KUCHING: Sarawak sees potential data centre demand equivalent to four to five times Malaysia’s planned or approved capacity if all proposed projects materialise, but the state is taking a selective approach to ensure the investments deliver wider economic benefits.
InvestSarawak CEO Timothy Ong Wye Ern said the state did not want to become a data centre hub simply by accumulating capacity, but wanted projects that could support other industries, create jobs and raise household incomes.
“We are very selective in terms of data centres. We don’t want to be just a data centre hub. We want something back for our people. We want jobs, we want sectors, we want industries, we want GDP, we want household income,“ he said in an exclusive interview with SunBiz.
Ong said Sarawak had received substantial interest in artificial intelligence and digital infrastructure, with the scale of potential demand also reflected in interest in renewable energy development.
He estimated Malaysia had 3.5 gigawatts of planned or approved data centre capacity, of which around 800 megawatts was operational, while potential demand in Sarawak could be four to five times the national figure if all proposals were deployed.
However, the state has alternative uses for its energy resources and does not intend to commit capacity simply to accommodate every proposal, said Ong.
Sarawak’s starting electricity tariff for data centres is around 40 sen per kilowatt-hour, compared with about 31 sen for non-data centre users in the state, Ong said.
He also cited the availability of power purchase agreements (PPA) spanning 15 or 20 years, with fixed price escalation mechanisms that provide greater certainty over long-term electricity costs.
Despite these advantages, Ong cautioned against attracting investors based solely on electricity prices or land availability.
“We don’t want investors who are just coming because of the tariff or because of the land. What happens when the tariff changes? What happens when the land price changes? They will leave,” he said.
Instead, Sarawak wants data centres to support a broader industrial ecosystem, including semiconductor manufacturing and other industries that can generate greater economic value.
Ong noted that a data centre campus itself might employ only about 150 people, limiting its direct employment impact compared with the resources it consumes.
The state is therefore looking at whether data centre investments can create opportunities across supporting industries, infrastructure, digitalisation and other technology-related activities, rather than operate as standalone facilities.
For contracted projects, Ong said, signed PPA provided the basis for committing to supply the agreed electricity capacity, while speculative demand would not automatically translate into infrastructure commitments.
The approach reflected Sarawak’s broader investment strategy of prioritising deliverable projects and their economic impact over headline investment announcements, he added.
Ong said the state would rather adjust its investment ambitions to changing conditions than meet an agency target without delivering meaningful benefits to Sarawakians.
Ong disclosed that Sarawak is discussing local-content levels of 30% to 40% where feasible with investors as it seeks to strengthen domestic companies’ participation in foreign investments, but the state is wary of imposing requirements that local suppliers cannot meet.
He said the agency was communicating the proposed range to investors, with the achievable level depending on the sector and capabilities available locally.
Ong stressed that the approach did not mean requiring investors to source every component locally, particularly in high-technology industries where Sarawak lacked the necessary manufacturing capabilities.
In the data centre sector, for instance, he said it would be unrealistic to expect local companies to immediately supply core components such as servers, graphics processing units (GPU) and racks.
Instead, Sarawak could initially focus on non-core infrastructure such as cooling systems and services, where local companies could participate while developing capabilities to move into more sophisticated parts of the supply chain.
Ong said the state was also looking to strengthen local technology companies and other suppliers so that they could eventually participate in higher-value activities.
He warned that imposing local-content requirements without building the necessary capabilities could result in domestic companies acting merely as intermediaries, with limited value accruing to the local economy.
“If you force local content and there is no capability, what happens? Traders become intermediaries,” Ong said, adding that this could add costs without creating the industrial capabilities that local-content policies were intended to develop.
Sarawak’s priority is to help local companies build the expertise needed to compete alongside multinational investors rather than simply route purchases through local entities. “We want local companies that can spar with FDI,” he said.
Ong said Sarawak generally allowed full foreign ownership, except in sensitive strategic sectors, and did not believe foreign investors should automatically be required to take on local partners.
Some investors approached InvestSarawak for help finding local partners, but the important distinction was whether the partnership added commercial value, he added.