Plans for a super prison in Port Talbot appear to have been blocked by the Welsh Government.
It owns the proposed site at Baglan and said it "will not facilitate" any new prisons in Wales until the Ministry of Justice has agreed to meaningful talks about the penal system.
Demands for the devolution of policing and criminal justice, bringing Wales into line with Scotland and Northern Ireland, have been rejected by the UK Government.
But the Welsh Government has gone ahead with its own Commission on Justice to look into how a devolved system should operate.
Mr Davies said Welsh prisons need to relate better to public services and policy approaches in Wales, including what could be done to prevent many people being sent to prison. He said short sentences often had a devastating impact on people's lives.
The Ministry of Justice says it remains committed to building a prison in Port Talbot, although the local council says it has chosen the wrong site. The Welsh Government's announcement was welcomed by the local MP.
Plaid Cymru has said that it should not be what it called a temporary reprieve but a complete ban on building new prisons until control of the criminal justice and penal system is devolved to Wales.