Sri Lanka’s shortage of data centre and cloud capacity is “to some extent a market failure,” the President’s Chief Adviser on Digital Economy said on Monday — clear demand from banks and other users has not drawn private supply, leaving the government to invest in a sector it should not need to.

“The Government really does not need to do it, but it will,” Dr. Hans Wijayasuriya said during a session on digital transformation at the Sri Lanka Economic and Investment Summit 2026, moderated by Ceylon Chamber of Commerce Secretary General and CEO Shiran Fernando, the Daily FT reported.

The demand, he argued, is not in doubt. “I think it is very clear that there is demand now. The banks are crying out for sovereign, resident cloud infrastructure.” The gap persists, on his account, only because investors have not acted on it: “There are sufficient demand signals out there for supply to be created. I sincerely believe that. The private sector can take this ball and run.”

The scale of the gap

Sri Lanka’s total data centre capacity stands at around 5 megawatts. Malaysia’s is about 1.5 gigawatts — roughly 300 times larger.

Wijayasuriya put the short-term national requirement at 25 to 50 MW of cloud capacity with built-in AI capability, a level at which he said Sri Lanka’s global competitiveness would be solid. The binding constraint to resolve first is the price of energy for data centres. The Digital Economy Ministry is working with the Board of Investment on an investment and incentive framework, with the government’s main role being to create the conditions for local and foreign private investors to enter the data centre, AI and cloud market.

The warning against building too much

The more pointed part of his argument was a caution against scale for its own sake. Sri Lanka would take a conservative approach, he said, targeting 25 MW in the short term given environmental concerns, and would not go as far as some regional neighbours.

He used Malaysia as the cautionary case. It scaled from around 5 MW in 2021 to roughly 1,500 MW, and is now pulling back after concluding that data centres not serving domestic demand were effectively buying energy and selling it.

“Basically, it is an energy export. We must be very clear on the economics of that energy export and the next best use of the next megawatt generated in your country,” he said.

“We are taking a calibrated approach to ensure that our industries are legitimately competitive and that we generate sufficient export revenues from data infrastructure, while being energy sensitive and environmentally sensitive in the process.”

This is a notably different pitch from June

The export framing Wijayasuriya is urging caution about is close to the one the government itself advanced four months ago. In June, Deputy Minister Eranga Weeraratne said procurement was underway for AI data centres and that the objective was to serve regional clients as well as domestic ones, opening a new foreign-exchange channel.

Monday’s remarks do not reject that goal — Wijayasuriya explicitly wants “sufficient export revenues from data infrastructure.” But they attach a test to it that the June announcement did not carry: whether the electricity consumed by a data centre serving foreign customers earns more than the next best use of that megawatt at home. On his account, the lesson from Malaysia is that it may not.

The 25 MW short-term target is also a much more modest number than a regional-hub ambition implies, and it is pitched at domestic enablement — “to enable AI across industries and services in both the private and public sectors” — rather than at serving the region.

Wijayasuriya has been the government’s most visible voice on digital policy this year, including on the expansion of digital public infrastructure into fintech.

Not reported

The filing does not say how much the government intends to invest, over what period, or through which agency — nor what form the BOI incentive framework will take, or when it will be published. It gives no timetable for reaching 25 MW, no current or proposed tariff for data centre electricity, and no indication of which banks have sought resident cloud capacity or what volume they require.

It does not say whether the procurement Deputy Minister Weeraratne described in June has concluded, or how the two positions are reconciled within government. No private data centre operator is quoted in response to the claim that the market has failed to supply evident demand, and the report carries no second verified newsroom’s account of the session.