Lagging behind in digital infra
The furious race toward increased digitalization in both the private and public spheres has led to a surge in demand for data centers, those unseen and power-hungry facilities that support increasingly vital activities from cloud storage to financial transactions, e-commerce, and artificial intelligence.
As Southeast Asia is expected to witness digital transformation at a massive scale, the fast-growing region has attracted investments from global tech giants such as Google and Microsoft.
Unfortunately, those top names and others like them are putting their money in Malaysia, Indonesia, Singapore, and Vietnam, not the Philippines.
Think tank Stratbase Institute has thus sounded the alarm, calling for immediate action from the government and the private sector to promote digital infrastructure projects lest the country falls further behind.
Citing data from Cloudscene, Reuters, and Data Center Dynamics, Stratbase underscored that Malaysia and Indonesia alone secured digital infrastructure investments totaling $16.7 billion and $5 billion respectively.
The Philippines? It has so far captured a mere $1.35 billion in similar commitments in hyperscale data centers and cloud infrastructure, and primarily from local companies Ayala and PLDT at that.
Leader in digital economy
Primarily to blame for the trickle of investments going into the Philippines is the lack of adequate infrastructure to support these facilities such as affordable and reliable electricity and government policies to adapt to the exact demands of the global digital economy.
To reverse the trend, Stratbase Institute President Victor Andres Manhit urged policymakers and business leaders to “urgently align national infrastructure and data governance policies so that the Philippines won’t miss out on billions in potential investment if current trends on the global data center market persist.”
The stakes are indeed huge as Synergy Research Group and Grand View Research estimates the global data center market will grow to $652 billion by 2030 as foreign companies take advantage of the lower cost of data center construction and operation in the region.
As Manhit put it, the need to position the Philippines as a leader in the digital economy that has radically changed sectors such as retail, education, banking, and finance and even governance has become a “battle for billions and for our future.”
Power requirement
Some of the ingredients needed to make the Philippines more attractive to foreign and local investors are already there, particularly in data sovereignty or security because of the country’s Data Privacy Act and rules governing cross-border data transfers.
The biggest turnoff, however, is the high cost of electricity that thus makes the operation of these high power consuming facilities more expensive here than in other countries, the same concern that has also stifled the flow of foreign investments into other job-generating sectors such as manufacturing.
Manhit thus suggested that the government put in place “targeted energy incentives” to bring down the cost of running these facilities. “This opportunity is real, but it comes with a caveat—data centers hosing AI technologies need energy on a massive scale,” he said.
The power requirement is indeed enormous, with power consumption by data centers in the Asean region projected to account for as high as 30 percent of national power demands, according to the paper of the Asean Climate Change and Energy Project, exacerbated by the extra demand for cooling in the region’s tropical climate.
“There will be no data center boom if we cannot guarantee a power supply that is sufficient, stable and clean,” Manhit said.
Aggressive plan
The point cannot be stressed enough, as the Philippines is in an intense competition for these scarce foreign investments against other countries that are already far ahead in digital infrastructure. Thus without an aggressive plan that will tie the government and the private sector together to accelerate the rollout of new and reliable energy facilities, the Philippines faces the grave risk of losing out on the golden opportunity presented by the growth in data centers.
Shoring up the country’s energy supply and making it reliable and affordable should be an integral part of a long-term and comprehensive strategy to scale up the country’s digital infrastructure with the support of the private sector and the academe that will be in charge of skills development.
The development of new power plants that can reliably run 24/7 has to be accelerated. Regulatory roadblocks have to be cleared and the national grid must also be strengthened to accommodate the increased output over the next few years. Then there is the regulatory mandate to ensure the lowest price possible to be borne by customers.
“No power, no place at the table. That’s the hard truth in the AI economy,” Manhit said, a conclusion that the Marcos administration must confront and act on if the Philippines is to stand even the slightest chance of cashing in on the data center boom.
