When you’re the neighbour of an industry hub like Singapore, whose overall tech infrastructure, digital ecosystem and data center investment far surpasses your own, you have to look at the drawing board and set realistic expectations- the idea of competing with Singapore is unfeasible at the present. Fortunately, Malaysia has taken the decision to play a different role from its neighbour, one which- if executed well, will undoubtedly pay dividends.
Tough Competition
To put it plainly; Malaysia has always been one of the most digital-savvy nations in Southeast Asia, with the country accompanying Singapore and Brunei as the only countries to have above 80 per cent internet penetration in the region. This statistic however, is slightly deceiving. Despite the country’s high penetration rate, it and the rest of Southeast Asia’s broadband speed is a fraction of those shared by Singapore, South Korea and Japan, putting into perspective the literal lagging of digital infrastructure.
The good news is that Malaysia has clearly recognised the importance of investing in digitisation, with government initiatives such as the National Fiberisation & Connectivity Plan (NFCP) and the Malaysia Digital Economic Blueprint, or more widely known as simply MyDigital, coming about in 2019 and 2021 respectively to provide a road map for country-wide digital adoption. The MyDigital agenda especially stands as the nation’s blueprint of designing a sustainable digital ecosystem that encapsulates high-level jobs, innovation across sectors and increasing overall digital literacy. Divided into three phrases, MyDigital is currently in its first phase, with the goal of building up foundational digital use from 2021 to 2022.
What’s ‘Best’ Is Situational
This has led to a favourable forecast in the eyes of investors, with market reports indicating the country’s potential of exceeding 800 million U.S. dollars by the year 2025. Malaysia’s position in the region is unique; whilst it is not a completed one-stop-shop data center landscape like Singapore, neither is it a frontier nor an emerging market like Vietnam or Cambodia. This spells opportunity for the nation; operators have noted an increasing pattern of investors preferring less developed markets, where the potential for growth is greater.
The advantages Malaysia shares with Singapore come in the forms of a high literacy rate, tax incentives for foreign investment and disaster-free geography. What the country has on top of its neighbour however- all 459 times more to be exact, is land space. We all know that in theory, data centers can be constructed anywhere, as long as an adequate power supply is provided and connectivity isn’t an issue. To actually decide on the final location before the first cement is poured however, requires an analysis of physical security, maintenance accessibility, scalability and geographic proximity to internet exchange points amongst other considerations.
Whilst the benefit of setting up a facility in a city like Singapore means latency and power requirements will never be an issue, finding the room to do so is both time-consuming and expensive. Conversely in Malaysia, speedy latency networks are often nucleated around key cities whilst other parts of the country offer comparatively slower speeds. The large majority of data centers traditionally only begin construction after customers have been secured- but with the country’s rapid digitisation and growth of tech infrastructure, investors can feel secure in slowly propping up facilities as national digital objectives are met. Furthermore, utilities in Malaysia are more economical; the country’s electricity tariff is lower than in Singapore and a natural abundance in water supply also spells cheaper cooling.
Fingers Crossed
Evidently, Malaysia’s digital ambitions have generated a healthy amount of interest, with Microsoft announcing plans to collaborate with the government and invest 1 billion U.S. dollars over the next five years in April and conditional permission being granted to Google, Amazon and Telekom Malaysia to build and run new hyperscale data centers and cloud services. Competition in a crowded region is unavoidable, but should never take immediate nor first priority. What the country can achieve is a clever positioning as the safer option to regional frontier markets, and as the more affordable alternative to Singapore. Malaysia’s expected increase of data center supply and capacity in the years to come is exciting to investors, and can only be seen as fertile ground ready to be ploughed.
Join the conversation at the Malaysia Cloud and Datacenter Convention 2022 to be at the forefront of discussions surrounding the game-changing developments within the industry, and capitalise on the opportunities they present for all major players across Malaysia.
