If ever there was a need and a time to engineer governance, then it was in May of 1969. The State Government of Penang was then taken over by an opposition political party, Gerakan (Parti Gerakan Rakyat Malaysia). This dramatically changed the relations between the State Government and the Federal Government. For nearly 12 years, since independence on 31 August 1957), the State and Federal Governments were led by the same political party – the Alliance. Working relations were rather ingrained and the State Government more often acquiesced to Federal Government rulings and direction. This was further assured by the fact that the key government positions in the State Government and Departments were filled by officers from the Federal Government Service – the Malaysian Civil Service (MCS), and with professionals from technical departments.

The situation was further complicated by the racial clashes of 13 May 1969. Though the State of Penang was not as badly affected as Kuala Lumpur and Selangor, it nevertheless had to impose curfew and come under emergency rule. The emergency rule resulted in the Federal Government coming under the National Operations Council (NOC) and the State under the State Operational Council (SOC). The top priority was to improve the security of the country and restore parliamentary democracy as quickly as possible. Politics were pushed to the background and interaction between Federal and State leaders were more professional. Relationships with the centre improved but some of the government servants were rather ambivalent. This meant that new approaches were required. The dynamics of administration had to be altered; an effective institutional framework needed to be put in place.

New directions had to be set in order to tackle the conditions of the State's economy. The State's economy was in the doldrums, with the business community despondent, creation of new jobs was nonexistent and the unemployment rate was estimated at 16%. There were in fact about 50,000 school leavers looking for jobs. The old ways and policies were of no use and as such, new and fresh thinking was required. There was at the time an ongoing study by Robert Nathan Associates on the economy of Penang. However, the dilemma was, who will evaluate the findings of the study and then more importantly plan for and implement the appropriate projects and programmes.