Balancing Servers and Sustainability: Southeast Asia's Data Center Dilemma

The low, whirring hum of a data center might sound distant to most of us - just background noise in the grand symphony of the digital age. But in Southeast Asia, this sound has become emblematic of a deeper story: a story of ambition, opportunity, and a fast-approaching environmental reckoning.

In the past decade, countries across Southeast Asia have been swept up in a race to become the region’s premier digital hubs. Data centers - the hidden engines of our digital lives - have emerged as the cornerstone of this transformation. From the shores of Johor in Malaysia to the outskirts of Jakarta and the eastern corridors of Thailand, shimmering new server farms are rising with the promise of prosperity. They hold the power to store, compute, and propel the data-driven dreams of nations. But like all engines, they consume. And as their appetite for power, water, and space grows, so does the region's need to ask: at what cost?

The Gold Rush of Data

Southeast Asia is experiencing a remarkable surge in data center investments, driven by the region’s booming digital economy and demand for cloud services. Countries like Malaysia, Indonesia, Thailand, and Vietnam have emerged as prime destinations for new data center projects, often outpacing the traditional hub of Singapore in growth rates. Malaysia alone attracted about US$26.6 billion in data center investments between 2021 and 2023.[1] In Thailand, investment interest has spiked as well – Google announced a $1 billion data center in the Eastern Economic Corridor (Chonburi) and TikTok (ByteDance) pledged about $8.8 billion over 5 years for Thai data infrastructure.[2] Indonesia is also seeing robust growth, with data center capacity distributed across Jakarta, Batam, and Surabaya now exceeding 514 MW and set to rise further as global tech firms (e.g. Tencent) and government programs build out facilities.

A mix of competitive costs, available land, and proactive government policies is fueling this boom. Every country had its own calculus. For Malaysia, the proximity to Singapore meant it could capture spillover investment. For Indonesia, its vast population and strong e-commerce market made it an appealing target. For Thailand and Vietnam, data centers became part of national strategies for digital transformation. And behind the scenes, a web of incentives, policy changes, and inter-agency coordination was quietly reshaping the investment landscape:

·       Malaysia provides generous perks such as 100% tax exemptions for data center operators and cloud service providers, fast-tracking permits, and dedicated industrial parks with ready access to power and fiber. In January 2025, Malaysia and Singapore jointly launched the Johor–Singapore Special Economic Zone (JS-SEZ), designating flagship districts in Johor with preferential 0–5% corporate tax rates for investors in data centers, AI, and other high-growth tech sectors.[3]

·       Thailand’s government, through its Board of Investment (BOI), has made data centers a priority sector for foreign investment. The Eastern Economic Corridor (EEC) in the Chonburi/Rayong area is being promoted for large data center campuses with incentives. In 2024 the Thai BOI approved over $2 billion in new data center projects.[4]

·       Indonesia has leveraged its vast domestic market and new infrastructure to draw data center builders. The government has promoted investment zones near Jakarta and Batam, streamlined licensing for digital infrastructure, and is working on improving reliable power supply for these energy-hungry facilities.

·       Vietnam similarly offers tax holidays and land incentives in tech zones (like the Hoa Lac Hi-Tech Park near Hanoi) to data center investors. Crucially, Vietnam’s cybersecurity law mandates certain data be stored in-country, which has led major cloud players to plan local data centers.

The Environmental Cost

If this prosperity has a shadow, it is the specter of sustainability. Data centers are energy-intensive, water-dependent, and land-hungry facilities and as their footprint expands, local communities and researchers are sounding the alarm about the sustainability of this growth.

The foremost of these challenges are the skyrocketing energy demands. In Singapore, for example, data centers already account for around 7% of national electricity consumption, and this share is projected to reach 12% by 2030.[5] Governments and utilities face pressure to expand generation capacity and grid stability to support the new centers. In Thailand, officials note that each large data center can demand 100–200 MW of power, necessitating long-term planning to maintain reliable supply.[6] Such loads, if met by coal or gas plants, could conflict with climate goals. Indeed, Singapore’s government observed that data centers were responsible for 82% of the tech sector’s carbon emissions in the country, prompting a reevaluation of unconstrained growth.[7]

Less visible but equally critical is water. Many data centers use water-based cooling (chilled water systems or evaporative cooling towers) to dissipate heat from servers. A single mid-sized data center can consume over a million liters of water per day for cooling.[8] In a tropical region where water shortages are a recurring issue, this level of consumption is drawing public concern. In Malaysia, authorities have warned that the data center boom is straining local water supplies. The National Water Services Commission reported it approved less than 18% of water volume applications from the 101 data centers operating across several southern states, holding back the rest due to the risk of diverting treated water away from public use.[9]

Land availability is also a growing concern. Data centers require sizable plots of land or industrial space, and tend to cluster in specific areas (for fiber connectivity and proximity to users). In land-scarce cities or pristine areas, this raises issues of land competition and ecological disturbance.

These challenges have not gone unnoticed. Across the region, civil society and media have started scrutinizing the data center boom’s environmental footprint. Commentators talk about a “dark side” to the data center rush – cautioning that without sustainable practices, the industry could undermine Southeast Asia’s climate commitments and resource security.[10] We are also seeing early signs of community pushback. For example, in Johor, Malaysia, public worries about water scarcity and power usage have pushed officials to closely evaluate new projects’ resource needs.

