RM4.09 / US DOLLAR: THANK YOU DATA CENTERS

 "Singapore BANNED Data Centers for a while".

The Ringgit is surging strongly against the US Dollar and also against other currencies. I hope it slips well below RM4.00 in the coming months. The multi-billion US Dollar Data Center investments are kicking off. Billions of US Dollars are pouring into the country. First some old news rehash:

• Foreign investment in Malaysian data centres booming
• Over RM144 billion approved since 2021
• Driven by tech giants like Microsoft, AWS, and Google
• Google invest US$2b (RM10b) its first data centre
• over US$23b (RM100b) from North America alone in early 2024
• valued at US$4.04b (RM17b) in 2024 
• Malaysian data centre market to exceed US$13.5b (RM56b) by 2030
• global tech giants: Amazon Web Services, Microsoft, Google, ByteDance 
• Amazon to contribute US$12.1b (RM57.3b) to Malaysia’s GDP 

My Comments:

As you can see the numbers are huge. These Data Centers have begun construction. Here is a Data Center under construction within about 5-10 minutes of where I live. This is in Nilai. 

The Billions of US Dollars are already pouring into Malaysia to buy land, construct the very special purpose buildings, buy all the billions of Ringgit worth of computer mainframes, machinery fabrication etc. You can see in the picture the buildings are massive in size. The columns are large and the flooring is thick possibly to support mainframes with minimal vibration. All this costs money.

I believe this is what is pushing up the Ringgit. (Just to explain, when Foreign Investments flow into the country they must convert their money - for example US Dollars - into Ringgit to pay for all their purchases inside the country. Hence the Ringgit will move up).

Not everyone is in favour of Data Centers. They are here for our cheaper electricity and for the abundant water (also cheap). Once they are all up and running the country's power supply will be fully stretched. We will have to build more power plants. Perhaps this is why they signed that natural gas deal with Donald Trump - we will need more gas to fire the power plants.

The Data Centers do not generate as much employment in relation to the amount of the investments. A Data Center may employ a couple of hundred people - mostly highly skilled engineers and technicians - most of whom will be imported expatriates because our education system is still busy with its liwats, rogols and the occasional mati jatuh dari tingkat atas. 

So if you are thinking that all these hundreds of billions of Ringgits invested in Data Centers will create tens or hundreds of thousands of jobs - well not exactly. This is a capital intensive, high tech but low labour intensive investment. Automation and AI is the name of the game. Of course the Security Guards will be Nepali. There will be no Bas Kilang ferrying Bangladeshi workers.

Data Centers will also generate heat pollution - hence they will spend billions to fabricate cooling systems. Data Centers located in urban areas may raise temperatures in the immediate surroundings - unless their cooling systems are well fabricated and operated.  Hence their need for large quantities of cheap water or water recycling.  In any case money must be invested and the Ringgit will go up some more.

Singapore BANNED Data Centers for a while. They have allowed Data Center investments again but with very strict conditions. They must generate a portion of their own electricity - using renewables. They must also recycle their cooling water. All that costs much more money.

Malaysia does not have such restrictions. 

At this point in time any investment is a good investment - regardless foreign or domestic investors. But more foreign investments will push the Ringgit higher. I hope the Ringgit goes to RM3:50 or something against the US Dollar.  Foreign travel will become cheaper. Imported inflation will disappear.

The views expressed are those of the writer and do not necessarily reflect those of MMKtT.