Malaysia has suspended the approval of new data centres that are not related to artificial intelligence (AI), citing increasing pressure on the country’s power and water resources, reports Channel News Asia. Prime Minister Anwar Ibrahim announced the decision in a parliamentary session on Tuesday, February 24, noting the government’s shift towards prioritising AI-driven facilities.
For nearly two years, Malaysia has been restricting the entry of new data centres that do not support AI applications. "All new applications that were not related to AI have already been stopped," Anwar told lawmakers. However, data centres that serve AI technologies will continue to receive approval, as these are seen as crucial to the country’s growing role in the regional tech infrastructure market.
While Anwar assured that Malaysia’s energy supply is currently sufficient, he highlighted the future challenges the country faces in meeting its rising energy demands. "For the next one or two years, it is sufficient," he said. Nevertheless, he acknowledged the need for additional power sources beyond domestic supplies, which could include tapping into the Association of Southeast Asian Nations (ASEAN) Power Grid and harnessing the abundant hydro and solar energy potential of Malaysia's Sarawak state on Borneo island.
The decision comes as Malaysia emerges as a key regional player in the data centre industry, with its proximity to Singapore and other Southeast Asian nations making it an attractive location for international tech companies. However, the surge in demand for data storage and processing facilities has placed a strain on the country’s already limited water and electricity resources.
In the neighbouring city-state of Singapore, resource constraints led to a halt in new data centre developments between 2019 and 2022, pushing companies to seek alternatives across the border in Malaysia. According to market intelligence firm DC Byte, Malaysia now accounts for more than half of the region’s under-construction data centre capacity, outpacing countries like Indonesia, Thailand, the Philippines, and Vietnam.
The southern state of Johor, which shares a border with Singapore, has seen rapid growth in data centre construction. Local authorities have introduced stricter regulations on water and power consumption for new facilities to ensure that resources are not overburdened.
As Malaysia looks to maintain its competitive edge in the IT infrastructure sector, balancing growth with sustainable resource management will remain a challenge for policymakers in the years ahead.
