Multiculturalism Is A Key Differentiator For Malaysia’s Startup Ecosystem

Malaysia is best described as an Asian melting pot. During the long British rule of what is now Malaysia, groups of Chinese and Indian workers immigrated to the territory to find work in the colonial economy. The population of these ethnic groups continued to grow throughout the 20th century, so much so that today, their presence has come to define Malaysia as an especially diverse country.

The national population of 31 million is split between Bumiputera, a term encompassing Malays and indigenous peoples (62%), Chinese (21%), Indian (6%) peoples, and many others. And while Islam is the official national religion, Buddhism, Christianity, Hinduism, Confucianism, Taoism, and other traditional Chinese religions are practiced in different pockets of the country. To appreciate Malaysia’s cultural openness, look no further than the local culinary options: from the endless food court at the Pavilion megamall in Kuala Lumpur containing booths representing countless different Asian and even global cuisines, to the plethora of options in the Indian Quarter providing a true taste of home for the country’s Indian population — each a culinary microcosm of modern Malaysia.

This heterogeneity is a major advantage for the country and its startup ecosystem, as the inclusion of Chinese and Indian subpopulations in particular fosters better relationships between Malaysia and these other two countries. Economically and commercially, it has meant that the barrier to enter these markets and partner with them is lessened. It has also meant that Malaysia has strategically started to become a bridge for these countries to access Southeast Asia, a highly valuable position.

For example, in late 2017, Malaysia partnered with Chinese technology conglomerate Alibaba to launch the Digital Free Trade Zone (DFTZ), a regional logistics hub for small and medium-sized businesses. This marked the first time a zone had been set up outside of China. According to Jack Ma, Founder and CEO of Alibaba, this zone aims to enable “small and medium-sized enterprises [to] easily plug into global trade via e-commerce.” The plans for the project include an e-fulfillment hub located near capital city Kuala Lumpur’s airport, and an e-hub platform with links to another zone, the Hangzhou zone, already setup in China.

Separately, in 2018 Alibaba announced plans for its cloud computing business to extend its big data services package, called “City Brain,” to Kuala Lumpur. This service “pulls in all kinds of data — including video feeds, social media and traffic information — which is then processed to provide information that helps to manage daily activities. That could be responding to a traffic accident, or providing the data to redesign parts of the city to reduce vehicle congestion.” Once again, these plans signify the first time a country outside of China will adopt this technology. These initiatives are big wins for Malaysia, but Malaysian authorities must tread lightly to make sure that the increased presence of a giant company like Alibaba (and others like it that could potentially invest in the country) doesn’t obstruct homegrown startup growth. Ideally, these foreign corporations would look to acquire promising local companies, and would boost the number of exit opportunities in Malaysia.

Malaysia’s diverse population also makes the country a great regional testing ground for new products or concepts. Startups are able to gather feedback on their products from different ethnic groups, each of which serves as a proxy for the native market it represents. However, this heterogeneity is a double-edged sword, as it also means there’s a lot of fragmentation and diversity of consumer tastes and behaviors. For example, the Muslim population values modesty when it comes to products like apparel products, and the Malay population pays close attention to product branding. Consider that in a country like Malaysia, the consumer population is divided between the different religious groups, regional groups, and ethnic groups within the country.

Entrepreneurs and their teams (especially B2C companies) must decide whether to create products catering to each and every group, or those targeting specific user types. If they choose to pursue the more exclusive route and market the product as such, they risk falling into the trap of neglecting potential high-value users who don’t fall in their perceived target audience (which oftentimes ends up being the groups they identify with). Take the example of a Malaysian handyman-for-hire startup (a localized version of TaskRabbit) that exclusively targeted urban areas in Malaysia. For reference, 76% of the total population lives in urban areas, the largest being Kuala Lumpur with 7 million people. What the company failed to recognize is that in the case of their particular service, everyone in the country, whether urban or rural, could benefit. By defining the Malaysian user base as the urban population, it disregarded a quarter of the Malaysian audience.

Targeting and marketing to specific groups makes sense in Malaysia especially for earlier-stage startups, after all trying to tailor a user experience and marketing campaign towards people with different needs and wants is difficult and expensive. But if a company hopes to grow nationwide, and eventually expand regionally, it must ultimately champion the inclusiveness and multiculturalism of Malaysia.