Singapore is consistently ranked among the most expensive places to live, and in 2022, was the world’s costliest once again. Singapore’s high costs could be Malaysia’s big chance to lure multinationals to relocate their lucrative regional headquarters here.

For many years multinationals have chosen Singapore over Malaysia when it comes to investing or establishing a regional headquarters. When Hong Kong reverted to China in 1997, some companies decided to relocate and Singapore was a popular choice. In more recent years, unrest in Hong Kong as Beijing exerts more control over the city has led to massive protests, which in turn encourages many more companies to leave or take Hong Kong off their ‘possible locations’ list.

By all accounts, Singapore has become the number one choice for multinationals operating in Asia looking to set up a regional HQ. The Singaporean government has done an excellent job of creating a very modern, efficiently run city and an immigration department that welcomes foreigners who they feel can benefit the country. As a result, over a third of the resident population of around 5.6 million people are foreigners. The foreign population includes domestic workers and migrant workers, as well as skilled expats who are holding employment passes. Unlike Malaysia, Singapore have also been reasonably liberal in granting permanent residency and over half a million people have PR there – many of them Malaysians.

By comparison, Malaysia has a relatively small number of expats holding employment passes probably less than half the number of Singapore, despite the population being roughly five times the size.

Singapore has one big problem, though, and that is the soaring cost of living resulting from its success and limited size. Compared to Malaysia, there is a huge difference in prices. Rental prices are still rising in Singapore, and according to the government website, are now 50% higher than they were just 14 years ago in 2009.

My daughter and her husband live in a 1,200-square foot apartment in central Singapore, and the monthly rent on renewal of their lease was increased more than 25% to S$7,500 (RM24,800), which is many times the rental of a similar size and quality apartment in Kuala Lumpur. In fact, the total compensation package her husband receives is very high, because their living costs in Singapore are much higher and companies need to offer good packages to attract people.

When I was the regional finance officer for American Express, I recall presenting our annual budget for Asia Pacific to our New York headquarters, and the first thing the international president said was that we would make a lot more money if we did not have the expense of the regional headquarters. Well, perhaps, but the simple counterpoint was that the operations in those countries would not be so profitable without the guidance offered by their regional headquarters staff. That argument is less convincing if you try and argue that the location of the headquarters seriously impacts a company’s regional profitability. The fact was, the cost of our headquarters in Hong Kong was much more expensive than many other options. I did suggest to the regional president that we consider moving somewhere cheaper, but he loved his US$40,000 a month house in Repulse Bay.

Kuala Lumpur is only 300 kilometres from Singapore, but even a modest-sized regional headquarters in Singapore can easily end up costing several times as much as one in Malaysia. The media in Singapore often highlight negative news about Malaysia, and very few expats in Singapore own cars, so many have seen very little if anything of Malaysia. The unfortunate result is many hold negative views about this country.

One reason Malaysia has lost out, particularly in recent years, is because it is less welcoming to foreigners, and it does seem they are still very concerned about having too many foreigners here, even though the numbers relative to the population are extremely small, with the exception of migrant workers.

In the past, we had suggested to the Malaysian government that it would make sense to target multinationals in Singapore to attract them to set up their regional headquarters here. After some initial interest and engagement with us, however, the idea was dropped.

Today, there are many more flights, making connectivity less of an issue, and Malaysia now offers an attractive place for expats to relocate and enjoy life in Asia. A few companies have made the decision to relocate here and cut their costs dramatically. I have heard very few of these expats complain about the decision. In fact, the vast majority of expats, of all ages, very much enjoy their lives here, although regrettably, there is an increasing sense that they are no longer as welcome as they used to be.

While we understand that all countries are concerned about a massive influx of foreigners, we genuinely don’t think that has really ever been a serious problem in Malaysia. Our research shows that for the most part, expats are made to feel welcome by Malaysians, and unlike some countries where expats lead completely separate existences from the locals, many expats here report integrating well and having plenty of Malaysian friends. Unfortunately, we hear over and over the perception from expats that while they feel the public is friendly to them, they believe the government is no longer as welcoming and does not appreciate the value they can add.

Given that Singapore is consistently ranked as one of the world’s most expensive cities in which to live – placing as the most expensive eight times in the last decade – there does seem to be a very real opportunity for Malaysia to benefit from that fact.