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SHAH ALAM - The data-centre boom may be digital, but its costs are decidedly physical — measured in water, electricity, land and environmental pressure.
As Malaysia positions itself as a regional hub for artificial intelligence (AI) and data infrastructure, Natural Resources and Environmental Sustainability Deputy Minister Syed Ibrahim Syed Noh said economic ambition must be matched by stronger safeguards for the resources on which that growth depends.
Malaysia’s digital ambitions, he said, did not exempt the country from its environmental and climate commitments, stressing that environmental stewardship must remain central to its economic and technological development.
“The right balance is not about choosing between economic growth and environmental conservation, but about reducing the resource intensity of digital expansion,” he told Sinar Daily.
Syed Ibrahim said existing frameworks had established standards for energy and water consumption in data centres.
These included the Investment, Trade and Industry Ministry's (Miti) Guideline for Sustainable Development of Data Centre and the Housing and Local Government Ministry's 2024 Data Centre Planning Guidelines through PLANMalaysia.
The guidelines also standardised the planning, application and approval processes for data-centre projects.
He said development was jointly coordinated by the Digital Ministry and Miti through the Data Centre Task Force, which took a holistic approach to planning and implementation.
The objective was not merely to accommodate digital infrastructure but to develop a sustainable ecosystem in which foreign technological investment strengthened local capabilities and generated wider economic benefits.
“Through sustainable development guidelines, data-centre projects were encouraged to support local infrastructure and create opportunities for Malaysian suppliers in areas such as precision cooling, energy management and smart-city technologies.
“This would allow more economic value generated by the sector to remain in Malaysia and be reinvested domestically.
“Environmental sustainability should serve as a long-term guardrail for economic growth, as infrastructure projects that compromise water security or grid reliability would ultimately become liabilities rather than economic assets,” he said.
Petaling Jaya Member of Parliament (MP) Lee Chean Chung said public concerns about data centres were understandable, as their physical structures and stringent security measures could make them appear isolated from surrounding communities, resembling enclosed compounds or even prisons.
He said operators, particularly those establishing facilities in densely populated areas such as Petaling Jaya and Shah Alam, needed to engage with surrounding communities and explain their operations.
“This does not mean rejecting data centres outright, but their development needs to be approached carefully because they consume significant amounts of energy and water.
“While existing supplies might remain adequate, authorities need to consider whether Malaysia would have sufficient water and electricity resources if the number of data centres continued to increase,” he said.
Lee also questioned whether the headline investment figures associated with data centres accurately reflected their value to the Malaysian economy, given that large facilities did not necessarily create substantial numbers of jobs.
Instead, their contribution should be assessed through local content, employment, talent development and downstream economic activity.
“Operators should be encouraged to meet local content requirements, while efforts should be made to train and upskill Malaysians for the jobs created.
“Malaysia should also encourage businesses to develop downstream activities around the data-centre ecosystem, particularly because some large facilities serve global customers and their wider economic impact might not be immediately apparent locally.
“Decisions on further expansion should ultimately consider four key factors: economic returns, manpower and talent development, water availability and energy supply,” he said.
Lee also pointed to relatively lower electricity and water tariffs and cheaper land compared with Singapore as key factors attracting data-centre operators to Malaysia.
This is particularly evident in Johor, where many data centres are concentrated because of the state's proximity to Singapore.
The concerns come as the global expansion of AI-driven data centres has highlighted their substantial environmental footprint, with large facilities requiring significant quantities of water and electricity while also raising concerns over pollution, noise and land clearing.
Some large AI facilities could consume millions of litres of water daily, while projections have pointed to a substantial increase in electricity demand as AI adoption expands.
