Malaysia has rapidly emerged as one of Southeast Asia's most dynamic data centre markets. Once viewed as a secondary alternative to Singapore, it is now a preferred destination for global hyperscalers, cloud providers and enterprise operators.
Valued at US$4.04 billion in 2024, the Malaysian data centre market is projected to exceed US$13.5 billion by 2030. In terms of investment figures, Malaysia secured US$23.3 billion from North American hyperscalers across the first 10 months of 2024.
That momentum has largely been propelled by three key tailwinds: a supportive regulatory environment, a strategic location near regional technology and financial hubs, and compelling cost and capacity advantages.
In 2024, Malaysia attracted approximately US$40.4 billion worth of foreign investment. It is through a comprehensive suite of fiscal incentives and sustainability measures that Malaysia has made itself an attractive investment destination.
Malaysia offers companies interested in entering the market or making local investments an attractive suite of tax and fiscal incentives. Companies granted the Malaysia Digital Status (MDS), awarded by the Malaysia Digital Economy Corporation (MDEC), may access income tax exemptions, investment allowances and import duty relief under the Malaysia Digital Bill of Guarantees. MDS-qualified companies may also benefit from the Malaysia Digital Tax Incentive (MDTI), which offers reduced tax rates or investment allowances.
In addition, the Digital Ecosystem Acceleration Scheme (Desac), administered by the Malaysian Investment Development Authority (Mida), provides investment tax allowances of up to 100% on qualifying capital expenditure for eligible digital infrastructure providers, offsettable against statutory income for up to 10 years.
Data centres consume vast amounts of energy and require robust infrastructure to ensure continuous reliability, connectivity and availability. Under the auspices of its New Industrial Master Plan, Malaysia is committed to achieving net zero emissions by 2050, entailing various forms of sustainability and infrastructure support.
Forward-looking frameworks such as the Green Lane Pathway, which shortens electricity connection timelines from 36–48 months to just 12 months, and the Corporate Renewable Energy Supply Scheme, which allows operators to procure renewable energy directly from developers via the national grid, are driving faster and more sustainable energy adoption.
Looking ahead, a Sustainable Data Centre Framework — expected by October 2025 — will provide clear guidance on project development, expansion and certification. Mida will serve as the single approval authority, ensuring a transparent and streamlined process.
Leveraging Johor's strategic proximity to Singapore
Johor has emerged as Southeast Asia's fastest-growing data centre hub, expected to account for 60% of Malaysia's capacity by 2030.
Johor's proximity to Singapore proved a major advantage: operators could access the city-state's substantial enterprise and digital demand while sidestepping Singapore's land, power and cost constraints.
This geographical proximity transformed Johor into a magnet for foreign investment, capturing growth that would otherwise have remained in Singapore. As a result, Johor's live supply expanded at a rapid pace, averaging 145% annual growth from 2019 to 2024.
A moratorium on new data centre projects in Singapore between 2019 and 2022 redirected hyperscaler expansion plans and data centre projects across the border into Malaysia — predominantly in Johor and the Klang Valley, encompassing Kuala Lumpur, Port Klang and Cyberjaya.
Although Singapore has since lifted the moratorium under a selective, sustainability-focused regime, Johor continues to attract outsized investment, supported by a 5.7GW development pipeline.
Johor's momentum is expected to be further bolstered by the Johor–Singapore Special Economic Zone (SEZ), which streamlines cross-border trade and investment, strengthens power and connectivity integration, and extends preferential treatment for data centre operators. This positions Johor not only as a spillover market but also as a fully scalable, investment-ready hub.
Building and powering at scale
Data centres are resource-intensive undertakings that require substantial financial investment. Malaysia offers both scalability and cost efficiency, distinguishing it from saturated regional markets.
Compared to its neighbour Singapore, Malaysia is more than 450 times larger in land area. With a population only about six times bigger, its population density is far lower, giving it far more land and infrastructure capacity.
Abundant, competitively priced land enables large-scale developments. Industrial parks in Johor and the Klang Valley offer flexible freehold and leasehold options, integrated with utilities and connectivity, streamlining entry and operations.
High-quality infrastructure, such as rail, ports, freeways and land connectivity with Singapore, also makes Malaysia — especially Johor — an attractive proposition for those wishing to build data centres.
Malaysia also fares favourably when it comes to actually building data centres and powering them. Construction costs are among the lowest in Southeast Asia, while electricity tariffs average around US$0.10/kWh. Recent tariff adjustments for ultra-high voltage sites are expected to have only a marginal impact.
These cost advantages are supported by a reliable national grid, mature energy infrastructure and growing access to renewable power — critical factors for hyperscalers prioritising sustainability.
Coupled with more than 20 international submarine cables and extensive domestic fibre networks, Malaysia is also able to deliver low-latency regional connectivity and broad digital reach. These qualities are crucial for businesses that are gearing up to transform, leverage cutting-edge technologies like artificial intelligence and deliver best-in-class products and services to their customers.
The combination of a supportive regulatory framework, strategic location and cost and capacity advantages has made it a compelling proposition for hyperscalers and enterprises looking to build out their data centre capabilities to cater to a regional customer base. As global cloud and AI workloads expand, we expect Malaysia to take on a defining role in regional digital infrastructure development.
Mili Simonovich (Associate, White & Case, Melbourne) co-authored this publication.
The article was first published in The Edge Malaysia and can be accessed here.
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