Locals left asking what comes next after Johor’s data centre rush swallows their villages

PASIR GUDANG, Johor – For most of her life, 64-year-old retiree Amnah Jemat has lived in Kampung Cahaya Baru, a quiet traditional Malay village of low-lying homes on a hill in Pasir Gudang, Johor Bahru.

Her family home once overlooked a forested area, and her mornings were cool and dewy. That view is about to change.

Singapore-based Racks Central is constructing three data centres on two plots of land spanning around 7ha – about the size of 10 football fields. These facilities are being built a stone’s throw from her doorstep on land that had previously been cleared. One 90MW facility is set for completion in December 2026.

“We thought it was going to be a shopping centre, and we were excited. After all, we live in a village with limited amenities,” the former factory worker told The Straits Times.

“Now we’re told it’s a data centre. We don’t know what it will be like when it’s built. Will our health be affected, and will our water supply be limited?” 

Madam Amnah is among residents in several Johor towns who are adjusting to a new reality – living next to data centres.

Technology parks built to house these power and water-guzzling facilities in the southernmost Malaysian state are almost at full capacity, forcing operators to look elsewhere to fulfil a growing global demand for artificial intelligence.

“I’m not sure what will become of our village after this,” Madam Amnah said, adding that she knows little about data centres.

Johor has rapidly emerged as one of South-east Asia’s fastest-growing data centre hubs, attracting billions of ringgit in investments. This is partly a result of a moratorium on data centres in Singapore between 2019 and 2022, which prompted the migration of such centres to elsewhere in the region.

With industrial hubs all full, real estate sources interviewed by ST said developers who kept their land over the years have found eager purchasers commanding substantial capital to buy large swathes of land at one go. These include plots that are just metres away from residential areas.

As at November 2025, Johor has approved 51 data centre projects with an investment value worth RM182.96 billion (S$59.3 billion), said Datuk Jafni Shukor, the state’s top official for housing and local authority.

A recent Asia-Pacific report on data centres by real estate consultancy Knight Frank showed how scarce land parcels in Johor’s major tech parks are now. Even the next phases of these parks are already being booked.

The report, published in September 2025, said: “The market is now highly constrained, with a vacancy rate of just 1.1 per cent, as planning becomes more challenging and power shortages (are) coming through.”

Kampung Cahaya Baru – which lies about 20km from Johor Bahru – is among several areas where data centres are being built close to homes. Racks Central acquired land in the nearby Iskandar Halal Park in October 2024 and March 2025 to build three campuses, each with a capacity of between 90MW and 175MW.

‘We were never consulted’

Two other flash points are in Iskandar Puteri: the Leisure Farm estate bordering Nusajaya Tech Park – home to at least 10 operational data centres – in Gelang Patah, and the Taman Nusa Bayu estate.

In these areas, the issue has drawn much ire from residents who have had to deal with persistent noise from construction and dust pollution.

The problem is more evident in Nusa Bayu, where residents staged a protest and sent a memorandum, seen by ST, to the Johor Menteri Besar’s office on Feb 9. In it, they demanded greater transparency on the state’s plans for data centres, and the potential impact on local power and water supply.

Around 10 residents interviewed by ST said they were caught off guard when developers began clearing a 15ha forested plot near their homes in August 2025. Two hills, once covered with lush greenery, were partially cut and levelled to make way for a service road.

According to a press release in October 2024, real estate developer Tropicana Corp, through its subsidiary Tropicana Firstwide, had sold a 15.5ha plot worth RM240 million to Beijing-based ZData. Another 27.7ha of land worth RM383 million was sold to Japan-based NTT Data Group.

“Most residents bought homes here because they wanted a calm and peaceful housing estate, away from the city,” said resident Zainoor Annuar, 45, who represents around 400 households there who mostly commute to work through Singapore’s Tuas Checkpoint.

Frustration drove Mr Zainoor, a PhD candidate studying disaster management at a local university, to use his drone to monitor the construction activities near his home.

Another resident, Mr Ulaganathan Krishna, said: “We’re not resisting development, but we hope that the authorities ensure that these developments abide by local protocols.”

Mr Krishna, who works at a Singaporean aircraft engineering firm, said the construction noise has disrupted the nights of most residents, who commute to Singapore daily for work.

Other residents told ST that construction dust has been persistent, causing health issues such as coughs and skin allergies among children. A pre-school in the area has closed, and parents are reluctant to let their children play outside because of the dust and heavy vehicles moving in and out of the site.

Some residents also said water pressure in their homes has dropped significantly.

Local authorities have held three town hall sessions since August 2025 to discuss the matter. In the same month, they issued a 14-day stop-work order to ZData for breaching construction protocols.

Earlier in 2026, developers erected dust barriers in the estate. But residents say the measures have been largely ineffective, as dust clouds rise high into the air before drifting into homes.

ZData said in a statement on Feb 11 that “it is highly unlikely that dust pollution originated from our development”. Tropicana Firstwide said on March 2 that it “refutes any suggestion that idle land under our control is contributing to the current pollution issues”.

Meanwhile, at the Pasir Gudang site, the development’s project director, Mr Ridzuan Abd Malik, said he has been engaging with the Kampung Cahaya Baru village chief about residents’ concerns over the planned Racks Central data centre. He told ST that a study is being conducted to assess the impact on the local environment and residents’ health.

Rules that nudge, not bind

Johor has tightened its data centre approvals in recent years. In April 2024, it introduced guidelines encouraging operators to explore renewable water and energy sources.

In November 2024, the state government rejected nearly 30 per cent of data centre applications due to concerns over insufficient sustainable practices to reduce water and power usage.

A year later, Datuk Jafni – who chairs the state’s data centre task force – said Johor would stop approving Tier 1 and Tier 2 data centres, which use more water. The state will instead prioritise Tier 3 projects, which use cleaner and greener technologies.

On a national level, Prime Minister Anwar Ibrahim said in late February 2026 that Malaysia would halt non-AI data centres – despite AI facilities requiring even more water and power.

However, he reassured Parliament that Malaysia’s current electricity and water supply remains sufficient to support existing and planned projects.

But analysts who spoke to ST remain critical of these moves. They noted that Johor’s data centre approvals remain at the discretion of the state government, while the state’s data centre development planning guidelines function more as encouragement than enforceable standards.

Among others, the state guidelines say that only a 50m stretch is mandated as a buffer zone between data centres and the nearest residential estate. The guidelines also say data centres “should” use renewable and energy-efficient technologies, with no firm requirement to adopt them.

Professor Mohd Fadhil Md Din, Universiti Teknologi Malaysia’s campus sustainability director, said: “The core issue is not AI versus non-AI data centres. It is the absence – or presence – of integrated resource governance.

“Malaysia’s digital expansion must be anchored in quantified megawatt caps per district, mandatory recycled water use, renewable energy integration and transparent cumulative capacity modelling.”

Researcher Badrul Hisham Ismail, senior fellow at the Atlantic Fellows for Social and Economic Equity, said that although Johor’s guidelines require preliminary consultations and a coordinating committee, actual community participation appears optional and limited.

“For socially contested infrastructure, effective policy models must include mandatory community impact assessments, public disclosure of water and energy consumption projections, and the inclusion of residents in monitoring and grievance procedures,” he told ST. “This would allow residents to participate legitimately before approvals are granted, not only after conflicts arise.”