                      and IHLs to source human talent according to firm
                                      specifications26.
                                      ...and the development of an internship programme could
                                      also assist firms with the acquisition of human talent,
                                      while providing industrial experience.
                                      An internship programme can allow graduates/students to
                                      obtain work experience in their industry of interest, while
                                      allowing employers to identify potential future recruits (a
                                      platform to assess the abilities of interns). The programme
                                      gives industrial work experience, to both improve employability
                                      of students, and better meet the industry requirements of
                                      human talent27. Instead of merely matching human talent
                                      supply and demand, an internship could also assist in bridging
26 Ascendas (firm managing Singapore Science Park) website, Singapore Science Park website
27 Undergraduate Business Internships and Career Success: Are They Related?, Jack Gault et al., Journal
   of Marketing Education vol. 22 (2000)
                                                                                                                 June 2015
                                                                                                                 Page 5-17
Chuping Valley Development Plan
the skill mismatch28 between graduate education and on-the-
job requirements.
Universiti Utara M alaysia  Universiti M alaya Perlis  Universiti Sains M alaysia
        (UUM ), Kedah                 (UniM AP)               (USM ), Penang
 Compulsory internships     Compulsory internships      Compulsory internships
 for courses include:       for courses include:        for courses include:
 i. M anagement             i. Engineering              i. Accounting
 ii. Social Sciences                                    ii. M anagement
 iii. Computer Science
Figure 5.22: Internship Examples at Nearby IHLs
The Singapore Science Park collaborates with IHLs such as
the Nanyang Technological University (NTU) to assist in both
internships and job placements. For example, at NTU, an
internship can last up to 24 weeks, depending on the course
studied29. Lembah Chuping could have an industry-academia
collaborative unit, for the purposes of facilitating job
placements and internships.
Based on feedback obtained during the focus group session
conducted in Penang, locating potential collaborators is an
issue hindering internship collaborations. In being the
facilitator between firms and IHLs, a human talent
development park service could assist in locating potential
collaborators.
                            - This space intentionally left blank -
28 Skill mismatch can be defined as the mismatch between the skills obtained/learned by a person and the
   skills required for a job; meaning a person might be under skilled for a job. (OECD skills website)
29 Ascendas website, Nanyang Technological University (NTU) website
                                                                                                                 June 2015
                                                                                                                 Page 5-18
Chuping Valley Development Plan
                    Focus Group Scores  20
                                        18
                                        16                          Locating Potential  Internal Processes  Others
                                        14                            Collaborators
                                        12
                                        10
                                         8
                                         6
                                         4
                                         2
                                         0
                                                Adequate financing
Figure 5.23: Main Challenges of Collaborative Efforts (KPMG
                                Focus Group Feedback)
Additionally, during the focus group30, firms stated that a lack
of industry experience was the greatest inhibitive factor related
to human capital. Education might not grant individuals enough
industry-specific knowledge31 (more theoretical than practical)
for their jobs. This problem could be assisted through
internship programmes (industry experience).
                    16
                    14
Focus Group Scores  12
                    10
                    8
                    6
                    4
                    2
                    0
                                        Lack of industry Obtaining/         Skill Mismatch Language skills  Others
                                        experience Retaining Human
                                                                    Talent
                    Figure 5.24: Human Capital Challenges (KPMG Focus Group
                                               Feedback)
30 The focus group was held on the 4th of March 2015 in Penang. Attendees were given survey forms to fill
   out; questions included topics such as industry supporting function requirements, human capital
   requirements, and industry-academia collaborations. Focus group scores for each question were out of
   three (3), with three (3) being the highest score (comparatively highest priority/ most important). Refer to
   appendix 6 for more information
31 Focus group scores for each question were out of three (3), with three (3) being the highest score
   (comparatively highest priority/ most
                                                                                                                 June 2015
                                                                                                                 Page 5-19
Chuping Valley Development Plan
                  Vocational and technical education (VTE) can assist in
                  improving the skills of the workforce, from low-skilled to
                  semi-skilled
                  A form of semi-skilled training is vocational and technical
                  education (VTE); it prepares students for direct entry into
                  specific occupations32, where skills learnt are relatively more
                  practical and less theory-based (as opposed to universities).
