Malaysia is witnessing a surge in investments in data centres and cloud computing, driven by the rising demand for artificial intelligence, cloud services, and digital applications. This growth, while offering new opportunities for the workforce and local businesses, is also placing significant pressure on the nation’s infrastructure, such as electricity and water resources. In the first half of 2026, Malaysia approved data-centre and cloud-computing investments worth RM95.8 billion, making up nearly 44% of the total investments approved during this period. The regions of Johor and the Klang Valley are emerging as key locations for these new facilities.
This burgeoning sector is creating a need for skilled professionals in fields like data science, engineering, cybersecurity, telecommunications, construction, and facility management. Additionally, it presents Malaysian companies with the opportunity to supply essential services, including construction and electrical work, to support these data-centre projects. The continuous operation of data centres demands substantial electricity, with usage in Peninsular Malaysia reaching 849 megawatts by December 2025 and projected to soar to 4,811 megawatts by 2030.
To accommodate this growing demand, the Malaysian government is planning to introduce up to 9,600 megawatts of additional power-generation capacity between 2028 and 2031, while replacing outdated power plants. Authorities are also scrutinizing electricity-use forecasts provided by proposed data centres to avoid unnecessary infrastructure investments and manage additional costs effectively.
Data centres also consume a significant amount of water for cooling purposes. In response, authorities are urging operators to utilize reclaimed and alternative water sources instead of relying solely on treated drinking water. Johor has implemented plans to supply up to 12 million litres of reclaimed water daily for cooling data centres, with similar initiatives underway in the Klang Valley. The government has mandated that new data-centre projects demonstrate sufficient power and water supplies and comply with energy-efficiency standards.
To ensure sustainability, data centres must adhere to specific Power Usage Effectiveness (PUE) targets, with colocation facilities limited to a PUE of 1.6 and hyperscale operators to 1.4. As Malaysia’s data-centre sector expands, it is expected to bring substantial economic and employment benefits. However, authorities remain vigilant in ensuring that this growth does not excessively strain the country’s electricity and water resources.