Johor in the south of Malaysia is fast becoming a data centre hub, attracting billions in foreign investment. However, with vast amounts of land being allocated to this unproven sector, concerns over long-term sustainability, power demands, and land use are rising. Will the benefits outweigh the risks?
Johor has emerged as Malaysia’s latest frontier for foreign direct investment, attracting RM31 billion ($7 billion) in 2022. A significant portion of this is being directed into data centres, a fast-growing sector fueled by global demand for cloud services and AI processing power. Big names such as Microsoft, Equinix, and ByteDance have already set up facilities in the state, drawn by its proximity to Singapore, lower operational costs, and availability of land. However, questions remain about the sustainability of this growth, especially with concerns over power, water, and land use.
The rapid expansion of Johor’s data centre industry is driven by global firms seeking neutral locations amid US-China tensions, as well as Singapore’s recent moratorium on new data centres. Johor, with its lower costs and strategic location, presents an attractive alternative. Local construction giants like YTL and MN Holdings are spearheading large-scale projects, including the YTL Green Data Center Park, which leverages solar power. While this boom signals economic growth, the sector’s long-term impact on local resources and employment remains uncertain.
Despite the influx of investment, there are significant risks. Data centres require enormous amounts of water and electricity, and there are concerns that Johor may face overcapacity, as new facilities are built ahead of confirmed demand. Additionally, these centres are highly automated, providing limited job opportunities for local workers and raising doubts about their broader economic contribution. As Johor continues to grow its data centre industry, the state must carefully manage land use to ensure a balanced and sustainable approach to economic development.
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