In an exclusive e-mail interview with W.Media, Steven Davis, Chairman & Co-Founder of Data Center Association of the Philippines hints at ‘large press releases over the next 6 months that will shake and shape the Philippines market’.
By Jan Yong, Editor (SEA), W.Media
- What is the most compelling story from the Philippines data center market today?
DCAP: There are several stories of mention from BeeInfoTech (BIT) initial plan, Digital Edge’s first commercial launch success, fast and large expansions of ePLDT Vitro and STT GDC, and the largest to date Equinix acquisition of TIM. Also, several new DCO players establishing their presence such as AFlow, YCO, and Digital Halo; however, the largest announcement has yet to come. I foresee some large press releases over the next 6 months that will shake and shape the market.
- What factors are driving the growth of the data centre market in the Philippines?
DCAP: Several factors are contributing to the growth such as 100% ownership of corporate structures, power cost reductions, government incentives and support, plus space versus future demand deficit. However, the largest contributor is that the Philippines has all the users – largest internet, mobile, and social usage throughout Asia in addition to Cloud usage, AI usage, and XaaS (“anything as a service”) companies which cannot overlook their largest market and what is driving their CAGR percentage.
3. What advantages does the Philippines have over its competitors in the ASEAN region?
DCAP: 1. Philippines is predominantly English speaking;
- Philippines is aligned to western paradigms, and is balanced between political interests;
- It is the largest BPO center in the world meaning more usage of Chatbots and AI than other countries;
- Philippines being late to deregulate does not mean irrelevance; we have a deficit between available space and power usage vs. upcoming demands to meet user needs;
- Geographic location has always been a key advantage;
- Cable landing stations, currently 10 in production with eight more in construction giving a total 18 landing stations, the second most in SEA behind Singapore;
- Highly skilled pool of talents, mostly originating from the Philippines; the engineers here are easily adaptable;
- Government incentives through the CREATE MORE Act, Green Lanes for Strategic Investments Act, and Open Access Network Act. For example, Bureau of Internal Revenue (BIR) incentives offer 7-year tax holiday + 10 years at fixed 5% in which 100% of power generation spending can be deducted from tax filing.
- There is a lot of emphasis on using renewable energy to power data centers; what is the latest news in the Philippines?
DCAP: Renewable energy is a growing area; for example, the Green Lanes for Strategic Investments Act empowers the Department of Environment (DOE) to allow any and all power generation companies immediate license to build and operate. As a result, many data centers are signing agreements and announcing green initiatives. Some initiatives include the use of solar, wind, tidal, geothermal, and natural gas.
- What are the major challenges faced by the industry and what steps have been taken to deal with them?
DCAP: Overcoming several modernization challenges has been a work in progress for the Philippines; the speed of adaptation and flexibility has been impressive however. Challenges still remain but as we continue to progress and identify each of them, we can then plan mitigation actions and tackle them one by one.
- The Philippines used to have the highest energy costs in Southeast Asia. How is the situation today?
DCAP: From 2022, Singapore has surpassed the Philippines in terms of power cost, making the Philippines no longer the most expensive in the region. Projections suggest that by 2025-2028, power costs in the Philippines will continue to stabilize and reach an Equalization-Point where we are no longer the highest in the region. On the other hand, Indonesia and Malaysia are gradually reducing government subsidies for power, targeting reduction to 7% (by 2028) and 5% (by 2030), respectively. This would impact their power cost competitiveness. The Philippines is the only SEA country with no Power Trade Partner influencing the supply or demand of its power availability. This means there are no outside influences on power prices in the Philippines to contend with.
- Ali Baba’s recent “Tech-Driven Sustainability Trends and Index 2024” report revealed that 77% of Filipinos fear that the high energy consumption associated with digital technologies may hinder widespread AI adoption. Furthermore, 84 percent believe that the substantial energy consumption of digital technologies such as powering AI may outweigh its benefit. What are your thoughts on this?
DCAP: Power utilization, actually realization, in most countries is growing and meeting immediate demands. The forecast of growth however seems to reveal a bigger gap; most Data Centers are overbuilding at this point, hoping that the adoption would happen quickly, for example, Malaysia will have 1.4GW built by the end of the year, while Indonesia will have 1.7GW by the end of the year.
- Philippines remains the most disaster-prone country in the world amid high exposure to flooding and earthquakes, according to the World Risk Index. How would this impact the appetite of data centres to be located in the Philippines?
DCAP: Japan has 2.8 times the disaster threshold than the Philippines, yet they have designed, managed, and built for those potential challenges. If we take a model of how that was done, we can learn from them.
- Where do you see the market headed in one year and in five years’ time?
DCAP: Over the next year, we will see several interesting changes: from more acquisitions and investments, to global Data Center Operators, Hyperscalers, and Independent Software Vendors (ISVs, XaaS) companies adopting the Philippines as a potential secondary digital infrastructure hub. Over the next five years, we will see “aggressive growth” driven by power costs equalizing in the region, more government support, evolving networks and increasing user demand. It will be a glorious ride! I look forward to seeing everyone at W.Media’s Data Center and Cloud Conference on March 27 at the Conrad Hotel Manila.
