Malaysia doesn’t fail to come up with surprises lately where data centers (DCs) are concerned. The country that will surpass the entire Asia Pacific ex-China in data center capacity by 2030 is new at this game and understandably, the people managing it are still at various stages of the learning curve.
The latest surprise comes at the highest level – the prime minister, no less, during the Ministers’ Question Time session in Parliament on Tuesday, said: “We have restricted the entry of new data centers that have nothing to do with AI. If there are benefits in terms of high-technology and AI development, approvals are easier. So, all new applications that are not related … have already been stopped.” (Quotes taken from Bernama, Malaysia’s national news agency).
Read literally, it appears that the PM has unilaterally restricted new approvals to only AI data centers. And that the country has stopped approvals of new non-AI data centers.
From a policy perspective, that would probably be Malaysia’s aspiration in the long-term (disregard for a moment the merits of this policy).
Malaysia has experienced an exponential increase in the number of data centers since several years ago. From just 10MW and one data centre in Johor in 2021, there are now hundreds of megawatts of operational data centres. The vast majority of these data centres are not running GPUs used in AI data centers. In fact, the first AI data center in Malaysia was YTL’s Nvidia-powered DC that was operational only in October 2025.
Back to Anwar’s surprise statement, is it true that non-AI DCs have been restricted in the last two years? If true, is this a total ban or on a case-by-case basis for non-AI DCs?
Says Ai Leen Tang, Partner at Wong & Partners, a member firm of Baker McKenzie International, “The PM’s comments reflect more the country’s approach to thoroughly reviewing DC applications in the face of an influx of investors setting up data centres in the country, rather than there being an existing blanket ban on certain types of data centres.”
The lawyer also explains that “the local councils of each state are the ones which evaluate and approve development plans. For example, in Johor, the state controls the approval process for data centres via the Johor DC committee. And based on our understanding, when considering applications, the Committee without exception takes into account the resource management plans closely, especially when it comes to water. But so far, we have not encountered an emphasis on only approving AI DCs.”
Ai Leen further highlights that, “the most recent controls on DC developments are imposed pursuant to the Data Centre Task Force (DCTF) approvals introduced last year… there is no indication that only AI DCs will be approved by the agency.”
In fact, our research has shown that there is no public information or records that confirmed only AI DCs have been approved.
James Rix, Head of Data Centres PDS Southeast Asia & Korea at JLL, chose the middle ground in his interpretation, saying, “I think non-AI DCs have been allowed on a case-by-case basis, depending on merit. But now, they are formally restricted.”
Rix believes existing approved data centre applications (including non-AI) would be allowed to continue.
On whether there will be an exodus of operators moving to other geographies, the data center expert is of the view that only time will tell.
Is this a wise move for Malaysia?
An observer, commenting in Linkedin in response to the news offered the following view (quoted verbatim):
“Tilting approvals almost exclusively towards AI risks concentrating national power capacity into a single, cyclical vertical. AI workloads are capital-intensive, power-dense, and highly sentiment-driven. That is not the same as structural, diversified digital growth.
“A healthy digital ecosystem requires balance across AI, cloud & enterprise compute, storage & disaster recovery; and fintech, etc.
“Over-concentration creates three risks, namely capital cycle distortion, future oversupply in one segment and grid dependency on a narrow demand profile.
“National infrastructure strategy should optimize for resilience, not trend momentum. Diversification is not hesitation — it is risk management.
“Strategic selectivity is wise. Strategic over-concentration rarely is.”
Food for thought indeed. And this was not the only criticism of the “AI-only DC” policy. It is worth noting that the digitisation effort in Malaysia currently leverages a lot on cloud service.
Let’s see what the government comes up with next. Reliable sources have indicated that Gobind Singh, Malaysia’s Minister of Digital will issue a statement very soon to clarify matters.