MALAYSIA’S rapid rise as a regional data-centre hub has created a new foundation for the digital economy, but questions are emerging over whether the country is building enough domestic capability to convert physical infrastructure into long-term economic value.
The issue comes as Malaysia recorded stronger economic growth in the second quarter of 2026, with gross domestic product expanding 5.8% year-on-year, compared with 5.4% in the first quarter.
Management and socio-economic consulting firm, 27 Advisory cited that manufacturing led growth with a 7.5% expansion, supported by export-oriented electrical, electronics and petrochemical industries, while mining and quarrying rebounded 10.2% due to stronger natural gas output. Services, the country’s largest employment sector, grew 5.4%, while construction expanded 6.6%, supported partly by non-residential projects including data-centre developments.
However, economists and industry observers argue that the visible success of data-centre construction represents only the beginning of the opportunity.
27 Advisory cited that the larger question is whether Malaysia can build the productive digital ecosystem around these facilities — one that creates recurring business value, high-skilled employment, locally developed technologies and exportable digital services.
Malaysia has approved more than RM110 billion in multinational data-centre investments since 2021, with Johor emerging as one of the fastest-growing locations after Singapore introduced restrictions on new data-centre developments in 2019.
The country added around 450MW of live IT capacity between 2019 and 2024, with Johor recording rapid expansion from a low base.
The investment wave has generated substantial economic activity through construction, engineering, electrical systems, cooling solutions, professional services and local supply chains.
But data centres themselves are highly automated facilities that require relatively small permanent workforces once operational, mainly involving technicians, security personnel and facilities engineers.
27 Advisory said the challenge for Malaysia is ensuring that the benefits extend beyond construction contracts and infrastructure hosting.
Key questions remain over whether Malaysian companies will secure recurring high-value work after facilities become operational, whether local businesses can access affordable computing resources, and whether the country will develop homegrown artificial intelligence applications, intellectual property and digital services.
Sarawak has highlighted this concern directly, with Premier Abang Johari Openg warning that data centres alone do not necessarily create large numbers of jobs despite the state's energy advantages.
“Many companies want to establish data centres in Sarawak because we have abundant energy,” he said, “however, we have to be selective because data centres do not create many jobs.”
The state government has said future approvals will place greater emphasis on wider economic benefits, including high-skilled employment, technology transfer and opportunities in areas such as semiconductor manufacturing, advanced engineering and renewable-energy technology.
The issue is not opposition to data centres, but ensuring that the resources supporting them — including land, electricity, water and incentives — deliver greater returns for Malaysians.
Beyond infrastructure, Malaysia’s next challenge lies in building what experts describe as the productive digital layer above data centres.
This includes businesses developing artificial intelligence applications, industry-specific AI solutions, cybersecurity services, trusted-data platforms, locally owned software, digital products and AI-enabled professional services.
The value lies not only in operating the machines but in creating businesses and intellectual property that use computing power to solve real-world problems.
Malaysia may be moving towards this direction through the proposed National AI Compute Exchange by the Malaysia Digital Economy Corporation (MDEC), which aims to improve access to computing resources for government agencies, businesses, small and medium enterprises, start-ups and researchers.
The initiative is intended to connect users with computing capacity, AI models and digital services while reducing barriers for smaller Malaysian companies seeking to adopt artificial intelligence.
However, its success will depend on measurable outcomes rather than the existence of the platform itself.
Key indicators will include actual usage by Malaysian firms, affordability of computing access, participation by SMEs and start-ups, growth of local intellectual property, creation of high-value jobs and the emergence of exportable digital products.
The same challenge applies to Malaysia’s workforce preparation.
Artificial intelligence is expected to reshape job roles and required skills before it significantly affects unemployment figures. A low unemployment rate does not necessarily indicate that workers are prepared for technological disruption.
Data from the Department of Statistics Malaysia showed skill-related underemployment among tertiary-educated workers at 35.2% in the first quarter of 2026, highlighting a continuing mismatch between qualifications and job requirements.
TalentCorp’s study on the impact of artificial intelligence, digitalisation and the green economy estimated that around 620,000 roles — approximately 18% of the workforce analysed across ten sectors — could experience significant changes within three to five years.
The estimate does not mean those jobs will disappear, but indicates that tasks, responsibilities and required skills are likely to evolve rapidly.
Malaysia currently lacks a comprehensive system that maps how artificial intelligence will affect specific occupations, tasks and career pathways.
A national workforce transition map could help identify which jobs are most exposed, which skills are needed and what retraining pathways can realistically move workers into emerging opportunities.
27 Advisory opined that the ultimate test for Malaysia’s digital transformation is therefore not simply how many data centres are built or how much computing capacity is installed.
The more important measure is whether Malaysian companies and workers are able to build new industries, services and expertise on top of that foundation.
Malaysia can become a major data-centre destination without becoming a major creator of AI-driven economic value.
The next phase of the digital economy will depend on whether the country can move from hosting technology infrastructure to building the businesses, talent and innovation ecosystem that turns that infrastructure into lasting national advantage. - August 1, 2026
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