Report: SEA makes up ~50% of APAC data center capacity being built, led by Malaysia and Thailand, which paused 49 and delayed approvals of 117 projects in Sept.

Data center build approvals in Thailand and Malaysia have been paused or delayed, impacting planned capacity and requiring new regulatory frameworks.

South-east Asia (SEA) is experiencing a significant slowdown in data center construction, with Malaysia and Thailand leading this trend. In September, Thailand paused 49 construction projects and delayed approvals for 117 others due to regulatory and monitoring concerns. Indonesia also halted a data center project over permit and environmental assessment issues. Despite these pauses, SEA accounts for approximately 50% of the data center capacity being built across the Asia Pacific region, driven by increased demand from AI and LLM usage. Historically, Singapore was the primary hub, but resource constraints led to a moratorium and now selective approvals. Malaysia, particularly Johor, has emerged as a major hub, attracting substantial investment. However, the rapid growth is straining power and water resources in these countries, leading to local community protests and government re-evaluations of approval processes, with a focus on energy and water efficiency.

The rapid expansion of data centers in Southeast Asia, driven by AI demand, is encountering significant headwinds related to resource constraints and regulatory oversight. Thailand's decision to pause construction and delay approvals, citing insufficient regulatory detail, highlights a growing concern about managing the immense power and water needs of these facilities. This shift from rapid growth to cautious reassessment signals that the region's data center boom may be maturing, forcing a confrontation with environmental sustainability and infrastructure capacity limits.

These resource pressures are compelling governments to implement stricter approval processes and incentivize more efficient operations, potentially altering the cost and timeline for new developments. While companies are exploring efficiency measures like water reclamation, the sheer scale of demand and the environmental impact are forcing a reckoning for both operators and policymakers, suggesting a more measured and regulated future for data center development in the region.