The AI boom means that data centers are being built at an unprecedented pace around the world
and Isaac, one country in Asia where the build-out is really obvious is Malaysia.
That's right, Mariko. Malaysia has emerged as an AI hub in Southeast Asia.
The country produces a lot of components that go into chips that help power AI technology.
The country has also been aggressively building data centers.
Now, the economy in Malaysia is expanding thanks to this boom,
but there's some pushback too.
Yeah, and the big question is whether or not those concerns about data center are justified.
And also, how is the pushback against them affecting Southeast Asia's effort to get a slice of the AI boom?
Every application you use, whether it's with AI or without AI, has to come from somewhere.
It's not just a little computation that's done in the cloud, right?
The cloud is actually hosted in a physical location called a data center.
One of the things that in these data centers they have is that they will have a lot of network cables, a lot of what they call server racks that is responsible for the computation, and then also the cooling, the energy requirements on there.
And usually the facilities are managed by very, very few people.
So the reason why that has been going was because the compute usage has gone up significantly, probably powered a lot by ChatGPT, Cloud, or every other AI application out there.
And that is why we need to, because we need data centers and we need large sources of land,
you're going to see large sources of construction, there is changes in the environment,
changes in maybe many normal people's daily expenses.
So that's why it's now become a big subject.
Yeah, indeed.
And yeah, because I was looking at, I think in the UK, there were some protests against
those data centers being built in your backyard, also in the United States.
But Isaac, here in Asia, Malaysia kind of stands out in terms of the number of data centers being built.
How did Malaysia become such a hub in terms of this AI boom?
I think the big contributor is back in 2019 when Singapore implemented this temporary ban.
So developers had to look elsewhere to put their data centers.
And so they looked into neighboring Malaysia, Johor.
Its proximity to Singapore makes it a perfect place to build data centers,
which you can see now, 85% of Malaysia's data centres are located in Johor.
Furthermore, the government put out incentives
that sort of draw in foreign investors to invest in the country.
So Bernard, Isaac just talked about Singapore's restrictions on data centres back in 2019.
Can you just explain why that was?
It's actually not so much a ban, it's kind of a moratorium
because I think the Singapore government is very prudent
about how they're thinking about the electricity
outages that have been going on.
They're mostly caused because of a spike in demand
in computing.
And I think post 2024,
when there was also the US banning China
for having the NVIDIA chips
and a lot of the Chinese founders
from the Chinese tech companies,
they require another place
where they could actually have
a source of good compute.
So that also drives in a lot of foreign director
investments into Malaysia as a result. So it's a combination of factors. We also talk about, say,
things like legislation changes. Somewhere between 2019 to 2023, a lot of the Southeast Asia
countries started to have what we call data sovereignty laws. So data sovereignty laws say,
for example, Malaysia said we need to have something like the data must be hosted in Malaysia.
Indonesia certainly say the same. So it also prompts the hyperscalers to say, okay,
we probably need in order to allow our businesses to operate in these countries,
we have to set up the data centers.
And that build up, I think, started as of when that period started.
And I have to say, they don't look that pretty to have in your back garden.
But Isaac, can you explain?
I mean, it's not just geography of where Malaysia was, right?
That all the investments started pouring into the country
because it has been producing a lot of components, tech components.
So how have all these data centers being built? How has it helped the economy?
And can you just explain the background of Malaysia's economy?
Yeah, like billions of dollars are being poured into Malaysia's economy.
And according to the International Monetary Fund, this year alone, it's expected for Malaysia's GDP to grow by at least 4.7%.
Now, the government obviously has a dream of being at the frontier of this AI revolution.
So it's investing a lot. It's offering eligible companies incentives.
For example, some of them could apply for income tax exemptions.
Others could even apply, could get like investment allowances.
So all these incentives are the government's steps to make that dream a reality.
But of course, there has been quite a lot of protests and you actually spoke to somebody.
So can you just tell us what she told you, what her concerns are?
Yeah, I spoke to Itha Malayana.
She's a 26-year-old English teacher.
So in July, she saw the news that a data center was being proposed in her community.
And she basically just said, no, not in my backyard.
And that concern is because she saw what's happening in the US, the huge backlash against
data centers, and she didn't want that to be in her community.
So she goes online and she creates this petition.
And what really stood out for me is that in that petition, she started with a really famous
quote about how when the last tree falls, people will realize that they can't eat money.
And I asked her about that.
She said that quote basically encapsulates everything that she's standing against the
data centers.
And this is what she has to say.
One of the justifications of data centers is that local industry workers would get trained
and hopefully get to develop this industry in Malaysia.
But I think I've read very briefly on this, but it seems like that's not going to be the
case at all.
Like they're just going to set up these servers and then have a few people managing it.
But it's not really going to be like a skill transfer thing.
I could justify using AI in like medicine or like, I don't know, astrophysics.
But why do we need it to decide what we want for lunch or solve a relationship problem?
Bernard, what do you think about what Aoife said?
I think there are a few parts of what it comes to when a data center comes online.
So before the data center is actually built, that actually brings in what we call construction jobs.
Now, once the data center is complete and completed,
then the management of the data center is taken over by, say, the hyperscaler.
They typically, it's actually very few people, as she rightfully pointed.
So what happens here is that then you have a few workers that is actually able to, if there's any anomalous things happening within the data center, they will be the person to resolve the issues on that.
