Data Centre Investments Bad Deals

By Jomo Kwame Sundaram and K Kuhaneetha Bai

KUALA LUMPUR, Malaysia, Oct 28 2025 (IPS) - Opposition to data centres (DCs) has been rapidly spreading internationally due to their fast-growing resource demands. DCs have been proliferating quickly, driven by the popularity of artificial intelligence (AI).

Who are data centres for?

Already, the AI boom has overwhelmed other ‘cloud’ uses and drives the rapid growth of DCs, imposing fast-expanding resource demands. This has triggered a bipartisan public backlash in the US due to higher energy, water, and land use, as well as rising prices.

In October 2024, McKinsey projected that global energy demand by DCs would rise between 19% and 22% annually through 2030, reaching an annual demand between 171 and 219 gigawatts.

This greatly exceeds the “current demand of 60 GW”. “To avoid a [supply] deficit, at least twice the [DC] capacity built since 2000 would have to be built in less than a quarter of the time”!

As tech companies are not paying for the additional energy generation capacity, consumers and host governments are, whether they benefit from AI or not.

As DCs increasingly faced growing pushback in the North, developers have turned to developing countries, outsourcing problems to poorer nations with limited resources.

Understanding these energy- and water-guzzling facilities is necessary to better protect economies, societies, communities, and their environments.

Energy needs

With growing corporate and consumer demand for AI, DC growth will continue, and even occasionally accelerate.

Increased AI usage will significantly increase energy and water consumption, accelerating planetary heating both directly and indirectly.

As demand for AI and DCs increases, supporting computers will require significantly more electricity. This will generate heat, needing the use of water and energy for cooling. Much energy used by DCs, from 38% to 50%, is for cooling.

Electricity generation, whether from fossil fuels or nuclear fission, requires more cooling than renewable energy sources such as photovoltaic solar panels or wind turbines.

A small-scale DC with 500 to 2,000 servers consumes one to five megawatts (MW). For tech giants, a ‘hyperscale’ DC, hosting tens of thousands of servers, consumes 20 to over 100MW, like a small city.

Data centres not cool

As the popular focus is on DCs’ enormous energy requirements, their massive water needs to cool equipment tend to be ignored, understated and overlooked.

Locating new DCs in developing countries will further heat local microclimates and the planetary atmosphere. Worse still, heat is more environmentally threatening in the tropics, where ambient temperatures are higher.

Establishing more DCs will inevitably crowd out existing and other possible uses of freshwater supplies, besides reducing local groundwater aquifers.

Unsurprisingly, DC investors rarely warn host governments about the amount of locally supplied energy and water required.

DCs require much freshwater to cool servers and routers. In 2023, Google alone used almost 23 billion litres to cool DCs. In cooling systems using evaporation, cold water is used to absorb severe heat, releasing steam into the atmosphere.

Closed-loop cooling systems absorb heat using piped-in water, while air-cooled chillers cool down hot water. Cooled water recirculated for cooling requires less water but more energy to chill hot water.

Investors expect subsidies

Like other prospective investors, DCs have relocated to areas where host governments have been more generous and less demanding.

Led by US President Trump’s powerful ‘tech bros’, many foreign investors have profited from subsidised energy, cheap land and water, and other special incentives.

Prospective host governments compete to offer tax and other incentives, such as subsidised energy and water, to attract foreign direct investment in DCs.

The US pressured Malaysia and Thailand to stop Chinese firms from using them as an “export-control backdoor” for its AI chips. Washington alleges that DCs outside China buy chips to train its AI for military purposes. So far, only Malaysia has complied.

This limits Chinese firms’ access to such chips. Washington claims that Chinese substitutes for US-made chips are inferior and seeks to protect US technology from China.

High-tech DC jobs?

Data centres are emerging everywhere, but not many jobs will be created. Advocates claim DCs will provide high-tech jobs.

DCs are largely self-operating, requiring minimal human intervention, except for maintenance, which they determine independently. Thus, job creation is minimised.

Construction and installation work will be temporary, with most managerial functions being performed remotely from headquarters. A Georgetown University report estimates only 27% of DC jobs are ‘technical’.

While the DC discourse mainly focuses on foreign investments, there is little discussion on growing national desires for data sovereignty.

Acceding to so many foreign requests will inevitably block national capacity ambitions to develop end-to-end DC capabilities and not just host them.

