This article first appeared in The Edge Malaysia Weekly on June 17, 2024 - June 23, 2024

Malaysia attracted the highest number of new data centre (DC) transactions in Asia-Pacific in the first quarter this year. It concluded 36% of the DC deals, followed by Japan with 23%. The other destinations for DCs were Hong Kong and Indonesia.

The sheer volume of new DCs mushrooming in Malaysia warrants close scrutiny of water and electricity demand.

The reason the DCs are converging on Malaysia is because of the government’s accommodative policies, unlike some other countries where there is increased control on new approvals for DCs.

Apart from a supportive government, the biggest advantage for DCs is Malaysia’s matured infrastructure. It has a reliable water distribution system and excess electricity, two resources that are vital for the DCs to operate. And land is also relatively cheaper compared with countries such as Singapore, which is an undersea cable hub.

But the supply of both electricity and water have their limits. There are already some signs of stress in the supply of water, especially in Johor. The state is facing water disruption amid the setting up of several DCs there. The water situation is much better in Cyberjaya, Selangor, which is the major DC hub in Malaysia.

As for electricity, Tenaga Nasional Bhd (KL:TENAGA), which currently has a reserve margin of about 26%, has the capacity to support the growth of DCs.

But surely, there is a tipping point before the authorities find that DCs are absorbing more water and electricity at the expense of households.

Hence, the authorities should determine the maximum number of DCs that Malaysia can accommodate for the next few years. There cannot be unfettered approvals. Approvals should be controlled now and not sometime in the future because water and electricity are more important to households than DCs.

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