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Thailand a new hotspot for data centres
Thomas Hundt
Digitalization and cloud services are driving demand for data centres. Thailand wants to become the leading location in South-East Asia with generous subsidies.
The digital economy is growing enormously. Experts estimate that the Thai digital economy's revenues will grow from US$ 35 billion to more than US$ 100 billion by 2022 to 2030. E-commerce, digital media and digital financial services are among the big growth segments.
Financial institutions, businesses and public agencies need to step up their game in many areas of data processing. They need secure information technology, stronger computing power and larger data storage, also because the legal requirements for data protection and data security are increasing. In Thailand, a Personal Data Protection Act came into force in June 2022. It is based in many respects on the European General Data Protection Regulation. A Cybersecurity Act and Cyber Crime Act from 2019 are fundamentally intended to ensure data security.
MEGATRENDS COLOCATION AND CLOUD SERVICE
Most businesses initially invest in their own computers and servers, but reach their capacity limits. As a solution, they can rent servers in independent data centres or place their own servers with professional providers via colocation contracts. According to a forecast by the market research firm Arizton, data centre operators' revenues will grow strongly from US$ 0.8 billion to US$ 1.3 billion during 2022 to 2028.
Data processing in the cloud is also becoming more popular. The industry giants are expanding their offerings because of the rising demand. Chinese cloud providers Tencent, Huawei and Alibaba were the first to offer cloud solutions on a larger scale.
US cloud giants, the so-called “hyperscalers," Google, Microsoft and Amazon Web Service (AWS) are now also getting on board and working with data centre operators. AWS even announced in October 2022 that it would invest about US$ 5 billion over 15 years in the new AWS region of Thailand, where local data centres will be set up so that customers do not have to store their data outside the country. AWS region of Thailand, where local data centres will be set up so that customers do not have to store their data outside the country.
Experts estimate that the Thai digital economy's revenues will grow from US$ 35 billion to more than US$ 100 billion by 2022 to 2030.
DC Byte analysts counted more than 50 data centres in Thailand by 2022. Most of them are located in Bangkok and in the country's largest industrial corridor. The State wants to make the so-called "Eastern Economic Corridor" fit for the Internet of Things. Its IT infrastructure, data networks and centres are therefore being rapidly expanded.
Data centres are getting bigger and bigger. The Singapore-based company ST Telemedia Global Data Centres opened a data centre in Bangkok in 2021 with an area of 30,000 square metres and a capacity of 20 megawatts. It thus belongs to the "hyperscale" size class.
Other data centre operators include True IDC from Thailand with 9 megawatts, NTT Global Data Centers (Japan, 5 megawatts), Supernap (Thailand, 5 megawatts), CS LOXINFO (Thailand), TCC Technology (Thailand), AIS (Thailand), Internet Thailand (Thailand), Telehouse (belongs to KDDI Japan), ChindataGroup (China), Alibaba (China) and Edge Centres (Australia). In addition, new projects are in the pipeline.
STRONG COMPETITION
Singapore holds the top spot in the data centre market in South-East Asia. The city State has an excellent infrastructure and important international data cables converge there. Because the spatial capacities in Singapore are limited, Thailand or Malaysia now offer themselves as alternatives.
Thailand is relatively well-connected in global data traffic via 14 submarine cable links. Other advantages of the location are the low costs of electricity, real estate and labour. In addition, specialists who can build and maintain data centres have already established branches. Thus, the kingdom is prepared for the rush of new data centres.
Energy suppliers have also installed excess capacities and are looking for buyers. The power demand of the data centres was around 46 megawatts in 2022. Experts calculate that with the new data centres, the required power will climb to around 56 megawatts by 2028.
However, 70 per cent of the electricity mix is based on fossil fuels gas and coal. Several operators, however, want to work in a climate-neutral way. They are therefore installing solar systems so that they can use green electricity.
LAVISH TAX EXEMPTIONS
Investors in data centres and cloud services can be exempted from corporate tax. The Thailand Board of Investment (BOI exempts qualified projects from corporate tax for eight years. The BOI also allows full ownership of land, which is only allowed to foreigners as an exception. The agency also approves the hiring of foreign professionals, issues visas and exempts necessary imports of equipment from import duties.
Data centre operators can also have their sales exempted from VAT at 7 per cent until 8 November 2027. Applications are accepted by the Thailand Revenue Department. The decree (Royal Decree No 759) of the Ministry of Finance has been in effect since November 2022.
Contact details:
Thomas Hundt
Director Thailand, Cambodia, Myanmar, Laos
GERMANY TRADE & INVEST
