Introduction ◦ Since 2021, the Malaysian government has approved 21 data centre projects under the Digital Ecosystem Acceleration (“DESAC”) scheme, attracting a total investment of RM113.8 billion. Foreign investment has been the primary driver, contributing 90% of the total, or RM102.3 billion, while domestic investment accounts for the remaining 10%, or RM11.5 billion . ◦
To achieve Malaysia’s goal of carbon neutrality by 2050, the government is prioritizing sustainability standards for data centres, particularly in energy and water efficiency. Recognizing the need for sustainable growth in this sector, the Ministry of Investment, Trade, and Industry (“MITI”) has introduced the Guidelines for Sustainable Development of Data Centres (“Guidelines”). ◦
These Guidelines establish a regulatory framework for the development and operation of environmentally sustainable data centres in Malaysia, setting out best practices and compliance requirements to enhance operational efficiency while minimizing environmental impact. This initiative aligns with Malaysia’s broader objective of strengthening its digital infrastructure and fostering a conducive environment for digital transformation, including through the provision of tax incentives for organisations investing in digital projects. ◦ Main Objectives of the Guidelines ◦
The main objectives of the guidelines are briefly, as follows: – ◦
a) To establish Malaysia as the data centre hub in Southeast Asia by attracting investments from organisations committed to sustainable data centre operations;
b) To unlock further capacity of organisations in designing and operating energy efficient data centres;
c) To promote the adoption of renewable and clean energy sources to drive low-carbon data centre operations and reduce environmental impact; and
d) To promote innovation in improving the efficiency of water consumption in the design and operation of the data centres. ◦ Eligibility Criteria For Sustainable Data Centres In Malaysia ◦
To be recognized as a sustainable data centre in Malaysia, organisations must meet the following key sustainability metrics, as provided under the Guidelines: –
Categories Of Data Centres In Malaysia (Appendix 1 Of The Guidelines) ◦
The Guidelines categorise the data centres into six categories based on their size, power usage, and infrastructure type, as follows: ◦ ◦
Apart from the information above, Appendix 1 also spells out the parameters for each category including the baseline Power Usage Effectiveness (“PUE”) at current information technology load, proposed design PUE target for high energy efficiency, measurement methodology for PUE, proposed design for Water Usage Efficiency (“WUE”), and measurement frequency for each category of data centre. ◦ Incentives Tied to Sustainability Compliance ◦
The Malaysian Investment Development Authority (“MIDA”) has provided that tax incentives under the DESAC scheme will only be granted to applicants who adhere to the conditions set out in the Guidelines. It is also pertinent to note that, this requirement is applicable to applications submitted until 31 December 2027. ◦
The tax incentive condition set by MIDA is a strategic move to ensure that Malaysia’s rapid data centre expansion aligns with sustainability goals. By tying tax incentives benefits to compliance with the Guidelines, the government is encouraging organisations to adopt greener and more efficient practices. This not only promotes industry growth but also strengthens Malaysia’s position as a leading destination for the sustainable development of data centres. ◦ Final Thoughts ◦
Malaysia’s rapid expansion as a digital infrastructure hub presents a strategic opportunity to align with Environmental, Social, and Governance (“ESG”) goals. The Guidelines mark a significant step in integrating sustainability into this growth, driving economic benefits through enhanced energy efficiency, stronger investor confidence, and alignment with international green standards. •
Guidelines For Sustainable Data Centres In Malaysia
Introduction
◦
Since 2021, the Malaysian government has approved 21 data centre projects under the Digital Ecosystem Acceleration (“DESAC”) scheme, attracting a total investment of RM113.8 billion. Foreign investment has been the primary driver, contributing 90% of the total, or RM102.3 billion, while domestic investment accounts for the remaining 10%, or RM11.5 billion .
◦
To achieve Malaysia’s goal of carbon neutrality by 2050, the government is prioritizing sustainability standards for data centres, particularly in energy and water efficiency. Recognizing the need for sustainable growth in this sector, the Ministry of Investment, Trade, and Industry (“MITI”) has introduced the Guidelines for Sustainable Development of Data Centres (“Guidelines”).
◦
These Guidelines establish a regulatory framework for the development and operation of environmentally sustainable data centres in Malaysia, setting out best practices and compliance requirements to enhance operational efficiency while minimizing environmental impact. This initiative aligns with Malaysia’s broader objective of strengthening its digital infrastructure and fostering a conducive environment for digital transformation, including through the provision of tax incentives for organisations investing in digital projects.
◦
Main Objectives of the Guidelines
◦
The main objectives of the guidelines are briefly, as follows: –
◦
a) To establish Malaysia as the data centre hub in Southeast Asia by attracting investments from organisations committed to sustainable data centre operations;
b) To unlock further capacity of organisations in designing and operating energy efficient data centres;
c) To promote the adoption of renewable and clean energy sources to drive low-carbon data centre operations and reduce environmental impact; and
d) To promote innovation in improving the efficiency of water consumption in the design and operation of the data centres.
◦
Eligibility Criteria For Sustainable Data Centres In Malaysia
◦
To be recognized as a sustainable data centre in Malaysia, organisations must meet the following key sustainability metrics, as provided under the Guidelines: –
◦
The Guidelines categorise the data centres into six categories based on their size, power usage, and infrastructure type, as follows:
◦
Apart from the information above, Appendix 1 also spells out the parameters for each category including the baseline Power Usage Effectiveness (“PUE”) at current information technology load, proposed design PUE target for high energy efficiency, measurement methodology for PUE, proposed design for Water Usage Efficiency (“WUE”), and measurement frequency for each category of data centre.
◦
Incentives Tied to Sustainability Compliance
◦
The Malaysian Investment Development Authority (“MIDA”) has provided that tax incentives under the DESAC scheme will only be granted to applicants who adhere to the conditions set out in the Guidelines. It is also pertinent to note that, this requirement is applicable to applications submitted until 31 December 2027.
◦
The tax incentive condition set by MIDA is a strategic move to ensure that Malaysia’s rapid data centre expansion aligns with sustainability goals. By tying tax incentives benefits to compliance with the Guidelines, the government is encouraging organisations to adopt greener and more efficient practices. This not only promotes industry growth but also strengthens Malaysia’s position as a leading destination for the sustainable development of data centres.
◦
Final Thoughts
◦
Malaysia’s rapid expansion as a digital infrastructure hub presents a strategic opportunity to align with Environmental, Social, and Governance (“ESG”) goals. The Guidelines mark a significant step in integrating sustainability into this growth, driving economic benefits through enhanced energy efficiency, stronger investor confidence, and alignment with international green standards.
•
About the author
Lynn Foo
Partner
Construction & Energy
Harold & Lam Partnership
[email protected]
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