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"Malaysia is rapidly emerging as a powerhouse in the global data centre landscape."
Malaysia is rapidly emerging as a powerhouse in the global data centre landscape. With its strategic location, supportive government policies and increasing demand for digital services, the country is attracting major international investments and setting the stage for long-term growth.
In 2024, Malaysia was named the fastest-growing data centre market in Asia Pacific, adding 1.3 GW of new supply in the first half of the year alone. This brought its total operational capacity to 11.6 GW. The state of Johor has become the country’s leading data centre hub, thanks to its abundant land, power and water resources, and its proximity to Singapore’s undersea internet cables, which ensures high-speed, low-latency connectivity.
Government Incentives Driving Data Centre Growth
The government’s push towards digitalisation, combined with robust infrastructure, competitive energy costs and a favourable business environment, has made Malaysia an attractive destination for data centre operators and investors.
Malaysia’s rapid rise as a regional data centre hub is strongly supported by a range of government-led initiatives and incentive schemes aimed at attracting investment, fostering innovation and accelerating digital transformation.
One of the cornerstone policies is the Malaysia Digital Economy Blueprint (“MyDigital”). This strategic roadmap outlines the country’s vision to become a global leader in the digital economy by 2030. It sets clear goals for enhancing digital infrastructure, improving public sector digital services and encouraging widespread adoption of digital technology across industries. For the data centre sector, MyDigital provides a framework that supports long-term growth, innovation and sustainability.
Complementing this is the Malaysia Digital Bill of Guarantees, which offers a suite of attractive incentives to companies that qualify for Malaysia Digital status. These benefits include exemptions from foreign equity restrictions, allowing companies to maintain full ownership of their operations. Additionally, qualified companies are permitted to hire foreign knowledge workers, helping to bring in global expertise.
Financial incentives such as income tax exemptions, investment tax allowances and exemptions on import duties for multimedia equipment further reduce the cost of doing business and make Malaysia a compelling destination for data centre operators.
Another key initiative is the Digital Ecosystem Acceleration Scheme, which provides tax allowances on capital expenditures for qualifying digital activities. This scheme is designed to support businesses investing in digital infrastructure, including data centres, by easing the financial burden associated with large-scale technology deployments.
Together, these government incentives form a robust support system that not only encourages the establishment of new data centres but also promotes the expansion and modernisation of existing facilities. By aligning policy with industry needs, Malaysia is positioning itself as a competitive and forward-thinking player in the global digital economy.
Strategic Location and Connectivity
Key contacts
"Malaysia is well-connected to the global internet infrastructure through a network of undersea cable systems."
Malaysia’s geographic position at the heart of Southeast Asia gives it a natural advantage as a regional data centre hub. Its proximity to major ASEAN markets makes it an ideal location for businesses looking to serve customers across the region with speed and efficiency. This easy access to neighbouring economies enhances Malaysia’s appeal for companies seeking to expand their digital footprint in Asia.
In addition to its strategic location, Malaysia is well-connected to the global internet infrastructure through a network of undersea cable systems. These submarine cables are critical for ensuring high-speed internet and low-latency connections, which are essential for data centre operations. As of February 2024, tech giants Google and Meta had invested in 29 and 15 submarine cable systems, respectively, highlighting Malaysia’s importance in the global digital ecosystem.
This robust connectivity, combined with Malaysia’s favourable business environment, has attracted significant investment from multinational corporations. For example, Microsoft announced in May 2024 that it would invest US$2.2bn over the next four years to build cloud and AI infrastructure in the country. Similarly, Amazon Web Services (“AWS”) revealed plans in August 2024 to invest US$6.2bn in Malaysia through to 2038, launching the new AWS Asia Pacific (Malaysia) Region.
These investments reflect growing demand for data storage, cloud services and digital infrastructure, driven by the expansion of regional businesses and the digital transformation of global enterprises. Malaysia’s location, connectivity and commitment to digital growth make it a compelling choice for data centre development.
Sustainability and Energy Efficiency
As the global demand for digital infrastructure grows, so does the need for sustainable and energy-efficient data centre operations. In Malaysia, this shift toward greener practices is becoming a central focus for both industry players and policymakers.
Data centres in Malaysia are increasingly adopting sustainability initiatives to reduce their environmental impact. These include the use of renewable energy sources, such as solar and hydroelectric power and the implementation of energy-efficient cooling technology – a critical component given the high energy demands of maintaining optimal temperatures in server environments.
The Malaysian government is also taking proactive steps to align the country’s digital growth with global climate goals. It has set an ambitious target to achieve net-zero carbon emissions by 2050, reinforcing its commitment to environmental stewardship. A major milestone in this journey was the launch of the National Energy Transition Roadmap (“NETR”) in August 2023. This comprehensive plan outlines strategies to increase the share of renewable energy in Malaysia’s energy mix and enhance energy efficiency across all sectors, including data centres.
"Malaysia is not only reducing its carbon footprint but also positioning itself as a responsible and forward-thinking leader in the global data economy."
By integrating sustainability into its digital infrastructure strategy, Malaysia is not only reducing its carbon footprint but also positioning itself as a responsible and forward-thinking leader in the global data economy. These efforts are helping to attract environmentally conscious investors and operators who are looking to build and expand in markets that support long-term green growth.
Protective Legislative and Regulatory Framework
Malaysia’s data centre industry operates within a well-established legal and regulatory environment that prioritizes data security, cyber resilience and operational integrity. This framework plays a vital role in building investor confidence and ensuring that data centres meet international standards for safety and accountability.