                  An example of a successful VTE institute is the Institute of
                  Technical Education (ITE) in Singapore, which was developed
                  in 1992 and focuses solely on VTE courses. The ITE has
                  developed and collaborates with VTE institutes and other
                  institutions around the world to develop the depth and breadth
                  of the courses on offer.
     Vocational and Technical Education (VTE): Institute of Technical Education (ITE),
                                                 Singapore
The Institute of Technical Education (ITE) in Singapore was established as a post-
secondary education institution in 1992, under the Ministry of Education33. The institute
offers vocational and technical education (VTE)34 covering a range of study areas;
about 101 courses.
                     Applied and
                   Health Sciences
                           (11)
 Businesses and     Institute of     Electronicsand
   Services (22)      Technical             Info-
                     Education
Design and M edia  (ITE):Areas of   communications
          (12)                      Technology (20)
                        Study
                                      Engineering (30)
                   Hospitality (6)
 Source: Overview of Institute of Technical Education, ITE website
 Figure 5.25: Courses Offered by Institute of Technical Education (Singapore)
 The purpose of the ITE was to shift segments of the low-skilled population towards
 higher skills, by offering the option of being trained into semi-skilled labour (vocational
32 OECD stats website
33 Institute of Technical Education (ITE) website
34 The education of the ITE is focused at about: 70% on practical training, 30% on theory (Toward a Better
   Future: Education and Training for Economic Development in Singapore since 1965, Lee Sing Kong et
   al., World Bank (2008))
                                                                                                                 June 2015
                                                                                                                 Page 5-20
Chuping Valley Development Plan
 training). The goal was to enable the work force to shift towards a higher skill level
 while improving the employability of individuals35.
 Source: Google maps, ITE website, KPMG analysis
          Figure 5.26: Location of the Institute of Technical Education (ITE)
 The ITE headquarters and one of its campuses36 are located in relatively close
 proximity to the Singapore Science Park. In terms of industry-ITE collaborations,
 the Traineeship programme was set up to improve industrial experience and
 employability of students (similar to internship programmes). Benefits to firms are
 the steady stream of labour whose skills could be moulded according to the
 required skills of firms.
 Additionally, the ITE launched the Certified On-the-job Training Centre (COJTC);
 firms tailor-make their in-house training with the assistance of the COJTC (the
 COJTC offers advisory support and guidance). This initiative aims at assisting the
 human capital development of the existing workforce. In this way, the workforce
 could be trained without necessarily needing the direct involvement of the
 COJTC37.
 In the development of the course curriculum (in terms of both subjects on offer and
 covered information), the ITE collaborates with other VTE institutes, government
 agencies, polytechnics and universities around the world. An example of
 curriculum development is the inclusion of environmental sustainability in all
 courses38.
 This promotes constant improvements through knowledge sharing practices.
 Through collaborative efforts with firms and foreign institutions, the ITE has
 developed into a respected and developed VTE institute that focuses on the
 development of semi-skilled labour39.
35 Toward a Better Future: Education and Training for Economic Development in Singapore since 1965,
   Lee Sing Kong et al., World Bank (2008)
36 There are 3 ITE campuses located around Singapore
37 ITE website
38 Environmental sustainability refers to three (3) areas: Awareness of Environmental Issues &
   Development; Responsible Environmental Practices; Ready & Competent for Green Economy (Eco ITE
   website)
39 Meaning training of skilled labour is left to be conducted by Singapore universities instead, such as the
   National University of Singapore (NUS)
                                                                                                                 June 2015
                                                                                                                 Page 5-21
Chuping Valley Development Plan
Figure 5.27: International Collaborators of the ITE
Locating a VTE institute in the Lembah Chuping can assist
in improving the skill-level of the workforce in the area,
while meeting firm demand for semi-skilled labour
A VTE institute in Lembah Chuping could be the source of
semi-skilled labour for industries in the vicinity. As with the ITE
in Singapore, the VTE institute could eventually provide both
training to new students, and also guide firms in training their
existing workforce. This could assist in shifting the low-skilled
workforce in the area towards being semiskilled and improve
income levels.
As seen from the average income levels of the domestic
manufacturing sector, higher skilled labour earn considerably
more then unskilled labour. If the VTE institute could shift a
person from low-skilled to semi-skilled, the person’s income
could increase almost two (2) times.
