Malaysia is positioning itself as a prominent data centre hub within Southeast Asia, with the government adopting a careful strategy to balance economic growth opportunities with environmental sustainability. Nik Nazmi Nik Ahmad, the Minister of Natural Resources and Environmental Sustainability, revealed the government’s approach in a recent interview with the Financial Times.
In his discussion, Nik Nazmi described data as “the new oil of the 21st century,” highlighting Malaysia’s ambitions to explore emerging sectors, particularly in artificial intelligence (AI), cloud computing, and cryptocurrency. He stressed, however, that Malaysia is not interested in indiscriminate growth. “We don’t want just any data center,” he noted, adding that applications involving advanced technologies would be prioritised for consideration.
This announcement comes at a time when Malaysia is witnessing a significant increase in data centre investments, especially in Johor, which currently has 22 operational data centres and another eight under construction. The state’s strategic location near Singapore, combined with competitive pricing for energy and water, has made it particularly appealing to tech companies. This influx has become even more pronounced following Singapore’s temporary moratorium on new data centre developments that lasted from 2019 to 2022 due to ecological concerns.
However, the rapid expansion of the tech sector in Malaysia is placing pressure on the nation’s resources, prompting the government to implement stricter regulations. Nik Nazmi explained that data centres are now required to pay a premium for their water and energy consumption, reflecting their high resource usage. “We expect data centers to pay a premium for access to water and energy supplies, and many are willing to do so to operate here,” he stated.
In an effort to promote sustainability, Malaysia is encouraging data centres to procure energy directly from green power producers, thereby bypassing the national grid. This initiative is in line with the country’s ambitious goal to achieve a 70% renewable energy capacity by 2050, substantially up from the current level of 25%. The willingness of tech firms to pay higher premiums is also spurring innovation in renewable energy and water recycling technologies, which conventional industries often find financially prohibitive.
Johor’s potential as a technology hub is significant, with the state’s data centre capacity rising dramatically from 10 megawatts (MW) to over 1,000 MW in just two years. Such unprecedented growth is contingent upon the successful scaling of clean energy production, a challenge that Malaysia is tackling through initiatives like solar power and pumped hydro storage.
In addition to these developments, the Malaysian government is reforming resource pricing by revising water tariffs and reassessing energy subsidies, ensuring that major corporations account for the full market cost of their operations. These comprehensive measures, along with a clear focus on attracting high-value technology investments, indicate Malaysia’s strategic shift towards fostering sustainable economic growth amidst its burgeoning tech landscape.
Source: Noah Wire Services