From Singapore to Malaysia: Key Considerations for Startups Exploring Cross-Border Teams
“We are moving parts of our company to Malaysia - a sentence I have heard enough over the last few months among startup leaders for me to write about"
Elena Chow, Founder of ConnectOne
Her observation reflects a growing trend as many Singapore-based startups and SMEs look across the border for expansion. Facing rising pressures on cash flow, the need to maximize profitability, and the growing cost of operations in Singapore, Malaysia has become an increasingly attractive alternative. However, as businesses consider this move, it's essential to weigh both the opportunities and challenges.
In this article, we explore the benefits and considerations of moving operations from Singapore to Malaysia particularly with regards to talent, drawing from insights provided by entrepreneurs and industry experts such as Elena Chow, Chen Chow Yeoh, Peiru Teo, David Wang, Sugasini Kandiah, Admond Lee and other thought leaders.
Benefits
1. Cost Efficiency
One of the most compelling reasons to relocate is the potential for cost savings. Chen Chow Yeoh, a seasoned entrepreneur, notes that the cost differential in Malaysia for "talent, office, utilities, and accommodation" compared to Singapore is substantial. For startups seeking to extend their cash runway, these savings can make a significant difference.
For instance, Yeoh pointed out that Singaporeans moving to Malaysia can enjoy a significantly higher quality of life at a lower cost. A two-to-three bedroom condominium in Malaysia can be rented for the same price as a modest one-bedroom HDB in Singapore. Elena weighs in about salaries where the differential for lower level roles is at least 50% although it equilibriates for leadership roles. This cost differential also applies to operational expenses including office rental, allowing companies to reduce overheads without sacrificing quality.
2. Access to a Growing Talent Pool
Malaysia's growing reputation as a tech hub means startups have access to a diverse and increasingly skilled talent pool. Elena Chow herself notes that it is not just the back-end functions that are moving to Malaysia, but core operations, finance and even leadership roles. This shift reflects the growing maturity of Malaysia's workforce and its attractiveness for startups looking to scale.
Admond Lee, another startup founder, highlighted that Malaysia’s educational standards are steadily improving, producing more high-quality talent. Furthermore, Malaysia’s bilingual professionals, proficient in both Malay and English, are particularly suited to companies targeting regional markets like Indonesia. For Singaporean companies looking to expand across Southeast Asia, this talent pool can be a significant advantage, but businesses must carefully consider the specific needs of their roles.
3. Cultural and Linguistic Synergies
Malaysia’s cultural and linguistic proximity to Singapore is a distinct advantage for companies looking to expand without dealing with complex language barriers or vastly different work cultures. Many Malaysians are proficient in both English and Malay, making it easier to integrate teams across borders and communicate effectively.
Additionally, Sugasini of Hidden Gems, a crossborder recruitment company based in Singapore emphasizes that Malaysians are particularly well-suited for customer-facing roles in Singapore, including sales positions. Given their cultural and linguistic similarities, many Singaporean employers find Malaysians suitable for these roles. "Often folks can't tell a Malaysian apart from a Singaporean," which makes Malaysians ideal for offshoring roles where direct client interaction is critical. This is a distinct advantage compared to hiring remote talent from other countries, where cultural and communication gaps may be more pronounced.
This is particularly beneficial for companies with regional ambitions. As Admond Lee explained, the ability to communicate seamlessly with Indonesian customers is a major plus. These synergies make Malaysia a strategically appealing location for expanding businesses.
4. Geographical Proximity and Infrastructure
Another reason Singapore-based startups are considering Malaysia is its geographical proximity. Cities like Johor Bahru and Kuala Lumpur are well connected to Singapore, making cross-border travel easy and relatively affordable. Initiatives such as the Johor-Singapore Special Economic Zone are designed to further strengthen this connection, offering companies the ability to operate across both countries seamlessly. This proximity minimizes logistical challenges and allows businesses to manage operations efficiently in both regions.
Additionally, Sugasini highlights Malaysia’s strong infrastructure, particularly in terms of internet reliability and power stability, making it an attractive option compared to cities like Jakarta or Manila, where issues like blackouts are more common. While traffic congestion in Malaysia remains a concern, it is manageable compared to the heavy gridlock found in other Southeast Asian cities.