RM16,691
RM31,630
          RM 89,231
                             Skilled Labour (65% )
                             Semi-skilled Labour (23% )
                             Unskilled Labour (12% )
Source: Report on the Survey of Manufacturing Industries 2012, DOSM
 Figure 5.28: Manufacturing Sector per Annum Incomes by Skill
                                     Level
                     June 2015
                     Page 5-22
Chuping Valley Development Plan
                   Hence, it is proposed to have a VTE institute in Lembah
                   Chuping. In line with the Green theme of the park, the courses
                   can be moulded to include an element of Green
                   sustainability40. This can include vocational training in
                   addressing or adhering to Green sustainability; an example of
                   vocational training with a Green theme being the Grid-
                   Connected Photovoltaic (PV) Systems Design Course offered
                   by SEDA41. The training covers both theoretical and practical
                   sessions (design of PV systems and related equipment, PV
                   system requirements). As is the case with new technologies
                   such as Green Technologies, the handling of it may be more
                   unfamiliar than with conventional techniques42. In this way, the
                   VTE institute could equip graduates with skills that are in
                   scarce supply (more specialised), and relevant to Lembah
                   Chuping.
         5.2.4 Other Supporting Functions
                   A business matching and advisory unit in the park could
                   assist in linking industries in Lembah Chuping with
                   surrounding industrial estates to obtain value chain
                   support
                   According to the Porter Diamond model, it is essential that an
                   ecosystem (or cluster) of firms/ institutions be supported by a
                   range of support industries43; this can be in terms of support
                   services, or value chain linkages. Activities in surrounding
                   industrial parks may complement the industries in Lembah
                   Chuping44; a business matching service may facilitate such
                   links in the value chain.
                   Hence, it is suggested that a business matching and advisory
                   service be set up for the Lembah Chuping. As this may require
                   a developed level of expertise and a developed network of
                   contacts to assist firms, this should be developed in later
                   phases45. Of note, in our benchmarked parks, a business
                   advisory service is provided to assist firms.
40 Green industry is defined by the United Nations Industrial Development Organisation (Unido) as an
   environmentally sustainable method of growth, possibly promoted through public investments and
   policies; for firms it means more resource efficient productivity and a change in production processes.
   (UNIDO Website)
41 The length of the training is 7 days and costs about RM5,500. Sustainable Energy Development
   Authority (SEDA) website
42 The Risks of Green Buildings: Why Moisture and Mold Problems are Likely, Florida Engineering Society
   Journal (2008), J David Odom et al.
43 Clusters and the New Economics of Competition, Harvard Business Review (HBR) 1998, Michael E.
   Porter
44 See Chapter “Value Chain Support and Competition: of this report for more detail
45 A point to note is that different firms will have different needs, based on type of industry and size. As
   such, different skills for advisory, in terms of range and depth will be needed. This is where the network
   of contacts would be useful; connecting the demand to the supply of knowledge.
                                                                                                                 June 2015
                                                                                                                 Page 5-23
Chuping Valley Development Plan
            Business Matching and Advisory Services: Benchmarked Industrial Parks
1. Singapore Science Park
                Business matching and business advisory
                The network of contacts of the park manager is used for a few purposes; linking
                firms to other institutions that can provide value chain support, and providing
                business advisory solutions across a range of applications46.
2. Eco World Styria
                Business advisory47
                This support service includes identifying partners for innovation advancements;
                consulting for business strategy, and methods of funding (e.g. choosing
                investors)
3. Hsinchu Science and Industrial Park
                Business advisory for startups and firm operations
                Provides startup assistance and operations support, inclusive of advice for
                audits, certifications (for equipment and tax deductions), logistics and
                manpower sourcing.
All three industrial parks offer services to assist in the development of industries, with some
services for more developed firms (e.g. innovation support and marketing), while others
would be more relevant for smaller, startup firms (e.g. licensing and regulatory adherence
support). The support provided also ranges across different stages along the value chain;
from R&D to logistics.
                   There also may be a need for further utilities development
                   in the future, in the form of power supply and waste-to-
                   resource facilities
                   For benchmarked industrial parks without an internal power
                   plant, it was found that the distance from the parks to an
                   external power plant was about 23.5km on average. In Perlis,
                   the nearest power plant to Lembah Chuping is in Simpang
                   Empat, Perlis; approximately 34.9km away48. This is above the
                   average for parks without an internal power plant. While there
                   are plans for using solar energy as an alternative power source
                   for the park, as it is envisaged that the energy requirements of
                   the park may substantially increase with growth.
