Malaysia: Data center hubs face sustainability challenges amid rapid growth

Malaysia is emerging as a prime destination for international data center investors, driven by robust regional demand for AI technologies, competitive land and energy costs, and a government receptive to tech investments. Southern Malaysian states, in particular, are benefiting from this trend as they offer alternatives to Singapore's constrained space and energy resources.

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Data becomes akin to 'new oil' in the era of AI and the digital economy, and data centers can be considered its main processing factory.

Data centers are now considered the primary processing facilities for 'new oil,' which is digital data in the AI and digital economy era. The economic impact of these investments is substantial, with projections indicating that a single major digital company's investment in Malaysia could generate approximately RM15 billion in positive economic impact and create 26,500 jobs by 2030. This figure does not include further mega-investments from other companies.

However, the rapid proliferation of data centers, described as 'mushrooming,' poses significant challenges if not properly managed. Increased data center construction leads to higher energy and water consumption. In Malaysia's hot and humid tropical climate, the energy required for cooling is substantial, potentially burdening the nation's utility systems and climate commitments.

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Investment by just one giant digital company in Malaysia recently is estimated to generate around RM15 billion in positive economic impact and create 26,500 job opportunities by 2030.

Neighboring Singapore has stringent approval processes for data centers, focusing on energy efficiency and requiring platinum-certified green data centers. Ireland has seen public opposition due to grid security concerns and the large share of national electricity supply consumed by data centers. While the Malaysian government has limited new data center approvals not related to AI, experts recommend mandating high energy efficiency standards, such as progressive Power Usage Effectiveness (PUE) metrics, for new constructions, rather than merely meeting minimum thresholds.

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However, the rapid proliferation of data centers across the country, like 'mushrooms growing after rain,' can turn into a weakness if there is no control.