KUALA LUMPUR: A cost-benefit analysis (CBA) is needed to determine the feasibility of making Tasik Kenyir an investment hub for data centres and artificial intelligence (AI), says Tengku Datuk Seri Zafrul Abdul Aziz.

The Investment, Trade and Industry Minister said the government welcomed the proposal, but further discussions must be held with stakeholders to determine the site's suitability in terms of energy, water and telecommunications infrastructure.

“For now, Terengganu is not yet a hotspot for data centres,” he said during his winding-up speech on the 13th Malaysian Plan (13MP) in Parliament on Aug 19.

According to Tengku Zafrul, Tasik Kenyir and Terengganu have adequate energy and water supplies to support a data centre in the state.

“There is also online access with speeds up to 1Gbps in Tasik Kenyir, aside from fibre optics connections through the Broadband for General Population.

“But, the present speed still isn’t enough to fulfil the needs of a data centre,” he said.

At the same time, Tengku Zafrul said data centres were one of the most energy-demanding industries in Malaysia and that was why the government was reviewing its energy tariffs and subsidies.

“The spike in electricity usage is real. Data centres use the most energy in all the industries that we looked into.

“So, we are reviewing tariffs and energy subsidies to ensure that investors' needs and national energy stability are balanced,” said Tengku Zafrul.

Tengku Zafrul also said data centres could strain water supplies in areas with high water pressure.

“That is why we encourage the usage of recycled water or alternative water in order to reduce environmental impact,” he said.

At the same time, Tengku Zafrul said there were no plans currently to introduce a carbon tax to data centres.

“We decided to start the carbon tax next year on industries with the highest carbon emissions, such as iron and steel.

“We haven’t discussed data centres yet,” he added.

Tengku Zafrul was responding to Datuk Radzi Md Jidin (PN-Putrajaya), who asked about measures to ensure national energy security, as Malaysia has been receiving many new investments in data centres.

According to Tengku Zafrul, Malaysia has approved about RM145.4bil in data centre investments since 2021 and they are mainly focused in Sedenak and Nusajaya in Johor, as well as Bukit Jalil and Cyberjaya.

“They chose Malaysia because land costs and energy are competitive. Electricity tariffs may be high, but the stability of electricity is very important.

“For now, it (energy) is enough,” said Tengku Zafrul.

Tengku Zafrul said his ministry decided to issue a new guideline for sustainable data centre development to ensure that energy consumption was optimum.

“We have to also make sure that they are investing enough to ensure energy efficiency,” said Tengku Zafrul.

“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 added.