KUALA LUMPUR (Oct 21): The federal government is working on restructuring its incentive packages for data centre investments in the country to ensure they bring broader economic benefits to the people, said Treasury secretary general Datuk Johan Mahmood Merican.
Johan said that the government is cognisant that while data centre investments bring in large capital expenditures (capex), they may not bring tangible added value to the rakyat, such as high-paying job opportunities and knowledge transfer.
"We are rethinking this enthusiasm with data centres. They are large in terms of capex, but sometimes they don't necessarily create many high-skilled jobs, and sometimes they consume a lot of electricity and water," he said on Monday during the Post Budget 2025 Debate organised by the Malaysian Economic Association.
As such, Johan said the new investment incentive framework, slated to be launched by the middle of next year, will utilise a 'scorecard' approach, where investments are assessed based on, among others, the ability to generate high income jobs, linkages to local businesses, sustainability features and their support to the nation's strategic economic clusters.
"The higher the score, the higher the incentives," he said.
Separately, investment, trade and industry minister Tengku Datuk Seri Zafrul Abdul Aziz earlier on Monday said the ministry will announce details on the new investment incentive framework as early as the first quarter of 2025, to ensure investors are well informed.
During the tabling of Budget 2025 last Friday, Prime Minister Datuk Seri Anwar Ibrahim said the incentives will be backed by a RM1 billion strategic fund, designed to cultivate local talent and promote high-value activities in the electrical and electronics and artificial intelligence sectors.
Between 2021 and 2023, Malaysia approved a total of RM114.7 billion in investments related to data centres, according to Knight Frank Malaysia's 1H2024 Real Estate Highlights report, as the country aims to become a data centre hub in the region.
More recent announcements include Microsoft Corp’s investment of US$2.2 billion (RM10.4 billion) in cloud and artificial intelligence (AI) infrastructure in Malaysia.
However, concerns have been raised on the environmental impact of data centres, potentially putting a strain on the national grid and water resources. There are also concerns that data centre investments are being driven solely by property plays, limiting their impact to the broader economy.