Impose moratorium on new data centres until citizens’ needs are guaranteed

From Kua Kia Soong

Malaysia’s spectacular rise as a regional data-centre hub has been hailed as evidence that the country is becoming a major player in the digital economy.

Ministers proudly announce billions of ringgit in investments from global technology giants, state governments compete to attract new projects, and consultants celebrate Johor’s emergence as Southeast Asia’s data-centre capital.

Yet amid this enthusiasm, one fundamental question is being neglected: Should Malaysia continue approving new data centres when many Malaysians still face concerns over water security, electricity reliability, and rising utility costs?

The answer should be obvious.

But before arguing for a moratorium, it is important to establish the scale of Malaysia’s data-centre boom and the growing concerns over electricity and water security.

Latest statistics on data centres

Malaysia has emerged as Southeast Asia’s fastest-growing data-centre hub, driven largely by artificial intelligence, cloud computing, and the relocation of facilities from Singapore, where land, water and energy constraints have forced policymakers to slow expansion.

Between 2021 and June 2025, the federal government approved 143 data-centre projects with total investments of RM144.4 billion. As of early 2026, Malaysia reportedly had 34 operational data centres and 33 more under development.

Johor, Selangor and Negeri Sembilan together host about 101 data centres, with Johor accounting for about 72 facilities, making it the country’s main data-centre hub. Johor alone had 51 approved projects by late 2025, of which 17 were operational and 11 under construction.

Modern hyperscale data centres consume enormous quantities of electricity and water, and Malaysia’s operational data-centre capacity is projected to grow from roughly 1,025 megawatts (MW) at the end of 2025 to more than 2,000 MW by the end of 2026, with an additional 3,500 MW in the pipeline.

By the end of 2024, 38 projects had already secured electricity supply agreements with a combined maximum demand of 5.9 gigawatts (GW), equivalent to approximately 43% of TNB’s contracted capacity.

At the same time, Malaysia is experiencing record electricity demand, which rose by 11.5% year-on-year driven partly by extreme heat and data-centre expansion.

The speed of expansion is unprecedented. In effect, Malaysia risks becoming the resource hinterland for the digital economy of the region.

Electricity security must come first

To meet growing electricity demand, Malaysia has increased reliance on natural gas generation while warning of future LNG imports to support the expanding power sector.

The crucial question is not whether Malaysia can eventually generate more electricity, but whether Malaysian households and local industries should compete with foreign-owned data centres for power supply.

No government should approve projects that could jeopardise domestic energy security. Before a single new data-centre licence is granted, the government should publicly demonstrate:

• Sufficient reserve electricity margins;
• Guaranteed domestic supply for households;
• No increase in electricity tariffs arising from data-centre demand;
• Adequate grid infrastructure; and
• Clear renewable-energy commitments from operators.

Without such guarantees, citizens are effectively subsidising private digital infrastructure.

Water security is an even bigger concern

Data centres require vast quantities of water to cool servers operating around the clock. Malaysia already experiences periodic water shortages, pollution incidents, and supply disruptions. Several states face increasing pressure from climate change, droughts, and competing industrial demands.

Johor’s own authorities have reportedly tightened approvals because of concerns over water and electricity availability. Industry reports indicate that up to 30% of applications have been rejected due to resource constraints.

This should serve as a warning to the rest of the country.

No Malaysian should face water rationing while data centres continue consuming millions of litres daily. The right to water must take precedence over the cooling requirements of multinational technology corporations.

Learning from international experience

Malaysia is not alone in facing this dilemma. This month, mayors from major cities around the world launched a coordinated initiative to address the growing burden of data centres on electricity grids and water resources.

City leaders warned that investment is occurring so rapidly that regulation cannot keep pace. Many governments are beginning to ask whether the economic benefits justify the environmental and infrastructure costs. Malaysia should ask the same questions:

• What is the real return to society from these projects?
• How many permanent jobs do they create?
• How much tax revenue do they generate after incentives?
• What are the long-term costs to water systems, electricity networks and public infrastructure?

These questions deserve transparent answers before further approvals are granted. A moratorium is not an anti-investment policy. It is a prudent pause to ensure that development remains sustainable.

The federal government and state governments should jointly suspend approvals for new data centres until the following conditions are met:

• Independent assessments confirm adequate long-term electricity supply.
• Independent assessments confirm adequate water availability.
• Citizens’ domestic consumption is guaranteed priority access.
• Data-centre operators pay the full environmental and infrastructure costs they impose.
• Mandatory renewable-energy targets are enforced.
• Full transparency is provided regarding water and electricity consumption.
• Public hearings are conducted before approval of major projects.

Putting Malaysians first

Malaysia should embrace digital development, but not at the expense of its people. Economic growth must serve society, not the other way around. When electricity and water become scarce, the first responsibility of government is to citizens, not foreign investors.

Until the federal government and state governments can guarantee secure, affordable and sustainable supplies of energy and water for every Malaysian household, there should be a nationwide moratorium on new data-centre approvals.

The digital economy can wait. The basic needs of Malaysians cannot.

Kua Kia Soong is a former MP and former Suaram director.

The views expressed are those of the writer and do not necessarily reflect those of FMT.