As the Philippines continues to embrace digital transformation, as shown through its high data consumption, growing popularity of e-commerce,
and greater demand for internet bandwidth, telco players, real estate developers, and global cloud service providers are keen to further boost the country’s internet technology by developing the region as the next data center hotspot.
Globally, data centers are a flourishing industry. In countries like the United States and neighboring Southeast nations such as Singapore and Thailand, data centers are powering IT companies and governments, facilitating technological growth, and enabling cloud services and digital entertainment on demand. With Filipinos being a tech-savvy and tech-dependent population, experts assert that the Philippines is poised to become the next emerging hub in the Asia-Pacific for data center market investors and players.
In a “Rise of Data Centers” forum organized by the European Chamber of Commerce of the Philippines (ECCP), professionals from the real estate and law industry weighed in on the factors that make the Philippines an attractive choice and what forces are driving demand for data centers.
According to real estate and property expert Santos Knight Frank, ‘hyperscalers’ or big tech companies such as Amazon AWS, Microsoft and Alibaba continue to look into the country given the high consumption of data, with an average of 76 million users logging in 10 hours of internet usage daily. Coupled with its investment-friendly climate, strong IT and engineering talent pool, and renewable energy push, the Philippines, especially the City of Manila, is among the preferred locations for investors.
“As we expand the amount of activities that require us to store and process data, as we continue to move more functions to the internet and to the cloud from business to our personal lives, there will be a continuing demand for data center space and investment,” said Monica Gonzales, Data Centers Lead at Santos Knight Frank.
“Moreover, current statistics show that the Philippine digital economy was worth PHP1.87 trillion in 2021 and contributed 9.6% to the country’s economy,” added Gonzales. “This highlights that the digital economy is a key part of the country’s economy and is worth supporting, and locally
established data centers are key and necessary for nurturing that growth.”
Meanwhile, Atty. Alain Charles J. Veloso, a partner in the leading law firm Quisumbing Torres (a member firm of Baker McKenzie), noted other favorable factors in the investment environment such as the passage of amendments to the Foreign Investments Act, the Public Services Act, and the Retail Trade Liberalization Act, as well as the reform of the tax incentive system under
the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, as encouraging developments in the rise of data centers in the Philippines.
In the digital economy, Atty. Veloso highlighted important legal developments such as the amendments to the Public Services Act that were recently passed, which liberalizes the telecommunications industry and has encouraged more activity and foreign investments towards the data center market.
A major effect of the amended act is the removal of nationality requirements for telecommunications services in the Philippines, which would allow foreign nationals to own even up to 100% of capital in a company providing telecommunications services directly to the Philippine public.
“This development will drive the country’s already aggressive forecast for the data center Market,” emphasized Quisumbing Torres Partner Atty. Alain Charles J. Veloso. “Now, the challenge is for the Philippines and regulators to meet the challenges that come with data centers such as ensuring a reliable supply of power, strengthening telco infrastructure, and improving the ease of doing business.”
In a 2022 case study entitled “Developing and Operating Data Centers in the Philippines” presented by QuisumbingTorres, it is forecasted that the Philippine data center market will be worth USD 535 million by 2026, with a CAGR of 11.40% from 2021 to 2026.
The Rise of Data Centers: Opportunities for 2023 event was held last December 7, 2022 and was organized by the European Chamber of Commerce of the Philippines in partnership with Santos Knight Frank and Quisumbing Torres.
