Expanding to Southeast Asia: What startups need to know

4 min read
14 Aug 2019

In addition to its strong financial infrastructure and tropical climate, Singapore is a cosmopolitan place of thriving tech entrepreneurs, forward-looking policymakers and a medley of cultural influences. 

With enhanced schemes for foreign entrepreneurs and one of the lowest tax rates in the world, the city-state enables companies from overseas to set up shop with relative simplicity. In fact, Singapore ranked second in The World Bank’s 2019 Ease of Doing Business report.

While startups can expect to find an open-minded culture in the city-state, companies are likely to hit a few hurdles when it comes to expanding into Singapore.  

This is something that the team at MING Labs has experienced firsthand. Founded in 2011 by three German natives in Shanghai, the company has helped a range of international businesses make their entry into China, Southeast Asia, Europe and the US. 

Ming Labs works across digital strategy, internal team enablement and UX production to guide clients in designing their businesses for the future. 

“We help companies create a roadmap for becoming more innovative, not only across their digital products but across their wider organization,” Sebastian told Startup Guide. 

Singapore ranked second in The World Bank’s 2019 Ease of Doing Business report. Photo: Adrien Olichon / Unsplash

A small but business-friendly market

Out of all the ecosystems in Southeast Asia, Singapore’s market is by far the most accessible. “It’s easy to do business in Singapore,” Sebastian says. “The ecosystem and financial infrastructure are strong and English is the language of business.”

Compared to China and Germany, however, Singapore’s market is small and its reach is rather limited. Companies are forced to “look beyond their own borders from the very beginning,” according to Sebastian, and many have most of their client bases outside of the country. 

The business culture in Singapore is very similar to countries like Germany, where everything is based on very transparent, open processes

Companies expanding to Singapore should consequently tailor their offerings not only to the local market but to Southeast Asia’s regional markets. 

This is an especially challenging task, however, given that Singapore – as a city-state and as an ecosystem – is strikingly different from the rest of the region. 

“I see a lot of startups trying to create products and services for the larger economies of Indonesia, Vietnam and Thailand that tend not to resonate with consumers in Singapore because it’s culturally and structurally very different,” Sebastian explains. 

Businesses play by the rules

In fact, in terms of the way businesses operate, Singapore is more similar to Europe than it is to the rest of Southeast Asia. “The business culture in Singapore is very similar to countries like Germany, where everything is based on very transparent, open processes,” says Sebastian.

For many entrepreneurs familiar with the Singaporean startup scene, companies in the city-state tend to practice business with caution.

Like entrepreneurs in the West, Singaporeans spend “a lot of time planning, asking questions and really understanding the issues at hand” before taking the plunge into any business arrangement, according to Sebastian. They also prefer to adhere religiously to written contracts.

“On the positive side, this means that there is little deviation from business plans and agreements,” he says. “But on the negative side, it means that even if the facts change, people will still stick to whatever is written down.” This lack of flexibility can often stifle new ideas and lead to “suboptimal results in fast-changing industries and environments,” Sebastian adds. 

In many ways, Singapore is still a more old-fashioned and conservative market compared to others in this part of the world

The somewhat risk-averse attitude of entrepreneurs in Singapore is a stark contrast to those in China who tend to be more experimental. 

Chinese entrepreneurs understand that business arrangements are often volatile and subject to change. Consequently, relationships are entered into more spontaneously and decision-making is faster. 

Aside from factors such as population density and economic power, Sebastian says that China’s risk-taking culture could be one of the reasons behind the global success of companies such as e-commerce giant Alibaba and internet-related services business, Tencent.

A conflict between old and new

“In many ways, Singapore is still a more old-fashioned and conservative market compared to others in this part of the world,” says Sebastian.

Indeed, despite being dubbed the new tech hub of Southeast Asia in recent media, consumers in Singapore are pretty slow to adopt new technologies, he adds. 

For example, in comparison to other countries in the region, such as Indonesia, where most transactions are processed through digital payment providers like Jack Wallet or Azar Mobile Payment, Singaporeans tend to stick with cash and credit card. 

Still, this hasn’t deterred many of the world’s tech firms, who have been sizing up Singapore over the last few years as a new opportunity for expansion, according to a 2018 report by Forbes. 

Uber tried and failed to expand its ride-hailing app to Southeast Asia, leading to the company’s flighty exit from the region and the sale of its Singapore-based operations to Uber’s rival, Grab. Meanwhile, Amazon, who already launched in Singapore in 2017, revealed its plans to enter Vietnam last year

While the city-state may still be catching up to its regional counterparts in many ways, Sebastian says that the government is unique in its readiness to embrace new ideas and business approaches.

The state-funded DesignSingapore Council, for example, encourages more traditional companies to engage with the methodology of design thinking – an approach to innovation that places the consumer’s needs at the center of product and service design.

This approach is also something that the government has begun to implement themselves.  

“A lot of government agencies work with companies like MING Labs to learn how to apply design thinking to the creation of civil services,” says Sebastian. “This is something I haven’t seen as much in other countries.”

Main photo: Adrien Olichon / Unsplash

Sebastian Mueller profile photo: Startup Guide Singapore