This article first appeared in The Edge Malaysia Weekly on June 3, 2024 - June 9, 2024

Tech giants have agreed to set up data centres in Malaysia through local partnerships. Thus far, Johor has emerged as a favourite location for data centres.

However, Johor Bahru City Council (MBJB) Mayor Datuk Mohd Noorazam Osman last week warned of potential water and power supply issues in the future as more data centres set up in the state.

“As a local authority, I believe that while promoting investments is important, it should not come at the expense of the domestic needs of the people,” Mohd Noorazam remarked in a panel discussion at The Johor Conversations 2024 forum.

The data centres that are sprouting up will help boost foreign direct investment (FDI), which has slowed down in recent years.

Malaysia needs FDI to drive economic growth. No one will disagree with that. But the multiplier effects of foreign investment in data centres are debatable.

Which investment creates more jobs for Malaysians — a multinational corporation setting up a regional headquarters or a tech giant locating a data centre in the country?

Malaysia has said it wants to back away from drawing foreign investment in labour and energy-intensive industries, the reason being that this merely takes advantage of incentives and leverages our subsidised energy and low foreign labour costs instead of creating jobs for Malaysians.

Data centres are here because they are guzzlers of electricity and water — something that Malaysia can offer at relatively attractive prices.

Another point to note is that competition for land will intensify in the future. Apart from urbanisation, we will need to clear land for data centres plus solar farms given that Malaysia also aims to be a renewable energy hub.

Bear in mind that the country also needs land for agricultural activities to ensure that Malaysia is self-sufficient in basic staples, such as rice, at the very least, in order to contain the ballooning imports of food items.

Perhaps, the government ought to take a step back and reconsider the pros and cons of data centre investments and come up with policies that ensure that the economic benefits are maximised.

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