46 This includes models for business viability and sustainability across a range of applications, such as for
   startups, and innovations for more established firms. Assistance is from both in-house consultants and
   from their contact network. ( iAxil website)
47 Handbook for Cluster Optimisation, Cluster and Network Cooperation for Business Success in Central
   Europe (CNCB) (2013)
48 Teknologi Tenaga Perlis Consortium (TTPC) website, KPMG analysis
                                                                                                                 June 2015
                                                                                                                 Page 5-24
Chuping Valley Development Plan
                                                                        40
           Approximate Disance (km) from Park to External Pow er Plant  35
                                                                                                                                                                                                                                                           34.9
                                                                                                        33.4
                                                                        30
                                                                                           29.5                                  29.1 Average distance: 23.5km
                                                                        25
                                                                                                                                                                 25.3
                                                                        20
                                                                        15
                                                                        10
                                                                         5 6.3
                                                                        0
                                                                            Kulim Hi-Tech Park Hsinchu Science and Singapore Science Techpark @Enstek        Eco World Styria Chuping Green Valley
                                                                            (KHTP)                      Industrial Park          Park
                                                                        Available pow er plant in park  No pow er plant in park        Chuping Green Valley  Average distance of external pow er plant
                                                                                                                                                             to industrial park (no pow er plant in park)
                                                                                                                                                             No pow er plant in park
                                                                        Figure 5.29: Distance of External Power Plants to Benchmarked
                                                                                                     Industrial Parks
                                                                            In Perlis, water treatment plant (WTP) capacities are at 289
                                                                            million litres a day (MLD), with production at 218 MLD;
                                                                            meaning a reserve margin of 24.5%49. This is above the
                                                                            average in Malaysia of about 17.6%, indicating the adequacy
                                                                            of current WTP facilities in meeting state water treatment
                                                                            requirements.
                                                                            However, with the development of new industries in Lembah
                                                                            Chuping, additional WTP capacity (expansion/new WTP) might
                                                                            be required to cater for industry requirements; in addition to
                                                                            possible inflow of employees into the state.
Table 5.1: Water Treatment Plant Capacities and Production in Malaysia (2013)
                                                                                                        Water Treatment Plants (WTPs)
States No. of WTPs                                                                                      Capacity (MLD)                 Production (MLD)      Reserve Margin (%)
                                                                                                               1497                              988                    34.0
P. Pinang                                                                   10                                 1789                             1215                    32.1
                                                                                                                906                              638                    29.5
Perak                                                                       46
                                                                                                                289                              218                    24.5
Terengganu                                                                  13                                 1986                             1508                    24.1
                                                                                                               1529                             1165                    23.8
Perlis                                                                      5                                   556                              487                    12.5
                                                                                                               1286                             1132                    12.0
Johor                                                                       44                                 1300                             1065                    18.0
                                                                                                                480                              430                    10.3
Sarawak                                                                     85                                  793                              736                     7.2
                                                                                                               4606                             4563                     0.9
Melaka                                                                      8                                  1300                             1326                     0.0
                                                                                                        Average                                                         17.6
Sabah                                                                       67
Pahang                                                                      80
Kelantan                                                                    32
N. Sembilan                                                                 22
Selangor                                                                    34
Kedah                                                                       36
Source: Malaysian Water Industry Guide (MWIG) 2014, The Malaysian Water Association
(MWA)
49 The reserve margin is the difference between maximum capacity of the water treatment plants, and the
current production.
                                                                                                                 June 2015
                                                                                                                 Page 5-25
Chuping Valley Development Plan
                   Currently, there are 10 acres allocated in Lembah Chuping for
                   a water treatment plant. A point to note is that there can be
                   different grades (classes) of recycled (treated) water; each
                   grade with different possible functions (due to level of water
                   pollution/cleanliness)50.
                   Depending on the level of technology used and the scale of the
                   WTP, the treated water of the park can eventually shift towards
                   a cleaner output with possibly more functions. In this way, the
                   WTP can shift towards being more than just waste treatment;
                   towards a waste-to-resource function51.
