Expanding into Asia is a top priority for many businesses; 29% of U.S. and UK tech firms see Asia as their primary region for accessing top talent. But identifying the best market(s) for global expansion is the first of many essential steps in a successful overseas endeavor. Two countries that are increasingly on the radars of many organizational leaders are Malaysia and Indonesia—each bringing with them their own unique advantages and challenges.
The Pros and Cons of a Malaysia Expansion
Malaysia offers a range of global expansion opportunities unavailable in many other Asian markets. With regards to the advantages of Malaysia over Indonesia, the former’s more-developed infrastructure presents far fewer logistical challenges than the latter’s.
Likewise, Malaysia is commonly seen as the more business-friendly of the two and, because of that, it is far more developed in terms of professional services as well. Malaysia has a highly developed banking sector, making it very attractive to financial services organizations in particular. Malaysia is also a country based on British common law, while Indonesia is not.
Finally, two of the major reasons why many businesses are increasingly expanding into Malaysia has to do with the country’s far stronger ties to the international community when compared to Indonesia, and the fact that their workforce generally has a higher degree of education as well.
This is not to suggest that there are no challenges to doing business in Malaysia. It has a drastically smaller population than Indonesia (just north of 30 million people compared to Indonesia’s 264 million), which creates smaller market opportunity as well.
The new Malaysian government is also far more protectionist than its predecessor. Historically speaking, the Chinese diaspora has been subjected to discrimination in Malaysia, which could present certain challenges with business operations elsewhere in the world—and for in-country Chinese employees.
The 1Malaysia Development Berhad scandal (also known as the 1MDB scandal) has also generated an enormous amount of bad press in recent weeks. For those unfamiliar, this is a situation where a strategic development company wholly owned and operated by the Ministry of Finance is facing scrutiny for money laundering, fraud, theft, and more.
Indonesia as a Global Expansion Destination
Indonesia, on the other hand, may be a more suitable opportunity for expansion thanks to a number of distinct reasons. As stated, it has a much larger population when compared to Malaysia, creating a much larger market opportunity.
Indonesia has also been home to a number of successful unicorn tech platforms like Go Jek, Bukalapak and Tokopedia, just to name a few. Additionally, many international businesses are attracted in large part due to Indonesia’s impressive wealth of natural resources, as well as its large youth population.
The challenges, however, are just as significant in many respects. Not only is Indonesia an incredibly diverse country from a geographic perspective, but also from cultural and language standpoints as well. This creates an incredible amount of complexity during a time when an organization may not be able to afford it.
Indonesia is also known for its protectionist government policies and, because of that, the business environment isn’t necessarily as friendly to foreigners as some of its neighbors. It’s important to note that Indonesia is also a cash-based society, which will likely require some fairly significant adjustments on firms’ behalves. Finally, one of the biggest challenges is its underdeveloped physical infrastructure, which can impact shipping, logistics, and general transportation around the country,
Similarities to Consider for an Asia Expansion
Malaysia and Indonesia are young, mobile-first countries with growing consumer bases, virtually all of whom are social media users—an element that is critical to modern businesses regardless of industry. However, both countries are also known for political corruption, which could present challenges for businesses.
Expand into Asia with an Experienced Global Expansion Partner
If you’re considering an Asia expansion and weighing whether Malaysia, Indonesia, or another top Asian market is right for your growth objectives, reach out to Velocity Global Today. With global expansion capabilities in more than 185 countries, we can help your organization break into virtually any market—or multiple markets.
Want to learn more about how our International Professional Employer Organization (PEO) solution has changed the way businesses expand overseas? Let’s talk.