Overseas investors show little interest in building data centres in Vietnam

It has been four years since US-based tech titan Apple announced plans to develop a $1 billion data centre in Vietnam. However, to date, there has been no further moves.

Indeed, to date, no overseas companies opened data centres in Vietnam,although the country has accelerated digital transformation which greatly demands the kind of the establishments.

Microsoft, Google, Amazon, and Alibaba are the highlight examples for the issue. Over the years, they have deployed data centres across Southeast Asia, however, Vietnam has never been one of their choices.

Microsoft and Google already have data centres in Singapore. Amazon is planning to launch a similar, $2.7 billion project in Jakarta, Indonesia next year or in early 2022. Alibaba in 2018 also announced developing a third data centre in Jakarta, following its two facilities in Malaysia and Singapore.

Article 26.3 of the Law on Cybersecurity stipulates that any domestic or foreign enterprise providing services on telecom networks, the internet, and other value-added services in the cyberspace in Vietnam who collects, uses, or processes data on users’ personal information, their relationships, or data generated by service users in Vietnam must store this data in the country for a yet undetermined period of time.

Thus, under the regulation, global tech businesses have to establish their own data centres or hire servers in Vietnam to store data generated from the country. As soon as the law was drafted, plenty of overseas tech companies spoke out against it mainly because of the large expenditures it would take to develop such facilities.

Research published by US-based business management consultant SP Home Run showed that the minimum expense for a data centre is about $1,000 per square foot. Thus, a 1,000-square-metre facility would cost about $1 million while a data centre Facebook or Google might use would cost somewhere between $250 and $500 million.

Regarding this, Vu Sy Cuong, an economic expert told VIR that tech giants like Facebook and Google have no need for a new data centre in Vietnam because they already have similar facilities in Singapore and other regional countries.

“Their existing facilities are large enough to handle data storage across the region,” Cuong said. “Opening other facilities in the same area will cost them a lot, so they are unlikely to open data centres in Vietnam.”

Over the years, overseas tech titans’ data storage services in Vietnam are mainly cloud computing services relying on data centres abroad.

Amazon Web Service is an example. With only 13 data centres, Amazon provides cloud computing services tomore than one million companies across the globe. In Southeast Asia, Amazon’s coming project in Indonesia will be responsible for handling data storage for the entire region.

Facing the protests of companies, the Vietnamese government remained adamant, claiming the law is necessary and the regulation has not interrupted internet operations at all.

The law has been benefiting Vietnam in diverse ways. First, it helps to better supervise cross-border service providers operating without representative offices in the nation. Specifically, to comply with the law, TikTok opened a representative office in Vietnam as soon as it entered the market last year. Netflix is working with local authorities to soon launch its representative offices here.

Second, with the requirement of storing data right in Vietnam, businesses have to open their own data centre or lease servers from local suppliers. Both choices would contribute to the development of the local data centre market.

The data centre is one of the up-and-coming sectors in Southeast Asia with the annual growth rate of 6 per cent, according to Viettel IDC. Specifically, Indonesia, Malaysia, Singapore, and Vietnam are the most promising markets in the region.

Vietnam is the regional market recording the fastest growth with a double-digit compound annual growth rate in 2019-2024, according to information shared by Viettel. Accordingly, the local market was valued at $165 billion in 2018 and is forecast to reach $294 billion in 2024.

A cloud-computing specialist at Viettel IDC told VIR that foreign firms establishing data centres will help diversify choice for local consumers– a solid base to flourish the local data centre market. “The landing of overseas giants in data services in Vietnam reflects the country’s immense potential for the sector. Otherwise, through the partnership with foreign companies, they could improve themselves and increase the ability to meet the requirement of their partners.” VIR

Van Anh

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