Because they can afford it.
How can they afford it?
It's because they have a good paying job or their business is making good money.
If that is the case, Penang manufacturing hub must be well alive?
Look at this chart -- labor cost comparison.
The original reason of putting manufacturing plants in China is no longer compeling. Originally, western companies put up plants in China were to take advantage of low wages. Unfortunately, the low wage advantage is dissapearing fast. You have people commited suicide and organized strike demanding higher wages. Dong Tao, Chief Asia Economist for Credit Suisse said 'This is the beginning of the end of an era for China as the world's factory'.
Income growth is their priority. They want to move up to higher value added manufacturing activities. They will continue to raise minimum wage.
China plans to increase its minimum wage by at least 20 percent annually in the next five years, more than doubling it by 2015, to increase spending power and consumption, the South China Morning Post said, citing Huang Mengfu, a government adviser.
At 20% rate, labor cost in China will surpass South East Asia's in 5 years. They have just lost Calvin Klein last year.
China’s rising labor costs prompted Top Form International Ltd., a bra maker for Calvin Klein, to pick Southeast Asia for a new factory, adding to signs of a reshaping of the economy away from export-tied regions.
“We’ve halted plans to open a fourth factory in China,” Eddie Wong, group managing director and co-founder of Hong Kong- based Top Form, which also supplies brands including Maidenform, said in an interview yesterday. “We can consider other cities in China but it’s only a matter of time before wages will rise again and it will get more expensive for us.”
Our current Penang government is doing a good job to take advantage of this trend. Our CM, Guan Eng said his team is working off their butts to attract investment. This is how they market Penang.
But Malaysia has a host of additional competitive advantages in the new manufacturing race, from logistics to geography. The island of Penang, for instance, has wide roads, a steady stream of university science graduates, an efficient power supply and a modern airport from which goods are flown around the world. "From Penang, we can get our products anywhere in 48 hours," says Purushothaman of National Instruments, which is currently building an $80 million factory close to the airport.
In addition, Penang has inherited the British legal system from its former colonial masters, which gives those doing business there a degree of comfort. "If you look at the region, companies feel comfortable with the intellectual protection measures and legal system in Malaysia," says Lee Kah Choon, chairman of Invest Penang, a government-run investment-promotion agency. "Whereas in China, they're very uncomfortable that whatever is introduced there can be copied."
The importance of intellectual-property protection is echoed by a wide range of technology executives who operate in both Malaysia and China. Almost universally, there is unease about the latter's commitment to copyrights and patents. "It's not as transparent as we want it to be," says Steven Siaw, a co-founder of Penang-based Vitrox Corp., an 11-year-old tech start-up that produces automated vision-inspection systems and has a presence in China. "There's a certain degree of respect for intellectual-property rights in Malaysia. We want peace of mind."
"We're paranoid about intellectual property," says Atul Bhargava, managing director of Intel Malaysia. How paranoid? Consistent with its global practices, Intel severely restricts media tours of its Penang factory lines: permission is rarely granted, and cell phones are always banned, lest illicit photos be secretly snapped. Any employee who leaves the firm is told, in a less than collegial fashion, that any proprietary work done at Intel does not leave the building. "You have to make sure there is a firewall," says Bhargava. Malaysia's commitment to intellectual-property protection, he says, is one of the reasons Intel employs roughly 10,000 people in Penang — the semiconductor firm's single largest bloc of workers outside the U.S.
Penang's recent economic momentum will continue, claim senior government officials. "We've worked our butts off to get investment in," says chief minister Lim. The effort appears to be paying off. National Instruments, Citigroup and health-equipment company St. Jude Medical are all poised to significantly increase their Penang headcounts over the next few years. Online job postings in Penang, according to Kuala Lumpur — based Jobstreet.com, soared 80% in 2010 over the previous year. According to Chook Yuh Yng, Jobstreet's country manager, postings for this year are looking pretty good too.
Read more: http://www.time.com/time/magazine/article/0,9171,2065153,00.html#ixzz1OHVBoAK3
The fact that they bring in St. Jude, National Instruments and Honeywell, we all should applaud Guan Eng's team initial success.
If his team continue to govern for the next few terms, we will see Penang will be a different today's Penang.
I know we have some problems created by a minority group(Umno-Putra) to take advantage of Malaysians but I'm optimistic that this will be resolved in the future. If not in GE 13, it will be one of the GEs. I want to appeal to Malaysian who resides in overseas to be fair when making statements. After all said and done, we all should not forget our root.