Introduction
As the world becomes more and more digitized, both international tech giants and nations pour billions of dollars into digital infrastructure around the world. Data centers are the premier unit of data infrastructure. Providing a climate controlled environment for computers and data servers, businesses rely on these data centers to host and manage applications, facilitate communication, and streamline business operations.1 Cooling for data centers consumes a large amount of power and water — as a result, tech companies build data centers in areas where these are both in abundance and easily accessible. While the data center industry is growing rapidly in places such as the United States, China and Europe, Southeast Asia is also becoming one of the fastest developing regions for digital infrastructure.
This article seeks to explore Southeast Asia’s digital infrastructure landscape, with a particular emphasis on Malaysia and Singapore, and the politics surrounding data centers.
Data Centers and Southeast Asia
Data centers serve as the technical foundation for IT infrastructure across the world. Both businesses and private households rely on digital infrastructure like this for day-to-day life — for example, inter-business communication and personal streaming services such as Netflix. Data centers store, manage and share data, providing large quantities of power and cooling for the servers and computers processing this data.2 Massive tech ‘hyperscalers’ — for example, Google, META, and Amazon — construct massive ‘hyperscale data centers’ in different regions across the world fulfilling the two most central requirements for data centers — electricity and water. Traditional chilled-air cooling is not enough; researchers and scholars publish many research pieces devoted to developing more efficient cooling methods. Hyperscalers work with local municipalities internationally to acquire land and easy access to water and electricity to keep maintenance costs as low as possible. As a result, data center politics revolve around resource politics from state to state. The industry usually measure substantive data center computing power in power consumption, ie. megawatts. This is not a perfect metric; one unit of energy does not linearly translate to computing power and efficiency. For example, an energy inefficient 100mW facility may still have less processing power than an 80mW facility with comparatively better energy usage.3
While the most dominant markets are located in regions such as Northern Virginia and Shanghai, Southeast Asia uniquely represents one of the most dynamic and fastest projected growing regions in the data center industry. Many business pundits and consulting firms contribute to the dominant optimistic narrative. Kearney 100 predicted in 2022 that $9 — $13 million USD would be invested into the data center colocation market for Southeast Asia.4 In a 2025 report by FIT consulting, they reported optimistic growth figures and opportunities in multiple ASEAN countries. For example, in early 2025, Thailand’s data center sector received over $16 billion USD in investments. IEA predicts that Southeast Asia’s energy usage will more than double by 2030, because of major data hubs in Malaysia and Singapore. Vietnam also issued an internal decree streamlining approvals for regulatory approval.5 A combination of ramping AI Adoption, land and power constraints in primary data center markets compared to Southeast Asia,6 and Southeast Asian Smart Governance Initiatives all contribute to Southeast Asia’s positive outlook.
Data Centers in Southeast Asia
Both Malaysia and Singapore are ASEAN’s frontrunners in data center development. A unique confluence of government intervention, land use, energy politics and great power politics all contributed to the construction of these major data hubs.
Singapore is Southeast Asia’s leading player in digital infrastructure development. While a moratorium from 2019-2022 temporarily halted its growth and spurred growth elsewhere, Singapore has one of the most competitive data center industries, because of its already favorable infrastructure. Access to very strong broadband connectivity, cybersecurity, and cloud services, as well as already being a major crossroads for undersea cables contribute to its relative strength in the industry.7 In 2023, they had over 70 operational data centers, accounting for over 60% of SEA’s capacity.8 However, the 2019-2022 moratorium, as well as general concern over data center land usage in the small Asian city-state, drove Singapore to invest in places like Malaysia. Malaysia, in February 2021, drafted and passed the Digital Economy Blueprint promoting Malaysian development with their digital economy. The document outlines a roadmap for driving economic growth and innovation in Malaysia through investment in AI and digital infrastructure. Along with favorable business headwinds, projections for the Malaysian data-center market are comparatively very favorable. According to a report commissioned by the Asia Pacific Data Center Organization (APDCO), they predicted AI models like ChatGPT would drive an 185% increase in data center capacity growth from 2023 to 2026.9 Furthermore, in 2026, Malaysia’s Prime Minister Anwar Ibrahim announced in a state budget speech he would invest RM 2 billion (~$490 million USD) in a sovereign AI cloud.10 Furthermore, the Malaysian government, via the Johor-Singapore Special Economic Zone, placed special emphasis on technical development and encouraging tech giants like AWS and Meta to expand data center infrastructure in Johore. Minister of Digital, Gobinh Singh Deo, said in a press release, “The creation of such an economic zone, and the bustling data centre sphere, will naturally encourage suppliers – domestic and international – to expand their businesses here. Such an effort will naturally contribute to the state’s dynamic economic landscape, and that of the country.”11 Crossborder data-center development between Singapore and Malaysia demonstrates a significant case for the substantive influence of international increases in demand for data centers and the effect of favorable regulatory regimes.
