6-5-2024 (KUALA LUMPUR) Amidst the lush rubber plantations and palm groves of Johor’s Kulai district in the southern state of Malaysia, a veritable El Dorado for the digital age is taking shape. Hundreds of acres of construction sites stretch into the horizon here – harbingers of the industrial parks and cavernous data centres set to transform this rural landscape into a tech powerhouse.
Within three years, these building sites northwest of Singapore will morph into cutting-edge digital infrastructure housing banks of high-powered computers and servers processing the world’s insatiable data demands. The world’s biggest tech giants are leading the charge, drawn by Johor’s strategic location and comparative advantages.
“Johor has all the necessary elements to attract international players, engendering natural growth in demand for digital services,” says Yeoh Seok Hong, Managing Director of YTL Power which is developing an AI Factory with US tech titan Nvidia in Kulai, in a $4.3 billion collaboration. “Malaysia has the potential to meet the demand for AI compute power as a regional hub.”
Global pioneers like Microsoft, AirTrunk, Princeton Digital and GDS have already staked claims in Johor’s burgeoning data centre ecosystem clustered around Southern industrial parks like the 745-acre Sedenak Tech Park. According to some estimates, the state could pull RM17 billion in new investments this year alone.
The proximity to land-starved Singapore has proved a key pull factor, with the city-state encouraging multinationals to expand their digital infrastructure southwards while maintaining headquarters operationally entwined with the financial hub. Cost benefits like cheaper land, construction expenses and lower power tariffs have fuelled this cross-border digital exodus.
“Johor utilises its strategic location and land resources to attract significant international data operations, as exemplified by Yondr Group’s 300MW campus in Sedenak,” highlights Associate Professor Lee Poh Seng from the National University of Singapore’s engineering faculty.
Beyond Singapore’s spillover effect, the US-China tech rivalry has also catalysed Johor’s data centre boom as corporations from both sides of the divide seek regional diversification footholds, according to Dr. Ong Kian Ming, former deputy trade minister. The impetus ranges from American efforts to restructure semiconductor value chains to Chinese firms keeping a “low profile” while securing digital beachheads regionally.
“If different ecosystems emerge for Western and Chinese firms, it may not be a bad thing as Malaysia could groom talent for these markets,” says Dr. Ong, a Malaysian Investment Development Authority board member.
An imminent Singapore-Malaysia special economic cooperation zone could further grease the wheels by enhancing cross-border flows and integration. Malaysia is aiming for the digital economy to contribute over a quarter of its GDP by 2025 as it chases development goals.
However, some infrastructural inadequacies like intermittent water and power shortages have raised concerns over supporting such a power-hungry industry’s needs. Authorities have sought to address these by measures like inking generous electricity supply accords with utility providers and approving massive new substations and water pipeline networks.
