Doing Business in Penang: Two Councils, Two Sets of Rules

The first question about doing business in Penang is not what to register. It is which side of the channel you are on.

Penang is one state with two city councils. Majlis Bandaraya Pulau Pinang licenses the island and George Town; Majlis Bandaraya Seberang Perai licenses the mainland. They issue different licences under different by-laws, on different fee schedules, and on at least one point — the language rule on your signboard — they do not agree with each other or with Kuala Lumpur.

Who licenses you, and under what

Both councils license under the Local Government Act 1976 (Act 171), the same enabling frame as everywhere in Peninsular Malaysia: s.102 supplies the by-law powers, s.107 governs fees, revocation and the three-year validity ceiling.

The difference from Kuala Lumpur is procedural but consequential. Penang has a State Authority, so by-laws are confirmed under s.103 by the State and published in the Penang Government Gazette as Pg. P.U. instruments — not in the federal gazette as P.U.(A). The Seberang Perai advertisement by-law, for example, is Pg. P.U. 1, gazetted 18 January 2001, made by the Yang Dipertua on 23 October 2000 and confirmed by the State Executive Council secretary on 7 December 2000.

There is a citation trap here worth knowing. The by-laws still carry the predecessor councils’ initials. MBPP became a city council in 2015 and MBSP in 2019, but the operative instruments remain:

Council	Business premises	Advertisements
MBPP (island)	Undang-Undang Kecil Tred, Perniagaan dan Perindustrian (MPPP) 1991, as amended	Undang-Undang Kecil Iklan (MPPP) 2000
MBSP (mainland)	Undang-Undang Kecil Perniagaan Yang Merbahaya, Tidak Sihat atau Yang Mengganggu dan Setal-Setal 1974 and Undang-Undang Kecil Bayaran Lesen MPSP 1980	Undang-Undang Kecil (Iklan) MPSP 2001

Citing “MBPP By-Laws” or “MBSP By-Laws” is wrong even though the current councils apply them. Penang also legislates at state level in areas Kuala Lumpur handles federally — MBPP’s own legislation register lists the Penang State Heritage Enactment 2011, the Entertainment Enactment 1998 and the Penang Freedom of Information Enactment 2010 alongside the federal Acts.

One more contrast: MBPP lists the Town and Country Planning Act 1976 (Act 172) among its governing statutes. Kuala Lumpur runs on Act 267 instead. Planning permission in Penang follows the ordinary state route.

The signboard rule is the reverse of Kuala Lumpur’s

This is the sharpest single difference, and it is published in plain terms.

By-law 3(2) of the Seberang Perai advertisement by-law provides that where Bahasa Malaysia is used together with another language, the Bahasa Malaysia words must be larger in size and shown more clearly in priority and visual position than the words in the other language.

The Kuala Lumpur by-law says the opposite thing: the other language must not exceed the Bahasa Malaysia size, which permits equal size. The same artwork can pass in KL and fail in Butterworth.

Three exemptions in the same by-law are worth knowing before you redesign anything:

• 3(4) — a firm, company or society name registered under the Registration of Businesses Act 1956, the Companies Act 1965 or the Societies Act 1966 need not comply where it includes non-Malay words
• 3(5) — goods registered under the Trade Marks Act 1976 need not be translated where the Council finds it impractical or unnecessary
• 3(6) — businesses consisting solely of a regulated profession are outside the rule

The mechanics of the by-law reward reading:

Provision	Effect
By-law 5	No advertisement may be displayed except under a licence
By-law 6	Where the Council approves retention of a sign already displayed without a licence, the fee is three times the annual licence fee
By-law 7(3)	Deposit of not more than RM3,000 — against DBKL’s RM50,000 ceiling
By-law 8(4)	Licence valid for not exceeding 36 months — the full s.107(4) ceiling
By-law 8(5), 9(3)	Council may refuse to issue or renew without giving any reason
By-law 11	Cancellation on one month’s written notice; the sign comes down within 14 days; no compensation
By-law 17	Fine up to RM2,000, imprisonment up to one year, or both
By-law 18	No licence needed for a for-sale or for-rent sign under 2 m², a building contractor board up to 4 m², a small contractor board up to 2 m², or a 0.3 m² direction sign

We have not published a ringgit figure from the 2001 fee schedule. The gazette is a scan and the columns interleave on extraction, inverting the lit and unlit rates — the same defect flagged for other councils in the signboard licence guide. Get the rate from the council, not from a table.

MBPP is worse served: its licensing and advertisement by-laws are published as image scans with no text layer, so no MBPP rate can be verified from a primary source at all. The council’s published service standard is that trade, business, industrial, food establishment, advertisement, garage and public entertainment licence applications are decided within four weeks.