Thus far, there is limited interest in the ‘afterlife’ of DCs, such as what happens after they have outlived their purpose, or the disposal of waste materials.

Higher energy and water costs, subsidies, tax incentives and other problems caused by DCs are hardly offset by their modest employment and other benefits.

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Available online at: Data Centre Investments Bad Deals

Strengthening East Asian Cooperation via ASEAN?

By Jomo Kwame Sundaram

KUALA LUMPUR, Malaysia, Oct 14 2025 (IPS) - Global South cooperation arrangements must evolve to better respond to pressing contemporary and imminent challenges, rather than risk being irrelevant straitjackets stuck in the past.

Southeast Asia

In 1967, the Association of Southeast Asian Nations (ASEAN) was established, initially to address regional tensions following the formation of Malaysia in September 1963.

The creation of Malaysia had led to problems with the Philippines and Indonesia, while Singapore had seceded from the new confederation in August 1965.

ASEAN was not a Cold War creation in the same sense as the Southeast Asia Treaty Organisation (SEATO), one of several regional security arrangements established by the Americans in the early 1950s, the only significant one remaining being NATO.

ASEAN’s most significant initiative was to declare Southeast Asia a Zone of Peace, Freedom and Neutrality (ZOPFAN) in 1973, two years before the end of the Indochina wars.

Regional economic cooperation

The region has since seen four major economic initiatives, with the first being the ASEAN Free Trade Area (AFTA).

AFTA was established at the height of the trade liberalisation zeal in the early 1990s. Beyond the initial ‘one-time’ trade liberalisation effects, there has been little actual economic transformation since then.

Trade liberalisation mahaguru Jagdish Bhagwati’s last (2008) book, Termites in the Trading System, saw preferential plurilateral and bilateral FTAs as ‘termites’ undermining the WTO promise of multilateral trade liberalisation.

While seemingly mutually beneficial, such FTAs are akin to termites that surreptitiously erode the foundations of the multilateral trading system by encouraging discrimination, thereby undermining the principle of non-discrimination.

Naive enthusiasm for all FTAs has thus actually undermined multilateralism, also triggering pushback since the late 20th century.

Following the 2008-09 global financial crisis, the G20’s developed economies all raised protectionist barriers, confirming their dubious commitment to free trade.

Meanwhile, US trade policies since the Obama presidency, and especially this year, have made a mockery of the WTO’s commitment to the multilateralism of the 1994 Marrakech Declaration.

Asymmetric financialization

The 1997-98 Asian financial crisis should have served as a wake-up call about the dangers of financialization, but the West dismissed it as simply due to Asian hubris.

Under Managing Director Michel Camdessus, IMF promotion of capital account liberalisation even contravened the Fund’s own Articles of Agreement.

When Japanese Finance Minister Miyazawa and Vice Minister Sakakibara proposed an East Asian financial rescue plan, which was soon killed by then US Treasury Deputy Secretary Larry Summers.

Eventually, the Chiang Mai Initiative was developed by ASEAN+3, including Japan, South Korea, and China as the additional three. Ensuring bilateral swap facilities for financial emergencies have since been multi-lateralised.

ASEAN+3 later led the Regional Comprehensive Economic Partnership (RCEP), still conceived mainly in terms of regional trade liberalisation.

Non-alignment for our times

Developing relevant institutions and arrangements in our times requires us to pragmatically consider history, rather than abstract, ahistorical principles.

2025 marks several significant anniversaries, most notably the end of World War II in 1945 and the 1955 Bandung Asia-Africa solidarity conference, which anticipated the formation of the non-aligned movement.

The world seems to have lost its commitment to creating the conditions for enduring peace. Despite much rhetoric, the post-World War II commitment to freedom and neutrality in the Global North has largely gone.

The world was deemed unipolar after the end of the Cold War. However, for most, it has been multipolar, with the majority of the Global South remaining non-aligned.

As for peace-making, the US’s NATO allies have increasingly marginalised the United Nations and multilateralism with it. Already, the number of military interventions since the end of the Cold War exceeds those of that era.

While ASEAN cannot realistically lead international peace-making, it can be a much stronger voice for multilateralism, peace, freedom, neutrality, development, and international cooperation.

East Asian potential

The world economy is now stagnating due to Western policies. Hence, ASEAN+3 has become more relevant.

