Sea Group enters choppy waters with latest Malaysia deals

Sea Group wants to boost its Malaysian investments. To that effect, it’s touting two initiatives – a mega warehouse and a data center – that aim to create 2,000 jobs in the country.

Photo credit: Reuters

These are all well and good but some investors and former government officials Tech in Asia spoke to believe that Sea’s targets may not be realistic.

Sea’s announcement came as part of a January 29 press release by Malaysia’s International Trade and Industry Ministry (Miti), which said that the firm, together with two other Singapore-based tech companies, will invest a cumulative 13 billion ringgit (almost US$3 billion) over the next few years.

Miti didn’t provide a breakdown when asked by Tech in Asia and was instead directed to the cumulative sum. Sea also declined our request for comments on the details of the investment.

But based on the ministry’s statement, Sea is committing to a cloud computing project that’ll be located in a three-story green facility in Johor, Malaysia’s southernmost state, and completed by the first quarter of 2024.

The tech titan’s ecommerce unit, Shopee, will also be expanding its Malaysia footprint through the construction of a mega warehouse in Klang, Selangor.

A history of delays

To be sure, Sea’s data center is old news. Last year, the firm was revealed to be the anchor tenant for the Green Data Center Park in Johor, which will be constructed by local conglomerate YTL. This is the same announcement in Miti’s latest press release.

That aside, a former Miti official tells Tech in Asia that Sea’s first hurdle is to realize the data center, citing Microsoft’s travails.

The US tech giant announced that it would build a data center in 2014 out of Sedenak in Johor. Three years later, that plan hit a snag with Microsoft reviewing the entire project. Fast forward to 2021, the firm reiterated its commitment to building a data center in the country. At the time of writing, the project has yet to be completed.

Sea’s data center ambition is also expected to meet regulatory requirements. Malaysian law dictates that data centers, just like telcos, are required to pay a certain percentage of their revenue to a universal service provision (USP) fund run by the country’s communications and multimedia commission (MCMC).

An illustration of YTL’s data center in Johor / Photo credit: YTL

This was a problematic development two years ago as industry players expressed concerns that such stringent laws would subject data centers to not only lower margins but enforcement, including search-and-seizure, where service providers will be compelled to disclose whatever that is requested by MCMC.

A hot sector

A Lazada copy?