The biggest news so far and potentially carrying the biggest impact in the data center industry in Malaysia is the proposed bill, Digital Infrastructure (Data Centre) Bill to regulate the industry. Singapore has already passed its almost similarly named Digital Infrastructure Act two weeks ago, so this is essentially Malaysia’s version and it’s about time. Thailand’s similar legislation is still under consideration after it was introduced in Parliament recently.
In Malaysia’s case though, the bill has attracted a lot of attention. The country is after all en route to being the largest data center hub in Asia (ex-China) by 2030. Hence, ahead of expected constraints with such huge upcoming gigawatts, the country is starting to tighten the requirements around its booming data center industry.
Essentially, the government wants to ensure the benefits from the enormous investment and consumption of local resources would go to its citizens. Hence, data center developers in Malaysia would soon face closer scrutiny of capacity reservations and greater responsibility for utility costs through the proposed bill and its subsidiary legislations and guidelines.
The proposed law will be submitted to the Cabinet for its consideration in 2027. As the National Economic Action Council (NEAC) headed by the prime minister has already agreed to it, the drafting and passing of the proposed bill in Parliament (likely by 2027) is practically a certainty. Parliamentarians will just have several debates before passing the bill which no doubt will receive blessings from both sides of the political divide.
The scale of the development pipeline explains the urgency. As of July, the Data Centre Task Force has approved 27 projects with estimated investment of RM225.97 billion. More than half will be hosted in Johor (16), while Selangor gets 10 and Negeri Sembilan one. All are under construction except for one.
Reserved vs demand gap
In terms of reserved power capacity and actual demand, the gap is huge – as of August, actual demand from 45 operating facilities is about 1.37GW while the combined maximum load is 6GW. The proposed bill will likely attempt to resolve this discrepancy.
During this week’s Parliament session, Investment, Trade and Industry Minister Johari Abdul Ghani proposed that data center developers should bear transmission upgrade costs attributable to their projects. And, operators would also be charged for committed electricity capacity they did not use, thus helping to narrow the gap.
But there is an issue here – developers need extra power to cater for future expansion needs while utilities cannot freely redirect capacity that’s already reserved for them. If the proposal gets passed, reserving power ahead of customer demand will henceforth carry financial consequences.
Separately, Deputy Prime Minister Fadillah Yusof proposed a “user-pays” electricity pricing mechanism and higher Connected Load Charges to discourage excessive reservations, alongside work on guidelines for independent generation with self-generation highly encouraged
Fadillah also disclosed 12.3GW of approved electricity supply capacity as of August, against projected maximum sector demand of 8.39GW by 2030. Neither figure represents today’s operating IT capacity.
When it comes to water, approved demand across Johor, Selangor and Negeri Sembilan is about 445.04 million litres daily over 2025–2030. Data centers will now have to account for their own water demand.
With more investment pouring in and capital raising rising in tandem, Malaysia also wants to ensure a larger share of local participation in terms of local content and workforce. Task force approvals now carry a minimum 30 per cent local content requirement, monitored through six-monthly implementation reports.
Meanwhile, the 27 projects approved are expected to generate 4,053 jobs, including 3,523 highly skilled positions, with Malaysians projected to fill 89.21 per cent of those roles.
In conclusion, data center development in Malaysia now sits at a critical juncture. Moving forward means resolving existing and expected constraints including community pushbacks. Rolling out the red carpet is no longer necessary. The goal has been exceeded and what is now needed is tighter rules to regulate the industry so everyone benefits. The uncertainty accompanying this transition phase is a necessary part of the country’s journey to becoming a matured data center hub.
*w.media’s Malaysia cloud and datacenter Convention is happening tomorrow, 22nd October, in Kuala Lumpur.