KUALA LUMPUR, July 28 — Malaysia’s booming data centre industry is helping drive economic growth and foreign investment, but the OECD has warned that its rapid expansion is straining electricity and water supplies while creating relatively few jobs.
In its latest Economic Survey of Malaysia report, the organisation said resilient economic growth has been supported by the global technology boom, with investment boosted by the rapid expansion of data centres, particularly in Johor.
However, it noted that while construction activity has benefited significantly, the industry creates only a limited number of jobs compared with the scale of investment.
The survey was presented by Dr Luiz de Mello, director of the OECD’s Country Studies Branch in the Economics Department, at its launch in Kuala Lumpur today.
The event was officiated by Economy Minister Datuk Seri Akmal Nasrullah Mohd Nasir, while the Economy Ministry’s deputy secretary-general (policy) Dr Zunika Mohamed also attended.
“It also strains the existing grid and water supply in certain areas,” the report said, adding that Malaysia’s continued reliance on fossil fuel-generated electricity could make achieving its net-zero emissions target by 2050 more difficult unless renewable energy deployment accelerates.
According to the OECD, Malaysia attracted approximately US$44 billion in data centre-related projects between 2021 and 2024, with total digital investments reaching US$65 billion during the same period.
Approved investments in the digital services industry alone reached US$35 billion in 2025, driven largely by major global technology companies.
The report said Malaysia has become an attractive destination because of cheaper land and competitive electricity tariffs compared with Singapore and Hong Kong, as well as tax breaks, investment allowances and streamlined approvals.
It said Singapore’s land and power constraints have also pushed hyperscalers to seek alternative locations nearby, with Johor emerging as the epicentre of Malaysia’s data centre boom.
Johor offers low latency and direct fibre links to Singapore, while Malaysia is also connected to a number of major international cables that provide high-speed global connectivity.
Beyond the immediate construction boom, the OECD said Malaysia is seeking to leverage the industry to create high-skilled jobs in engineering, cybersecurity and data management while developing local networks of suppliers in areas including software services, equipment maintenance and facility management.
Greater computing capacity could also support Malaysia’s ambitions to become a regional artificial intelligence hub by making it easier for local firms to adopt AI.
Nevertheless, the organisation cautioned that accelerating investment in renewable energy and electricity infrastructure will be important as the sector expands, both to strengthen energy security and reduce emissions.