At the core of Malaysia’s cybersecurity legislation is the Computer Crimes Act 1995, which mandates that data centres implement stringent measures to safeguard against cyber threats. These measures are designed to protect the integrity, confidentiality and availability of data stored and processed within these facilities. Operators are required to maintain robust systems that can detect, prevent and respond to malicious activities, ensuring that sensitive information remains secure.
Oversight of the data centre sector is provided by the Malaysian Communications and Multimedia Commission (“MCMC”), which regulates operations and enforces high standards in data protection. The MCMC plays a key role in ensuring that data centres comply with national policies and technical codes, particularly in areas related to network security, data privacy and service reliability.
Malaysia also maintains a business-friendly approach to foreign investment, with minimal restrictions on foreign ownership in the data centre sector. This openness has helped attract global players and foster a competitive environment for digital infrastructure development.
A cornerstone of Malaysia’s data protection regime is the Personal Data Protection Act 2010 (“PDPA”). This legislation governs how personal data is collected, processed and stored by both public and private entities. Under the PDPA, data centres must implement technical and organisational safeguards to prevent unauthorised access, loss or misuse of personal data. The law promotes transparency and accountability, requiring data controllers and processors to uphold high standards of privacy and security.
The Communications and Multimedia Act 1998 (“CMA”) further strengthens the legal framework by providing comprehensive guidelines for Malaysia’s digital and communications industries. It empowers the MCMC to enforce regulations related to online activities, data privacy and network integrity, and requires data centres to secure the systems and infrastructure they operate.
In the financial sector, Bank Negara Malaysia has issued a Policy Document on Risk Management in Technology, which sets out requirements for financial institutions to ensure that their data centres meet resilience and availability objectives aligned with business continuity needs. This policy underscores the importance of reliable infrastructure in supporting Malaysia’s financial ecosystem.
Environmental sustainability is also gaining prominence in the regulatory landscape. Data centres are increasingly pursuing certifications such as the Green Building Index (“GBI”) and Leadership in Energy and Environmental Design (“LEED”) to demonstrate compliance with energy efficiency and environmental standards. These certifications reflect a growing commitment to sustainable operations and responsible resource management.
Additional requirements include voluntary industry codes issued by the MCMC, such as the Technical Code on Specifications for Green Data Centres, which provide best practices for environmentally friendly design and operation. Operators must also navigate import permits and duties related to the procurement of data centre equipment, ensuring compliance with trade and customs regulations.
Together, these legal and regulatory measures form a comprehensive framework that supports the secure, sustainable and resilient growth of Malaysia’s data centre industry.
CHALLENGES AND FUTURE OUTLOOKS
Current Challenges
"Despite its rapid growth and promising outlook, Malaysia’s data centre industry faces several challenges that could impact its long-term trajectory."
Despite its rapid growth and promising outlook, Malaysia’s data centre industry faces several challenges that could impact its long-term trajectory.
Location constraints are among the most pressing issues. In high-demand urban areas such as Kuala Lumpur and Penang, land availability is limited and highly competitive, driving up acquisition costs. Data centres, which require large plots of land and robust infrastructure, often compete with other industries for space, making expansion difficult.
Additionally, climate-related risks – such as flooding in certain regions – pose threats to physical infrastructure. These risks necessitate investment in disaster-resilient design, including elevated structures, advanced drainage systems and climate-adaptive technologies.
On a regional level, Malaysia faces rising competition from neighbouring countries, particularly Singapore, which has long been regarded as Southeast Asia’s premier data centre hub. While Malaysia offers advantages in terms of cost and land availability, it must continue to innovate and differentiate itself to remain competitive.
Sustainability is another critical challenge. Data centres consume vast amounts of energy, and as Malaysia’s digital infrastructure expands, so does its energy demand. Balancing this growth with environmental responsibility is essential. Although the country is exploring renewable energy solutions, the current reliance on non-renewable sources presents a hurdle in achieving long-term sustainability goals.
The industry also grapples with a shortage of skilled labour, particularly in areas requiring specialised expertise such as cloud infrastructure, network engineering and cybersecurity. The pace of data centre development may outstrip the growth of the talent pool, making it difficult for operators to fill key roles and manage increasingly complex systems.
Finally, regulatory compliance remains a challenge. Data centre developers and operators must navigate a complex landscape of local zoning laws, national regulations and international standards, including the European Union’s GDPR. Ensuring compliance across jurisdictions can be time-consuming and resource intensive.
Optimism for Continued Growth
"Malaysia’s data centre developments reflect the growing importance of digital infrastructure in the global economy."
Despite these challenges, the outlook for Malaysia’s data centre industry remains highly optimistic.
The market is projected to reach approximately US$1.25bn by 2025, with a compound annual growth rate of 9.4% from 2022 to 2028. This growth is driven by increasing digitalisation, the widespread adoption of cloud computing, and emerging technologies such as artificial intelligence and the Internet of Things.
Malaysia’s data centre developments reflect the growing importance of digital infrastructure in the global economy. With strong government support, robust connectivity and rising demand for cloud services, the country is becoming an essential player in the regional data centre landscape.
As more investments flow into Malaysia’s digital sector, the country’s digital economy is poised to thrive. Businesses will benefit from a secure, scalable and resilient foundation for their digital operations, reinforcing Malaysia’s position as a leading destination for data centre development in Southeast Asia.
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