Industrial land: the island costs exactly double

Penang’s industrial estate is largely developed and administered by the Penang Development Corporation (PDC), the state development corporation, which acts as landlord as well as developer. PDC was formed in 1969 and constituted under the Penang Development Corporation Enactment 1971 — a state enactment, not a federal Act — and administers 11 industrial parks across the state as of 2024, including the Bayan Lepas and Perai areas. That gives Penang something most states do not have — a published, gazetted price on the island-mainland gap.

Where PDC industrial land changes hands, consent is required first, and the approval fee is gazetted under the Penang Land Rules effective 21 June 2018:

	Island	Mainland
Sub-sale, operating owner (built and operated on the land for at least 12 months)	RM10.00 psf	RM5.00 psf
Sub-sale, non-operating owner (sells without operating)	RM20.00 psf	RM10.00 psf
Sub-let, operating owner	5% of total rental for the whole tenancy period	5%
Sub-let, non-operating owner	10% of total rental for the whole tenancy period	10%

Two things fall out of that table. The island is priced at exactly twice the mainland for the same transaction. And the state charges double again to anyone who bought industrial land and never built on it — an explicit anti-speculation fee, not a market observation.

Layered on top, Bayan Lepas and Perai are free industrial zones under the Free Zones Act 1990 (Act 438). A free zone is declared by the Minister of Finance and is treated as a place outside Malaysia for the purposes of the Customs Act 1967, the Excise Act 1976, the Sales Tax Act 2018 and the Service Tax Act 2018 — which is the actual legal mechanism behind the duty position export manufacturers come to Penang for. It is federal law, not a state incentive.

The economic case

From DOSM’s GDP by State, 2025, released 1 July 2026:

• RM130.3 billion of GDP, growing 7.3 per cent — the second-fastest growing state in Malaysia, after Johor, and well above the national 5.2 per cent
• Manufacturing is 47.3 per cent of the state economy against services at 46.7 per cent — Penang is the large state where manufacturing outweighs services
• Manufacturing grew 10.0 per cent, led by electrical, electronic and optical products at 12.7 per cent
• E&E exports accelerated to 28.2 per cent growth, from 5.0 per cent in 2024
• GDP per capita RM80,584, fourth in Malaysia and well above the national RM59,167

On investment, InvestPenang’s own published release records RM12.5 billion of approved manufacturing investment in the first half of 2025, up 150 per cent, across 86 projects and an expected 11,116 jobs, with FDI at RM10.5 billion or 84 per cent of the total and the E&E, machinery and equipment and chemicals sectors accounting for 92 per cent of inflows. For the full year, Penang went on to record RM22.4 billion in approved manufacturing investment in 2025 — up 29 per cent on 2024 and third nationally at around 17 per cent of Malaysia’s total — across 232 projects and an expected 24,633 jobs, with approved manufacturing FDI of RM15.2 billion (68 per cent) and domestic investment of RM7.2 billion (32 per cent). The figure was announced by Chief Minister Chow Kon Yeow in March 2026 and carried by Bernama, The Star and the New Straits Times.

Penang also sits inside the Northern Corridor Economic Region, so NCIA incentives and facilitation are available in a way they are not in Kuala Lumpur.

What is not different here

Company registration, directors, secretaries, annual returns, corporate tax, SST, e-Invoice, EPF, SOCSO and EIS are federal and identical across Malaysia. Nothing about Penang changes them. What changes is the council, the by-law, the land, and the zone.

Common mistakes

• Treating Penang as one licensing jurisdiction. MBPP and MBSP are separate authorities with separate by-laws and separate portals.
• Citing “MBPP By-Laws 1991” or “MBSP By-Laws 2001”. Both instruments carry the predecessor councils’ initials, MPPP and MPSP.
• Carrying a Kuala Lumpur signboard design across the channel. Seberang Perai requires Bahasa Malaysia to be larger; the KL by-law only caps the other language.
• Putting up the sign first. Under by-law 6 a retrospective approval in Seberang Perai costs three times the annual fee.
• Assuming heritage constraints stop at the island. MBSP publishes a distinct signage specification for business premises of heritage value in Seberang Perai.
• Ignoring the PDC consent fee when modelling an exit. Selling island industrial land you never operated on attracts RM20.00 per square foot.
• Assuming free industrial zone status is a Penang state incentive. It is a federal declaration by the Minister of Finance under Act 438.

What’s next

Fix the address first, because it determines the council, the by-law and the land regime in one step. Then ask the council in writing for the fee schedule and document checklist that applies to your activity — in Penang more than most states, neither is reliably published, and a quoted rate from a third-party guide is not a rate you can budget on.