Malaysia’s Edge in the Data Centre Race

AWANI

As AI adoption and hyperscaler investments surge, Malaysia is emerging as one of Asia’s most cost-competitive data centre hubs—ranked 17th globally at US$11.37 per watt, well below Singapore and Tokyo.   But with rising power densities, cooling challenges, and supply chain risks, how can Malaysia maintain its edge?  Join us as Carlos Garcia Rodriguez, Project Director at Turner & Townsend, unpacks the cost structure, construction hurdles, and policy actions needed to future-proof Malaysia’s data centre ecosystem.

Transcript

00:00Hari ini, kami menjelaskan salah satu dari sektor yang lebih cepat di Malaysia,

00:04industri data-centre yang lebih cepat.

00:06Alikasi dengan pemerintah data-centre yang lebih cepat dengan Asia-Pacific data-centre

00:09market movement, Malaysia's data-centre sector is entering a new phase of expansion

00:13fueled by artificial intelligence, AI adoption and large-scale hyperscaler investment.

00:18Asa salah satu dari Asia's most cost-competitive markets,

00:21the country offers developers a strong balance of affordability,

00:26policy stability and regional connectivity, reinforcing its role as a strategic alternative

00:32to higher-cost hubs across the region.

00:34The data-centre construction cost index 2025 from Global Professional Services,

00:40company Turner & Townsend benchmarks construction costs across 52 markets worldwide.

00:46Ranked 17, costs have remained relatively stable at US$11.37 per watt

00:53and Malaysia continues to attract investment through its combination of competitive build rates,

00:58growing hyperscale capacity and increasing regional significance

01:02as a scalable alternative to Singapore.

01:05Joining us in the studio is Carlos Garcia Rodriguez,

01:08Project Director at Turner & Townsend to unpack Malaysia's cost structure,

01:14construction challenges, coding technologies and what it will take

01:17to strengthen our long-term competitiveness.

01:20I want to say thank you very much.

01:21Thank you for having me.

01:22Carlos, how are you?

01:23I'm very good, thank you.

01:24It's a pleasure to be here.

01:25It's an honour to have you also.

01:27So we know that talking about data centre is growing globally,

01:31but how could you summarise Malaysia's cost structure and key advantage

01:35compared to established a data centre in like Japan and Singapore?

01:40Yes, so Malaysia obviously there's a lot of land availability.

01:45There's no land scarcity, such as in Singapore obviously.

01:49I would also say that politically it's very stable as a country

01:53and that's perceived by the investors and developers as well as a very stable economy.

01:59And I would also say that the skill of the market and the labour market itself in Malaysia

02:04is at par to the biggest economies in the world I would say.

02:08So obviously all of these builds into an ecosystem that flourishes international investment

02:14coming from the US, from different regions in the world.

02:18And obviously Malaysia is in a great position to continue this race into the AI world.

02:24How do you factors like land costs, labour availability and local regulations in Malaysia

02:31affect the overall project delivery and timeline and budget?

02:35It's not easy because we know that a lot of experts have to be focused.

02:39Maybe you can share with us.

02:40Yeah, I can share with you.

02:41Let me start with the regulatory approach.

02:43So over the past few years, Malaysia has streamlined the permitting process,

02:49especially I would say on the fire department, fire regulation.

02:54And I would say the same, especially in the state of Johor in the south,

02:58where there's new bodies making sure that the data centres are aligned

03:03to the Malaysia plan of digital economy.

03:06If we move on into the labour cost, labour availability or even the contractor's books,

03:13I would say it's very important to say that we are still far away from very, very condensed markets

03:19like Japan and Singapore.

03:21In Japan, the order books for the contractors fall until 2028.

03:27So to start the construction in Japan, it takes time.

03:29Here in Malaysia, we are still in a heating wave.

03:33Obviously, it's something to watch out, but as more international contractors

03:38and local contractors venture into data centres,

03:42I do think that we still have room for growth in the country.

03:45And as power densities increase and cooling rise, like AI, liquid cooling,

03:51maybe what is the best way or the best method?

03:53Or how do you see Malaysian balancing these technical needs

03:57at the same time at the advantage of the cost?

04:00So I would like to focus first on the society itself, on the citizens.

04:06So obviously, data centres consume a lot of power.

04:09They use a lot of water.

04:11So I do think that Malaysia has taken the right steps

04:14by securing additional power, securing green lane initiatives

04:18for faster access for data centres into power.

04:23So I don't think that on that area, as a national undertaking,

04:28I do think that Malaysia is taking the right steps.

04:31Now, when it comes to other factors such as costs,

04:35well, I'd like to point out the new SSD introduced a few months ago

04:41by the Malaysian government.

04:43That's obviously impacting the data centre industry

04:46as well as all the industries because now operators and investors

04:50need to account for additional 6% of construction costs

04:55as they venture into Malaysia with investments.

04:59So that's something that they are actually taking into consideration.

05:02And on the other hand, during the operations,

05:06the public water company in Selangor, Tenaga National Berhad

05:10have also increased the fares and the tariffs for data centre operators.

05:15So that's something that obviously needs to be balanced

05:18into a TCO, total cost of ownership,

05:21when data centre operators decide to make investments in Malaysia.

