Malaysia’s AI boom has a hidden cost: Water — Mohd Firdaus Abdullah

Malaysia is embracing AI, but the growth of data centres and cloud computing comes at a hidden cost: water. In the first half of 2026, approved investments for these projects totaled RM95.8 billion, making up nearly 44% of Malaysia's total approved investments. The expansion is centered in Johor, a state with abundant industrial land and proximity to Singapore.

However, this boom raises concerns about water demand and how it will be managed. Johor's water treatment plants have a combined design capacity of 2,352 million litres a day, but the statewide reserve margin is only 14.5%. The demand for water in Johor Bahru and Kulai, areas with significant data centre expansion, is projected to reach 1,600 million litres a day by 2030 and 1,800 million litres a day by 2040.

This means there is less room for error as the state spends on and plans to expand water supply. Malaysia has acknowledged the issue, stating that new facilities should avoid water-stressed areas and aim for a design Water Usage Effectiveness (WUE) of 2.2 cubic metres per megawatt-hour or lower. Johor has also begun using reclaimed water for two data centres, reducing their dependence on treated drinking water.

To address these challenges, Malaysia should require transparency in water use, prioritize reclaimed water for cooling, establish clear drought rules, and evaluate projects based on resource consumption relative to the value they create.