Why Singapore Can’t Afford More Data Centers: A Shift to Malaysia and Indonesia
Singapore has long been a leading data center hub in Southeast Asia due to its strategic location, robust infrastructure, and stable government. However, the city-state now faces significant challenges that prevent further large-scale expansion of data centers. These constraints are primarily due to limitations on land, energy, and environmental sustainability, leading many operators to explore alternative locations in nearby countries like Malaysia and Indonesia.
Key Challenges for Data Centers in Singapore
- Land and Power Constraints
Data centers require vast amounts of land and energy. In land-scarce Singapore, these resources are at a premium. The government imposed a moratorium on new data center construction in 2019, citing concerns over their intensive energy and water usage. While Singapore lifted the moratorium in a limited capacity, allowing for controlled expansion, the availability of only 60MW of new capacity per year is insufficient to meet growing demand. This constrained supply has made it increasingly difficult for data center operators to scale their operations locally(IT News Asia)(Datacenter Dynamics). - Environmental Sustainability
Singapore is committed to becoming a green economy, aiming for energy-efficient operations. However, data centers are typically energy-hungry, and Singapore’s strict new regulations now require data centers to have a Power Usage Effectiveness (PUE) ratio of 1.3 or below. Despite these efforts, the push for decarbonization limits the number of data centers that can be built, as they must meet stringent environmental standards(Datacenter Dynamics). - High Operational Costs
The cost of land, electricity, and labor in Singapore is high compared to neighboring countries. These operational costs add to the growing pressure on the country’s capacity to host more data centers. In contrast, nearby regions like Malaysia and Indonesia offer more affordable solutions(IT News Asia)(TNGlobal).
Malaysia and Indonesia: Emerging Alternatives
- Malaysia
Malaysia, particularly Johor, is quickly becoming a prime location for data center investments. Johor benefits from its proximity to Singapore, allowing data centers there to offer reduced latency and maintain strong international connectivity. The Malaysian government has also been highly supportive, streamlining regulations, offering incentives, and launching initiatives like the Green Lane Pathway, which accelerates the power approval process for new data centers(IT News Asia)(TNGlobal). As a result, global operators, including Google and AWS, are setting up large-scale facilities in Malaysia. - Indonesia
Indonesia, with its large and growing tech-savvy population, is also emerging as a significant player in the data center space. By 2029, Indonesia is expected to triple its data center capacity as it shifts toward cloud computing, artificial intelligence, and IoT technologies. The Indonesian government is encouraging this growth through tax holidays, relaxed foreign ownership laws, and incentives designed to attract international investments(TNGlobal)(Datacenter Dynamics).
Conclusion
While Singapore remains an important data center hub, the country’s strict land, power, and environmental limitations are driving a shift in investments to Malaysia and Indonesia. These neighboring countries offer more space, lower costs, and growing infrastructure, making them attractive alternatives for global hyperscalers and tech companies looking to expand their data center operations. As a result, Singapore risks losing out on future opportunities in this booming industry, even as it pushes for greener, more energy-efficient operations.
