Southeast Asia Data Centers Stall as Thailand Pauses 166 Projects

Southeast Asia data centers are hitting the limits of local power grids and water supplies, and governments in the region are now slowing the build-out. Thailand has paused construction on 49 projects and frozen approval decisions on 117 more, Malaysia's Johor state has stopped approving the most water-hungry designs, and a provincial governor in Indonesia has halted one site over missing permits, according to a Guardian report published on November 7, 2026.

The slowdown matters well beyond the region. Southeast Asia holds about 50% of all data center capacity under construction in Asia Pacific, according to a 2026 Cushman and Wakefield report cited by the Guardian, which makes it one of the main places where AI computing is being built outside the US and China.

Why Are Southeast Asia Data Centers Being Paused?

Thailand's data center policy board made the decision at its first meeting on September 4, 2026. The Nation Thailand reported that the pause covers about 166 projects in total, while four subcommittees draft national standards for electricity and water use, site safety, environmental safeguards and economic returns. Officials said they want projects to create jobs and technology transfer, not just "space for servers".

The pause came after a strong start to the year. Early in 2026, Thailand's Board of Investment had approved projects from TikTok, UAE-based Skyline and Singapore's Bridge Data Centres with a combined planned investment of $27 billion. Thailand's energy minister, Akanat Promphan, has also argued that data centers run on expensive imported gas and should pay a new, higher electricity tariff.

How Fast Has Johor Grown?

Johor, the Malaysian state across the border from Singapore, is the clearest example of the boom. Its operational capacity grew from 94 megawatts in 2023 to 1,110 megawatts in 2026, with another 3,088 megawatts under construction or planned. The state government says it has attracted $40 billion of data center investment, including a $2.2 billion Microsoft commitment across Kuala Lumpur and Johor and a $3 billion AirTrunk expansion. Google has also been expanding in the country, as we reported when it added $15 billion for Malaysia.

That growth has a cost. Energy consultancy Wood Mackenzie estimates that data centers already use 24% of Johor's electricity and could reach 40% by 2035. As a result, Malaysia set up a data center taskforce to review new projects for energy and water security, and Johor said it will no longer approve Tier 1 and Tier 2 facilities, the designs that use the most water.

Why Is Water the Bigger Problem?

Many facilities in the region are water-cooled and sit in hot, humid lowlands, which pushes water use higher than in cooler climates. Johor is prone to droughts, and residents near Thailand's Eastern Economic Corridor worry about already depleted reservoirs. In February, Johor saw its first public protest against a data center construction site, built by China's ZData Technologies.

Operators say they are adapting. For example, Bridge Data Centres built a water reclamation plant for a Johor campus due next year, and AirTrunk partnered with Johor Special Water in April to reuse treated wastewater for cooling. However, Microsoft's own efficiency data shows its Asia-Pacific sites have the weakest power usage effectiveness (PUE), the industry ratio of total facility power to IT power, in its global fleet.

What Does This Mean for the AI Build-Out?

Southeast Asia became the overflow market after Singapore paused new data centers from 2019 to 2022 and then approved new capacity only selectively. Now the overflow market is setting its own limits. That pattern is familiar from the US and Europe, where towns have pushed back on projects over power bills and land use, as seen in recent protests at a Microsoft site in Amsterdam.

In our view, the region is unlikely to stop building, but the era of fast, agency-by-agency approvals looks over. Expect stricter water and power conditions, higher tariffs and slower timelines, which could push AI companies to spread capacity across more countries or pay more for cleaner, more efficient designs.

If you want the basics on why these buildings use so much power and water, see our explainer on what a data center is.

The full Guardian report also covers Indonesia's 1,699-megawatt Jakarta pipeline and Bangkok's 2,084-megawatt pipeline.