August 27, 2025
PETALING JAYA – The onward march of data centres in Malaysia is a tide that cannot be stemmed, and it comes with an upward curve for treated water demand, say industry observers.
According to Investment, Trade and Industry Minister Tengku Datuk Seri Zafrul Abdul Aziz, Malaysia has approved about RM145.4bil in data centre investments since 2021, mainly in Sedenak and Nusajaya in Johor, as well as Bukit Jalil and Cyberjaya in Selangor.
“They chose Malaysia because land costs and energy are competitive,” said Tengku Zafrul in a parliamentary reply last Wednesday, in response to a question from Putrajaya MP, Datuk Radzi Md Jidin, who asked about measures to ensure there will be enough water for domestic needs, in view of the many proposals for data centres.
Tengku Zafrul did admit that data centres could strain water supplies in areas that are more water-stressed, though he did not name them.
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Traditionally, data centres depend heavily on water-cooled systems to manage heat, which is increasingly unsustainable in regions where water security is a pressing concern, said Wong Weng Yew, founder and managing director of Open DC Sdn Bhd, a significant player in the market.
According to the National Water Services Commission (SPAN), Air Selangor received an application for treated water supply up to 79 million litres per day (MLD) for data centres that will be rolled out until 2032, an amount equivalent to 30 Olympic-sized pools.
“Johor’s water operator, Ranhill SAJ Sdn Bhd, received requests of up to 440MLD until 2035 in the districts of Johor Baru, Iskandar Puteri, Sedenak, Kulai/Senai, Pasir Gudang and Pontian, with demand (from all sectors in Johor) is estimated to hit 614MLD in the same period,” said SPAN in a media briefing earlier this year.
Seen from another perspective, the proposed demand of 440MLD from upcoming data centres is equivalent to 23% of Johor’s water demand in 2023.
However, any suggestion that Johor is facing threats to its water supply has been met with disdain, with Johor Mentri Besar Datuk Onn Hafiz Ghazi accusing some parties of creating concern among investors by claiming the state could not provide enough water.
In his speech at the signing of a memorandum at the Invest Malaysia Facilitation Centre-Johor (IMFC-J) in Forest City last Wednesday, Onn Hafiz said Johor has enough water for industry usage “beyond 2050”.
He said claims that Johor has problems keeping up with water and energy demand are damaging as the state endeavours to attract investments, particularly in the Johor-Singapore Special Economic Zone.
“Our initiatives are carried out comprehensively with the federal government to provide the best facilities for investors,” he said, adding that Johor has a special task force consisting of three state executive councillors to assess data centre applications.
“Johor is very serious about bringing in investments and we will ensure that investors who choose the state feel secure as we have adequate water and electricity supply,” he said.
Recently, Johor, Selangor and Penang unveiled new water tariffs that single out data centres, with Johor charging RM5.33 per cubic metre (1,000 litres) of treated water for data centres effective this month.
Selangor is not far behind, charging RM5.31 per cubic metre for data centres effective Sept 1, while Penang is also matching Selangor’s treatment by July 2026.
“This average price of around RM5 per cubic metre for data centres will be the norm for all states,” said Datuk Saiful Zaini Mohd Bokhari, CEO for Pengurusan Air Pahang Bhd when met last week.
More importantly, he added that SPAN will not allow a “downhill race” when it comes to water tariff setting, so no state can compete for data centre investments on the basis of cheaper water.
While water resources are a state matter, any application to increase tariffs must obtain federal approval through SPAN, and in this regard, all states have already submitted their proposals for revision.
According to Saiful Zaini, the spreading of data centres throughout Peninsular Malaysia will eventually reach east coast states, including Pahang, which currently supplies raw water to Selangor through a pipe that cuts through the Titiwangsa mountains.
For its part, Investment, Trade and Industry Ministry (Miti) has issued guidelines on how data centres can be built and operated in a sustainable manner.
“It is important to ensure sustainable data centre development and we decided to issue new guidelines for data centres in terms of electricity, water and carbon emissions,” he said, adding that encouraging the usage of recycled water or alternative supplies is part of the equation.
On Aug 11, Indah Water Konsortium (IWK) and Johor Special Water Sdn Bhd (JSW) entered into a collaboration to develop reclaimed water solutions for the data centre industry in the state through agreements involving three sewerage treatment plants (STPs) to supply treated effluent to two data centres in Johor for further purification.
Treated effluent will be supplied to water reclamation plants (WRP) built by Bridge Data Centres Malaysia IV Sdn Bhd (BDC) and Computility Technology (Malaysia) Sdn Bhd, while JSW will supply an alternative water source directly to DayOne Data Centre Malaysia II Sdn Bhd (DayOne).
Under this agreement, IWK will supply 12MLD of treated effluent to the WRPs built by BDC and Computility. These WRPs are able to further treat the effluent into high-grade water suitable for data centre cooling.
“With Johor experiencing a surge in water demand, driven by interest from over 50 data centres in the past two years, JSW has been working closely with IWK to deliver viable and sustainable water solutions,” said JSW CEO Abdul Rashid Ismail at the signing event.
According to IWK CEO Narendran Maniam, the collaboration with JSW marks a significant step forward in water management.
“By supplying reclaimed water sourced from treated effluent, IWK is providing a solution that meets the high water demands of industries like data centres to support Malaysia’s sustainability goals,” he said.