KUALA LUMPUR (Oct 28): States without sufficient water supply will not be allowed to host data centres, even if land is available, as Malaysia tightens its approval process for new projects, Investment, Trade and Industry Minister Datuk Seri Johari Abdul Ghani said.

Malaysia has no plans to impose a blanket moratorium on new data centres but will assess applications based on water availability, electricity supply and investors’ financial strength before granting approval.

Johari told the Dewan Rakyat during the winding-up debate on Budget 2027 on Wednesday that the Malaysian Investment Development Authority (Mida) will work with state governments to assess water requirements, while electricity availability will be evaluated in consultation with Tenaga Nasional Bhd (KL:TENAGA).

The government has approved 117 data centres nationwide, of which 55 are operational, 19 are under construction and 16 have received approval but have yet to begin construction. The remaining 27 are at various stages of development, with their electricity needs expected to be met through off-grid arrangements.

To protect Tenaga Nasional’s reserve margin and ensure sufficient electricity for other industries, the government has separated data centres’ electricity requirements from those of other industrial users.

Data centres supplied with electricity through Tenaga Nasional will be charged market rates without subsidies, Johari said. Operators must also pay for their contracted electricity capacity even if their actual consumption is lower.

For example, an operator that contracts for 300 megawatts (MW) but uses only 100MW must still pay for the remaining 200MW.

Data centre operators will also be required to meet a minimum local content requirement of 30% for data centre-related development.

Johari said the measures aim to ensure that data centre investments benefit Malaysia while taking into account the country’s water and electricity resources.

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