Between 2017 and 2021, the share of Internet users in Malaysia rose from 80.1% to 96.8% – putting the country in competition with regional competitors such as Singapore, Thailand and Indonesia.
2021 saw the launch of the MyDigital framework, designed to accelerate the growth of the country’s digital economy, replacing the previous MSC Malaysia. Currently, the country’s 5G rollout is fast moving towards full deployment, surpassing the target of 40% 5G coverage for 2022 according to Digital Nasional Berhad (DNB). The country had nearly 3,900 sites covering populated areas nationwide 50% reached.
Figure 1: Share of the population in internet use
Source: International Telecommunication Union (ITU)
Hailed as a true game changer, the 5G launch is poised to transform our everyday lifestyles with the hype surrounding blazing-fast network speeds and ultra-low latency mobile connectivity. Consequently, greater use of cloud-based services, the Internet of Things (IoT) and big data analytics will exponentially increase the amount of data transmitted and stored, driving demand for data centers – both by businesses and consumers.
Once a small niche market for a select few, the data center is now gaining traction as a potential real estate investment. With an estimated 4 million square feet of data center offering currently in the pipeline at various stages of planning and construction, Malaysia is firmly on track to meet the nation’s projected growth of 500MW by 2025 from its existing 212MW. While this may distance us from Singapore’s estimated capacity of 1,000 MW by 2021, every mile gained closes the gap.
2022 saw more market entries and expansions of data center projects in Malaysia. These include the debut of Equinix Inc with the International Business Exchange (IBX) data center (JH1) at Nusajaya Tech Park and NTT Ltd’s Cyberjaya 6 (CBJ6) data center. in Cyberjaya. In addition, there is an exclusive data center development on a 150-acre industrial lot in the Delapan Special Border Economic Zone between AREA Advisory and Northern Gateway Sdn Bhd.
As an alternative sector with high performance capacity requirements, the data center segment is likely to highlight the potential environmental issues and emphasize the importance of green and sustainable features. This aligns with the growing pool of ESG-compliant data center operators who value greenhouse gas emissions and energy efficiency. At the local level, the government’s power generation plan aims to use 31% renewable energy by 2025 and 40% renewable energy by 2035, with the recent announcement of the Corporate Green Power Program (CGPP) to encourage companies to adopt green energy such as solar power to use.
Nevertheless, with the high data usage, the question of security arises. Currently the Personal Data Protection Act 2010 (PDPA) is the regulatory law in force, albeit with some criticism of its long overdue revision. The Minister of Communications shares the government’s intention to review the law while strengthening the public sector cybersecurity specialists, Cybersecurity Malaysia (CSM). One concern is that this could lead to the government requiring data ashore for security and privacy reasons, as is the case in some countries such as Vietnam and Indonesia. On the one hand, onshore data could provide an additional boost for increasing local data center presence. Conversely, this can prevent data operators and service providers from staying local and not venturing elsewhere.