It is no secret that Singapore is the leading data center market in Southeast Asia, and one of the primary markets in the wider Asia Pacific region — decades of easy access and business-friendly policies have propelled the tiny city state into a meeting point for multinational tech corporations, and that includes some of the industry’s largest data center operators and investors.

So, what is the one largest impact of the data center industry on Singapore’s already bustling economy?

Ajay Sunder, Deputy Director of Strategy at SC-Nex, believes that it is the continued exemplary governance that Singapore takes around data protection and privacy that will make the country a leader in the region. As the volume of data grows, so does the need for stronger policies that guarantee data security. In this, therefore, Singapore can serve as a model for its neighbouring economies, thereby solidifying its position as the data hub of Southeast Asia.

On the other hand, Patrick McCreery, Head of Commercial at Keppel Data Centers, points out that the biggest impact of the data center industry on Singapore’s economy is added capability to develop next-generation technologies.

Data centers are directly tied to the digital ecosystem and infrastructure of a region, and Singapore already has the best conditions for a thriving tech hub. As such, it produces a synergic effect: 5G, AI, and Internet of Things (IoT) can thus be accelerated at greater speed.

Smart City initiatives and data centers

The capability of a data center is closely tied to the success of a smart city, and here is where the presence of data centers has the potential to influence the development of other sectors around it.

Mr. Sundar highlights how the data center industry cuts across the world’s six core sectors — metals, minerals, infrastructure, logistics, digital media, and real estate — making it one that is unique and thus charged with potential. Building a smart city requires a high level of skill in the core sectors, and a talented labour force. If a market has a large pool of talent in the above sectors, we will be able to see considerable growth.

Long story short, a data center enables the economy around it, and in this case, Singapore serves as a shining example.

Singapore’s short and long term challenges

However, this does not mean that Singapore’s data center market is without its challenges. Daryl Dunbar, a Singapore-based tech strategy leader and independent consultant, says that so far, much of next-generation tech skills are still constrained to the US and Western European market. This means that migration of such skills is one challenge that lays ahead if an economy such as Singapore wants to grow bigger.

“There needs to be a localisation of tech skills to allow for further growth,” he said.

Another challenge is sustainability. It is reported that data centers in Singapore consume about 20 percent more energy compared to the global average. Therefore, operators inevitably have to evaluate and improve on energy efficiency for data centers.

According to Mr. Sundar, questions that data center companies should address when going green, include: who their energy partner is, and how energy efficiency can be guaranteed.

“These will determine how operators will be perceived in the industry in the long run,” he added.