Malaysia’s vibrant economy and strategic advantages offer significant growth opportunities for Singaporean businesses, but it is important to look at the whole picture.
Located in the heart of Southeast Asia, Malaysia offers a mix of geographical benefits, strong economic growth and a welcoming business environment. Malaysia’s diverse market and cultural ties with Singapore make it a familiar yet promising place for both entrepreneurs and established businesses.
Malaysia ranks highly for business ease, with the World Bank’s Doing Business report ranking it at number 12 out of 190 in 2020. And, like Singapore, its booming digital economy and focus on tech-driven commerce open up plenty of opportunities for growth.
Look further into Malaysia’s business landscape and you’ll find modern tech start-ups, traditional industries and everything in between. This diversity makes it an exciting place for Singaporean businesses eyeing expansion. Kuala Lumpur and Penang are hotspots for innovation, attracting emerging businesses and foreign investments with their solid infrastructure and government incentives. Meanwhile, rural parts of Malaysia are full of opportunities in agriculture and manufacturing.
Thanks to the government’s pro-investment policies, foreign investors can tap into opportunities and support systems designed to foster growth and innovation. In fact, in the first quarter of 2023, Singapore was the largest source of foreign direct investment (FDI) for Malaysia.
The cultural and language similarities between Malaysia and Singapore make business expansion into Malaysia much easier too. In many professional settings, you’ll find people speaking English, which makes business communications straightforward. Additionally, the young, skilled workforce helps streamline business operations.
Many businesses make the leap into Malaysia for its strategic position as a gateway into the ASEAN market. There have been pprojections which suggest that the region will become the fourth-largest economy in the world by 2050.
But it’s not just about its location; Malaysia is also forging ahead into the digital age. There are many efforts made to boost the digital economy, with a view to attract quality investments into lightning-fast internet and seamless digital payment solutions. This digital push is creating a playground for e-commerce businesses to thrive.
Internet usage is one of the highest in the world at 97.4%, higher than South Korea and the USA. There’s been a noticeable shift towards online shopping and tech-driven solutions among Malaysian consumers in recent years, again something that e-commerce businesses can take advantage of.
With Malaysia’s population of 34 million next to Singapore’s’ 5.6 million, taking into account rising income levels and a growing middle class, it’s evident that there are many opportunities available in Malaysia for forward-thinking businesses.
If you’re looking into doing business overseas, you’ll know that getting a handle on the costs is vital to success. Here, we’ve outlined the main expenses to consider.
Starting costs
Establishing a business in Malaysia comes with its own set of start-up costs. Think registration fees, legal bills and the cost of any licences you might need. These expenses vary depending on your business type and industry but are generally favourable compared to other ASEAN countries.
Business overheads
Then, there are the daily costs. Rents for offices or shop spaces are quite reasonable, especially outside of bustling city centres such as Kuala Lumpur. When it comes to labour, rates for skilled workers are generally lower than in Singapore, without a compromise in quality.
Taxation
Malaysia’s corporate tax rate is 24%. Resident Malaysian businesses enjoy a reduction on the tax rate on amounts up to RMB 600,000.
Digital infrastructure
Starting a company in Malaysia’s tech-driven market may bring extra costs. These include investments in the latest technology and services, such as high-speed internet, cybersecurity solutions, cloud computing services and digital marketing costs.
Marketing strategies
The costs of marketing your products and services in Malaysia will vary based on your approach. Digital marketing campaigns tailored to local audiences are cost-effective but require a good understanding of local consumers. On the other hand, using local marketing agencies or consultants incur additional fees on top of marketing spend, but could help you navigate the market more effectively.
Another cost-effective strategy is through established e-commerce marketplaces such as Lazada, Shopee or TikTok Shop. Selling here can significantly reduce the initial setup costs associated with physical stores or local entities. Plus, you can tap into a vast network of consumers already familiar with online shopping. On the flip side, you’ll need to consider marketplace fees, competitive pricing strategies and expenses to market on the platforms.
- Open 10+ local currency accounts with local account details
- Direct CNH payments to 1688.com
- Pay suppliers, partners and staff in 40+ currencies and 130+ destinations
- Collect secure payments from 100+ marketplaces and payment gateways, including Amazon, AliExpress, Paypal and Shopify
- Lock in currency conversion rates for up to 24 months
For Singapore businesses looking to expand into Malaysia, there are a few free trade agreements (FTA) to be aware of and how they might help your business.
ASEAN Free Trade Area
Created in 1992, the ASEAN Free Trade Area (AFTA) allows regional members to reduce tariffs, essentially promoting trade. This translates to lower costs when exporting goods to Malaysia, making them more competitive in the Malaysian market.
Other international trade deals
Agreements such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Regional Comprehensive Economic Partnership (RCEP), while not restricted to the region, also reduce trade costs. They streamline business operations by aligning regulations across countries. Foreign companies can expect more stable trade conditions and better protection for investments and intellectual property.
When expanding your business into Malaysia, it’s important to explore different options and research local cultural practices.
Joint ventures and partnerships
Collaborating with a local company can be a strategic way to enter the market. You’ll be able to leverage their existing local knowledge, networks and established systems. It reduces the risk of navigating an unfamiliar market but requires shared investments.
Setting up locally
For complete control over your operations, setting up your own branch or subsidiary in Malaysia is the way to go. You may need to invest more to begin with, but you’d get direct market access and full business control.
Cultural etiquette and building relationships
Understanding local culture is key in any global expansion plan. In terms of Malaysia, similarities such as its diversity of ethnicities make it easier to understand the market. But there are subtle differences in business etiquette, too, that can affect your success. For instance, there’s a big emphasis on respect and hierarchy as well as on saving face, meaning communications are often polite and indirect.
Personal relationships are important. It might take several meetings and social gatherings to build trust before finalising an agreement.
Handling the financial aspect of expanding into Malaysia means prioritising digital finance tools. These can help with faster cross-border payments and simplify currency management.
Streamlined payments
Fast and reliable payment systems are vital, especially for international transactions, where delays are common. In Malaysia, businesses particularly value fast payments, so a slick payment process can help strengthen trust.
Multi-currency accounts
For many global businesses, using a multi-currency account has been a gamechanger. They let you hold, convert, pay and get paid in different currencies, so you can speed up transactions and bypass constant currency exchanges.
We’ve just launched a Malaysian ringgit receiving account, taking the number of currency accounts to over 14. Here are some ways you can use your MYR currency account:
- Receive Malaysia ringgit from third-party businesses, your online storefront or marketplaces in Malaysia, for free
- Add funds in Malaysia ringgit to pay 1688.com suppliers in China instantly
- Transfer between your business entities for free*, such as your Singapore entity and your Malaysian entity
*Transfers between World Accounts are free.
Have a World Account already? Create an MYR receiving account in seconds.
How to make MYR transfers
- Log in to your World Account
2. Create a new receiving account
3. Select MYR as the receiving account and give it a nickname
4. Add MYR into your World Account, from your bank, your online store or a marketplace
Open a World Account for free today and start expanding your business to Malaysia.
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