Malaysia to Require Technology Transfer and Unsubsidised Power From Data Centre Investors

Malaysia plans to make technology transfer and market-based electricity costs key conditions for future data centre investments, as the government seeks to ensure the sector delivers stronger domestic benefits without placing additional pressure on power capacity used by households and other industries.

Investment, Trade and Industry Minister Johari Abdul Ghani said foreign operators should help develop local technological capabilities while bearing the full cost of the electricity infrastructure and energy they require.

Technology Transfer to Become Part of Investment Conditions

Malaysia wants data centre operators to contribute more directly to local capability development.

Johari said investors should work with Malaysian universities and help transfer knowledge in areas such as:

• Cloud computing
• Artificial intelligence
• Generative AI
• Agentic AI
• Data storage
• Cybersecurity
• E-commerce

The aim is to ensure that Malaysia develops its own technical expertise rather than depending indefinitely on foreign technology providers.

Universities Expected to Play a Bigger Role

The government wants stronger links between major technology companies and local universities.

Johari said Malaysia should use the presence of global players such as Amazon Web Services, Microsoft, Google, Oracle, ByteDance and Alibaba to build local skills and technology capabilities.

This could create more opportunities for research collaboration, workforce development and access to advanced computing infrastructure.

Data Centres to Pay Market-Based Electricity Prices

Malaysia also plans to separate data centre electricity requirements from the power supply serving households and conventional industries.

Johari said data centres should not benefit from electricity subsidies.

Power prices should instead reflect actual market costs, including the market price of natural gas used for electricity generation.

The approach is intended to prevent data centre growth from shifting energy costs onto other electricity users.

Government Wants to Protect Existing Grid Capacity

Tenaga Nasional currently has around 28,000MW of available capacity, while industrial demand can range between 22,000MW and 26,000MW.

The remaining capacity acts as a reserve margin for households, businesses and other industries.

The government therefore wants data centre demand to be planned separately so large new projects do not consume capacity required for existing economic activity.

Energy Regulators to Oversee New Requirements

Future data centre power arrangements will involve coordination between the Energy Commission, Ministry of Investment, Trade and Industry and Ministry of Finance.

Johari said the conditions should form part of negotiations when investors submit applications.

Malaysia does not want to approve projects that are unwilling to meet requirements covering power costs and domestic capability development.

RM385.7 Billion in Data Centre Investments Approved Since 2021

Malaysia has approved around RM385.7 billion in data centre investments since 2021.

The scale of investment has made the sector an important part of the country’s digital economy strategy, but it has also raised questions over electricity consumption, water use, land requirements, infrastructure costs, incentives and local economic value.

The government is increasingly focusing on how much of the sector’s growth translates into domestic jobs, engineering capabilities and technology development.

Data Centre Policy Shifts From Investment Attraction to Local Value

Malaysia’s approach to data centres is entering a new phase.

Earlier policy focused heavily on attracting hyperscalers and large international investments.

The government is now putting more emphasis on the wider economic impact of those projects, including technology transfer, skills development, grid capacity, energy costs and local participation.

For future investors, access to Malaysia’s growing data centre market may increasingly depend on demonstrating not only how much capital they will invest, but also how their projects contribute to the country’s industrial and technology ecosystem.