5. Government Support and Incentives
Malaysia has significantly ramped up its efforts to attract startups and digital entrepreneurs. Programs like DE Rantau and Malaysia Tech Entrepreneur Programme (MTEP) offer startups and SMEs opportunities to benefit from incentives aimed at easing the transition into the Malaysian market. With increasing focus on building a supportive ecosystem, Malaysia is becoming an attractive base for startups that want to scale without the higher costs associated with Singapore.
Considerations
1. Leadership Talent Gaps
“Startups shifting parts of their core business—such as finance or operations—must evaluate whether Malaysia has the leadership depth to meet their specific needs.”
- Elena Chow, Founder of ConnectOne
While Malaysia's overall talent pool is expanding, Elena Chow raises concerns about whether there is enough leadership talent to support startups moving core operations outside of Singapore. Startups shifting parts of their core business—such as finance or operations—must evaluate whether Malaysia has the leadership depth to meet their specific needs. In particular, high-level roles such as C-suite positions might still be harder to fill, requiring startups to be more strategic about recruiting from outside local markets.
Peiru Teo, Founder of Key Reply, and David Wang, Founder of Helicap, both of whom have expanded their teams in Malaysia, highlight the country's strong potential for growth and development. While they note that there are opportunities to enhance global exposure and communication skills within the talent pool, they remain confident in the market's ability to nurture these capabilities over time. Malaysia continues to be an attractive destination for expanding operations, thanks to the growing potential of its workforce.
2. Managing Cultural and Operational Diversity
Managing cross-border teams introduces complexities related to cultural and operational diversity. While the varied perspectives of a decentralized team can foster innovation, they also demand more intentional leadership. Elena Chow warns that startups must be prepared to navigate the challenges of leading decentralized teams, which require greater emphasis on communication and management. Companies must invest in building a cohesive culture and aligning operational practices to avoid misalignment across different markets.
3. Market Knowledge and Proximity to Key Stakeholders
When expanding operations to a new country, understanding the local market is crucial. For Singapore-based startups, moving operations to Malaysia requires more than just identifying cost advantages; it demands a deep understanding of the Malaysian business landscape and consumer behavior. Knowing where your key clients, partners, and other stakeholders are located plays a significant role in making this transition successful. Elena Chow notes that decentralizing operations without a solid grasp of the local market can lead to misalignment in business strategies. Moreover, if a large portion of your client base or partners are still in Singapore or other regions, moving operations too far away may disrupt these relationships and affect business continuity. It's essential to strike a balance between cost savings and maintaining close proximity to critical stakeholders to ensure that the business remains agile and responsive to market needs.
4. Talent Retention and Salary Discrepancies
Despite the lower cost of living in Malaysia, there remains a significant salary gap between the two countries. As Chen Chow Yeoh points out, the disparity in salaries between Singapore and Malaysia is one of the major challenges for talent retention. For ambitious professionals, Malaysia may not yet offer the same level of compensation or career growth opportunities as Singapore. Sugasini also raises the point that Malaysia isn’t always the cheapest destination for offshoring within the region, as Malaysians can cross the border to work in Singapore relatively easily. This dynamic can make it difficult for startups to negotiate competitive salaries while retaining talent.
5. Limited Tech Talent Pool
While Malaysia’s startup ecosystem is growing, its pool of tech talent remains relatively small. Sugasini notes that the country’s limited history in tech startups, until recently, makes it difficult for companies to find experienced tech professionals. This is especially relevant for startups requiring senior-level technical expertise, making Malaysia less attractive compared to other tech hubs like Singapore or even emerging cities like Ho Chi Minh City.
Conclusion
As the startup ecosystem in Southeast Asia continues to evolve, moving parts of a Singapore-based startup’s operations to Malaysia offers significant opportunities, particularly in terms of cost savings, access to talent, and geographical proximity. However, startups must also be prepared to navigate challenges related to leadership and quality of top-talent.
For Singapore-based startups considering this move, the decision should be a strategic one, balancing cost efficiencies with long-term growth objectives and the ability to manage cross-border teams effectively. While Malaysia offers great potential, success will depend on the ability of startups to navigate both the opportunities and the risks involved.