Malaysia restricts data centre construction in water-scarce areas

The Malaysian government has implemented new restrictions on data centre developments to protect public resources. Under guidelines managed by the Data Centre Task Force (DCTF), construction will be prohibited in regions with critical water reserves to ensure basic needs are met during droughts or supply disruptions.

Data centre operators are now required to maintain water storage tanks capable of supporting at least two days of usage and must explore alternative sources such as recycled water or rainwater for cooling systems. To safeguard the national electricity grid, the government is separating data centre electricity requirements from other industrial users. Operators will be charged market rates without subsidies and must pay for their full contracted electricity capacity, regardless of actual consumption.

Investment, Trade and Industry Minister Datuk Seri Johari Abdul Ghani stated that while there is no blanket moratorium, approvals will be strictly assessed based on water availability, electricity supply, and investor financial strength. Additionally, operators must meet a minimum local content requirement of 30% for related developments.