This article first appeared in The Edge Malaysia Weekly on August 19, 2024 - August 25, 2024

DATA centres are critical infrastructure in the development of an ecosystem for the digital economy and their spinoff effects are huge, says Minister of Digital Gobind Singh Deo.

In an interview with The Edge, he says many of the solutions needed today — whether by governments or companies — are based on artificial intelligence (AI), which requires a lot of data centre capacity.

“For example, if you want AI, it runs on data. GenAI runs on data, right? We’ve got new technology that will be created in years to come. So, at the end of the day, it’s a question of making sure you have that infrastructure within your jurisdiction that you can use, and it will support the economy around you,” Gobind explains.

On the investments that have flowed into Malaysia recently, Gobind says the huge jump was fuelled by the country’s focus on getting digital investments, including in data centres and cloud computing.

Malaysia recorded a 23% year-on-year jump in approved investments to RM329.5 billion in 2023. Prime Minister Datuk Seri Anwar Ibrahim said the surge in investments was in line with the rapid growth of the digital economy.

The digital economy contributed about 23% to the country’s gross domestic product (GDP) from 2021 to 2023. The target now is to increase the contribution to 25.5% by 2025.

Malaysia’s focus on data centres has received some criticism as the investments do not seem to be adding much value to the economy despite the amount that has flowed in. That is because data centres are essentially conduits of the flow of data, rather than an economic activity that provides high-income jobs or generates a lot of revenue for the country.

“You’ve got to think about the bigger picture ... you’ve got ministries that are looking at problems that they have today and solutions that they want to put in place. The solutions are AI-based,” says Gobind.

“You’ve got industries that have problems which they can overcome using AI. That again is a solution that’s AI-based. You’ve got new companies that will build up, they will start, new economies will emerge, new industries will emerge.

“The income that they are making will be a lot higher because they are now industries that are tech-based. So, the spinoff effect of this will be extra jobs because there will be new companies that will emerge using the technology.”

In Google’s Data Centre Impact Report 2023 on Loudon County, Virginia, the digital giant said it added about US$1.1 billion to the US’ GDP annually between 2017 and 2022, through direct, indirect and induced contributions. The California-based company also said that its data centre operation in Loudon County contributed about US$330 million in direct, indirect and induced contributions to labour income.

During the same time period, Google’s operations supported about 3,500 direct, indirect and induced jobs in Loudoun County, it said. The company invested US$1.8 billion in Loudon County for its data centre there in 2018 and 2019 and expanded that with an investment of US$1.2 billion in 2021.

In Malaysia, Google is investing US$2 billion in City of Elmina in Shah Alam, Selangor, for its first data centre and cloud region in Malaysia. The investment is expected to support 26,500 jobs and bring in an economic impact of RM15.04 billion.

Data centre investments have also been criticised for using up a lot of resources such as electricity and water, not to mention the land that they occupy.

On this, Gobind says the government has taken the challenges the country faces in respect of water and energy into account when it comes to promoting industries, including data centres. “The government is looking at ways and means by which we can ensure that we are able to sustain as we go ahead and there are sufficient reserves as well.”

Having said that, he believes that Malaysia does not have much of a choice when it comes to opening up for data centre investments.

“You either say yes, we can do this, and prepare the country with the right infrastructure and get it done — take the lead. Or you say no, we’re going to take a step back and let others move ahead and then perhaps when it’s a bit too late, look back and say, look, this is what we should have done,” he says.

“We have made a decision. We are going to make sure that we prepare our country for the future. And I think the prime minister is very clear on his vision for this and it is a work in progress.”

For Gobind, embracing data centre investments, apart from being an enabler for the development of the digital economy, is also about creating a “buzz” in attracting global investments.

“Now, if you don’t have that, for example, the rest, as I said, is not just about us. It’s about how we perform in Asean, how we attract global investments. If you don’t have all these, then you are not going to be able to create that buzz. That to me is crucial at this point for us to build the country economically,” he says. 

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