05:25So this is one of the key factors that you mentioned.

05:29We also know that the trend in Malaysia is heating right now.

05:33Also, we need to take a look at the opportunities and the risks.

05:38What are some of the main challenges in promoting cooling technologies

05:44within Malaysia's data centre market?

05:47So look, with the advancement of liquid cooling,

05:51which is not something new, but it's been made a sort of a commodity lately,

05:56the knowledge on the cooling technologies plays a big part.

06:02And what we've seen over the past year, I would say,

06:06is that projects have been redesigned at design stage

06:10or even in construction stage to account for liquid cooling technologies.

06:15So that's obviously carried forward a delay in the construction.

06:19and it's carried forward an increase in the costs as well.

06:23But obviously, I would say there's a fear of missing out in some sort of way.

06:30And then obviously, data centre operators and investors,

06:33they need to account for these investments.

06:35When we build these buildings, they will be there for 20 or 25 years.

06:41So they need to be accounted for all the technologies that we'll have in the future.

06:45And definitely, this is a long-term strategy.

06:49And talking about long-term strategy implementations and planning,

06:54what strategies have been used by operators, developers,

06:58to mitigate risk from the supply chains or cost shocks,

07:01particularly in the construction materials and critical equipment?

07:05So I would say the critical equipment is somehow in a bottleneck, I would say.

07:13So that's why data centre operators are reaching out to, you know,

07:18distributors of UPSs, generators, chillers, cooling towers to book orders in advance.

07:24So there's a trend to do bulk ordering on a global level, not only on Malaysia level.

07:31I would say also modularisation has played a big part here.

07:36So by phasing the development according to the data centre operator's tenants,

07:44basically we can make sure that we adjust the capital expenditure at the initial of the stage,

07:50sorry, at the initial of the projects to make sure that it aligns with the delivery strategy

07:55and the tenant strategy for use.

07:58So, yeah, all in all, the industry is becoming more creative.

08:04We need to think outside the box.

08:06Yeah, innovative.

08:07Yeah, exactly.

08:08So that's the data centre world in the end.

08:11And also we need to take a look at the costs.

08:14Costs usually are the main focus.

08:17Without costs, we can't move this.

08:19And given the rising costs of construction materials, labour and supply chain delays,

08:25how do you foresee data centre construction in Malaysia's costs would evolve and the wider APEC region?

08:33So let me focus on the APEC region first and then I'll go back to Malaysia.

08:39So we've seen trends, especially in Indonesia and Japan and Singapore,

08:44where costs have risen up over the past few years,

08:47but then later on have become very stable.

08:51I do see Malaysia having this sharp cost increase over the past three years.

08:57However, my forecast is that over the next four to five years,

09:02Malaysia cost of construction will stabilise,

09:06especially considering that there's a big pool of contractors

09:10currently delivering data centres in the country.

09:13I don't foresee many issues happening like the issues that I was mentioning before in Japan

09:19on the pipeline of contractors.

09:22So that's something that I don't think it plays a big role.

09:26Besides that, I don't think that the policy makers are looking into the right things as well.

09:31So we can look into incentives to continue delivering data centre projects in Malaysia.

09:40And what I would encourage everyone to look at is how, as a society,

09:45we benefit from the data centres, because obviously construction is one stage.

09:49But after that, data centres will be operated.

09:52Can we build an AI economy in Malaysia at the back of this?

09:56And what are some of the policy or incentives that can accelerate data centre growth in Malaysia?

10:02So obviously tax exemptions for overseas investments is something that the government is looking at.

10:10Obviously there are other things such as green lane initiatives for permitting.

10:15There are other areas that we could focus on,

10:19such as the special, the Johor Economic Zone, Special Economic Zone.

10:24So obviously this needs to come along with a policy debate.

10:29It's not something that I'm in a position to advise.

10:33But obviously I do think that dialogue is important among the government,

10:38the data centre operators, contractors and society as a whole

10:41to make sure that we can continue building in data centres in Malaysia.

10:45Probably my last questions.

10:47We know that we are growing trend in Malaysia.

10:51So what are some of the best policy, incentive, strategy or ways that we can learn from other countries,

10:58probably with more advanced economies that have more funding,

11:02that have more money to accelerate the data centre growth?

11:05What are some of the things that we can learn and adapt from them?

11:07So I must say that Malaysia has learned a lot

11:11and has learned from shortcomings that happened in other countries, Europe, Singapore.

11:18So at some point in time, not too long ago, probably around five years ago,

11:23several data centre construction moratoriums were implemented in several countries.

11:29one of them is Singapore, for instance, another one is the Netherlands,

11:32especially the area around Amsterdam, whereby the government realised

11:37that there was not enough power for data centres and the citizens.

11:41Now, we got quite close to this situation in Malaysia, especially in Johor.

11:47But I do think that the government reacted swiftly

11:50by implementing the additional governances in the state of Johor,

11:55which have warranted power for not only for data centres, but for society.

12:01So I do think that Malaysia is learning from those mistakes.

12:04And I'm happy that this is not happening in Malaysia, actually.

12:07Thank you.

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