Just before President Trump made his April 2nd Liberation Day unilateral tariffs announcement, the governments of Japan, China, and South Korea met in late March without ASEAN to coordinate responses despite their long history of tensions.

ASEAN risks becoming increasingly irrelevant, due to the limited progress since the Chiang Mai Agreement a quarter of a century ago. Worse, ASEAN’s regional leadership has rarely gone beyond trade liberalisation, now sadly irrelevant in ‘post-normal’ times.

Rather than risk growing irrelevance, regional cooperation needs to rise to contemporary challenges. Working closely with partners accounting for two-fifths of the world economy, ASEAN countries only stand to gain from broader regional cooperation.

President Trump’s ‘shock and awe’ tariffs and Mar-a-Lago ambitions clearly signal that ‘business as usual’ is over, and Washington intends to remake the world. Will East Asia rise to this challenge of our times?

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Available online at: Strengthening East Asian Cooperation via ASEAN?

No African Development from Western Trade Policies

By Jomo Kwame Sundaram and K Kuhaneetha Bai

JOHANNESBURG, South Africa, Oct 7 2025 (IPS) - The World Bank’s 1981 Berg Report provided the blueprint for structural adjustment, including economic liberalisation in Africa. Urging trade liberalisation, it promised growth from its supposed comparative advantage in agriculture.

Berg promises

Accelerated Development in Sub-Saharan Africa: A Plan for Action by Professor Elliot Berg blamed government interventions for blocking post-colonial African economic progress.

Removing ‘distortions’ caused by marketing boards and other state interventions and institutions was supposed to unleash export-led growth for Sub-Saharan African (SSA) producers.

However, despite the supposed comparative advantage and trade preferences, African agricultural exports have not grown significantly due to protection by wealthy nations.

By the turn of the century, Africa’s share of worldwide non-oil exports had declined to less than half of what it was in the early 1980s.

African agricultural output and export capacities have been undermined by decades of low investment, economic stagnation and neglect.

Significant public spending cuts accelerated the deterioration of existing infrastructure (roads, water supply, etc.), undermining potential ‘supply responses’.

However, high growth in East and South Asian economies boosted SSA mineral exports, often mined by foreign firms from the most significant economies in Asia.

Even the primary commodity price collapse from 2014 did not prevent Africa’s share of world exports from increasing.

Promises, promises

The 1994 Marrakech declaration, concluding the Uruguay Round of multilateral trade negotiations, created the World Trade Organisation (WTO) in 1995.

The new Doha Development Round of trade negotiations began in 2001, following the dramatic walkout by African trade ministers at the WTO Seattle ministerial conference in 1999.

The Public Health Exception to the WTO’s onerous new intellectual property rules alleviated this concern but was ignored during the deadly COVID-19 pandemic.

Developing countries were projected to gain US$16 billion in the most likely scenario, according to a 2005 World Bank study led by Kym Anderson, which estimated the likely effects of a Doha Round trade agreement.

However, various studies estimating the welfare effects of multilateral agricultural trade liberalisation – including Anderson et al. – suggest significant net losses, not gains, for SSA.

Gains from agricultural trade liberalisation would largely accrue to existing major agricultural exporters – mainly from the Cairns Group – not SSA.

Nevertheless, the World Bank and others continued to insist that trade liberalisation would benefit all developing countries, including SSA, although most studies indicated otherwise.

WTO trade rules have reduced the policy space for developing countries – especially in industrial, trade, or investment policy – although some claim that room for industrial policy remains.

African governments were told that a Doha Round deal would reduce agricultural subsidies, import tariffs and non-tariff barriers by rich nations, especially in Europe.

But the neglect of both physical and economic infrastructure over two decades of structural adjustment programmes left little effective capacity to respond to new export opportunities.

Worse still, trade liberalisation of manufactured goods also undermined nascent African industrialisation.

African market access to rich, mainly European, markets was secured through negotiated preferential agreements, rather than trade liberalisation. Hence, further multilateral trade liberalisation would erode these modest gains.

Additionally, most African governments – particularly those of poorer economies with limited government capacities – were unable to replace lost tariff revenues with new taxes.

African losses foretold

What was Africa expected to gain from a Doha Round deal?

Thandika Mkandawire warned the WTO trade regime would make Africa worse off, especially without preferential treatment from the European Union under the Lomé Convention.

