Data centre investments - good or bad for Malaysia? - MIDA | Malaysian Investment Development Authority
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Data centre investments – good or bad for Malaysia?

Data centre investments – good or bad for Malaysia?

17 Sep 2022

DATA centres are in vogue

Due to a growth of cloud computing, demand for data centres is growing exponentially and Malaysia is fast becoming a hub.

The Malaysian Investment Development Authority (Mida) is pursuing such investments.

Lim Bee Vian, Mida deputy chief executive officer (investment development) says: “The data centre colocation market has been witnessing very steady growth due to the ever increasing volume of data generated and the increased usage of Internet-based services.”

She cites the case of Microsoft Corp, which last year announced plans to establish its first data centre in the country to deliver cloud services locally.

Then came another Nasdaq-listed company, Chindata Group Holdings Ltd.

The company late last year announced the construction of its fourth hyperscale data centre in Johor, with an investment value of about Rm2.5bil over the next five years.

Malaysia has also attracted Hong Kong-listed GDS Holdings Ltd, which broke ground in Johor on April 25 this year for the development of a data centre with a total investment value of Rm1.38bil.

In the second half of this year, Google said it plans to include Malaysia as its new Google Cloud region, an investment that will involve a data centre.

More recently, YTL Power International Bhd, through its subsidiary, YTL Data Center Holdings Pte Ltd, said it is investing Rm1.5bil for the first phase of the YTL Green Data Centre Park in Johor.

Sea Ltd will become the anchor tenant for the YTL Green Data Centre Park.

Japan-listed Nippon Telegraph and Telephone Corp also has plans to invest over Us$50mil (Rm227mil) for its sixth data centre in Cyberjaya.

Mida’s Lim cites a report by Technavio, a market research firm, that says that the data centre market in Malaysia is expected to increase by Us$2.08bil (Rm9.43bil) from 2021 to 2026.

This translates to a compound annual growth rate of 15.72%.

But data centres are not without controversy.

Detractors point out a few problems with this type of investments coming into the country.

One concern regarding data centres, especially the hyperscale ones, is environmental-related.

This is because data centres tend to use up a lot of electricity as well as water.

“In Malaysia, our electricity and water tariffs are pretty low in comparison with many countries. So that’s why data centres like it here, ” says an industry observer.

However, he adds, “But is it right to bring in such investments that use up so much of our resources while not creating suf­ficient jobs.

“There is also the issue that almost all the hardware and software for data centres will be imported into the country.

“Furthermore, these projects don’t employ that many people as the data centres are largely software and artificial intelligence (AI) driven, ” he points out.

Notably, Singapore had in 2019 imposed a moratorium on the construction of new data centres.

Singapore’s senior minister of state, ministry of communications and information Janil Puthucheary said one of the reasons the moratorium was imposed was because data centres are “intensive users of water and electricity”.

This has led to neighbouring countries such as Malaysia and Indonesia benefiting as data centre investments went there.

However, earlier this year, Singapore removed the moratorium and is now welcoming the construction of new data centres again.

Puthucheary pointed out that there are new post-moratorium measures which are intended to “facilitate the calibrated growth of data centres that possess the best in-class technologies and practices for energy efficiency and decarbonisation”.

Mida’s Lim, though, disputes the theory that data centres do not create much employment.

”One of the benefits or spillovers of data centre projects in Malaysia is the creation of job opportunities,
” she says.

She says data centres not only create direct employment in facilitating the operation of the data centre which requires high-skilled, well-remunerated roles that require significant training and educational and professional qualifications, but also indirect employment.

These include construction-related jobs and the maintenance of the data centre infrastructure.

In regards to the acceleration towards digitalisation, Lim says: “Data centres are a critical digital enabler.”

According to her, the investing environment is evolving in Malaysia, making it totally different compared to years ago.

“Those days, Malaysia used to be heavily involved in manufacturing, ” she says.

“Now, there is more emphasis on services, ” she adds.

However, she says that currently the focus is on both services and manufacturing, as they complement one and another.

Source: The Star