Bagan MP Lim Guan Eng has urged Prime Minister Datuk Seri Anwar Ibrahim to reconsider the establishment of a Special Financial Zone (SFZ) in Penang, warning that the state’s heavy reliance on the electronics sector leaves it dangerously exposed to potential punitive tariffs from the United States.
Lim said he raised the matter directly with the prime minister during a meeting on January 16, 2026, arguing that an SFZ was no longer a long-term aspiration but an urgent economic safeguard. He proposed that the zone be located in Bagan, Butterworth, on the mainland, as part of a broader strategy to shield Penang from external trade shocks.
According to Lim, Penang’s economy is overwhelmingly dependent on manufacturing and services, which together account for about 95 per cent of economic activity. This concentration, he said, makes the state particularly vulnerable to shifts in global trade policies, especially amid lingering tensions linked to the US-China trade conflict.
He pointed out that although Malaysia concluded an Agreement of Reciprocal Tariffs with the United States in 2025 that capped certain duties at 19 per cent, the electronics sector was excluded from the arrangement. Given that electronics form the backbone of Penang’s industrial base, Lim said the omission had created deep uncertainty for businesses and investors.
Lim cautioned that the situation could deteriorate sharply if the United States proceeded with proposals to impose tariffs ranging from 200 to 300 per cent on selected electronic products, a move he described as potentially devastating for Penang’s economy and employment landscape.
To counter these risks, Lim proposed the creation of an SFZ modelled on the one approved in Johor, describing it as an economic anchor that could diversify income streams, attract high-value financial activities and reduce dependence on traditional manufacturing. He suggested a 70-acre, state-owned site in Ampang Jajar, Bagan, noting that its development could also help correct long-standing economic imbalances between Penang Island and Seberang Perai.
Lim said Anwar acknowledged the proposal but indicated that the federal government was not inclined to approve a Penang SFZ at this stage, as the Johor zone remained in its early implementation phase. Despite this, Lim maintained that the Ampang Jajar proposal had strong merits, citing its location on government-owned land, its mainland setting to promote balanced growth, and its position within Penang’s main transport and communications network.
The renewed appeal reflects a shift in strategy after the Finance Ministry previously rejected an application by the Penang state government that focused solely on three privately owned sites on the island. Lim said the revised submission would now combine the state-owned mainland site with the earlier island proposals, in an effort to strengthen Penang’s case for federal approval.
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