Singapore has to take a selective strategy towards expanding its capacity for data centres due to geographical and energy constraints, said Deputy Prime Minister Gan Kim Yong.

Speaking during a fireside chat at the Semafor World Economy conference in Washington DC on Thursday (Apr 16), DPM Gan said that Singapore is gradually allowing for more data centres to be set up, but that they need to be used for "very critical operation and functions".

"We don't really want (the data centres) to store all your birthday photos, and so I think that you can store somewhere else that's not so critical," he said.

Instead, the data centres should be used for banking data, transaction data, and business data, which are "very critical" for Singapore.

DPM Gan said: "If you need to develop AI systems, you need to have access to the data centre capacity, and that's what we are focusing on."

He explained that Singapore has strict regulations on data centre development due to the limited alternative energy sources available.

"We depend only on natural gas. We have solar, but because solar requires land, and Singapore is very small island, as you put it, we have very limited solar power," he said.

One way to work around such constraints is to collaborate with neighbouring countries such as Malaysia and Indonesia which have a supply of green energy, said DPM Gan, adding that "it's a win-win outcome for all three of us".

Fielding questions on Singapore's AI strategy, DPM Gan said that a balance needs to be struck between strong governance and room for innovation.

"AI will be a game changer which will transform how people work, reshape jobs and influence how people learn, play and live. And it's something that we have to be prepared for", he said.