SIJORI is a prosperous and blooming region situated in the heart of Southeast Asia. It is positioned within the soon-to-be launched ASEAN Single Window initiative, offering a multitude of opportunities and benefits for economic agents involved in the trading industry.
Furthermore, thanks to its strategic location and generous incentives offered by the local authorities, SIJORI has managed to attract substantial foreign investments over the years.
However, since the world is constantly evolving, especially in the aspect of technology and economy, it is crucial to understand how SIJORI’s position in the APAC region stands currently in order to strategize for sustainability and growth in the future.
In the current Asia Pacific data center landscape, Glen Duncan, the Head of Data Center Research for the APAC Region at JLL, sheds light on the dynamics of SIJORI, such as emerging market trends, competitive landscapes, and market maturity, and explains where it stands today in the APAC region.
Sustainability Takes Center Stage
While sustainability has long been a cornerstone in data center operations, recent years have seen an intensification of efforts in this arena. With a keen focus on efficient design, construction, and operations, alongside a push for renewable energy usage, stakeholders from governments to environmental groups are placing unprecedented pressure on data center operators.
This surge in sustainability concerns has only been amplified by the explosive growth of artificial intelligence (AI) technology, which according to Duncan, has been a game-changer since 2023, driving up energy demands even further. As a result, “Operators are looking for the optimal geographic locations for data centers beyond regional hubs like Singapore now, and edge locations are becoming more attractive alternatives,”
Singapore’s Constraints and Spillover Effect
Singapore, a key player in the APAC data center landscape, has faced supply constraints since 2019 due to governmental policies aimed at aligning with international climate agreements. “Demand has far outstripped supply. Operators and investors have been looking to the other geographies in the SIJORI region to act as potential spillover locations for this demand. There has been significant land banking in both Johor and Batam and also significant new data center builds in different clusters of Johor,” said Duncan.
Understanding SIJORI’s Unique Position
Duncan highlights the distinctive characteristics of Indonesia, Singapore, and Malaysia within the SIJORI context.
“Indonesia (175+ million) has a much larger population than Singapore (5+ million) and Malaysia (33+ million). This gives Indonesia a large domestic market for digital services that require data center infrastructure. Singapore’s data centers predominantly serve a Southeast Asian regional market rather than just its domestic market. Indonesia (1,904,569 km2) also has a much larger land area than Singapore (734.3 km2) and Malaysia (330,803 km2).”
Indonesia, with its vast population and land area spread across thousands of islands, presents a unique landscape for data center development. Duncan said “there is significant variation in quality of infrastructure and population density across each of these islands. For example, Karimun, Bintan and Batam all vary markedly. From a data center perspective, most development will occur in Nongsa Digital Park for the foreseeable future. Singapore’s infrastructure on the other hand is world class across the island,”
SIJORI Growth Drivers
The growth of the SIJORI region is being shaped by some key factors that are also influencing growth across the wider Asia Pacific area, according to Duncan. Things like the increasing use of cloud services, advancements in artificial intelligence, and the growing number of digital devices and services are all playing a big role. There’s also a focus on making data centers more efficient and sustainable. Singapore, in particular, is emerging as a hub for these trends, with major players like Facebook setting up massive facilities there. This means that SIJORI is becoming a central hub for the region’s cloud and data infrastructure.
“Continued cloud and hyperscale buildout in APAC will be the key drivers shaping the SIJORI region, and we are seeing this already with large data centers already completed or under construction in Johor servicing cloud tenants,”
Competitive Advantage and Market Maturity
“In APAC, there are several metros that act as regional hubs including Singapore, Hong Kong, Shanghai, Sydney and Tokyo. Each of these hubs serves their own sub-regions and doesn’t necessarily compete with the other hub metros. Singapore acts as the hub for Southeast Asia and its competition for this role is other Southeast Asian metros including Kuala Lumpur and Jakarta, as well as Bangkok and Manilla,” said Duncan.
However, in assessing SIJORI’s competitive advantage relative to other APAC regions, Duncan underscores the region’s role in consolidating Singapore’s hub status. “The SIJORI region in fact has consolidated Singapore’s regional hub status because it has provided alternative land and power sources, as well as different labor pools and labor costs upon which to draw in order to establish spillover clusters in neighboring Johor and Batam. Through SIJORI, the Singapore market has capacity for expansion,”
While Singapore stands as a mature hub market with 1000+ MW of supply, Malaysia and Indonesia are positioned as emerging markets with significant potential for growth, with a total national supply of approximately 200 MW each.
Opportunities and Challenges Ahead
The SIJORI region presents a unique landscape of opportunities and challenges distinct from other parts of Asia Pacific. It has been formed to appeal to both regional and international investors.
“The SIJORI Growth Triangle is an agreement between Singapore, Malaysia (specifically Johor) and Indonesia (specifically Riau Islands) that seeks to make the subregion attractive to regional and international investors. The agreement links the infrastructure, capital and labor skills of Singapore with the natural and labor resources and the land of Johor and the Riau islands.,”
However, despite its advantages, sustainable energy sources remain a pressing challenge, highlighting the need for concerted efforts to harness renewable energy potential.
“In the coming years Indonesia and Malaysia have the potential to become major producers of renewable energy which can be channeled into the subregion and power the industry,” said Duncan
Anticipating Future Trajectories
Looking ahead, Duncan anticipates robust growth for the SIJORI region, positioning it as a pivotal player in the APAC data center landscape. While emerging markets like Jakarta, Kuala Lumpur, Bangkok, and Manila are also ramping up their data center capacities, potentially affecting Singapore’s demand, the overall surge in demand across Southeast Asia is expected to outweigh any setbacks.
“The SIJORI region is effectively Singapore. The subregion enables Singapore to maintain its regional data center hub status for Southeast Asia and as such the subregion as a whole will continue to grow strongly,”
In essence, SIJORI stands poised at the nexus of innovation and opportunity, charting a course towards sustainable growth and technological advancement in the dynamic landscape of the Asia Pacific data center industry.
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This story first appeared in our Special SIJORI issue of the Cloud and Datacenter magazine, and is being republished on the website in the run-up to SIJORI Week.
