Sustainable Infrastructure, Local Impact

Malaysia has established itself as a leading digital hub in Southeast Asia, outperforming its regional peers, according to real estate consultancy firm Knight Frank’s Data Centre Research Report 2024. To strengthen its position, the Malaysian Government introduced the Digital Ecosystem Acceleration (DESAC) Scheme under Budget 2022, aiming to attract strategic investments in advanced digital infrastructure, including data centres and cloud computing projects.

The DESAC Scheme offers attractive tax incentives designed to encourage data centre operators who adopt sustainable practices such as energy and water efficiency equipment as well as renewable energy (RE). These initiatives aim to attract strategic investments in advanced digital infrastructure while embedding environmental, social, and governance (ESG) principles into industry practices.

Complementing this effort, the Ministry of Investment, Trade and Industry (MITI) launched the Guidelines for Sustainable Development of Data Centres in December 2024. These guidelines provide data centre operators with a well-defined sustainability framework to qualify for tax incentives under the DESAC scheme, incorporating internationally recognised best practices and regulatory standards.

These guidelines aim to ensure that data centres in Malaysia are not only high-performing but also environmentally sustainable.

Key objectives of the guidelines:

1. Positioning Malaysia as the leading data centre hub in Southeast Asia by attracting investment from sustainable data centre organisations;
2. Enhancing energy efficiency in the design and operation of data centres to unlock greater capacity and reduce waste;
3. Accelerating renewable energy adoption to power data centre operations with clean, low-carbon sources; and
4. Fostering innovation to improve water efficiency in data centre infrastructure.

This strategic shift towards sustainable development offers a unique opportunity to align the country’s digital economy with ESG goals, paving the way for long-term economic resilience, responsible investment, and national decarbonisation.

These benchmarks promote greater transparency and accountability in managing critical resources, reflecting Malaysia’s commitment to responsible and efficient infrastructure growth.

These initiatives are aligned with Malaysia’s commitment to advancing green technology and promoting the integration of RE in data centre operations. This supports the national target of achieving 70% RE capacity by 2050, as outlined in the National Energy Transition Roadmap (NETR). These efforts are further reinforced through the Corporate RE Supply Scheme (CRESS), which enables data centre providers to access RE from third parties, ultimately reducing operational costs and enhancing long-term competitiveness.

The impact of data centre investments extends beyond infrastructure, spurring the growth of a broader ecosystem of vendors, service providers, innovators, and manufacturers.

In addition, data centre projects create opportunities for local manufacturers to integrate into the data centre supply chain, offering them a platform to scale up and expand into global markets. These projects also serve as a magnet for international manufacturers and suppliers supporting the data centre industry, encouraging them to establish operations in Malaysia. The operational demands of data centres and cloud services further stimulate the local economy by creating business opportunities for a wide range of support services, including architectural, construction, engineering, and electrical contractors. This leads to increased productivity and growth for local companies through partnerships. Moreover, data centre and cloud services companies are instrumental in accelerating the digital transformation of Small and Medium Enterprises (SMEs) by providing them with greater agility, scalability, cost efficiency, enhanced security, reliability, and access to valuable data analytics capabilities.

Eligible companies are encouraged to submit their applications to MIDA under the DESAC Scheme, which is available until 31st December 2027.

Applications will be assessed to ensure that proposed projects demonstrate strong linkages to the local economy and comply with sustainability standards to qualify as sustainable data centres.

For more information, contact the Business Services & Regional Operations Division, MIDA at https://www.mida.gov.my/staffdirectory/business-services-and-regional-operations-division/.

Knight Frank: Malaysia is number one again for data centres in Southeast Asia after tech giants’ RM105b investments
Source: Malay Mail
https://search.app/A5QhDBSWVePG3L3N6

MITI finalising sustainable development guidelines for data centres
Source: The Star
https://www.thestar.com.my/business/business-news/2024/10/23/miti-finalising-sustainable-development-guidelines-for-data-centres