Water availability to determine eligibility for new data centres
Malaysia does not plan a blanket moratorium, but project approvals will depend on water, power and investors’ financial strength.
Malaysia will bar new data centres in states where water supplies are inadequate, regardless of land availability, Investment, Trade and Industry Minister Datuk Seri Johari Abdul Ghani told the Dewan Rakyat on Oct 28.
Johari said the government does not intend to introduce a blanket moratorium. Instead, applications will be assessed against available water and electricity supplies, as well as the financial strength of investors.
During the Budget 2027 winding-up debate, he said the Malaysian Investment Development Authority (Mida) would assess water needs alongside state governments. Tenaga Nasional Bhd will be consulted on the availability of electricity.
Nationwide approvals cover 117 data centres: 55 are operating, 19 are being built and 16 have approval but have not started construction. Another 27 are in various development stages, with off-grid arrangements expected to supply their electricity.
Johari said data centre power demand has been separated from demand by other industrial users to safeguard Tenaga Nasional’s reserve margin and maintain sufficient supply for other industries.
Operators receiving electricity from Tenaga Nasional will pay unsubsidised market rates. They must also pay for the capacity they contract for, including any portion they do not use, he said.
A minimum local content requirement of 30% will also apply to data centre-related development. Johari said the measures are intended to deliver benefits to Malaysia while accounting for its water and electricity resources.