The Southeast Asian data-center market is not a monolithic entity. Malaysia and Singapore front-run the industry because of their comparatively favorable institutions and resource access, but this is not stopping other SEA nations from nurturing their data-center industries. The Thai government, while having less favorable terrain for undersea cables and comparatively weaker infrastructure for data centers, is strengthening their commitment to data-center construction. They undertook multiple initiatives, including increased investments in submarine cable expansion, construction of the Asian Direct Cable, and promoting renewable energy resources to increase cost-efficiency.12 In May 2024, Microsoft also announced the construction of a major data-center in Thailand.13 Indonesia, a close neighbor to both Singapore and Malaysia, included the data-center industry as part of their ‘Making Indonesia 4.0’ initiative to propel Indonesia to one of the world’s top ten economies.14 To foster growth, they enacted incentives such as the following, “Up to 10 years of tax holiday and exemption from withholding tax on dividends; Simplified procedures for repatriating profits; Relaxation of foreign ownership restrictions, including allowing foreign entities own land for data centre projects.”15 These examples demonstrate that the wider ASEAN sphere wants to be part of the data-center boom. The geographic dimension contains a uniquely consistent type of rationale for Southeast Asian nations who want to benefit from it. These reasons range from development of domestic industry and talent, encouraging innovation, and cultivating a perception of being technological front-runners. This relationship between Southeast Asian governments and international Hyperscalers creates their own questions; do the governments create proper regulatory conditions, or is it purely a function of available resources? Do Southeast Asian governments perceive a higher data center demand to meet for their populaces, or is it purely to facilitate international business? Who are the biggest benefactors of the data center boom? Due to the recency of the data-center boom, most of these points do not have definitive answers.
Environmental Impacts
The data-center industry’s environmental consequences is an issue not exclusive to Southeast Asia. Local municipalities across the world, whether it be regulatory boards or local citizen initiatives, criticize data-centers for their lack of substantive impact on local communities, increasing electricity costs and unsustainable water use. The ICT sector as a whole is under scrutiny for greenhouse gas emissions, potentially being responsible for 2.1% to 3.9% of the world’s greenhouse gas emissions.16 As a result, Hyperscalers and governments, in constant push and pull, try to create consensus in resource use while improving data-center resource efficiency through improved cooling technology.
The Singapore 2019 data-center moratorium is one of the higher profile government decisions regarding data-centers. The Singaporean government cited environmental concerns with the Singaporean domestic data-center industry, enacting the moratorium until 2022. In 2022, the Infocomm Media Development Authority (IMDA) and Economic Development Board (EDB) worked with data-center operators over a six month period outlining new requirements for sustainable energy use and energy efficiency.17 One of the regulatory requirements listed is having a Power Usage Effectiveness (PUE) of at least 1.3 — the amount of power entering a data center divided by the power used to run the equipment within it.18Furthermore, the IMDA published a roadmap in October 2024 detailing the Singaporean government’s commitment to green energy and reducing greenhouse gas emissions. The paper highlights different technological advancements in cooling, as well as outlining goals such as bringing every Singaporean data-center PUE below the 1.3 PUE benchmark.19 Other ASEAN nations rely on fossil fuel generated electricity to varying degrees, which is another cause for concern with Southeast Asian data-center environmental practices. Malaysia’s electrical grid is entirely reliant on coal and gas, and their data-center industry growth could potentially drive a seven-fold growth in emissions from 2024 to 2030.20 Indonesia faces similar emission growth figures in the Java-Madura-Bali grid — 5MtCOTe to 19 MtCOTe (Metric Tons of Carbon Dioxide Equivalent.)21 While the Philippines has a comparatively smaller data-center capacity (~200mW), their electrical grid is similarly reliant on fossil fuels, with potential demand targets increasing to 10.5 MtCOTe by 2030.
If the ICT industry wants to maintain its credibility and prove their commitment to international climate change goals, then continued dialogue with local municipalities and governments is a must. Unsustainable water and electricity use will be detrimental, and without this assurance, local communities are sure to push back on the further construction of data centers.
Conclusion
The Southeast Asian data-center industry represents a unique combination of geographic, regulatory and economic factors contributing to its development. Favorable regulatory environments, domestic emphasis on technical skills, and Hyperscalers’ comparative ease of access into the Southeast Asian data-center industry all created the explosive growth projections in the region. Singapore and Malaysia, based on their current trajectories, will likely stay as the front-runners in Southeast Asia, due to their own advantages in comparison to other ASEAN nations. However, both governments and Hyperscalers have a responsibility to control potential environmental harms and resource misuse in data-center construction and use. Environmental protection and environmental health of local communities will stay as central issues for Hyperscalers and governments; without addressing emissions, electricity and water overuse, there may be long term consequences for Southeast Asia and the world as a whole.
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