The rapid growth of the digital economy in Malaysia has made it one of the most attractive destinations for foreign investment. The government’s initiatives, such as Malaysia Digital (MD) driven by Malaysia Digital Economy Corporation (MDEC), have enabled the country to emerge as a regional hub for data centres, driving digital adoption amongst aspiring business owners, companies and citizens.
Malaysia has a highly diversified economy and export structure, industry-ready talent, a strong and well-capitalised financial sector, and an export-driven diversified economy spurred on by high technology, knowledge-based and capital-intensive industries.
Based on the 2022 Milken Institute Global Opportunity Index, Malaysia ranks first in emerging Southeast Asia as the country with the most potential to attract FDI. Wan Murdani says data centres are critical digital infrastructures to drive digital economy development. "Looking at the stable growth of cloud services in Malaysia, we are moving toward becoming the regional hub for data centres. In addition, the impact of COVID-19 on the post-pandemic era has changed the way of working and business activities contributing to the consistent growth of cloud adoption."
MDEC is the federal agency responsible for facilitating data centre investments in Malaysia since 2010, on top of other digital investments including in the areas of cybersecurity, drone tech, blockchain, robotics and more. MDEC works to attract investors, develop attractive locations and promote the adoption of cloud services by promoting their socio-economic benefits. It also hosts technical talks and issues guidelines to help those interested in understanding the relevant technologies.
Drive digital investments
Over the years, MDEC drove the growth of the nation's digital economy through the MSC Malaysia initiative. MD, meanwhile, is the enhanced and revamped initiative to drive digital investments into Malaysia while allowing SMEs to invest in many of its promoted activities under its new framework for improved incentives.
"In 2021, the hyperscale cloud revenue in Southeast Asia was US$8.9 billion, whereas Southeast Asia's data centre market size is forecasted to be US$12.60b by 2025 with a CAGR of 13%. The rise in 5G network connectivity and submarine cables deployment, the increasing applications of IoT, the emergence and adoption of advanced IT workloads and sustainable initiatives by data centre investors are driving DC & Cloud growth in the region," Wan Murdani adds.
End-to-end facilitation
The Malaysian government and MDEC are responsive to the needs and requirements of investors by facilitating the key project components such as energy, utility supply, connectivity, local authority approvals, as well as providing agile regulatory and policy approaches. R&D is also vital to reduce carbon emissions, water use for cooling and e-waste and ensure local sustainability.
Renewable energy and clear regulations on international best practices will be encouraged to facilitate regional workloads in Malaysia.
Over the years, Malaysia has also evolved to accommodate large-scale investments and large megawatt deployments. He says: "Malaysia has met its maturity and readiness of infrastructural ecosystem, namely connectivity, availability of suitable lands and utilities.
"There is a ready pool of service providers that are well versed with the needs and requirements of the investors. MDEC has been putting efforts to educate and share experiences with agencies at the state level on how to facilitate these investors."
The Malaysian data centre industry is expected to snowball in the next five years. According to a research report by Technavio, the local data centre market is set to progress at a CAGR of 15.72% from 2021-2026.
Government tax benefits encourage investments by hyperscale and colocation operators, allowing for the development of data centres in free trade zones. In addition, the MD Status grant provides incentives, rights, and privileges from the government, designed to create a favourable environment for qualified companies.
Local councils provide fast-tracking services to address investors' aggressive timeline needs while agencies at all levels coordinate, support, and facilitate such investments. This infrastructure supports economic growth for customers and partners alike, enabling them to capitalise on cloud technology innovations and projects while bolstering their technological ecosystems.
Addressing investors’ needs
With the increase in digital technology investments, MDEC is addressing investors’ needs and working closely with Malaysia’s power utility provider, Tenaga Nasional Berhad, to provide medium and high-voltage electricity supply to investors. This collaboration aims to drive new large scale data centre projects into Malaysia and to ensure that energy supply for projects are delivered on time as envisaged by the investors.
Meanwhile, on the ESG front, MDEC is promoting and educating investors on the use of renewable energy - namely hydro, solar and biogas. The Virtual Power Purchase Agreement (VPPA) and Third Party Access (TPA) will be introduced in Malaysia very soon, which has been highly anticipated by data centre investors in the region. These initiatives demonstrate an effort towards creating a comprehensive approach to suiting business needs, while promoting environmental management goals.
The agency also plays an advocacy role in bridging the investors or industry with the government policy makers and regulators, to ensure Malaysia enhances its value proposition and remain competitive as an attractive destination for global businesses seeking to invest in data centres.
To do this, MDEC acts on behalf of these stakeholders to help bridge the communication gap that often arises when dealing with unfamiliar regulatory procedures, or technical infrastructure complexities. By removing barriers preventing further growth of data centres within Malaysia, MDEC is amplifying the nation's potential as a leader in digital investment opportunities.
"MDEC recognises that it is our responsibility to facilitate this process of finding practical solutions while respecting ecological responsibilities,” Wan Murdani concludes.