But then when you look out to the bigger economy, right, then you think about what the data center is actually driving.
The data center, the real focus is actually to drive more what we call the digital economy.
So the digital economy could be in the form of, say,
maybe knowledge-based work.
It could be new kinds of jobs that may be created out of this AI.
I know we are now in what we call a transition stage.
And so the big fear is the job displacement is larger than the job creation.
Yeah.
The only answer to what she's saying is the creation of new jobs.
Is there going to be more than or less?
That question, I don't know.
I would prefer to be much more humble to say I don't know.
But I think we've seen different iterations of technological change.
And so far, every time it happened,
we seem to end up creating more jobs.
If you're just looking at this current time period,
when's the data center built?
She's effectively right on that.
But how the data center creates value
for the digital economy within that country,
that is not so clear to me.
But would that be within that country?
Because couldn't you argue that those new jobs created,
thanks to the AI boom, might be outside of Malaysia?
So that was the whole reason why every country
now has their own Data Sovereignty Act.
Yes, you can host other data from other parts of the world,
but you still have a sustainable holding.
And every business out there who needs,
whether it's a neocloud or hyperscaler,
they have to invest in Malaysia in order to get that part of the economy.
And they have to drive the local economy
because what they don't really want is having everyone,
the local communities holding pitchforks and say,
hey, you know, we want to burn down the data center.
That is also a cause of concern for them.
And I think that stability also becomes part of the conversation.
How has the Malaysian government been speaking about this ambition,
their ambition to be the AI hub, but also concerns from those local residents over jobs,
but also about the environment. I previously mentioned that Johor currently houses about 80
to 85% of the data centers in Malaysia. So in the state of Johor, the government has banned two tiers
of data centers. First is a tier one and tier two. Those are data centers which consume about 50
million litres of water a day. And that amount is basically about, it could satisfy the people's
daily drinking needs above 25 million people. So the government has stopped those data centres
from being built. It has also introduced penalties where if the data centre operator said that
this is the amount of electricity it's going to use per year, if it doesn't need 85% of it,
they're going to find the operator.
There's actually a metric to look at data centers.
It's called power usage effectiveness,
what they call the PUE metric.
So if you think about, say,
currently Singapore is mandating
that all data centers must be below
what is called 1.25 PUE.
Okay.
Malaysia, I think it's 1.4.
So there are two aspects of the problem.
So one of them is the water problem.
The water problem is real
if they do not try to recycle the water for the data center's cooling.
So there are actually already known solutions to that.
So there is something called StatePoint Liquid Cooling.
A couple of companies actually started in the US.
But how do they do it?
So basically, you reflux the water.
There is an entire recycling technology on that.
The more concerning part of this is actually energy.
Because of the usage of AI is exponentially growing,
the energy usage is also growing exponentially
and we are actually filling it.
So a lot of it is due to poor demand forecasting of power.
If you think about, look at the region as a whole,
countries, I mean, Singapore is already doing that.
The next data centre you build,
you have to have a certain energy,
that means the energy you use,
some parts of it must come from renewables.
Then as you go to say Malaysia, for example,
then the question is what kind of,
they definitely have energy,
they have petroleum, oil,
so they can hydrocarbon so you can power some part of it then the question is do they want to
rely on other mixes because the there is no way now that uh just by using a carbon they are able
to run that they also you also bring about the increase of climate change as well and malaysia
has the ambition to be that ai hub in southeast asia and it really wants to achieve that so i
think the government needs to balance between addressing the people's concerns while also
taking realistic steps to make those dreams a reality of being an AI hub. So the Malaysian
government, the Prime Minister announced that the young people will be able to access a three-month
free subscription to some of the AI models and that is basically to allow them to explore the
AI models, play with it and even to perhaps boost their creativity and improve their digital skills.
So the government is taking an active step into making the country embrace AI.
But I guess we'll see how the government addresses the people's concerns.
Will they keep building data centers for now with, I guess, stricter regulations, Isaac?
I think so, honestly, because the people's concerns about data centers are valid.
And for example, you heard from Ether herself that she said that she doesn't want Malaysia to become like the US,
where the people actively push back against data centers
because she's questioning why is data centers, AI, relevant or even important?
Because we've heard from the AI company CEOs themselves
that they say that this AI revolution is inevitable.
But she's questioning that.
So I think we'll hear more and more people having similar concerns as Ether.
One interesting example of a country that's in this AI revolution
that's not very much we would think about is China.
so where China is pretty effective
is the energy infrastructure
so they have built up
most of the energy infrastructure
they have built up
most of the
renewable energy mix
what they don't have
is now the chips
and the AI models are lagging
basically 3 to 6 months
depending on who you talk to
on that
but if you look at say
there was a survey done
80% of Chinese
are hopeful about the AI future
and then if you do the same survey
in the US it's only 31%
So the question is, what's the big difference, right?
So I think a lot of it is in whether we're optimistic
that the AI will bring about sort of a growth of a new economy.
And there are some things that I think people take it to the logical extreme.
If AI was to do everything of this, then what should humans do, right?
I think the way I would probably want to moving ahead,
I think that there is actually human creativity is actually infinite.
The demand for human creativity is actually infinite.
And I think for that, because of that, even if AI can automate most of the things,
there are still things for us to do.
Yeah, really insightful conversation.
Thank you so much for joining me, Bernad and Isaac.