Boon and bane of data centres

DATA centres are a key reason for the spike in investments that Malaysia has seen over the recent years.

From Microsoft to Google, major multinational corporations are setting up their data centres in the country, with the most preferred destination being Johor – given its proximity to Singapore.

Malaysia emerged as an attractive destination for its availability of land, apart from its cheap water and electricity – although the recent power tariff hike has changed the dynamics to some extent.

As lucrative as they are, data centres are often contentious, with the biggest criticism revolving around how they are resource guzzlers.

In the case of Malaysia, data centres are projected to require 19.5GW of power generation capacity by 2035, accounting for 52% of Peninsular Malaysia’s electricity use.

This is a substantial increase from just 2% currently, Deputy Prime Minister Datuk Seri Fadillah Yusof told Reuters in June.

To meet this massive demand, Malaysia is looking to build 40% to 54% more gas-fired power capacity, at the same time the country is trying to make its electricity grid greener.

Data centres also gulp down water for cooling purposes. The consumption is too huge to the point Johor is expected to face a treated water supply shortfall by 2030, according to BIMB Research.

This is despite the RM4.4bil in water treatment and distribution projects and RM2.4bil in new raw water resource projects currently planned,

By 2030, which is just five years’ away, water demand from data centres in Johor alone is forecast to surge 18-fold to 368 million litres per day (mld).

Currently, the water demand stands at only 20 mld. BIMB Research says the surge will take place as the data centre count in Johor rises from 17 to 52.

Beyond energy and water, data centres also take up land to be built.

While the total land acquired for data centres is unclear, significant plots have been sold, including 389 acres to Google in Port Dickson and over 300 acres to Microsoft in Johor.

Landowners such as listed firms Eco World Development Group Bhd, Tropicana Corp Bhd, Crescendo Corp Bhd, Gamuda Bhd, Paragon Globe Bhd and Sunway Bhd – to name a few – have benefited from disposing of their land to data centre developers.

For many of these landowners, the sale represents a one-time gain, but some are plugged in for the medium or longer term.

YTL Power International Bhd, for example, owns the artificial intelligence (AI)-powered data centre in Kulai, Johor.

A key tenant of this data centre development is Singapore’s Sea Ltd, the parent of eCommerce platform Shopee.

Meanwhile, the likes of Eco World, Gamuda, Sime Darby Property Bhd and Sunway Bhd’s construction arm – Sunway Construction Group Bhd (SunCon) – benefit from the construction of data centres or lease of land.

Earlier this week, SunCon reported its second-quarter results, whereby net profit more than doubled for the second straight quarter while quarterly revenue crossed RM1.4bil for three consecutive quarters.

All thanks to data centre projects.

The group, which has delivered more than 100MW of data centre capacity to its clients, is currently managing five ongoing data centre projects for four major multinational corporations.

These additional contracts for Malaysian firms, including those in the supply chain such as cable, switchboard and building material suppliers, are surely a positive for the job market.

However, a key question is: How significant is the leap in job creations and will the benefits offset the toll data centres took on Malaysian resources?

Also, how many of these new jobs are skilled in nature?

A scrutiny of the government-provided data shows that data centres bring in multi-billion-dollar investments, but very less jobs.

This is something that Starbiz 7 and industry experts have been saying from the very start. It is also a trend that the more developed countries have seen prior to the data centre boom in this part of the world.

Modern data centres run on highly automated operations, and jobs are often skewed to the construction phase.

In an earlier analysis by Business Insider, it is discovered that even the largest data centres in the United States generally employ less than 150 permanent employees. Some even have as few as 25.

In the first six months of 2025, Malaysia has recorded “approved digital investments” of RM42.58bil under the Malaysia Digital initiative.

The government said these will create 17,495 of potential skilled jobs over five years.

Of the RM42.58bil investments, the data centre and cloud vertical contributed 73% or nearly RM31bil investments.

Notably, data centre companies alone committed RM13.45bil.

Despite contributing nearly three-quarter of investments, the data centre and cloud vertical will only generate 1,440 jobs. In short, 73% investments will potentially create only 8.2% of jobs.

Of course, the benefits of data centres transcends direct job creation within the facility.

Malaysia can reap the most benefits from data centres if the country is able to develop the local support ecosystem for these facilities.

More than just the hardware, it is about local companies’ ability to provide the software that could help process and build on these data.

The high-value jobs will actually appear from the digital economy multipliers such as AI, financial technology, cloud services, cybersecurity, data analytics and eCommerce that ride on the data centres.

And more importantly, these multipliers must be localised, instead of relying on foreign providers.

For this to happen, the local ecosystem must be developed fast with a strong innovation-led public-private partnership.

However, even a great public-private partnership will not work out if there is a lack of skilled workforce supply in Malaysia.

Now, the question worth asking would be, are Malaysians ready to tap into the opportunities?