Archive · 7 Oct 2026
World Bank Says Data Centre Incentives Could Cost South Asia
Data centres are large buildings that store and process information for online services.
They need a lot of electricity and water to operate.
The World Bank says South Asia has some disadvantages, including limited water, weaker infrastructure and lower governance scores than advanced economies.
Electricity is a particularly important cost, and new data centres could increase local energy prices.
The region also gets much of its electricity from coal, which has high pollution costs.
The report says governments may not need to offer special deals to attract these businesses.
Instead, they could improve the conditions for investment.
Companies may choose to build near large markets because that can make online services faster.
The World Bank says South Asia’s resource, infrastructure and governance gaps make attracting data centre investment with special incentives costly.
Energy makes up 65% of data centre operating expenses, and large AI data centres could raise local energy prices.
Coal produced an average 70% of South Asia’s electricity in 2020–24; the pollution cost per kilowatt-hour is three times that in advanced economies.
South Asia has the second-smallest water endowments among emerging markets, while broadband speed and higher-education attainment are below emerging-market averages.
The World Bank says the region could attract private investment by improving its investment climate instead of offering special incentives.
- Who
- The World Bank assessed the prospects and costs of attracting data centre investment in South Asia.
- What
- It found that resource, infrastructure and governance gaps could make special incentives costly, and said improving the investment climate may be an alternative.
- When
- The article cites electricity-generation averages for 2020–24; it does not state when the World Bank assessment was published.
- Where
- South Asia.
- Why
- Data centres depend on energy, water, infrastructure and governance, areas where the region has disadvantages compared with advanced economies or other emerging markets.
Special incentives
Investment climate
How to attract data centres
Special incentives
The article says attracting investment through special incentives is possible, but would be costly given South Asia’s resource, infrastructure and institutional gaps.
Investment climate
The World Bank says improving the investment climate may be sufficient, particularly in parts of the region with large markets, because private data centres have incentives to locate near customers.
- Data centre operating expenditure
- Energy accounts for 65%.
- South Asian electricity mix
- Coal accounted for an average 70% of electricity generation in 2020–24.
- Pollution cost
- The pollution cost of a kilowatt-hour of grid electricity is three times greater in South Asia than in advanced economies.
- Water endowments
- South Asia has the second-smallest water endowments among emerging markets.
- Energy reliability
- The article says energy reliability raises investment by 20%.
- Governance index
- South Asia scores 29 percentage points below the advanced-economy average on a comprehensive governance index.
- Suggested approach
- Improve the investment climate rather than relying on special incentives.