South-east Asia’s data centres need to be planned like public infrastructure, not buildings

A GENERATION ago, airports were largely viewed as transport assets. Success was measured by the number of flights they handled and passengers they moved. Today, that view feels incomplete.

The world’s leading airports are understood as economic ecosystems. Their success and value depend not only on runways and terminals, but also on the transportation networks, power systems, logistics infrastructure, workforce availability and commercial activity that intrinsically supports and surrounds them.

The same is becoming true of data centres.

Across South-east Asia, governments are racing to attract digital infrastructure investment as demand for cloud services and artificial intelligence continues to surge.

New capacity announcements are accelerating across Malaysia, Indonesia, Thailand and Vietnam, positioning the region as one of the world’s fastest-growing data centre markets.

The challenge facing South-east Asia is not whether it can attract investment, but whether the infrastructure systems surrounding that investment can keep pace.

Power and water: the twin constraints

Across both South-east Asia and the wider Asia-Pacific region, reliable and affordable power and water access has become one of the defining challenges facing data centre development.

For years, data centre planning has largely followed a familiar pattern. Developers secure land, source for power, arrange water supply, establish digital connectivity and navigate approvals.

Regulators, utilities and planning authorities review each of those requirements in turn, much like real estate projects.

But that review happens in silo, one agency, one permit at a time, rather than as a single coordinated system.

This approach, while fragmented, worked when facilities were smaller and growth was more gradual. It doesn’t hold at the scale at which AI infrastructure is now being demanded.

Power tends to dominate the conversation around expansion because grid constraints are the more visible pressure point, but water is under the same strain and moving on the same trajectory.

As AI workloads intensify, cooling demands rise in step with electricity demand. A facility’s viability depends as much on secure water access as secure power generation.

The boom in investments has also exposed policy gaps forcing governments, energy and utilities authorities to rethink regulations actively and intervene with tariffs and guidelines to mitigate the effect of rising demands.

Planning solely around today’s capacity requirements risks creating tomorrow’s constraints.

The real challenge lies in moving to system-level planning and execution, siting facilities alongside a resilient mix of power generation (renewable and firm capacity) and water systems built to withstand the same climate pressures already reshaping supply across the region’s fastest-growing urban centres.

At Arup, we see power and water as two sides of the same competitiveness question. Just as energy security shapes a market’s economic competitiveness, water resilience is fast becoming just as decisive a factor in its digital competitiveness.

When growth outpaces the grid and strains resources

Malaysia offers one of the clearest examples of demand outpacing what current systems can support.

The country has emerged as one of Asia’s most attractive destinations for data centre investment, particularly in Johor. Capacity is set to more than double to 2,055 megawatts (MW) by end-2026, at a compound annual growth rate of 70 per cent since 2020.

Yet as development accelerates, power infrastructure is increasingly under pressure. Grid connection timelines have become longer, and infrastructure upgrades are being asked to support growth at unprecedented speed.

This challenge is further complicated by the fact that energy systems across South-east Asia are simultaneously being asked to decarbonise, electrify and support growing day-to-day demand.

That growth’s impact on water is already measurable. In a recent consultation report published by the Asean+3 Macroeconomic Research Office, a single 100 MW data centre can consume over four million litres of water a day for cooling.

Johor, now home to roughly 80 per cent of Malaysia’s operational data centre capacity, is experiencing pressure on local water infrastructure as demand for data centres accelerates.

These challenges should not be interpreted as a sign of failure. They are better understood as an early indication of what happens when digital infrastructure scales faster than the systems supporting it.

Planning ahead of constraints

Singapore’s temporary (2019 to 2022) moratorium on new data centres has sometimes been interpreted as a brake on growth. However, it reflects a recognition that digital infrastructure can no longer be planned independently of national energy, water sustainability and land-use objectives.

The decision signalled a shift in thinking – from maximising data centre growth to optimising how that growth aligns with wider infrastructure priorities.

Both examples offer valuable lessons for neighbouring countries such as Indonesia, Vietnam and Thailand, as investment in the region accelerates.

Energy, water and digital infrastructure present a singular planning problem that no single regulator or agency can solve alone.

From project-level to system-level planning

While data centres may be the most visible symbol of the digital economy, their success depends on a far less visible network of enabling infrastructure.

This infrastructure requires meaningful, considered coordination between regulators, planners and developers – before constraints start to surface.

For governments, that means integrating digital infrastructure more closely into broader infrastructure strategies, including energy, water and transportation planning. It means identifying growth corridors where multiple systems can scale together.

This approach is already being put into action. In the Johor-Singapore Special Economic Zone, Arup is providing guidance on a cross-border energy plan that links the zone’s expanding data centre industry with a 500 MW solar facility – the largest of its kind in Malaysia and the first to incorporate utility-scale battery storage.

The project was specifically designed to strengthen grid reliability as digital infrastructure continues to grow.

Rather than addressing power generation, energy storage and digital demand as separate concerns, this initiative treats them as a single, integrated system.

Thinking longer term

South-east Asia continues to face pressing realities. Today, power affordability and water stress are both live, sensitive issues across the region, as households and industry compete for supply amid global supply disruption, rising costs and climate pressures.

Leaders and policymakers need to keep in mind that powering and cooling digital infrastructure cannot be framed as separate from the region’s residential and industrial needs.

It must be planned as part of strengthening the same energy and water systems that everyday life depends on.

For developers, it means assessing long-term ecosystem readiness – grid capacity, alternative energy-generation mixes, water supply and treatment capacity, as well as connection timelines alongside site readiness.

A location’s future competitiveness will increasingly depend on the resilience of the infrastructure around it, not simply the availability of land within it.

While capital markets may still price data centres like real estate, governments and energy authorities are actively intervening – as Singapore’s moratorium has already shown.

Across the region, planning execution cannot remain siloed within the agencies responsible for power, water, land and digital connectivity. Governments and developers alike need to move beyond project-level planning towards system-level planning.

Airports became engines of economic growth exactly because governments learnt to plan the systems that supported them, not just the assets themselves.

Data centres are reaching a similar moment.

The conversation typically begins with a familiar question: Where should the next data centre be built? The more important question, however, is: What needs to be built around it?

The writer is associate principal, South-east Asia technology business leader at Arup