Ong Kian Ming, who previously served as deputy investment, trade and industry minister, said there are substantial economic gains to be obtained from the data centre boom in Johor and the Klang Valley, particularly in attracting investments from tech giants like Alphabet, AWS and Microsoft.

He said delays in policy and a lack of inter-agency coordination could hinder Malaysia’s ability to capture the value-added activities associated with data centres.

He said the updated incentives for data centres, which include guidelines on energy and water usage, were announced by investment, trade and industry minister Tengku Zafrul Aziz last month.

“These have been submitted to the finance ministry by the Malaysian Investment Development Authority (Mida) but have yet to be finalised and announced,” Ong said in a statement.

The former Bangi MP said that increased energy and water consumption by data centres could exacerbate resource depletion, fuelling criticism from opponents of the data centre industry.

According to estimates from Tenaga Nasional Berhad, the potential electricity demand from data centres is expected to exceed 5,000 megawatts (MW) by 2035.

A data centre with a capacity of 100MW uses about 1.1 million gallons of water per day for cooling, the equivalent of daily water usage in a city of 10,000 people, according to a US study cited in the report.

As such, Ong also echoed a proposal by Tengku Zafrul’s deputy, Liew Chin Tong, to establish a data centre operators association.

He said this is to enable data centre players to provide valuable inputs in a coordinated manner to the government.

Ong also said policies drawn up for data centres should go beyond financial incentives to include innovations that promote value-added economic activities.

Existing guidelines from PLAN Malaysia and the Malaysian Communications and Multimedia Commission for data centres are “mostly technical documents which are not particularly innovative”, he added.