Malaysia is emerging as a global data center hotspot, attracting more than $16 billion in investment commitments over the past year from Amazon, Nvidia, Google, Microsoft and ByteDance, most of which will go toward developing data centers in Johor state, which borders Singapore.

However, the data center requires huge amounts of energy and water for cooling, which has officials concerned.

Nik Nazmi Nik Ahma, Minister of Natural Resources and Sustainable Environment, said the government was being more selective after the data centre boom put huge pressure on water and energy resources.

Instead of licensing any data center, the government will consider if it comes with AI or other advanced technology.

“Data is the new oil of the 21st century, we want to be a part of that,” he added.

data center freepik
Data centers require huge amounts of energy to operate and cool. Photo: Freepik

Mr Nazmi hopes data centres will pay for access to water and energy, stressing that many firms are willing to do so to operate in the country.

Part of what makes Malaysia and Johor regional data hubs is their cheap land costs, abundant labor, proximity to Singapore, and the fact that Singapore put a hold on new data centers from 2019 to 2022 due to concerns over energy consumption.

From 2024, Malaysia will start allowing data center operators to source energy directly from clean energy producers, bypassing the grid.

The change will help develop a local renewable energy system with tech companies paying for access to clean energy, according to Minister Nazmi.

Johor currently has 22 data centers and eight more under construction, according to research firm Baxtel. Bryan Tan, managing partner at law firm Reed Smith, said the data center potential in Johor is “huge.” The state could support 40 centers.

Johor is aiming to double its power capacity to 2.7 gigawatts by 2027, supporting up to 90 data centers, according to Mr. Tan. But he said the goal can only be achieved if more clean energy is available.

Faced with global energy concerns, major technology companies are increasingly purchasing electricity directly from suppliers or developing their own, investing in both traditional renewable energy sources such as wind, solar and nuclear power.

Malaysia is aiming for 70% renewable energy by 2050, up from 25% now, according to Mr. Nazmi.

(According to FT)