Vietnam now a magnet for datacentre developers

• Vietnam’s datacentre sector is currently dominated by local telcos
• But a vibrant economy, new regulations and demand for local cloud services are attracting overseas investors
• New entrants, including Japan’s NTT and Alibaba, are planning datacentre facilities in the South-east Asian country

Vietnam's datacentre sector is attracting a lot of interest from foreign investors with international developers and operators, such as NTT and Alibaba, starting to enter the market in a sector that, currently, offers somewhat limited capacity and availability but has the potential for rapid and extensive growth. 

According to a new report from global real-estate company Jones Lang LaSalle (JLL), cited by Vietnam News, the Vietnamese datacentre market is, for historical reasons, currently dominated by local telcos, including VNPT, Viettel IDC, FPT Telecom and CMC Telecom, which have reported increasing demand for cloud and data analytics services. And the cloud services sector is expected to continue to grow for the rest of the decade: An IDC report cited in this post from the Vietnamese government suggests it will grow at a CAGR of 10.8% in the coming years and be worth $1.26bn by 2030. 

At the same time, Vietnam’s economy is on the up and is increasingly attractive to overseas investors and businesses. According to Vietnam’s General Statistics Office, the nation’s gross domestic product (GDP) grew by 6.7% in the final quarter of 2023 and by 5.66% during the first quarter of 2024 (with that slight slowdown attributed mainly to a decline in the number of mobile handsets shipped). 

Nonetheless the International Monetary Fund (IMF) is sticking to its forecast that the Vietnamese economy could reach a value of $469.7bn this year and enable the country to retain its place as the fifth-largest economy in South-east Asia. The statistics for the first quarter of this year show a new high in the establishment of new domestic enterprises and in attracting overseas businesses to start operations in the country. More than $6.17bn of newly registered, additional and contributed capital, along with share purchases by foreign investors, were recorded in the first quarter, up 13.4% year on year. 

Foreign investment was up by 7.1% at $4.63bn and rising. The influx of foreign investment came from 62 countries and territories, with Singapore emerging as the leading investor in Vietnam during the period, having ploughed 2.55bn Singapore dollars (US$1.88bn) into the Vietnamese economy. 

The JLL report attributes Vietnam’s interest to overseas investors as a combination of the country’s strategic geographical location, its dynamic economic policies, a supportive government, a young and very tech-savvy population and the increasing need for data localisation. These factors point to Vietnam being a prime candidate to become an important hub for datacentres in Asia. 

Among those operators and developers that have recently entered the Vietnamese market with major projects are Gaw Capital, with a 20 megawatt (MW) datacentre facility in Saigon Hi-Tech Park, a 30MW datacentre project by Singapore-based Worldwide Data Centre Solutions, and a partnership between Japanese telco NTT and QD Tek (Quang Dung Technology) of Vietnam to construct a major datacentre in Ho Chi Minh City. 

The huge Chinese conglomerate and cloud services provider Alibaba also plans to build a major facility in the country, it confirmed to Nikkei Asia, mainly because of new regulations that mean data must be stored in-country. The major US hyperscalers are likely to follow suit in order to also comply with that recent law. 

And as this report suggests, the dominant incumbent players, such as Viettel, are also planning to invest more in the sector

The JLL report says development costs for datacentres in Vietnam range from US$6m to $13mn per megawatt, considerably lower than the equivalent cost in Japan, Singapore or South Korea, but slightly more expensive than building such facilities in China or India. 

The Vietnam government says that when the country’s new-ish ‘light-touch’ Telecommunications Law (that was actually passed in 2023) comes into practical effect in the coming months, it will provide a more structured regulatory framework with clearer definitions and guidelines for datacentre and cloud computing services – see Vietnam opens door to foreign digital service providers.

It is hoped the legislation, which allows 100% foreign investment in datacentre services, will prove “conducive” to the liberalisation of market access conditions and more foreign investment. 

- Martyn Warwick, Editor in Chief, TelecomTV