KUALA LUMPUR (Dec 9): In recent years, Malaysia has emerged as a data centre powerhouse in the Asia-Pacific region, driven by a global surge in demand and an established data centre sector. 

With favourable conditions such as the availability of land, cheaper electricity, and an advantageous geographical location, the country has attracted numerous firms to establish data centre operations within its borders.

As interest surged, Tenaga Nasional Bhd (KL:TENAGA), the national electricity provider in Malaysia, responded by launching the Green Lane Pathway initiative in 2023 to streamline power approvals for data centres, reducing lead time from three to four years to as short as 12 months.

This effort paid off as the Malaysian data centre market took off, with RM114.7 billion investments in data centres and cloud services approved from 2021 to 2023. This propelled Malaysia into a data centre powerhouse, and further expansion is expected as the current supply is still insufficient to meet growing demand, according to Wan Murdani Mohamad, the vice-president of digital industry acceleration division at Malaysia Digital Economy Corporation (MDEC).

"Malaysia’s data centre industry is poised for significant growth over the next five years, driven by increasing demand for cloud services, digital transformation, and substantial investments from global tech companies, with a projected compound annual growth rate of 10% to 15%, positioning the country as one of the fastest-growing data centre markets in the Asia-Pacific region. 

“MDEC plays a pivotal role in this development through its Malaysia Digital (MD) initiative, which aims to establish the country as a key hub for artificial intelligence (AI) and data centres. By leveraging technological innovation to foster sustainable economic growth, MDEC is helping to position Malaysia as a leading destination for digital infrastructure and global investments, solidifying its role as a major player in the global digital economy,” said Wan Murdani.

Happy with its success but eager to cement its place as a strategic data centre hub in the Asia-Pacific, the Malaysian government is working hard to build an expansive data centre ecosystem. 

For a start, they are encouraging investments across related industries and seeking to leverage the growth of the data centre industry to support the country’s transition to renewable energy.

More importantly, Malaysia is positioning itself as an early mover in the white-hot AI field. The objective is simple: to place the country at the forefront of AI by leveraging the synergies between data centres capabilities and AI development. 

As Malaysia rises as a premier destination for AI, it aims to attract global technology firms looking to establish a base for cutting-edge research and innovation.

The mandate for AI comes straight from Prime Minister Datuk Seri Anwar Ibrahim, who stated that the government is committed to positioning Malaysia as a sustainable AI data centre destination in Southeast Asia, strengthening its position as a leading global investment destination.

To achieve this, the Ministry of Investment, Trade and Industry (Miti) is developing special incentives for AI data centres. Minister Tengku Datuk Seri Zafrul Abdul Aziz noted: "The National Investment Council has agreed [for the Malaysian Investment Development Authority or Mida] to provide an incentive framework, including the use of energy and water-efficient equipment, as well as sufficient renewable energy to facilitate AI data centre investments in Malaysia.”

Malaysia itself is well positioned in AI. According to the “Government AI Readiness Index 2023” report by Oxford Insights, the Malaysian government has an excellent readiness score of 79.99%, while its total score across all three evaluated criteria is 68.71%, placing it in the top 25 countries globally.

Moreover, the growth of data centres is further bolstered by strategic investments in the semiconductor industry under the National Semiconductor Strategy (NSS). This initiative underscores the critical symbiotic relationship between the data centre and semiconductor sectors, as advancements in semiconductor technology drive efficiency and scalability in data centres. 

By prioritising semiconductor development, Malaysia strengthens its infrastructure for AI data centres and enhances its appeal as a sustainable and innovative destination for global investments. This supports Malaysia's ambitious goals in the AI landscape, reinforcing its role as a leader in Southeast Asia's digital and technological evolution. 

As the amount of computing resources required for training cutting-edge AI models increases and more organisations turn to AI for a competitive advantage, the demand for AI data centres will only increase. 

The initiatives by the government will position the country to capture a significant share of this growing market, ensuring it remains at the forefront of technological innovation and economic growth in the region.

The government's proactive approach to fostering a conducive environment for AI development is further bolstered by its strategic partnerships with public cloud giants, which have announced cloud regions in Malaysia and emphasised their AI offerings.

Ultimately, Malaysia is setting itself up as an AI hub by a judicious combination of investing in infrastructure, incentives, and creating a digital ecosystem for global tech companies to thrive.

Rizwal Zakaria is the Malaysian business development director of EdgeConneX, a global hyperlocal to hyperscale data centre solutions provider.