High demand for green solutions within Southeast Asia’s booming Data Centre Sector

Southeast Asia’s data centre market is entering its fastest scaling phase ever. Demand for cloud services, AI workloads, fintech adoption, and national digitalisation strategies is pushing every major economy in the region to build capacity quickly. Indonesia, Malaysia, the Philippines, Thailand, and Vietnam all share a common trend: digital demand is growing faster than infrastructure can keep up. This creates openings for investors, developers, utilities, technology providers, and engineering firms who can move early.

Opportunities are strongest where governments are actively pushing digital transformation, offering incentives, and opening their markets to foreign ownership. Power-hungry AI workloads are attracting hyperscalers and forcing countries to rethink grid upgrades, renewable energy procurement, and water management. Malaysia, Indonesia, and the Philippines are currently the loudest growth stories, but Vietnam and Thailand are not far behind in terms of long-term potential.

At the same time, growth is limited by several challenges that are broadly similar across the region. Power availability remains the common bottleneck. Water constraints and the need for more efficient cooling solutions are rising concerns. Permitting processes remain complicated and require coordination across multiple government agencies. Talent shortages, especially in specialised data centre operations, create delays and operational risks. Finally, regulatory regimes, especially around data protection and foreign ownership, vary from country to country and require careful navigation.

Despite these issues, the overall picture is positive. Every government featured in the deck recognises that data centres are now strategic assets. All are modernising policies to attract hyperscalers. And almost every country has developed, or is actively developing, digital economy masterplans, green energy pathways, and streamlined investment processes.

The region is at an inflection point: high demand, accelerating investment, and governments willing to upgrade their systems. Companies that engage now stand to shape the next decade of Southeast Asia’s digital infrastructure.

 

Indonesia’s Data Centre landscape

Indonesia is one of the fastest-growing data centre markets in the region, valued at USD 2.57 billion in 2023 and projected to reach nearly USD 4 billion by 2030. Growth is being driven by accelerating cloud adoption, digital-transformation initiatives, and rising IoT demand. With 79 operational data centres already in operation and an additional 24 facilities under development, the market is accelerating its growth and transitioning toward infrastructure suited for hyperscale requirements.

Most data-centre activity remains heavily concentrated in Jakarta, which accounts for more than half of the country’s total capacity due to its superior network interconnectivity and strong enterprise demand. Batam is emerging as an important secondary hub, supported by special-economic-zone incentives, proximity to Singapore, and strong international connectivity. In addition, West Java is considered as a strategic location for data-centre development, as reflected in the development of the National Data Center (PDN) in Cikarang.

Market expansion continues to be driven by the growing adoption of cloud computing, IoT, 5G, and other low-latency digital services. Investment is increasingly focused on hyperscale and wholesale colocation facilities, with significant contributions from global players such as Microsoft, Amazon, and Princeton Digital Group. Sustainability has become a key priority, with operators implementing renewable-energy sourcing, energy-efficient cooling systems, and greener infrastructure designs to meet environmental goals and regulatory requirements.

Despite the positive momentum, utilities remain a major bottleneck. Power availability, especially outside Java, along with grid reliability issues pose significant challenges for large-scale deployments. The permitting and regulatory process also remains complex, requiring coordination across multiple ministries for land approvals, and environmental reviews. Even with these constraints, Indonesia is set to remain one of Southeast Asia’s fastest-growing and most strategically important data centre markets.

Malaysia’s Data Centre landscape

Malaysia has quickly become Southeast Asia’s breakout data centre hub. Valued at USD 4.04 billion in 2024 and projected to reach USD 13.57 billion by 2030, it is now the fastest-growing market in the region. Johor and Klang Valley dominate development due to power availability, land access, and connectivity.

The country has attracted massive investments from Google, AWS, Microsoft, ByteDance, Nvidia, Equinix, PDG, and others. Over 1.2GW of pipeline capacity is planned on top of a 2024 base of 504.9 MW. Malaysia benefits from solid infrastructure, a stable regulatory environment, and a government that actively supports digital investments through MyDIGITAL, the Digital Investment Office, and the Green Lane Pathway that fast-tracks power connections.

Challenges revolve mainly around utilities. Power demand is rising faster than planned grid upgrades, especially in Johor. Water supply risks also require operators to adopt efficient cooling systems and maintain on-site reserves.

Malaysia’s biggest advantage is the concentration of hyperscale-friendly industrial zones already designed for large facilities. With tax incentives and a relatively straightforward regulatory regime, Malaysia is currently the easiest regional market for new entrants.

Philippines’ Data Centre landscape

The Philippines is rapidly transforming from an under-served market into a major future hub. Valued at USD 633 million in 2024 and projected to reach USD 1.97 billion by 2030, the market’s growth rate sits at more than 20% annually. One of the highest in the region.

Digitalisation initiatives, cloud adoption, AI readiness, and strong enterprise demand are generating significant momentum. The country has more than 15,000 racks installed and is commissioning a wave of new high-capacity facilities between 2025 and 2030. Operators like ePLDT, STT GDC, Digital Edge, and foreign cloud players are now expanding aggressively.

However, infrastructure challenges are real. Electricity prices remain a concern, although the grid is adapting quickly to the needs of hyperscale operators. Local peering structures and telecom fragmentation also add friction. The permitting environment involves many agencies including DICT, NTC, BOI, PEZA, LGUs, which can slow timelines unless projects qualify for the Green Lane fast-track.

