BANGALORE - A government-run electronics consortium in the Malaysian island of Penang Wednesday signed a pact with the government of the southern Indian state of Karnataka to jointly manufacture and design hardware and develop customised products for global markets.

"It is a synergy between Malaysia's hardware manufacturing abilities and India's software experience," said Koh Tsu Koon, chief minister of the city of Penang.

"That is you (India) moving to hardware and we moving to software.

"We should explore and exploit the growing market of India of 1.1 billion people and of Asean with over half a billion people," Koh said referring to the 10-member Association of Southeast Asian Nations (Asean).

He said the pact between the Penang Electronics Consortium and the Karnataka government would combine Indian design capability with Malaysia's manufacturing capability to serve markets in India, Asean and other regions.

"We can develop customised products for specific markets and also look at joint venture between Malaysian and Indian companies based on comparative advantage and cost competitiveness," Koh said.

"Moreover, transnational corporations can operate in both nations. For example Dell's story in Asia is a tale of three cities," he said.

Pilot projects

Dell has manufacturing facilities in Penang, Xiamen in China and a call centre in Bangalore.

"So a synergy already exists. Let us start with pilot projects. Let us start small and work for success. What is important is that we need to cooperate in order to compete.

According to a report by India's premier trade body, the Confederation of Indian Industry, India's domestic hardware market was worth US$4 billion and has more than 2,000 Indian and multinational companies making computers and peripherals.

The number of personal computers is expected to grow to 22 million units by 2010 from two million in 2000, it said.