Malaysian Prime Minister Anwar Ibrahim said yesterday that proposals for data centers in the country unrelated to AI have been stopped since “almost two years ago.”

This would mean that any proposals to build a non-AI data center would have been stopped as of sometime in 2024.

“If there are benefits in terms of high-technology and AI development, approvals are easier. All new applications that are not related… have already been stopped,” said the Prime Minister in response to a parliamentary question about the impact of data centers on the country’s energy infrastructure and electricity tariffs.

Malaysia already employs vetting mechanisms for data centers.

In Johor, which is home to many of Malaysia’s AI data centers, an ad hoc Data Center Development Coordination Committee formed in June 2024 has reportedly rejected 30 percent of applications after they failed to meet certain sustainability standards.

The country also offers conditional tax incentives to data centers based on a given project’s sustainability.

But Prime Minister Anwar’s statement, which singles out data centers unrelated to “high-technology” and AI, validates the existence of an overarching, but informal criteria when deciding whether to approve a project.

AI data centers tend to use more energy than other kinds of data centers, and are bigger and more expensive. Other kinds of data centers – like colocation, enterprise, and networking facilities – tend to require less power, meaning they have less of an impact on the grid.

This implies that the Malaysian government has been rejecting a larger quantity of small data center projects in favor of approving larger, AI-centric ones.

Anwar also said that the government was pursuing efforts to source energy from the ASEAN Power Grid, a proposed initiative that would connect the energy infrastructure of several ASEAN member states.

He added that the government was also looking into sourcing power generation from Singapore and Sarawak, a Malaysian state located on the island of Borneo.

Most of Malaysia’s data centers are located on its peninsular portion, and the country’s AI data centers are concentrated in the southern peninsular state of Johor.

It is the influx of these data centers – spurred by the imposition of an informal moratorium in neighbouring Singapore and the cheaper cost of resources – that has turned Johor and Malaysia into the region’s fastest growing data center market.

Real estate consultancy CBRE said last May that Malaysia possessed the biggest pipeline of data center developments in Southeast Asia.

The government, concerned about the industry’s potential to provide widespread economic benefits and its potential impact on the country’s infrastructure, has previously expressed a desire to consider projects more carefully.

In a speech introducing the country’s national budget for 2025, Prime Minister Anwar said that “investments in data centers should not be pursued unless they bring tangible added value to the rakyat [meaning ordinary people], such as high-paying job opportunities and knowledge transfer.

“A shift in focus is now essential, ensuring that the support provided yields economic spillovers that directly benefit the rakyat and the nation, rather than merely serving the profit motives of investor companies.”