Cloud to the Islands: How the Philippines is positioning itself as a data center hotspot
The Philippines, one of Southeast Asia’s fastest-growing emerging economies, is witnessing rapid growth led by a large digitally savvy consumer market and improving IT infrastructure. Its strategic location and proximity to major markets, such as China, Japan, South Korea, Southeast Asian countries, the United States, and the European Union, makes it ideal for data center operations, facilitating efficient connectivity and reduced latency. The strengthening trade relations between the Philippines and these markets further catalyze economic growth.
These favorable factors have prompted businesses to expand their IT budgets. In 2021, the Philippines’ internet economy doubled to $17 billion, and it is expected to reach $40 billion by 2025, driven by various government initiatives and the continued acceleration of digital adoption.
As the country’s internet economy grows, so does the demand for data center services. Today, data center capacity in the Philippines is concentrated in the Greater Manila metropolitan area, but cities like Cebu and Davao are catching up rapidly.
The Philippines offers tremendous potential for data center operators and developers to succeed, supported by four key pillars.
Enabling faster cloud adoption by businesses
The Philippine digital economy is growing amid an increased adoption of cloud services by businesses looking to improve their operations, reduce their IT costs, and cater to consumer demand for novel services.
Post-pandemic, the e-commerce sector in the Philippines has experienced promising growth driven by increased smartphone adoption and internet penetration, which reached an estimated rate of 55.82 percent in 2022. As digital consumers embrace e-commerce – with 88 percent already doing so, according to e-Conomy SEA Research 2022 – business and consumer demand for robust cloud adoption continues to rise.
In addition, the government has plans to fortify and improve broadband connectivity nationwide. Data centers are a vital link between cloud adoption and economic regeneration, with each component mutually supporting the other.
Lastly, the Philippines has been actively nurturing a startup ecosystem, providing a platform for developing innovative enterprises. These startups rely heavily on data usage for various operations, from product development to artificial intelligence and user experience development.
Instituting favorable government policies for digital transformation
The Philippine government has fostered a favorable regulatory environment to encourage data center growth, driven by a focus on promoting economic growth through job creation, investment flows, and a robust digital transformation agenda. Initiatives, such as the National Broadband Program and the Digital Philippines campaign, are aimed at improving the country’s digital infrastructure and supporting the growth of the IT industry, including the data center market.
Last year’s amendments to the Foreign Investments Act have played a crucial role in making the Philippines a digitally hospitable environment for people and businesses. These amendments, combined with streamlined bureaucratic processes, increase the Philippines’ attractiveness to foreign investors and position it to receive foreign direct investments. With increased resources and capital from foreign investments, businesses have a greater capacity to implement advanced cloud technologies into their operations and services.
Data centers are a vital component in supporting the government’s pursuit of a flourishing digital economy and are backed by various initiatives; these policies are aimed at driving stronger economic growth.
Building a renewable energy infrastructure
A steady supply of power is critical for data centers. The Philippines is making significant strides in developing its sustainable energy infrastructure and actively promoting renewable sources, such as wind and solar power. The country’s ‘National Renewable Energy Program for 2020-2040’ aims to generate half of the country’s power from renewable energy by the end of 2040. Numerous renewable energy projects are underway, projected to increase the combined solar and wind power by 15-fold by 2030. Industry players in the data center sector consider these developments crucial in maintaining the delicate balance between reliability, reducing carbon footprints, and lowering costs.
Developing a robust telecommunications infrastructure
The Philippines has a robust telecommunications infrastructure with an extensive fiber optic network. With ongoing subsea cable developments seven trans-pacific cables will connect the Philippines to the US by next year. Notable networks include Bifrost, Jupiter, and AAG. Furthermore, the Philippines government has collaborated with Facebook to implement the significant subsea cable Pacific Cable Light Network (PCLN), which will provide rapid internet services to the Philippines, matching the speed at which telecommunications giants operate. These developments and projects position the Philippines as a flourishing telecommunications location in the APAC region, supporting the country’s growing demand for data center services.
With Filipinos clocking in the region’s highest average of internet use per day, averaging almost four hours daily, the Philippines has the potential to become a hub of innovation and a key player in the APAC region. The country’s business environment and government policies provide a fertile ground for developing the data center industry, poised to play a crucial role in shaping the country’s digital future.
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