Since about mid-2024 Malaysia has stopped approving new data centres that do not serve AI or high-technology use, according to the Prime Minister. Every new project now needs clearance from a federal Data Centre Task Force, and that clearance depends on spare power and water. Johor hosts most of the country's capacity and has paused new water-cooled builds until about mid-2027.
Grid power for a large industrial user in Malaysia costs about US$0.14 per kWh as of July 2025, the country figure ArusGrid applies where a site has no published rate. The US export control position for advanced AI chips in Malaysia, as of 27 September 2026, is recorded as “No US destination-based licence requirement as enforced”.
Approvals and licensing · Power · Incentives · Data rules · Water and cooling · On the clock · 83 projects in Malaysia
The Prime Minister told Parliament that new data centre applications with no link to AI or high technology have been stopped. He said the restriction had been in place for nearly two years. No formal end date was given.
MIDA (Malaysian Investment Development Authority) is the lead agency for all new and expansion data centre applications. The Data Centre Task Force is co-chaired by the trade ministry MITI and the Ministry of Digital. It received more than 40 applications in 2026 and scores them on investment value, energy and water efficiency, connectivity and economic contribution.
MITI said data centre projects will be approved only when energy and water supply is sufficient. Residents get first call on water.
New projects need task force approval and must show secured demand, such as offtake agreements, and proof of financial close. The rule aims to filter out speculative power requests.
Johor stopped approving Tier 1 and Tier 2 data centres. These are lower-redundancy designs that the state says use far more water. New sites must sit in industrial zones and use reclaimed water instead of the public supply.
Selangor will not approve a data centre unless TNB confirms power supply and Air Selangor confirms water supply. Each project also needs clearance from the federal task force.
The RP4 tariff took effect on 1 July 2025. RP4 is the regulatory period that sets TNB's base tariff. Data centres above 100MW fall into the ultra-high voltage class, which pays the highest rates. Analysts put the cost at about 60 sen per kWh, 10 to 15 percent above the old tariff.
Data centre supply agreements require 85 percent use of declared maximum demand in the first four years and 75 percent in years 5 to 6. A shortfall is billed at RM8.50 per kW each month.
TNB has signed electricity supply agreements for 59 data centre projects totalling 8.3GW. All are five-year take-or-pay contracts, so the customer pays even if it uses less. About 68 percent of the capacity is in Johor.
The Energy Commission said data centres used 9.28 percent of national electricity, with about 0.8GW live and about 3GW in applications. It set no cap on data centre power and approves connections based on system capacity.
CRESS (Corporate Renewable Energy Supply Scheme) lets a large buyer take green power from a developer over TNB's grid for a system access charge. The charge for firm supply fell from 20 to 14 sen per kWh for projects running by 31 December 2028. Contracts must run at least 10 years.
DayOne signed an MoU (memorandum of understanding) with TNB Power Generation on 7 August 2026 to study up to 1.5GW of onsite power with battery storage at a Selangor campus. The fuel type was not disclosed. The plan still needs feasibility work and regulatory approval.
DESAC (Digital Ecosystem Acceleration Scheme) gives new data centre companies a 60 or 100 percent Investment Tax Allowance for 5 to 10 years. They can choose a 10 or 15 percent tax rate instead. Existing companies get 30 or 60 percent for 5 years, capped at 70 percent of income.
At least half of staff must be full-time Malaysians earning RM5,000 a month or more. Applicants also need two local vendor programmes and at least one green technology.
The Guideline for Sustainable Development of Data Centre sets design PUE targets of 1.4 to 1.7. PUE (power usage effectiveness) is total site power divided by IT power. The guideline also targets WUE of 2.2 cubic metres per MWh or lower, and meeting it is a condition for DESAC incentives.
MIDA approved RM95.8 billion of data centre investment in the first half of 2026. That was 44 percent of all approved investment. Cumulative data centre approvals since 2021 reached RM385.7 billion.
An amendment to the Personal Data Protection Act (PDPA) took effect on 1 April 2025. It replaced the government list of approved countries with a test. Personal data may go to countries with substantially similar protection.
The PDP Commissioner's guideline accepts binding corporate rules, standard contract clauses and certification as transfer tools. Transfer impact assessments are valid for up to three years. The guideline sets no data localisation rule.
From 1 June 2025, data controllers must appoint a data protection officer and report data breaches.
Bank Negara Malaysia revised its RMiT (Risk Management in Technology) policy, which governs how financial institutions manage technology and cyber risk. The revision took effect on 28 November 2025. It also adds Code of Practice duties for critical national infrastructure.
The Prime Minister said Malaysia will build secure storage for sensitive government and citizen data. He cited concern over the US CLOUD Act. No rules have been published.
Johor told data centres that rely on water for cooling to wait at least 18 months for new supply, to about mid-2027. The state cites distribution limits during drought. MITI said in February 2026 that no investment had been deferred as a result.
A separate water tariff for data centres in Johor took effect on 1 August 2025. The rate is RM5.33 per cubic metre.
SPAN, the National Water Services Commission, issued guidelines on alternative water sources in September 2025. They ask data centres to cool with reclaimed water where available, or with air-cooled systems that discharge no water.
New Johor data centres must use reclaimed water instead of drawing from Ranhill SAJ, the state water utility. Two reclaimed water plants serve data centres today, at Ulu Tiram and Gelang Patah. Both treat Indah Water effluent.
The national sustainable data centre guideline targets WUE of 2.2 cubic metres per MWh or lower, falling to 2.0 within 10 years. WUE (water usage effectiveness) measures water use per unit of IT energy. The guideline also steers sites in Peninsular Malaysia to areas with a water stress index below 0.8.
The government said Budget 2027 would be tabled in early October 2026. Any change to data centre incentives would likely appear there.
The Energy Commission and SPAN are drafting standards for power, water and carbon efficiency. CUE (carbon usage effectiveness) measures emissions per unit of IT energy. No issue date has been announced.
MITI said in November 2025 that a single licensing authority for data centres would be set up. No law or start date has been published.
Johor's hold on new water-cooled capacity is due to run to about mid-2027. Johor and the federal government are funding RM5 billion of new reservoirs and treatment plants.
DESAC incentives and the sustainable data centre guideline apply to applications MIDA receives by 31 December 2027.
Projects must reach commercial operation by 31 December 2028 to lock in the 14 sen CRESS access charge.
What this research looked for and could not confirm from a primary or credible source. Listed so the gaps are visible.
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