Malaysia: High Income Nation by 2028 with Data Centers

Summary

In 2024, Malaysia’s economy is experiencing a turnaround, with its currency becoming the best-performing in Asia. The country is attracting major foreign investments, particularly in data centers, thanks to its low energy costs, reliable power supply, and government incentives. Major tech companies like Google and Microsoft are expanding in Malaysia, driving growth in construction, engineering, energy, and water infrastructure sectors. The data center boom is expected to create long-term economic opportunities, offering investors a chance to tap into this rapidly growing industry that is critical to the global digital economy.

Takeaways

• 😀 Malaysia's ringgit experienced its worst performance in 2023, but in 2024, it became the best-performing currency in Asia.
• 😀 The World Bank upgraded Malaysia's GDP forecast from 4.3% to 4.9%, signaling economic improvement.
• 😀 Despite pessimism in Malaysia, the country has attracted significant foreign direct investment (FDI), amounting to 645 billion ringgit since 2021.
• 😀 A major portion of Malaysia's FDI is focused on data centers, with 115 billion ringgit invested between 2021-2023 in data centers and cloud services.
• 😀 Data centers are critical for processing AI, cloud computing, and big data analytics, rather than just storing data.
• 😀 Hyperscale data centers, serving big companies like Google and Microsoft, require massive space and computing power.
• 😀 Malaysia is seen as an ideal location for data centers due to its cheap and reliable energy, minimal natural disasters, and affordable land.
• 😀 The Singaporean government’s 2019 moratorium on new data centers pushed tech companies to seek alternatives, leading them to Malaysia.
• 😀 Malaysia benefits from low energy costs and strong government support, including tax exemptions for eligible data centers.
• 😀 The expansion of data centers will stimulate the construction industry, especially in specialized sectors like mechanical and electrical engineering, and also energy infrastructure.
• 😀 Companies like TNB and those involved in renewable energy and water infrastructure stand to benefit from the growing demand for data center resources in Malaysia.

Q & A

Why was the Malaysian ringgit performing poorly in 2023?

In 2023, the Malaysian ringgit faced a significant decline, reaching its lowest point in 25 years at 4.79 per US dollar and 2.53 per Singapore dollar. This caused widespread pessimism regarding Malaysia's economic future.

What major change occurred in the Malaysian economy by 2024?

By 2024, the Malaysian ringgit became the best-performing currency in Asia, signaling a positive shift in the nation's economic outlook. Malaysia's GDP forecast was also upgraded by the World Bank from 4.3% to 4.9%.

What has been the role of foreign direct investment (FDI) in Malaysia's economy since 2021?

Since 2021, Malaysia has received 645 billion ringgit in foreign direct investment (FDI), marking a strong recovery post-pandemic. This influx of FDI helped reverse the downward trend in domestic investments, particularly in sectors like data centers.

Why are major international tech companies like Google and Microsoft investing in Malaysia?

International tech giants are investing in Malaysia because of the country's favorable conditions for data centers, such as low energy costs, reliable electricity, abundant land, and government support for renewable energy and tax incentives.

What are the two types of data centers mentioned in the script?

The two types of data centers are hyperscale data centers and colocation data centers. Hyperscale data centers are large, serving major companies like Google and Microsoft, while colocation data centers allow multiple smaller companies to share space.

Why is Malaysia a more attractive destination for data centers compared to Singapore?

Malaysia offers lower energy costs, fewer natural disasters, and more available land. Additionally, Singapore has limited new data center construction due to energy and environmental concerns, prompting tech companies to seek alternatives like Malaysia.

How does Malaysia's energy cost benefit the data center industry?

Data centers consume a massive amount of energy, and Malaysia's low energy costs make it an attractive location for these facilities. Additionally, Malaysia has a reliable power supply, which is critical to ensuring data centers run 24/7 without interruptions.

What is the significance of Malaysia's government support for data centers?

The Malaysian government supports data center growth through initiatives like a 100% tax exemption for eligible data centers and cloud business investments for up to 10 years. This, combined with the National Energy Transition Roadmap, boosts investor confidence.

What industries and companies are expected to benefit from the data center boom in Malaysia?

The data center boom in Malaysia will benefit various sectors, including construction, mechanical and electrical engineering, energy suppliers, renewable energy, and water infrastructure companies. Firms involved in building and maintaining data centers, like main contractors and subcontractors, will also see growth.

How can investors capitalize on the data center boom in Malaysia?

Investors can capitalize by focusing on the value chain of the data center industry, which includes industrial park developers, construction companies, mechanical and electrical engineering firms, energy suppliers, and companies involved in renewable energy and water infrastructure.