Amazon Web Services Investment Underscores Malaysia's Many Attractive Offerings - Economist

By Siti Radziah Hamzah

KUALA LUMPUR, Aug 23 (Bernama) -- The latest investments by Amazon Web Services (AWS) underscore that Malaysia has much to offer to foreign businesses that go beyond tax incentives, said an economist. 

Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said its strategic location, infrastructure, talent pool and pro-business policies are among its key attractions.

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This has resulted in the government not having to rely too much on tax incentives to attract foreign investors and businesses.

"Having said that, the type of the incoming investments have to be well diversified. In the best possible way, the government has to avoid over-concentration in sectors because this leaves the country vulnerable to a sudden change in the investment waves," he told Bernama. 

On Thursday, AWS announced a US$6.2 billion (RM29.2 billion) investment in Malaysia as part of its long-term commitment through to 2038.

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This investment accompanies the launch of its AWS Asia Pacific (Malaysia) Region, providing developers, start-ups, entrepreneurs, and enterprises in Malaysia with greater options to run applications and serve end users from local AWS data centres.

The construction and operation of the new AWS Region is estimated to add approximately US$12.1 billion (RM57.3 billion) to Malaysia’s gross domestic product and will support an annual average of more than 3,500 full-time jobs through to 2038.

On Friday. Prime Minister Datuk Seri Anwar Ibrahim said as part of this new relationship, AWS has signed a cloud framework agreement with the government to boost cloud adoption within the public sector.

Mohd Afzanizam noted that the proliferation of data centres suggested that Malaysia could create a niche technology space and the country has already established its footprint in the semiconductor industries.

There has been a move to uplift skillsets by promoting integrated circuit design. On that note, Malaysia has the potential to be Asia’s data centre hub, given its land mass and infrastructures, he added. 

Meanwhile, Malaysian University of Science and Technology's economics professor Dr Geoffrey Williams said Malaysia has the space to host more data centres; the real issue is to ensure there were spillovers to the local economy.

"Data centres are largely automated and will not create many long-term jobs. The profits will be repatriated by the foreign owners so the benefits may not stay here," he noted. 

On concerns about data centres’ high usage of water and electricity, which are cheaply available in Malaysia, Mohd Afzanizam said this should be viewed from a holistic approach with the country’s green economy transition. 

"This means rationalising electricity subsidies and promoting renewable energy. Perhaps, carbon trading and carbon tax are policy options that can be leveraged to have a win-win solution.

“I am sure data centre operators are well aware of this development,” he said, adding that there is common ground between the government and data centre operators.

Williams also said recent foreign direct investment inflows have been mainly in the technology sector and these require specific resources.

The National Energy Transition Roadmap will raise renewable energy generation and because renewable energy is cheaper, this will help foreign companies to use low-carbon electricity which they cannot get at home.

"So they may be environmentally sustainable if they use renewable energy but this will put pressure on local resources which could raise costs for local communities. In that sense, they may not be socially sustainable," said Williams. 

-- BERNAMA