Overview of the Guidelines for Sustainable Development of Data Centres

Overview of the Guidelines for Sustainable Development of Data Centres

By Alif Mustaqim                                                                                       Published 08.01.2025

Introduction

Aiming to become the leading digital hub in Southeast Asia, Malaysia has introduced the Digital Ecosystem Acceleration (“DESAC”) scheme to attract high-quality digital infrastructure projects like data centres and cloud computing. The DESAC scheme offers significant tax incentives to data centre operators who adopt sustainable practices.

These incentives aim to offset the high costs associated with sustainable development, making it financially viable for operators to comply with global benchmarks and regulatory standards.

Pursuant to this, the Malaysian Investment Development Authority (MIDA) has also introduced the Guidelines for Sustainable Development of Data Centres (“the Guidelines”) to provide data centre operators with a clear framework for qualifying for tax incentives under the DESAC scheme, streamline compliance with international standards, and attract global investors by ensuring operational efficiency and cost-effectiveness in line with business priorities.[1]

This article provides a detailed overview of the Guidelines for Sustainable Development of Data Centres, along with additional guidance on data centre building compliance and licensing requirements, to support businesses to open up data centres and/or develop existing ones.

Objectives of the Guidelines

The Guidelines are designed to achieve the following key objectives:

  1. Position Malaysia as the data centre hub in Southeast Asia by attracting investment from sustainable data centre organisations.
  2. Enhance the capacity of organisations in designing and operating energy-efficient data centres.
  3. Accelerate the adoption of renewable or clean energy to deliver low-carbon energy sources for data centre operations.
  4. Foster innovation to improve water consumption efficiency in the design and operation of data centres.

Eligibility Criteria For Data Centres

To qualify for tax incentives under the DESAC scheme, operators must achieve sustainable data centre status in Malaysia, determined using the following key metrics:

  • Power Usage Effectiveness (PUE): Measures how efficiently energy is used. Calculated as the ratio of total energy consumption (including cooling, lighting, and overheads) to IT equipment energy consumption. A lower PUE reflects higher efficiency. Operators must declare their PUE based on ISO/IEC 30134-2 standards.
  • Carbon Usage Effectiveness (CUE): Evaluates the carbon footprint relative to IT energy demand. Lower CUE values indicate reduced emissions, achievable by adopting renewable energy or co-generating electricity. CUE calculations must align with ISO/IEC standards.
  • Water Usage Effectiveness (WUE): Measures water efficiency by calculating the water consumed per unit of IT energy used. Operators should implement water-saving practices and avoid high water-stress areas.

All metrics must adhere to ISO/IEC standards, ensuring reliability, transparency, and alignment with global benchmarks.

Categorisation of Data Centres

The Guidelines classify data centres into six categories detailed in Appendix 1:

  1. Hyperscale (commercial single tenant & Service Provider Private)
  2. Colocation (multi-tenant) Purpose Built (post-2020 build)
  3. Colocation (multi-tenant) Purpose Built (pre-2020 build) medium voltage
  4. Colocation (multi-tenant) Purpose Built (pre-2020 build) low voltage
  5. Colocation (multi-tenant) Converted Building
  6. Enterprise Private (Captive) Purpose Built & Converted Building

Appendix 1 outlines specific parameters for each category, including power supply, capacity, baseline PUE at current IT load, high energy efficiency design targets, methodologies for measuring PUE and WUE, and the frequency of required measurements.

Tax Incentives Under the DESAC Scheme

The DESAC scheme provides the primary benefit of tax incentives, including:[2]

  • Investment Tax Allowance (ITA): 100% on qualifying capital expenditures for new companies for 5 or 10 years, offset against up to 100% of statutory income. For existing companies undertaking expansion projects, ITA of 60% on qualifying capital expenditures is available for 5 years, offset against 70% of statutory income.
  • Reduced Tax Rates: Depending on company tier, new companies are eligible for reduced tax rates of 10% or 15% on statutory income.

These incentives are designed to make sustainable practices financially viable for operators, fostering growth in the data centre industry.

Requirements for Development of Data Centres in New Areas

For companies looking to develop new data centres in Malaysia, they must comply with the Planning Guideline for Data Centre (“Planning Guideline”) which was issued by the Ministry of Housing and Local Development.[3] Section 5.1 of the Planning Guideline provides the requirements summarised as follows:

Control Aspect Details
Land Category and Land Condition ·        Building or Industrial.

