High investment, low job creation

THE cat is out of the bag when it was disclosed that the massive surge of data centre investments in Malaysia has not lived up to expectations.

The headline investment number is impressive.

In 2024, Malaysia attracted RM125.7bil in data centres and cloud investments and by the middle of 2025, the figure had hit RM144.4bil.

Malaysia is reported to have approved 143 date centre projects between 2021 and 2025.

The amount of money that has been ploughed into data centres is significant.

Data centre investment accounted for 40% of total approved investments between 2024 and much of 2025.

With data centres and cloud investments shifting the balance of total foreign investment, the question arises about their broader impact beyond the headline figures in Malaysia.

A significant drawback of data centre investments, as reported, has been their limited job creation.

“We are therefore trying to revisit the investment incentive framework to link incentives to factors such as economic capacity, job creation and links to local businesses to ensure that incentives ultimately support higher income growth,” says Treasury sectary-general Datuk Johan Mahmood Merican in a news report.

While the incentives offered to data centres to establish operations in Malaysia are attractive, they may have caused some harm to the country upon review.

The main purpose of foreign investment is job creation.

Malaysia offers cheap land, water and electricity as incentives to attract such investment, but the country needs tangible benefits, especially job creation.

So far, the firms benefiting are those linked to building data centres, such as companies involved in cabling, power and water infrastructure.

However, the benefits appear to be one-off which later transition into replacement support services.

The risk of high investment is the pressure on energy and water infrastructure.

While it is easier to say set up plants to generate power for the hungry data centres, less straightforward is ensuring a supply of potable water needed to cool the chips and power systems of the data centres.

In fact, the sheer pace of investment has led Johor to reportedly request data centres to delay their rollout by 18 months to allow water infrastructure to catch up.

These are real issues that can create bottlenecks in water infrastructure, impacting other industries and households.

They can also deter other types of investments and job opportunities.

There are concerns about the financial viability of artificial intelligence (AI) and data centres, with reports questioning whether the revenue generated can support the massive debt incurred to build data centres globally.

As more data centres are constructed, the increased supply of computing power shifts the focus to attracting customers.

This could lead to price wars and overcapacity, potentially undermining their viability – reminiscent of the dotCom boom in the early 2000s.

Restricting incentives for data centres is not unprecedented in the region; Singapore previously slowed such investments due to sustainability concerns.

Although the moratorium has been lifted, strict benchmarks for power efficiency and water usage are now required to approve new data centre projects.

Malaysia’s leniency may also stem from its appeal as a hub for investments.

The fear of being left behind is real, as is the potential for data centres to contribute to a country’s AI ecosystem.

For Malaysia, the strategy must also focus on ancillary services that capitalise on data centres within the country.

However, the key question is whether there is sufficient capital and, more importantly, the capability to leverage these data centres to deliver AI-driven and tech-centric services that benefit from a large data centre presence.

Without mobilising such

services, Malaysia risks becoming merely a host offering low-cost infrastructure to digital infrastructure owners, with minimal employment or fiscal benefits.