Thailand halts 49 datacentre projects as south-east Asia's build-out stalls

Thailand paused construction on 49 datacentre projects and froze approval decisions on 117 more in September 2026, bringing a $27bn investment wave to a sudden stop. The country's board of investment had earlier approved projects from TikTok, UAE-based Skyline Datacentre and Singapore's Bridge Datacentres. Now regulators cite insufficient detail for monitoring and regulation as the reason for the freeze. What looked like a new industrial juggernaut has, within a year, ground to a halt.

Thailand is not alone. In Indonesia, the governor of West Java, the country's most populous province, halted construction of a datacentre over missing permits and an incomplete environmental assessment. The pause marks a sharp turn for a region that had become AI infrastructure's fastest-growing frontier.

How did south-east Asia become a datacentre hub?

AI demand has surged over the past five years, and south-east Asia emerged as a surprise growth centre. China still holds the largest operational datacentre capacity in Asia Pacific. But south-east Asia commands roughly 50% of the region's under-construction capacity, according to a 2026 report by real estate firm Cushman and Wakefield. Malaysia and Thailand account for the bulk of it.

Singapore was the region's original hub through the 2010s, drawing Alibaba and Facebook. Then the city-state imposed a moratorium on new datacentres from 2019 to 2022, because they were "intensive users of water and electricity", in the words of a press release from the Ministry of Energy, Trade and Industry. Since then, approvals have been selective under land and sustainability constraints. Only 95MW of operational capacity was added between 2023 and 2026, per Cushman and Wakefield.

In short, Singapore's restrictions pushed the build-out to its neighbours.

Why is Malaysia the biggest winner — and risk?

Malaysia absorbed the overflow. Operational capacity in the southern state of Johor grew more than tenfold, from 94MW in 2023 to 1,110MW in 2026, with a further 3,088MW under construction or planned. Johor is now south-east Asia's largest datacentre hub, attracting $40bn of investment as of 2026, according to Menteri Besar Onn Hafiz Ghazi, the state government's head.

Microsoft announced a $2.2bn investment in cloud and AI infrastructure across Kuala Lumpur and Johor in 2024. Australia's AirTrunk plans to invest $3bn to double its Johor facilities from two to four.

Others are catching up:

• Indonesia has a 1,699MW pipeline in greater Jakarta and is developing Batam as a secondary hub.
• Microsoft is building five datacentres under a $1.7bn Indonesian investment; Princeton Digital Group and Digital Edge are expanding there too.
• Bangkok's pipeline stands at 2,084MW, while Manila and Ho Chi Minh City ramp up, per Cushman and Wakefield.

The money is real; the power and water to sustain it may not be.

What is the strain on power and water?

Energy consultancy Wood Mackenzie estimates Johor's datacentres already consume 24% of the state's total power. That share could reach 40% by 2035.

"The rapid growth of datacentre developments in Johor has the potential to create localized grid connection bottlenecks and increase the need for transmission network upgrades as well as new power supply capacity," says Alvin Tan, research analyst at Wood Mackenzie.

Thailand's energy minister, Akanat Promphan, says datacentres need large volumes of power generated from expensive imported gas. He has called for a new electricity user category with higher tariffs to reflect that demand.

Water is the sharper flashpoint. Johor is drought-prone, and current operational datacentres are estimated to need about 675m cubic metres of water per day. In Indonesia, research firm Tenggara Strategics reports that many datacentres are water-cooled and sited in hot, humid lowlands, pushing consumption above facilities in cooler climates. In Thailand's Eastern Economic Corridor, residents fear further depletion of already strained reservoirs.

"The Khlong Luang Reservoir in Chonburi (in eastern Thailand) is a primary flashpoint," says Somnuck Jongmeewasin, research director of advocacy group EEC Watch. "Despite the reservoir being shallow and under strain, authorities are piping its water to industrial estates."

In February, Johor saw its first public protest against datacentre construction, with demonstrators picketing a project by China's ZData Technologies over dust pollution near homes and potential water-supply impacts.

"While datacentres may create substantial investment and construction activity, they generally generate fewer long-term jobs than many other industries requiring comparable amounts of land, electricity and water," says Jie-Sheng Tan-Soo, an assistant professor at Singapore's Lee Kuan Yew School of Public Policy. "Communities may therefore reasonably ask whether they are receiving a proportionate share of the benefits while bearing the environmental and infrastructure costs."

The region's boom, in other words, is meeting its first serious political audit.

Are operators fixing their efficiency problem?

Operators say yes, though the evidence is thin. Bridge Datacentres built a water reclamation plant and pipe network in Johor to cool its upcoming facility, expected online next year. AirTrunk announced a partnership in April with sewage treatment operator Johor Special Water to recycle wastewater for its datacentres' operational needs.

An AirTrunk representative said its "campuses are designed to operate significantly more efficiently than conventional datacentres and incorporate advanced technologies to optimise energy performance" — but did not respond to detailed queries for actual efficiency data. Microsoft says it is exploring south-east Asian clean energy projects, yet its own Power Usage Effectiveness data shows its Asia-Pacific facilities are its least energy-efficient globally. The pledges, so far, outrun the disclosures.

What are governments doing about it?

Regulation is tightening across the region. Singapore now ties approvals strictly to power efficiency and carbon emissions. Malaysia has set up a datacentre taskforce to vet new projects for energy and water security, and Johor said it will no longer approve Tier 1 and Tier 2 datacentres — designs that use up to 50m litres of water per day, roughly the daily drinking water needs of 25 million people. Thailand has announced an approval framework covering energy and water use, power guarantee requirements and higher tariffs for operators.

Tan-Soo argues national governments should make operators face "the full social opportunity cost" of the resources they consume through integrated policy frameworks.

"South-east Asia is increasingly aware but only partially prepared," he says. Whether preparedness can catch up with $40bn of committed capital is now the region's central infrastructure question.