KUALA LUMPUR: BMI, a unit of Fitch Solutions, views Malaysia as prioritising high-value and capital-intensive projects by formalising its policy of only approving larger artificial Intelligence (AI) data centres that require more capital.
In a note, BMI said this view was reinforced by a policy announced by Prime Minister Datuk Seri Anwar Ibrahim in February 2026, under which proposals for non-AI-related data centres in Malaysia have been halted since 2024.
It said the move is part of the Malaysian government’s efforts to prioritise approvals for larger facilities while advancing the country’s AI capabilities.
Hence, BMI said consolidation among well-funded platforms is expected to continue as barriers to entry into the Malaysian market, particularly in Johor, rise and increasingly favour large, established players over new entrants.
"This statement explains the rather bifurcated Southeast Asia data centre market, where Malaysia’s capacity pipeline is virtually entirely AI-focused, with our estimates pointing towards 4.6GW of capacity (both planned and under construction).
"Hence, other markets within the region (Philippines, Vietnam) continue to see limited AI applications, where the pipeline likely points to digital transformation yielding enterprise demand,” it said.
However, BMI believes Indonesia, Thailand and the Philippines will look to capture displaced demand.
"We have noted that these markets were already attracting investment amid saturation and infrastructure bottlenecks in primary markets, with our view now narrowed within the non-AI workloads,” it said.
BMI said Malaysia’s demand narrative has matured, shifting away from solely being an overspill of Singapore's demand, as it is now driven by government digital ambitions, hyperscaler investment, and local enterprise workloads.
On the policy environment, it said Malaysia was rejecting nearly 30 per cent of data centre proposals that failed to demonstrate responsible water and power consumption practices, signalling that growth must align with environmental standards. - Bernama
