Malaysia's data centre blues: A dream that’s tough to realise (Part 1)

  • Malaysia’s regional data centre dreams are experiencing some setbacks
  • Power and bandwidth costs remain thorns in the country’s side


Malaysia's data centre blues: A dream that’s tough to realise (Part 1)


FOR some years now, Malaysia has had its heart set on becoming a regional data centre hub. Singapore is its closest competitor and the island nation has been rather aggressive in promoting itself as a regional data centre hub.

Does Malaysia still stand a chance? Malaysia Digital Economy Corporation (MDEC), tasked with driving the country’s data centre ambitions, thinks so. However, the path is fraught with many challenges and obstacles, as Digital News Asia discovered during a recent interview with MDEC’s head, data cloud, digital enablement, Tan Tze Meng (pic).

For the uninitiated, as far back as 2011, the Malaysian government declared that the data centre industry is expected to contribute a gross national income (GNI) of RM2.4 billion and create some 13,290 jobs by 2020. A target was also set to increase sales of Malaysia data centre floor space to 5 million square feet by 2020.

MDEC’s Tan, however, believes the floor space target is no longer viable. “One year into the execution we realised that even the 5 million was not a realistic target because of two things.  One is cloud. Cloud was becoming more and more important and the other thing was technology has always improved so servers get more powerful over time and they occupy less space, take up less power, so the original plan of 5 million square feet became very unrealistic.

“We quickly realised that having a data centre industry that was driven by just a floor space growth wasn’t a realistic target to have. So we dropped the target. It is no longer a target for us,” he explains.

When asked if the GNI target is on track, he replies that MDEC is having a relook at it as the industry has changed. 

“As more and more people move to cloud the data centre industry is not expected to grow that strongly anymore. So we can already see that the growth from the last three years has been slowing down. It’s still good growth but its slowing down and it’s something we can see coming because of the advent of cloud basically, more and more people are moving to cloud. So that’s where our challenge is.”

How have they been measuring the progress of the local data centre industry? Tan explains that twice a year, they collect revenue data from all the data centre companies they are directly in contact with. “So we have been tracking the progress based on the revenues they report to us.” 

What has growth been like? “Basically if you look at the original projection, we made an assumption that the industry will grow 20% year on year, it is no longer 20% it has fallen to 15% the last three years. It’s still good growth because 15% is faster than the GDP [gross domestic product] is going but it is slower than our projection. Now the original has to be reviewed because this is 6 years ago, technology has changed so it could be that the original projection isn’t valid anyway.”


Malaysia's data centre blues: A dream that’s tough to realise (Part 1)


The lure of Singapore

He adds that MDEC has realised that as people move to cloud, at the moment Malaysia doesn’t have a viable and credible cloud platform. “There is no global cloud player in Malaysia today. So every Malaysian company that adopts cloud basically ends up being hosted by Singapore whether with aid of US or with Asia or Google, it’s all in Singapore.

“The reason for all those people being in Singapore is historical because Singapore was the hub for telecommunication and that became a natural place for data centres to set up there, so all the giants are there. So we realised that if we don’t do something about it, then Malaysia will become far too dependent on Singapore for our IT services. There is argument both ways whether does it matter if it’s in Singapore. But it is hard to say. To me, personally I think it is not a good to rely on Singapore. Malaysia really needs to have our own eco-system here as well. So this is why MDEC is pursuing all those same companies to set up shop here in Malaysia.”

However, it’s a long drawn out affair, he says. “It’s not like you come here we give you incentives, it doesn’t work that way. What we realised is building a data cloud centre is a 20-30 year investment. So they are really careful where they choose to invest. If you noticed all this kind of data centres are currently constructed and operated from what we call mature economies, developed economies where it is considered safe from the point of view of the data centre operators.”

Tan points out that Malaysia is a developing nation and this presents a level of risk for the big data centre players. “That’s our challenge. So we are continuously trying to reach out to them and say look we are almost there, we are safe, we are investor friendly, we have the right infrastructure, we have more demand than Singapore. So all these things are what we propose to these guys. Again, so far nothing has moved yet, many things are in progress but nothing I can talk about right now.”

What advantages does a mature economy have over a developing one like Malaysia? Tan notes that a mature economy has all the ecosystem parts completed. He cites the example of Singapore. “The infrastructure there is very well thought out, particularly telecommunication infrastructure. Singapore’s telecommunications sector was liberalised in 2000 and that has reaped benefits for them so basically they have many foreign operators that are established and invested in Singapore. As a telecommunications hub it obviously becomes interesting for regional data centre operators to be where the telco infrastructure is, because from Singapore it can reach to Malaysia, Cambodia, Vietnam, Thailand, Indonesia so it makes sense.”

He points out that if data centre giants were to come to Malaysia, we don’t have the same level of infrastructure as Singapore. “We only have two major international connectivity players which are Telekom Malaysia and TimedotCom. Malaysia is not attractive at the movement to be used as a regional base and that’s what we are also working on to try and resolve. In terms of investor friendliness and ease of doing business I think Malaysia scores well in all those things so it’s not really that bad. Like I said we are almost there, not there yet but we have a few little things that we need to fix.”

Next page: The high cost of the dream


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