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The name Penang may refer either to Penang Island (Pulau Pinang) or the state of Penang (Negeri Pulau Pinang).
The word is derived from the Chinese name for the areca nut or betel palm.
The Arabs then intermarried with the Minangkabau and this gave rise to Arab-Minangkabau admixture who are described as Malay as they have assimilated into the local Malay community. The richest and prominent Arab was Sayyid Husain Aidid.
On 17 July 1786, Captain Francis Light, an English trader-adventurer working for the Madras-based firm, Jourdain Sullivan, de Souza and the East India Company, landed on the island at what was later called Fort Cornwallis, took formal possession of the island "in the name of His Britannic Majesty, King George III and the Honourable East India Company" and founded a settlement at the northeast point of the island.
One of the first Englishmen to reach Penang was the navigator and privateer Sir James Lancaster who on 10 April 1591, commanding the Edward Bonadventure, set sail from Plymouth for the East Indies, reaching Penang in June 1592, remaining on the island until September of the same year and pillaging every vessel he encountered, only to return to England in May 1594.
Later the Arabs arrived in Penang and settled mainly in Jelutong.
A resident of Penang is colloquially known as a Penangite (in English), Penang Lang (in Penang Hokkien) or Penangkaran (in Tamil).When Light reneged on his promise of protection, the Sultan tried unsuccessfully to recapture Prince of Wales Island in 1790, and the Sultan was forced to cede the island to the company for an honorarium of 6,000 Spanish dollars per annum.Light established Penang as a free port to entice traders away from nearby Dutch trading posts.The earliest use of the geographical term "Penang Island" may have been the "The Nautical Charts of Zheng He" dated to the expeditions of Zheng He (Cheng Ho) in Ming dynasty during the reign of the Yongle Emperor.In the 15th century, the Chinese navy using the record of nautical chart as navigation guide from "Con Dao Islands" (Pulo Condore) to Penang Island, Penang has been seen to trade with the Ming dynasty in the 15th century.
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For Light, Penang was a "convenient magazine for trade" and an ideal location to curtail French expansion in Indochina and to check the Dutch foothold in Sumatra.