Malaysia and UAE Ramp Up Collaboration on Data Center Development


The UAE and Malaysia have signed an MoU to advance investment cooperation on digital infrastructure, including data center and AI assets.

By Arendse Huld

The United Arab Emirates (UAE) and Malaysia have signed a Memorandum of Understanding (MoU) to advance investment cooperation on digital infrastructure. Under the MoU, which was signed by the Ministry of Investment of the UAE and the Ministry of Investment, Trade and Industry (MITI) of Malaysia, the two countries will collaborate on the expansion of data centers in Malaysia, among other digital infrastructure initiatives.

According to a press release from the MITI, the MoU will also seek to foster “greater bilateral economic and investment relationships between the public and private sectors of both countries”. In addition to data center development, the two countries will also collaborate on the advancement of artificial intelligence (AI).

Malaysia’s data center industry

Malaysia has emerged as a strategic location for the development of data centers. Driven by growing demand from the country’s growing digital industries, Malaysia’s data center industry is projected to grow at a compound annual growth rate (CAGR) of around 16 percent from 2022 to 2027 to reach US$2.90 billion, per the press release on the MoU from the UAE Ministry of Investment.

As of 2024, the country’s data centers have an estimated IT load capacity is around 713.76 MW, while the total market size is around US$838.03 million, according to data from Mordor Intelligence. According to MITI, potential projects developed under the MoU are expected to achieve a total capacity of 500 megawatts.

Key areas for data center construction in Malaysia include the city of Iskandar Puteri, near the border with Singapore in the state of Johor, Cyberjaya, near Kuala Lumpur in the state of Selangor, and the capital city of Kuala Lumpur. The Malay Peninsula, where these cities are located, has a low propensity for natural disasters such as earthquakes, which can be a hindrance to developers in other parts of Southeast Asia. The abundance of land resources and the low-cost, reliable sources of energy also make it an ideal location for data centers.

The industry is also receiving considerable support from the government, in particular through the New Industrial Master Plan 2030 (“NIMP 2030”). The NIMP 2030 seeks to develop a range of industries in the country, including the digital, information, and communication technology (ICT) sector.

Among the goals of the NIMP 2023 is the “Mission-based Project 2.1”, which aims to “transform 3,000 smart factories”. One of the “enablers” of this project is developing 4.0 technologies, such as data centers, which can support the development of technologies required for smart factories, including cloud computing and AI.

The UAE press release also notes that the MoU “proposes introducing incentives to bolster relevant initiatives and seeks to facilitate the exchange of knowledge”, but did not provide further details on what the incentives may be.

UAE-Malaysia relations

The UAE and Malaysia have developed strong bilateral trade and investment relations in recent decades. The UAE is Malaysia’s second-largest trade partner in the Middle East, accounting for 32 percent of trade with all Arab countries. In 2022, the two countries recorded the highest level of bilateral trade to date, reaching a total of US$8.79 billion. In the first half of 2023, the non-oil bilateral trade volume surpassed US$2.22 billion, according to the UAE Ministry of Investment.

Meanwhile, Malaysia is a key re-export partner for the UAE in the ASEAN region and is the UAE’s eighth-largest non-Arab partner for exports.

The UAE and Malaysia have been ramping up collaboration in a variety of fields in 2023. On October 6, 2023, during a two-day visit by Malaysian Prime Minister Anwar Ibrahim to the UAE, the Malaysian Investment Development Authority (MIDA) signed an MoU with the city of Masdar in Abu Dhabi. In the MoU, Masdar committed to invest RM 37.8 billion (US$7.8 billion) to develop a 10GW renewable energy facility in Malaysia.

According to the MIDA, the UAE has participated in 44 approved manufacturing projects as of June 2023, with a total value of RM 6.19 billion (US$1.3 billion). Project fields include machinery and equipment, halal pharmaceuticals, scientific and measuring equipment, food manufacturing, wood and wood products, chemicals and chemical products, rubber and plastic products, furniture and fixtures, and non-metallic mineral products.

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