A number of positive factors make Malaysia an attractive destination for data center players to be in.
Make no mistake, we are firmly in the data centre age. We are in an age where smartphones are beginning to dominate with the term App Economy becoming commonplace and with everything being pulled into the cloud. Behind all this buzz sits the data centre. The global data center industry is being driven by increasing demand in user-generated content, m-commerce, 4G, video usage, data transfer, storage requirements and other factors. It is a booming industry.
The Datacenter Dynamics 2012 Global Census, a worldwide survey of the data center industry, shows that total investment in data centers has grown from approximately US$86 billion in 2011 to US$105 billion in 2012, a rise of 22.1%.
That’s not all. The forecast for 2013 shows a slower rate of growth but still at a very healthy 14.5% over 2012 levels, with a further US$15 billion of additional investment predicted.
Malaysia too is aiming for a bigger piece of this pie by positioning the country as a “world-class” data center hub. This ambition is parked as an entry-point project (EPP) under the Business Services NKEAs (National Key Economic Areas) of the Economic Transformation Program (ETP). The ETP itself aims to transform Malaysia into a “high-income” economy.
It is no surprise that because of this commitment, Multimedia Development Corporation (MDeC) chief executive officer Datuk Badlisham Ghazali hails the Government’s clear commitments to support the sector. “The Government has invested approximately RM14 million (US$4.7 million) into various programs to raise the game of our operators,” Badlisham said, adding that this was part of the ‘3Cs’ MDeC has been driving: Enhancing the capability, capacity and credibility of Malaysian data center operators.
Meanwhile third party data center space has grown from around 0.5 million sq ft (in 2008) to about 1 million sq ft today. Revenues are enjoying a healthy growth too with the data center industry in Malaysia on track to hit RM400 million (US$133 million) or higher in revenue in 2012, after recording revenues of RM320 million (US$106 million) in 2011. The target for 2013 is RM480 million (US$160 million).
Acknowledging that countries such as Singapore and Hong Kong have a lead, Datuk Seri Dr S. Subramaniam, Minister of Human Resources feels that there is still a “clear opportunity” for Malaysia to position itself in the region. As the minister in charge of Business Services, the responsibility of meeting the targets set for the data center industry rest on Subramaniam’s shoulders.
Delivering a keynote address at a recent Datacentres Malaysia Summit in Kuala Lumpur, Subra pointed out that, “the data center market in Asia Pacific is projected to increase by 16.3% in revenue annually to reach US$3.4 billion in 2014. And due to higher wages and rising real estate costs, the revenue growth of the more established hubs is declining.”
This is where he spots opportunity for Malaysia.
“This [rising costs] simply makes Malaysia a natural and preferred location for data center investment,” he said, adding that the country’s political stability and lack of natural disasters were further advantages.
However, he said Malaysia did not intend to compete with its neighbor down south and wanted a “synergistic” partnership with Singaporean data center players. “As Singaporean players run out of space, they can expand into Iskandar,” he said, adding that he did not see this as cannibalizing the Malaysian industry but as allowing both countries to grow beyond their present limitations. An MSC-status area has been created within the Iskandar Malaysia economic development hub in the southern state of Johor to cater for this spillover.
With the recent spurt of investment into Iskandar, it is not inconceivable that the tech part of Iskandar starts seeing some action too, especially in the data center space. That RM480 million target for 2013 does not seem such a stretch after all.
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