Malaysia has adopted a restrictive policy towards data centres, effectively blocking the approval of new projects not directly related to artificial intelligence. This decision, confirmed by Prime Minister Anwar Ibrahim, had already been an informal practice for about two years.

Objective: AI

The stated goal is to attract investments in the AI sector, leveraging the country's strategic geographical position and lower costs compared to Singapore. Malaysia has become one of the fastest-growing markets in Southeast Asia for data centres, with rapidly expanding capacity, mainly concentrated in the state of Johor.

Infrastructure problems

However, this growth poses challenges. The Malaysian government has expressed concerns about the energy and water consumption of data centres, fearing an increase in tariffs for consumers. Delays in grid connections represent a bottleneck for new developments. The government aims for more efficient use of existing capacity and requires that infrastructure upgrade costs be borne by developers.

Technological sovereignty

Another issue concerns technological sovereignty. Malaysia risks becoming a mere infrastructure provider for foreign companies, without obtaining an adequate return in terms of innovation and control. The government has allocated funds for the creation of a sovereign AI cloud, but the scale of foreign investment is far greater.

Energy and ASEAN

To ensure energy supply, Malaysia is looking to external sources, such as electricity from the state of Sarawak and, in the future, the ASEAN Power Grid. The presence of Chinese capital and infrastructure in the Malaysian data centre sector adds a further layer of geopolitical complexity. Malaysia's situation is reminiscent of Ireland, where data centres consume a significant share of electricity, creating problems for the grid. Malaysia must avoid repeating the same mistakes, carefully managing data centre growth and ensuring that they bring concrete benefits to the country.