In Malaysia’s Johor, silicon dreams meet parched realities

Malaysia’s southern state of Johor is being transformed by a torrent of tech investment. Global heavyweights – Microsoft, Nvidia, ByteDance – are pouring billions into vast data centres, the digital foundries that underpin the international AI industry and cloud economy. For Malaysia’s government, these investments are nothing short of transformative, representing a once-in-a-generation opportunity to vault ahead in Southeast Asia’s technology race. But for Johor residents like Muhammad Azrien Mohammad Ali, the future arrives with a simple, daily anxiety: will water still flow from the tap? “This year I have experienced three water disruptions,” the 35-year-old told This Week in Asia. “The water supply is there but it is now low compared to before.” Earlier this month, almost a million people faced supply disruptions after pollution shut down several treatment plants along the Johor River – the latest symptom of a long-running water crisis in Malaysia’s most drought-prone state. Warmer weather and surging industrial demand are intensifying the strain. Data centres consume prodigious amounts of water to cool high-performance servers. For some families, this has meant taps now run dry or dribble unpredictably even in affluent enclaves like Eco Botanic City in Iskandar Puteri, where Muhammad Azrien lives. Just a short drive away, the Nusajaya Tech Park pulses around the clock with the hum of eight massive data centres: vast, air-conditioned complexes that process the world’s digital traffic, but also draw on local water supplies at staggering rates. Johor now hosts 47 data centre facilities, either operational or under construction. According to government estimates, these sites require around 675 million litres (178.3 billion gallons) of water per day – enough to fill 270 Olympic-sized swimming pools – just to keep their servers from overheating. And the boom shows no sign of slowing: Microsoft announced on November 4 that Johor Bahru would host its new “Southeast Asia 3 cloud region”, a hub for the company’s expanding digital infrastructure that adds to a wave of new hyperscale projects. Environmentalists warn that, without stricter oversight, these developments could worsen Johor’s water crisis. River pollution and dredging already threaten drinking water supplies for the state’s 1.7 million residents. “Without proper limits and monitoring, the impact could be felt by residents and smaller industries that depend on the same sources,” Muhammad Shaqib bin Shahrilnizam, a Johor Bahru native and conservation finance analyst, told This Week in Asia. The data centre rush of the past five years has been fuelled in part by Singaporean companies shifting their resource-intensive operations across the border. In 2019, Singapore imposed a freeze on new data centre developments, citing rising concerns over power and water consumption. Although the moratorium was lifted in 2022, stringent new controls remain, reflecting the city state’s land constraints, energy costs and net-zero ambitions. Several Singaporean firms have since moved across the causeway. Among them is ST Telemedia, which operates a campus in Nusa Cemerlang Industrial Park, just 15km (nine miles) from its home market. Environment vs economics In Johor, transparency over water use remains a sticking point. “We often hear about new projects, but not about their environmental impact or water footprint,” Muhammad Shaqib said, urging state authorities and developers to publish consumption data and disclose their water allocations. Microsoft insists its latest facility will use water-efficient cooling systems powered by renewable energy, alongside initiatives such as mangrove restoration and clean water access for schools. “Microsoft is committed to building and operating data centres responsibly,” the company said in a statement. Still, scepticism persists. “What I am afraid of is whether the state government and the water authorities can cater to both the consumption of data centres and the consumers,” said Abu Bilal, a cloud engineer living in Johor. Malaysia’s National Water Services Commission has already sounded the alarm. In August, it urged data centre operators to tap alternative sources such as recycled, rain or desalinated water to ease pressure on public supply. Of the 101 data centres across Selangor, Negeri Sembilan and Johor states, only 18 per cent of water supply applications were approved by the commission, as existing infrastructure could support just 142 million litres (37.5 million gallons) a day to data centres – far below the 808 million litres (213.5 million gallons) demanded. Johor alone accounted for nearly 90 per cent of that requirement. Malaysia’s rapid ascent as a data centre hub has brought dramatic changes. Global tech investment over the past five years has created more than 2,300 high-value jobs in Johor with more to follow – an economic windfall by any measure. Among the marquee deals: a US$4.3 billion partnership between Malaysian conglomerate YTL Utilities and Nvidia to develop AI infrastructure; Microsoft’s US$2.2 billion pledge to support Malaysia’s digital transformation, the firm’s largest investment in the country; and Google’s US$2 billion plan for its Malaysian first data centre and cloud region. The problem isn’t development itself, but the lack of long-term planning to ensure water security Muhammad Shaqib bin Shahrilnizam, analyst ByteDance, which already operates a facility in Sedenak Tech Park in Kulai, has also signalled its intent to expand further with deals that could total a projected US$2.2 billion, with an additional US$220 million for supply chain investments. In the past five years, data centre capacity in Johor has grown a hundredfold, according to research firm DCByte – it now exceeds 1,500 megawatts, enough to power more than a million homes, and is triple the capacity of regional rival Indonesia. Authorities say new guidelines now compel operators to minimise water waste and use non-potable sources for cooling. But campaigners warn the ecological cost is mounting. For Muhammad Shaqib, the core dilemma remains: unconstrained growth will squeeze residents’ water supplies and hasten damage to the environment – as well as Malaysia’s own climate commitments. “The problem isn’t development itself, but the lack of long-term planning to ensure water security,” he said.

In Malaysia’s Johor, silicon dreams meet parched realities

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}As global tech titans invest billions in data centres to power the AI revolution, the state’s most precious resource is fast evaporating

As global tech titans invest billions in data centres to power the AI revolution, the state’s most precious resource is fast evaporating