Despite these challenges, the Philippines stands out because its demand fundamentals are exceptionally strong. Enterprises, government agencies, and consumers are shifting online at speed. As connectivity improves through new subsea cables and the National Fiber Backbone, the country is likely to become a major regional market.

Thailand’s Data Centre landscape

Thailand’s data infrastructure market is rapidly upgrading — while in 2024 the market may have seemed modest, the country is now on a fast growth path, with recent analyses estimating the hyperscale‑data‑centre segment size at approximately USD 4.3 billion (2025). What’s more, capacity builds and investments currently in motion point toward a multi‑billion‑dollar expansion over the coming years.

Although Bangkok remains a dominant base thanks to its existing infrastructure and connectivity, the Eastern Economic Corridor (EEC) — especially areas like Chonburi and Rayong province is rapidly emerging as the preferred zone for large‑scale hyperscale developments.

Recent investment activity validates growing global confidence: in 2025 alone, the government approved around USD 2.7 billion in new data‑centre and cloud‑services projects. Major players — both local (e.g., True IDC) and international (e.g., a 300 MW facility by Beijing Haoyang Cloud & Data Technology) — are moving ahead with expansions, while a recent green‑energy‑powered hyperscale campus by Galaxy Data Center plans to invest USD 2 billion in the EEC.

On the supply side, the government is strengthening its support infrastructure. A new energy‑sector plan, unveiled in late 2025, aims to ensure stable grid supply and green‑energy procurement — specifically to back data‑centre growth.

Challenges remain — permitting can be complex, and foreign‑ownership rules under the business‑regulation regime still require navigation. But thanks to supportive policies such as the ongoing Thailand 4.0 initiative and incentives from the Board of Investment of Thailand (BOI), regulatory hurdles are increasingly balanced by long‑term opportunity.

Overall, Thailand offers compelling long‑term potential: a strategic geographic location in ASEAN, growing demand driven by cloud adoption and AI, major investments from global hyperscalers, and improving infrastructure — making it a strong contender for investors looking to tap into Southeast Asia’s next digital‑infrastructure frontier.

Vietnam’s Data Centre landscape

Vietnam's data center market is also experiencing explosive growth. Total data centre capacity is projected to nearly double from 525 MW in 2025 to close to 1,000 MW by 2030. Demand is driven by AI adoption, cloud computing expansion, fintech growth, e-commerce boom and rapid digital transformation across sectors. Additionally, Vietnam is tightening data localization requirements under regulations such as Decree 53 and strengthening personal data protection laws, which mandate enterprises to store Vietnamese users' personal data within the country, further accelerating the need for domestic data center facilities.

The country currently has 41 commercial data centres operating nationwide, owned by 12 enterprises. Domestic operators such as Viettel, FPT, CMC, and VNG dominate the market and hold most of the existing capacity.

Vietnam is witnessing a wave of major investments from both domestic and international players. Domestic operators are leading significant projects. Viettel stands out with two AI data centre projects launched in 2025: a 140 MW facility (operational Q1 2026) ranking among Southeast Asia's top 10. In August 2025, Viettel also inaugurated another data center valued at VND 17,500 billion (approximately USD 700 million), built to Uptime Tier III standards with plans to upgrade it to the company's second hyperscale facility by 2030. Besides, foreign consortiums including G42, Microsoft, AIC, and ST Telemedia are also committing billions to hyperscale facilities.

Vietnam offers compelling advantages with one of the lowest construction costs in the Asia – Pacific and low industrial electricity rates. The country also benefits from strategic geographic positioning, improving data regulatory frameworks, and robust connectivity infrastructure. This makes Vietnam attractive for operators seeking cost-effective regional hubs, particularly in Hanoi and Ho Chi Minh City where most projects are concentrated.

Challenges include ensuring stable power supply for energy-intensive AI workloads, streamlining complex project approval procedures across multiple ministries, expanding international transmission infrastructure, developing specialized technical talent, and enhancing climate adaptation capabilities. Still, Vietnam's significant cost advantages, strong digital economy trajectory, and growing regulatory maturity make it an increasingly attractive destination for data centre operators willing to navigate a developing but rapidly improving investment environment.

 

Cross-Market Themes

Across the five markets, several themes consistently appear:

• Demand growth is outpacing current infrastructure.

• Governments see data centres as strategic assets and want to attract foreign investment.

• Power availability and reliability remain the biggest constraint everywhere.

• Water usage is becoming a key issue as cooling needs rise.

• Talent gaps are present in all markets.

• Permitting remains multi-layered and requires strong local partnerships.

• Hyperscalers are driving the investment wave, pushing governments to modernise policies.

The overall direction is clear: Southeast Asia is entering a decade of major digital infrastructure development. Companies that can navigate utilities, land, permitting, and partnerships will find meaningful opportunities across the region.

Join Our Regional Data Centre Workshops

To help Danish companies understand these opportunities first-hand, the Trade Council is exploring organising targeted workshops with leading data centre operators, developers, utility providers, industrial parks, and government agencies across Southeast Asia. These sessions will focus on:

• Market entry strategies

• Power and land availability

• Partnership models

• Regulatory navigation

• Upcoming investment-ready projects

If your organisation is exploring entry or expansion in the region’s data centre market, this is the most efficient way to connect with the right stakeholders and assess opportunities before committing resources.

For more information, contact Mark Perry, Head of Trade, Embassy of Denmark in Malaysia at markpe@um.dk