·        Approval of a special permit from the State Authority is mandatory for using land outside the expressed conditions of the KTN (Act 828). Industrial and commercial zones are permitted for development.
Permitted Land Use Zones Allowed in light and medium industrial land use zones and commercial land zones as per the gazetted development plan.
Data Centre Categories All types of data centres (small, medium, and large) are allowed.
Plot Ratio, Plinth Area, Building Height, and Building Displacement Subject to gazetted Development Plan and Uniform Building By-Laws 1984 (UBBL).
Open Space Requirements Allocate 10% open space, or 5% if the master plan has been approved.
Road Reserve Requirements Local roads: 20 meters (66′), Collector streets: 30 meters (100′), Junction visibility triangle: 9.144m x 9.144m (30′ x 30′).
Utility Reserve Requirements For new developments (greenfields), additional utility reserves of 1.5 meters wide should be provided on both sides of the road reserve.
Parking Requirements One parking lot per 46.41 m² (500 sq. ft. of office gross floor space) plus 10% for visitors; motorcycle parking: 20% of total lots; one lot for disabled access; minimum one loading bay.
Building Components Must include office spaces (command centre, meeting rooms, pantry, etc.), non-office spaces (data halls, battery rooms, generator set, loading area, etc.), and comply with separation between these areas.
Buffer Zones A 50m buffer zone should be provided between the data centre and residential boundaries unless noise levels are <5 dB above original levels.
Design The facade should align with the surrounding development context, include soundproof materials, and integrate solar and water harvesting systems for buildings with roofs ≥100 m².
Other Requirements Placement of fire hydrants, compliance with CPTED (Crime Prevention Through Environmental Design) and Universal Design principles, and implementation of an intelligent security system with CCTV.

Requirements for Development of Data Centres in Existing Buildings

For companies that have been developing data centres in existing buildings, Section 5.2 of the Planning Guidelines provided the requirements as summarised in the table below:

Control Aspect Details
Land Category and Land Condition Approval of a special permit from the State Authority is required for using land outside the expressed conditions of the KTN (Act 828). Allowed land categories include industrial and commercial.
Permitted Land Use Zones Data centres can be developed in light and medium industrial land use zones as well as commercial land zones, in line with gazetted development plans.
Data Centre Categories Development is permitted for small (1-5 MVA) and medium (>5-25 MVA) data centres.
Plot Ratio, Plinth Area, Building Height, and Building Displacement Compliance with the gazetted Development Plan and Uniform Building By-Laws 1984 (UBBL) is mandatory.
Parking Requirements Parking must comply with the following guidelines:

·        Car: 1 parking lot per 46.41 m² (500 sq. ft. office floor space) + 10% for visitors

·        Motorcycle: 20% of total parking lots

·        Disabled: Minimum 1 lot (located near main entrance with ramp/rail facilities)

·        Loading Bay: Minimum 1 lot
Buffer Zones Buffer zone distances are case-specific and must account for site and environmental conditions. Public health and safety risks must be assessed thoroughly.
Other guidelines ·        Existing buildings must have certificates of completion and compliance (CCC).

·        New components and technical updates must adhere to approved planning permission (KM) and building plans (PB). Amendments require resubmission to authorities.

·        Developments exceeding allocated electricity or water usage must seek prior feedback and approval from TNB and water supply companies.

·        A dilapidation report is required to mitigate risks of damage to adjacent structures.

Licensing Requirements for Data Centre Providers in Malaysia

Under the Malaysian Communications and Multimedia Act 1998, a data centre must obtain an Application Service Provider Class License (“ASP-C License”) from the Malaysian Communications and Multimedia Commission (“MCMC”) to offer “cloud services.” A cloud service is defined as any service provided to end users on demand via the internet from a cloud computing provider’s server.[4]

However, data centre operators that exclusively provide physical infrastructure services, such as colocation or hosting, without directly delivering cloud services to end-users, typically do not require an ASP-C Licence. The MCMC has clarified that web hosting and client-server activities remain exempted from licensing requirements.[5]

This licensing regulation supports Malaysia’s vision of establishing itself as a leading digital hub in Southeast Asia, ensuring high standards for cloud and data centre services.

Conclusion

The Guidelines, supported by the DESAC scheme’s tax incentives and reinforced by the Planning Guideline and ASP-C Licensing requirements, create a clear and comprehensive framework for developing and operating sustainable data centres in Malaysia. Through measurable metrics (PUE, CUE, and WUE), robust land use regulations, and regulatory adherence to ISO/IEC standards and the Communications and Multimedia Act, Malaysia ensures data centres meet global benchmarks for sustainability and operational excellence. This alignment of fiscal, environmental, and operational policies positions Malaysia to attract high-quality digital infrastructure investments and advance its role as a leading data centre hub in Southeast Asia.

If you have any questions or queries, please email us at general@nzchambers.com.

Author: Alif Mustaqim

References:

[1] Accessed at https://www.mida.gov.my/wp-content/uploads/2024/12/Guideline-for-Sustainable-Development-of-Data-Centre.pdf.

[2] Guidelines and Procedures for the Application of Digital Ecosystem Acceleration (DESAC) Scheme. Accessed at https://www.mida.gov.my/wp-content/uploads/2024/12/DESAC-Guideline_MIDA.pdf.

[3] Accessed at: https://mytownnet.planmalaysia.gov.my/ver2/gp/GPP%20Pusat%20Data%20ENG.pdf.

[4] Frequently Asked Questions (FAQ) on Licensing Cloud Service Providers. Accessed at https://mcmc.gov.my/skmmgovmy/media/General/pdf2/FAQ-Regulating-Cloud-Service.pdf.

[5] Ibid.

Published Date: 08 January 2025