Malaysia, the Next Regional Data Centre Hub

The pandemic has amplified the importance of broadband connectivity in daily lives. Today, connectivity is as critical as other basic amenities such as energy and water. Efficient and stable highspeed connectivity at home is an important infrastructure to enable individuals and families to continue with work and manage daily lives  seamlessly. Malaysia is well-positioned in implementing digital infrastructure strategies. In 2019, 90% or 29 million of the total population size of 32 million people have access to the internet, and this is projected to surge to 33.5 million by 2025 through JENDELA – the national digital infrastructure plan.

Digitisation plays a significant role when it comes to boosting the economy. With the digital economy constantly growing, the need for computing technologies and data processing also increases. This inevitably leads to more pressure placed on IT infrastructures, thus increasing demand for data centres.

Data centres have always been at the forefront of innovation and have been helping businesses not just for storing data, but for providing backup, disaster recovery, data management, and networking options.

The data centre construction market in the Southeast Asia (SEA) region is forecasted to grow by USD3.61 billion during 2021- 2025, progressing at a CAGR of almost 12%, according to a recent report by global tech research company TechNavio. The market is driven by the increased usage of cloud-based services, IoT, big data analytics, rising adoption of mobility, rapid pace of digitalisation and digital services in the SEA region, which has prompted the world’s cloud computing giants to expand their cloud infrastructure footprint to facilitate the expansion.

Meanwhile, internet usage in the SEA region continues to multiply, with 40 million new online users in 2020 alone as reported in e- Conomy SEA 2020. In addition, the COVID-19 pandemic led to an acceleration of digital services consumption such as video streaming and video conferencing.

Based on these facts coupled with our youthful, digitally savvy and upwardly mobile populations, the SEA region is enjoying unprecedented attention as the new global data centre hotbed with Malaysia particularly gaining traction.

Malaysia is among the South East Asian peers that have captured the attention of global data centre players due to the sheer scale of opportunity that lies ahead as outlined below:-

• Data & Storage ASEAN stated that Malaysia is seen as one of the rising stars that can offer ease of access, lower cost of entry and abundance of land mass at competitive real estate prices.

• Malaysia has among the lowest electricity tariff rates in general across the SEA region, as analysed by a leading economic consultancy, Lantau Group in February 2020.

• Global data centre players have corporate targets to reduce their carbon footprint. For data centre investments, the availability of renewable energy (RE) is an important factor for consideration. Malaysia is focusing on its power generation plan with a target of 31% RE in its installed capacity by 2025, and 40% by 2035.

• The country is currently connected to 29 submarine cable networks with 14 landing stations, offering excellent connectivity to the rest of Asia and the world.

• Malaysia was ranked as SEA’s second most digital advanced country on Huawei’s Global Connectivity Index 2020 and was placed 34th out of 79 countries. Malaysia’s banking and ecommerce sectors are among the most evolved in the region, ahead of Hong Kong, China, and Singapore.

• Located in the heart of ASEAN, with a conducive business environment, competitiveness in ICT, well developed infrastructure, dynamic skilled workforce, liberal investment policies, intellectual property (IP) protection, economic stability and support from its public sector, Malaysia is well positioned to become an attractive destination for data centres players.

On 19 February 2021, the Malaysia Digital Economy Blueprint (MyDIGITAL), a blueprint designed to strengthen the foundation and development of the country’s digital infrastructure was launched by the Prime Minister. The Government is aiming to attract RM70 billion investments in digitalisation, with the digital economy expected to contribute 22.6% to the country’s GDP and provide 500,000 job opportunities by 2025. Cloud services are earmarked under the MyDIGITAL initiative such as increasing local data centres to provide high-end cloud computing services. The blueprint outlines a goal to nurture an enabling environment for local data centre companies to specialise in high-end cloud computing services in the first two phases (2021-2025) and sets a target for the local data centre industry to generate a revenue of RM3.6 billion by 2025.

To further intensify efforts in enticing more digital investments including data centres into the country, the establishment of the Digital Investment Office (DIO) was endorsed by the National Council of Digital Economy and Fourth Industrial Revolution (MED4IR) chaired by the Prime Minister of Malaysia on 23 April 2021. DIO will act as a single platform between MIDA and MDEC to coordinate and facilitate digital investments in the country.

This timely collaborative effort will cater to the rapidly growing digital industries’ needs with a view to anchor global technology leaders, build local champions and nurture future ready talent in Malaysia. In the long term, with the shift in the global digital landscape, the Malaysian Government anticipates the DIO to play a vital role in driving Malaysia towards becoming the preferred digital hub and the Heart of Digital ASEAN in the region.

Source: MIDA e-Newsletter July 2021