                            Water Treatment Process: Hsinchu Science Park
 Water treatment in the Hsinchu Science Park undergoes two (2) levels of
 filtration/treatment:
 i) Wastewater discharged by firms: Must meet a standard set by the park
            administration52 before drained into the sewers.
 ii) Water treatment plant in the park (about 165 MLD)53: Goes through multiple
            levels of treatment54
                  Physical filtration
                  Biological treatment (use of microorganisms)
                  Chemical treatment
 This dual method of treating water assists in ensuring that discharged water will be of a
 certain standard; limiting pollution to the environment. Also, a portion of the costs is
 passed onto firms, rather than being absorbed by the park administration. This provides an
 incentive for firms to limit the quality of water from production processes; more water
 treatment is required if the water by-product is more polluted.
 As a result of water treatment, product of the processes (waste-to-resource) are55:
 i) Recycled water (industrial uses)
 ii) Recycled sludge, which can be used as raw materials in the manufacture of bricks
                   The importance of utilities was further validated during the
                   focus group held in Penang. Firms stated that infrastructure
                   was a key supporting function required in the operations. A
                   stable utility supply was the most important factor, followed by
                   transport, telecom, and waste management56.
50 The definition of these water grades (classes) will differ based on institution, an example being the
   Environmental Protection Authority (EPA) of Victoria, Australia; classes range from A to D. Class A has a
   range of uses, including watering crops and toilet-flushing. Moving down the classes means the recycled
   water has less allowed functions (more polluted/ less treated). (Guidelines for Environmental
   Management: Use of Reclaimed Water, 2003)
51 Dependent on the capabilities of the industrial park, and its development.
52 Regulation for the Use and Management of Wastewater Treatment and Sewage System in the Science-
   based Industrial Park, Hsinchu Science Park Bureau, Ministry of Science and Technology Taiwan (2010)
53 Hsinchu Science Park Bureau website
54 Emerging Organic Pollutants in Waste Waters and Sludge (vol2), Damia Bercelo (2005)
55 Hsinchu Science Park Bureau website
56 A point to note is that a score of zero (0) doesn’t imply low importance, just relatively less importance
   compared to the other potential answers.
                                                                                                                 June 2015
                                                                                                                 Page 5-26
Chuping Valley Development Plan
Focus Group Scores  8
                    7
                    6
                    5
                    4
                    3
                    2
                    1
                    0
                       Utility Supply  Transport  Telecom  Waste
                                       Infrastructure Infrastructure Management
Figure 5.30: Industry Infrastructure Requirements (KPMG Focus
                                       Group Feedback)
5.3 Value Chain Support and Competition
In addition to developing park-specific supporting functions to enable
efficient operations within Lembah Chuping, mutually beneficial
relationships can also be established between the newly proposed
industries and surrounding establishments in Perlis and Kedah;
namely companies within surrounding industrial estates. This will
facilitate both the provision of industry support and the establishment
of potential markets for goods produced in Lembah Chuping.
The Significance of Proximity
In today's economy, a total-cost perspective has become increasingly
more important in supply chain management, as compared to
choosing a manufacturing location solely based on cost (in terms of
labour and raw materials)57 — especially since increasing energy
costs have pushed up transportation, logistics, and distribution
expenses58. This has given rise to the concept of “profitable proximity”-
a comprehensive approach to procurement that requires companies to
consider total supply chain costs and lead times when determining
suppliers. Currently, Malaysia is among the nations with the highest
logistics costs (10.7% of GDP) (Table 5.2). These costs may
potentially be minimising the gains made from traditional low-cost
value chain strategies59, hence increasing the importance of having
suppliers within close proximity.
