Data Centres: Johor's Next Frontier
- Johor attracted RM31 billion (US$7 billion) in foreign investment, with a significant portion directed towards data centres
- The state has become a hub for data centres due to lower costs and proximity to Singapore
- Major international companies like Equinix, Microsoft, and ByteDance are investing in Johor’s data centre sector
- Concerns exist about overcapacity, as many data centres are being built without confirmed clients
- The high demand for water and electricity from data centres poses challenges for the state’s resources
Johor’s economy has seen rapid growth, attracting RM31 billion (US$7 billion) in foreign investments last year, with a significant portion directed towards data centres. The state’s growth has always been linked to land use, from plantations to industrial production, and now data centres. However, Johor faces a dilemma on whether to fully commit its land to this sector, which may only offer short-term benefits.
Over the past three years, Johor has attracted about 50 data centres, including major players like Equinix, Microsoft, and Chinese companies such as ByteDance. Data centres are essential for cloud services, data storage, and processing power, and demand for them has surged with the rise of cloud computing and AI. Malaysia, and Johor in particular, offers an attractive location due to its lower costs and proximity to Singapore, which is a global hub for data centres but faces restrictions due to high energy consumption.
Johor also has established construction firms, and a supportive government experienced in managing industrial parks. However, concerns exist about overcapacity, as many new data centres are being built without confirmed clients. Additionally, the high demand for power and water raises challenges, as well as questions about the local economic impact, as these centres mainly require imported materials and few local workers. Finally, while land is plentiful, it’s not infinite, and there are worries about how much should be reserved for future sectors.
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