Anderson et al. claimed SSA would gain substantially as “farm employment, the real value of agricultural output and exports, the real returns to farm land and unskilled labor, and real net farm incomes would all rise substantially in capital scarce SSA countries with a move to free merchandise trade”.

To be sure, the modest gains from trade liberalisation would be ‘one-time’ improvements projected by the models used.

Anderson et al. claimed that SSA, excluding South Africa, would gain US$3.5 billion, compared to roughly US$550 billion worldwide.

These projected gains of less than one per cent of its 2007 output were nonetheless much more than the tenth of one per cent for all developing countries!

World Bank structural adjustment programmes undermined the limited competitiveness of African smallholder agriculture. However, their projections ignored the reasons why African food agriculture declined after the 1970s.

Meanwhile, the agricultural exports of wealthy nations have benefited from higher production subsidies, which more than offset lower export subsidies. However, reducing agricultural subsidies would likely lead to higher prices of imported food.

Uneven effects

Uneven and partial trade liberalisation and subsidy reduction will have mixed implications. These effects vary with national conditions, including food imports and share of consumer spending.

Earlier estimates for all developing countries obscured the likely impacts of trade liberalisation on Africa. The one-time welfare improvement for SSA, excluding most of Southern Africa, would be three-fifths of one per cent by 2015!

With deindustrialisation accelerated by structural adjustment, Sandra Polaski estimated that SSA, excluding South Africa, would lose US$122 billion from Doha Round trade liberalisation.

Although former World Bank economists agreed the lost decades were due to Bank structural adjustment programmes, these were reimposed a decade ago.

SSA, excluding South Africa, would lose US$106 billion to agricultural trade liberalisation. Poor infrastructure, export capacities and competitiveness in both SSA industry and agriculture were responsible.

Most of the poorest and least developed SSA countries were likely to be worse off in all ‘realistic’ Doha Round outcome scenarios.

With more realistic model assumptions – e.g., allowing for unemployment – Lance Taylor and Rudiger von Arnim found SSA would not gain, on balance, from trade liberalisation.

Mainstream international trade theory cannot justify trade liberalisation for SSA. Worse, ‘new trade theories’ and evolutionary studies of technological development suggest trade liberalisation would permanently slow growth.

Export growth?

As economic growth typically precedes export expansion, trade can foster a virtuous circle but cannot trigger it.

Specifically, a weak investment-export nexus hinders export expansion and diversification, as rapid resource reallocation is unlikely without high investment and sustained growth.

Citing the World Bank, Mkandawire noted Africa’s export collapse in the 1980s and 1990s meant “a staggering annual income loss of US$68 billion – or 21 per cent of regional GDP”!

For Dani Rodrik, Africa’s ‘marginalisation’ was not due to its trade performance, although poor by international standards. Gerald Helleiner has emphasised, “Africa’s failures have been developmental, not export failure per se”.

With its geography and income, Africa probably trades as much as can be expected. Indeed, “Africa overtrades compared with other developing regions in the sense that its trade is higher than would be expected from the various determinants of bilateral trade”!

Vulnerable Africa

The Doha Round of WTO negotiations effectively ended over a decade ago as the backlash in wealthy nations – against globalisation and its consequences – gained momentum.

Meanwhile, trade liberalisation – as part of structural adjustment programmes – deepened SSA deindustrialisation and food insecurity.

With Africa unevenly integrated by economic globalisation, most of the continent exports little to the USA, making it less of a target of Trump’s tariffs.

Nevertheless, trade liberalisation has made developing economies more vulnerable to and unprotected from the recent weaponisation of tariffs and other economic measures.

Last month’s expiration of the African Growth and Opportunity Act (AGOA) prompted some African leaders to scramble for an extension.

US AGOA imports in 2023 totalled US$10 billion, accounting for high shares of some countries’ exports. Tariff imposition will exacerbate problems due to AGOA’s demise.

Meanwhile, there have been great expectations for the African Continental Free Trade Area (AfCFTA). Still, regional trade integration may not be very beneficial, as SSA exports are more competitive than complementary.

K. Kuhaneetha Bai studied at the University of Malaya and does policy research at Khazanah Research Institute.

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• Agricultural Trade Liberalization Undermined Food Security

Available online at: No African Development from Western Trade Policies