Singapore, the long-standing regional leader in data centers, experienced this dilemma first and most starkly. Concerns over power and land led the authorities to take an unprecedented step: a temporary moratorium on new data center construction. Singapore’s experience offers a cautionary tale and important lessons for its neighbors on managing the trade-offs between economic and environmental priorities

A Glimpse into the Future? Singapore’s Moratorium as a Case Study

As Southeast Asia’s original data center hub, Singapore was among the first to encounter the sustainability dilemma of this industry. By the late 2010s, Singapore had grown into a regional data center powerhouse (over 70 centers and ~1 GW capacity) but at the cost of rising resource burdens.[11] In 2019, faced with mounting concerns about electricity consumption, carbon emissions, and scarce land, Singapore’s government quietly enacted a moratorium on new data center projects.

The freeze sent a strong signal: sustainability had become a non-negotiable factor in Singapore’s tech infrastructure planning. Only after intensive study and stakeholder consultations did Singapore begin easing the restriction in 2022. In January 2022, the government formally lifted the blanket moratorium to initiate a pilot quota. In 2022–2023, regulators offered a limited capacity allotment (about 60–80 MW of new capacity) to be awarded to a handful of operators that met stringent criteria like Green Mark (Platinum) building ratings and investments in Singapore’s broader digital ecosystem cautious reopening paved the way for a more comprehensive strategy unveiled in 2024.[12]

In May 2024, Singapore launched its Green Data Centre Roadmap (GDCR) – a long-term plan to grow the data center sector only in alignment with sustainability goals. Under the GDCR, authorities will allow up to 300 MW of additional data center capacity in coming years, on the condition that new facilities adhere to strict green standards. The roadmap defines a “Green Data Centre” along three key pillars: (1) Exceptional energy efficiency, both at the building infrastructure level and the IT equipment level; (2) Use of low-carbon energy sources to power the facility (e.g. sourcing renewable energy imports or offsets); and (3) Superior water efficiency and innovative cooling methods.

Singapore’s moratorium experience underscores the balancing act at the heart of the environment vs. development dilemma and should become a warning as well as a roadmap for its neighboring countries who are following a similar pathway to growth. At the heart of this challenge lies the need to recognize the trade-offs early enough and prepare for them proactively.

Strategies for Balancing Digital Growth and Sustainability

With data centers set to be the backbone of Southeast Asia’s digital economy, how can countries balance the benefits of digital growth with environmental stewardship? The challenge is multi-faceted, but a combination of regional cooperation, smart national policies, and technological innovation can help chart a sustainable path forward.

Regional Cooperation Through ASEAN

A coordinated ASEAN regional strategy can help to tackle challenges no countries individually can. There are a few dimensions to this cooperation:

·       Harmonizing Standards and Best Practices: ASEAN member states can work together to establish common sustainability standards for data centers, such as region-wide benchmarks for energy efficiency or green building certifications. By agreeing on metrics countries can avoid a “race to the bottom” where investments gravitate to whichever locale has the weakest standards.

·       Cross-Border Data Solutions: countries can coordinate data connectivity and sovereignty rules. If data can flow securely across borders, ASEAN nations can optimize where to locate data centers. This concept of a regional hub network – rather than each country duplicating facilities in suboptimal locations – ties into the idea of ASEAN as a unified digital market.

·       Knowledge Sharing and Capacity Building: ASEAN cooperation means sharing expertise and technology. Singapore, being a pioneer in green data center regulations, can share its playbook (e.g. its Green Mark for Data Centers certification and new technology testbeds) with neighbors. Countries like Thailand and Malaysia, which are newer hubs, could jointly develop training programs for data center energy management, or pool resources to fund R&D in sustainable cooling suited to tropical climates

National Policies for Greener Data Centers

At the national level, governments need to set clear policies that encourage digital growth while enforcing environmental responsibility. Several Southeast Asian countries are now crafting or implementing such policies. Singapore’s Green Data Centre Roadmap is a leading example that other countries can note from. Policymakers can also look beyond the region for models. In Europe, for instance, the data center industry and regulators have forged a Climate Neutral Data Centre Pact that commits operators to ambitious goals – such as running on 100% carbon-free energy by 2030, strict PUE targets (1.3–1.4 for new centers), water conservation, and equipment recycling measures. Some governments may also mandate sustainability disclosure for data centers (similar to how factories must report environmental metrics), incentivize the use of waste heat recover, or impose requirements on using non-potable or recycled water for cooling. The key is that national policy should send a clear message: digital infrastructure must grow responsibly. Deliberations on this issue have already begun. Malaysia, Indonesia and Thailand are all on their way to making sustainability a more prominent part of their national data center strategy.

Green Innovations in Data Center Technologies

Technology will be an invaluable ally in reconciling data centers with environmental limits. A range of innovations in green data center design and operation are emerging with some already being deployed in Southeast Asia that can dramatically reduce energy and water usage. These include advanced and more sustainable cooling technologies, integration of renewable energy such as through data center operators signing large-scale Power Purchase Agreements (PPAs) for off-site renewable energy and implementing AI and smart energy management. Staying updated on, and further encouraging, the implementation of environmentally friendly technologies will be the way forward for many countries.

Conclusion

As Southeast Asia races into the digital future, its challenge is not whether to grow, but to grow with care and foresight. Can the region become a beacon for digital development without compromising its ecological balance? Can servers and sustainability not just coexist, but reinforce one another?

The answers lie not in a single policy or project, but in a collective mindset shift. In ASEAN meetings where sustainability shares the stage with innovation. In public dialogues where environmental voices are heard as clearly as economic ambitions. And in a shared regional will to ensure that the digital dreams of today do not become the environmental regrets of tomorrow.

Because in the end, a smarter, greener Southeast Asia isn’t just possible. It’s necessary.