Malaysia has evolved into an attractive location for data centre (DC) investments, thanks to abundant land and power resources, good international connectivity, and supportive government policies.
According to Arizton Advisory and Intelligence, the domestic DC market is projected to grow at a compounded annual growth rate of 7% to USD1.6 billion by 2027 from USD1.1 billion in 2021, driven by rapid hyperscale investments and strong co-location demands.
“The country is already home to some 41 enterprise DCs which include the likes of AIMS, Bridge Data Centres, GDS Services, Keppel, and TM ONE/VADS,” said RHB Research (RHB) in the recent RHB Research (RHB) in the recent Regional Thematic Research Report.
The development of the DC industry is overseen by the Malaysia Digital Economy Cooperation (MDEC), an agency under the purview of the Ministry of Communications and Digital, tasked with advancing the nation’s ICT and digital economy.
Together with the Malaysian Investment Development Authority (MIDA) and the Performance Management and Delivery Unit, they form the DC task force (DCTF) responsible for facilitating DC investments into the country.
The DCTF acts as a one-stop shop to assist potential DC investors looking to establish their presence in the country. The task force works to understand investors’ requirements and specifications, and to connect them with relevant stakeholders such as the utility providers, telcos, land owners, and relevant government agencies. Ultimately, the task force expedites the overall end-to-end process for DC investments in the country.
In Feb 2021, former Prime Minister Tan Sri Muhyiddin Yassin unveiled the Malaysia Digital Economy Blueprint, which outlined the plans to accelerate Malaysia’s progress as a technologically advanced, digitally driven, high-income economy over the next decade.
A key policy thrust in the blueprint is the building of enabling digital infrastructure to provide seamless and extensive digital connectivity, with DCs and submarine cable landing stations identified as strategic infrastructure assets.
Following the announcement, four global cloud service providers, Microsoft, Google, Amazon and TM, were appointed alongside four local managed service providers, Cloud Connect, Enfrasys Solution, Awantec Systems, and Radmik Solutions, to facilitate and drive DC investments.
Conditional approvals were given for the cloud service providers to construct hyperscale DCs as part of the country’s Cloud-First strategy, with the total investment value reported at RM12-15 billion over five years.
On 9 May 2022, the government, through the Malaysian Administrative Modernisation and Management Planning Unit, inked cloud framework agreements with the cloud service providers with the target to migrate 80% of public data to hybrid cloud systems by the end of 2022.
The Cyberjaya township in Selangor has long been a focal point for DC investments in Malaysia with its coveted Multimedia Super Corridor status attracting early investors. With superb infrastructure and unparalleled connectivity, Cyberjaya is home to almost half of all DCs and more than 70% of the combined DC land area in the country.
Nippon Telegraph and Telephone, Japan’s leading internet and telecommunications group was among the pioneers in Cyberjaya with its maiden facility constructed in 2002. Bridge Data Centres, a subsidiary of NASDAQ-listed Chindata Group, is another key player in Cyberjaya with two facilities in operation, with a combined 20 megawatt capacity.
Outside of the Klang Valley, Johor is rapidly transforming as the next DC hotspot with its large swathes of industrial land designated as technology hubs. The state’s proximity to Singapore, Asia’s largest DC metro, is a key competitive advantage, with DC investors lured by the lower construction and connectivity costs.
Johor’s appeal as a fledgling DC hub received a major shot in the arm after the Singapore government issued a moratorium on new DC construction in 2019, over sustainability concerns. While the moratorium was lifted in early 2022, more stringent conditions were laid out for the construction of DCs, including a cap on capacity.
This has compelled investors to scout for alternative locations, with Johor and the island of Batam in Indonesia emerging as alternative DC sites. In 2015, the Johor state government announced the development of the Sedenak Technology Park (STP).
Previously known as the Kulai Iskandar Data Exchange, Sedenak Technology Park sits on a 745-acre land in the Iskandar Region with access to at least 600 megawatt of capacity, dark fibre connectivity, scalable utilities, and infrastructure.
Sedenak Technology Park looks set to give Cyberjaya a run for its money with DC investors such as Bridge Data Centres, Yondr Group, Equinix, and ByteDance System having committed to set up their DCs in the area.
While the DC industry has grown steadily over the past decade, MDEC estimates that the overall industry capacity stood at 100 megawatt at the end of 2021.
The figure is set to be dwarfed over the next decade, as upcoming hyperscale developments should see an additional 800 megawatt capacity progressively come on stream.
In May 2022, former Senior Minister of International Trade and Industry, Datuk Seri Mohamed Azmin Ali said the government had given approval in principal for AWS to invest in the country, and were studying requests made by the company.
In Mar 2023, AWS officially announced a USD6 billion investment to set up a cloud region in Malaysia to meet the strong demand for cloud services in the country and in South-East Asia.
To be staggered over 15 years, the sum represents the single largest international technology investment of its kind in Malaysia. The new AWS region will consist of three availability zones, adding to the 99 availability zones across 31 geographic locations globally with each availability zone having its own. This includes Singapore and Indonesia.
