South-East Asia's Datacentre Boom Stalls as Thailand Freezes 166 Projects

The region matters to every company racing to secure AI computing capacity. South-East Asia accounts for about half of the datacentre capacity under construction in Asia-Pacific, according to a 2026 report by property firm Cushman and Wakefield, with Malaysia and Thailand making up much of it. China still has the most operational capacity in the region. Investors from the Gulf are involved too: a UAE-based Skyline datacentre project was among those Thailand's Board of Investment approved early this year.

Thailand's Freeze

The Thai pause came at the first meeting of the country's new data centre policy board on September 4, chaired by Deputy Prime Minister and Finance Minister Ekniti Nitithanprapas. The board asked 49 projects under construction to halt and held back permission for 117 more, according to the Nation. Earlier in the year, the Board of Investment had approved projects from TikTok, Skyline and Singapore's Bridge Data Centres with total planned investment of $27bn, the Guardian reported.

Officials said no single agency could see a project's full demands. Investors apply separately to power utilities, water authorities and local building regulators, and some datacentres are registered as warehouses. Danucha Pichayanan, secretary-general of the National Economic and Social Development Council, told the meeting that data from 16 agencies showed 35 projects already operating. Only 11 of those had Board of Investment promotion.

Four subcommittees were given a month to draft minimum standards. Officials said new projects would have to meet requirements on town planning, distance from neighbouring buildings, safety, electrical systems, backup fuel storage and environmental protection, and that existing operators would get a transition period. Energy minister Akanat Promphan has said datacentres run largely on power generated from expensive imported gas. He has called for a new class of electricity user that would pay higher tariffs.

In Indonesia, the governor of West Java, the country's most populous province, halted construction of a datacentre because it lacked permits and its environmental assessment was incomplete.

Johor's Tenfold Growth

The pauses follow years in which demand spilled out of Singapore. Singapore barred new datacentres from 2019 to 2022 because they were heavy users of water and electricity, and has approved new capacity sparingly since. It added just 95MW of operational capacity between 2023 and 2026, according to Cushman and Wakefield.

Much of that demand moved across the border to Malaysia. Operational capacity in the southern state of Johor rose from 94MW in 2023 to 1,110MW in 2026, with another 3,088MW under construction or planned. The state's chief minister, Onn Hafiz Ghazi, says Johor has drawn $40bn of datacentre investment. Microsoft committed $2.2bn to cloud and AI infrastructure in Malaysia in 2024, and Australian operator AirTrunk plans to spend $3bn to double its Johor sites from two to four. Google this week pledged $15bn for Malaysian datacentres and 1GW of clean power.

Indonesia has a 1,699MW development pipeline in greater Jakarta and is building up Batam as a second hub. Bangkok's pipeline stands at 2,084MW, according to Cushman and Wakefield.

Water and Local Opposition

The strain is starting to show. Energy consultancy Wood Mackenzie estimates that datacentres already use 24% of Johor's electricity, a share that could reach 40% by 2035. Alvin Tan, a research analyst at the firm, warned of "localized grid connection bottlenecks" and of the need for new transmission and generation.

Water is the sharper local issue. In Thailand's Eastern Economic Corridor, Somnuck Jongmeewasin of the advocacy group EEC Watch named the Khlong Luang Reservoir in Chonburi as "a primary flashpoint". He said water from the reservoir is being piped to industrial estates even though it is shallow and already under strain. In February, Johor saw its first public protest against a datacentre, aimed at a project by China's ZData Technologies near homes.

Jie-Sheng Tan-Soo, an assistant professor at Singapore's Lee Kuan Yew School of Public Policy, said datacentres generally create fewer long-term jobs than other industries that use comparable land, power and water. He said communities may reasonably ask whether they are getting "a proportionate share of the benefits".

The next test is Bangkok. Three of the six datacentre applications filed in the capital remain on hold until the national standards are in force, the city's governor, Chadchart Sittipunt, said.