Table 5.2: Global Logistics Costs as a Percentage of GDP (2012-2013)
                       Country         Logistics Cost (as a % of GDP)
                       China                      18.0
                       India                      13.0
                       Mexico                     12.0
57 http://www.supplychainquarterly.com/topics/Global/scq200803nearshore/
58 http://talkinglogistics.com/2015/02/18/financial-dimension-supply-chain-visibility-episode-highlights/
59 Leveraging value chain support elsewhere as a result of lower costs; labour, materials, compliance costs
                                                                                 June 2015
                                                                                 Page 5-27
Chuping Valley Development Plan
Malaysia     10.7
Thailand     10.7
Vietnam      10.7
Indonesia    10.7
Australia    10.5
Spain        9.7
Italy 9.7
France       9.5
Canada       9.0
South Korea  9.0
Taiwan       9.0
Singapore    8.5
Japan        8.5
UK 8.3
US 8.3
Source: Armstrong & Associates via World Bank, IMF World Economic Outlook
Furthermore, a recent study done by electronic component specialist
TTI Market Eye shows that the average lead times60 for passive E&E
component61 manufacturing have decreased globally over the past 4
years (Figure 5.31); which could be in response to increased product
demand putting downward pressure on lead times for finished E&E
goods. This may indicate that E&E manufacturers require components
to be delivered for end-product assembly in an increasingly timely
manner.
            Source: MarketEYE
    Figure 5.31: Average Global Lead Times for Passive Electronic Components
                                                (2010-2014)
         The trend above indicates that profitable sources of value chain
         support for certain technology-based industries may be from
         organisations within close proximity to a firm’s operations; given that
         support in the vicinity will require less expenditure on logistics, and
         facilitate smaller lead times. The fact that various technology and
60 Defined as the time elapsed between the initiation and completion of a production process
61 Those devices or components which store or maintain Energy in the form of Voltage or Current
   (Electricaltechnology.org)
                                                                                                                 June 2015
                                                                                                                 Page 5-28
Chuping Valley Development Plan
         consumer goods companies have already adopted practices in line
         with profitable proximity indicates that this concept may be relevant to
         Lembah Chuping 62.
         Overview of Surrounding Industrial Parks in Malaysia
         The following industrial parks have been chosen based on two (2)
         criteria. Firstly, as explained above, they are within close proximity of
         Lembah Chuping (approximately within a 2 hour drive). Secondly, their
         business activities serve to complement Lembah Chuping’s proposed
         industries63. Each park’s complementary nature will be evaluated
         based on the number of firms available the park to provide value chain
         support to the industries proposed. Other supporting factors that are
         considered are capabilities of these firms, in addition to the extent of
         value chain support required based on each industry’s requirements.
         The industrial parks being considered in this Chapter are (Figure
         5.32):
                 Kulim Hi-Tech Park
                 Bukit Kayu Hitam
                 Sungai Petani Industrial Estate
                 Kuala Ketil
                 Bayan Lepas Free Industrial Zone
                 Prai Industrial Estate
                  Figure 5.32: Map of Complementary Industrial Estates
62 http://www.supplychainquarterly.com/topics/Global/scq200803nearshore/
63 Value chain support for E&E (Semiconductor, LED and Solar Component Manufacturing), Green
   Materials, Halal Manufacturing and Solar Energy Generation
                                                                                                                 June 2015
                                                                                                                 Page 5-29
Chuping Valley Development Plan
5.3.1 Green Materials
Figure 5.33: Green Materials Manufacturing Value Chain
For Lembah Chuping, the products for Green materials include
natural composite fibres and renewable polymers; high-
strength filaments produced by refining, blending, and
compounding kenaf and vegetable oils. This Chapter will focus
on the midstream applications of these materials within the
construction and automotive sectors, and surrounding
industrial estates will be evaluated based on their ability to
provide value chain support (Figure 5.33). For the purpose of
this Chapter, the Green materials value chain support is
defined as follows (Table 5.3):
Table 5.3: Value Chain Definition - Green Materials Manufacturing
Stage of Value Chain             Description
R&D                              Research into innovative processes and
                                 technologies using plant-based materials
Procurement of Raw Materials     Supply/distribution of raw plant-based material
                                 (Kenaf, Jute, Hemp etc)
Inbound Logistics                Receiving, warehousing of raw materials,
                                 distribution of materials to manufacturing
                                 facilities
         Material Processing     Processing of raw material into a useful form
                                 for manufacturing
    Manufacturing & Assembly
         Outbound Logistics      Production of finished goods
          Sales, Marketing &     Warehousing and distribution of finished goods
               Distribution
         After-Sale Services     Wholesale/retail distribution, and installation of
                                 finished goods
Source: US Department of Energy
                                 Replacement/maintenance of finished goods
                                                        June 2015
                                                        Page 5-30
