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Sustainable Data Centres To Grow In Popularity In Thailand


Fitch Solutions Sector Intelligence  

 

    THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data are solely derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.

    Sustainable Data Centres To Grow In Popularity In Thailand

    • 04 Jun 2022
    • Thailand
    • Data Centres
    • Raimon Land

    Key View:

    • Thailand is a promising location for data centre investments due to rising digitalisation. Consumers are spending more time online and raising demand for digital services, while industries have also been digitalising their assets and infrastructure.
    • On the supply side, the government has been actively expanding the capacity of digital infrastructure through various policies and initiatives.
    • Sustainability remains at the forefront of the government’s agenda, as seen from the Thailand 4.0 initiative.

    In May 2022, Nautilus Data Technologies signed a partnership with Thailand luxury property developer Raimon Land. The deal will see Raimon use Nautilus' water-cooled data centre architecture to build facilities in Thailand and other regional markets including the Philippines. With the deal, Raimon will enter the data centre space, extending its focus from the luxury and super-luxury real estate spaces.

    Fitch Solutions’ Infrastructure analysts downwardly revised Thailand's Industry Rewards score in Q222 due to weaker growth forecasts for the sector as a result of lingering impacts of Covid-19, which have caused many projects to be halted temporarily. The Thai tourism market was also crippled by the pandemic, with arrivals plummeting by 83.2% to 6.7mn in 2020 and by 93.6% to 427,870 in 2021, which in turn impacted hotel businesses and the retail sector. The real estate sector may continue to experience a slowdown in 2022, as the conflict between Russia and Ukraine will lead to an increase in oil and construction materials prices, labour shortages in the construction sector and an increase in interest rates.

    Given the uncertainty of the real estate market, it is strategic for Raimon to enter the data centre sector. Thailand is a promising location for data centre investments, with the country’s data hosting market already growing rapidly pre-pandemic. Home to a high number of internet users, coupled with the growing middle class in the country, consumers are utilising more services online, such as making digital purchases. With consumers increasingly reliant on digital services, demand for digital content and cloud-hosted services and applications will be raised and data centres will be needed to support the trend. The values of Internet banking transactions and mobile banking transactions, for instance, saw increases of 132.5% and over 500% respectively over the 2017-2021 period.

    Transactions Reflect Rising Usage Of Digital Services
    Thailand - Internet Banking & Mobile Banking Trends, 2017-2021

    Source: Bank Of Thailand, Fitch Solutions

    The public and private sectors have also been digitalising their assets and infrastructure. During the pandemic, the cloud computing market moved to a faster growth trajectory as industries saw the necessity for increased efficiencies and cost reductions. All these will, in turn, increase the necessity for data centre and network infrastructure investments. We forecast cloud computing spending to rise from THB46.8bn (USD1.437bn) in 2021 to THB147.7bn (USD4.31bn) by 2026.

    Thailand Cloud To Grow Robustly
    Thailand - Cloud Computing Spending, 2020-2026

    e/f = Fitch Solutions estimate/forecast. Source: Fitch Solutions

    In addition to the demand-side momentum created by the pandemic, investments and government policies have improved supply-side conditions in recent years. The government announced the National Economic Social Development Plan and Digital Government Plan in 2016 that aimed to strengthen IT infrastructure in the public sector, as well as a national procurement law that will benefit cloud vendors through its requirements that value for money in contracts be prioritised. Furthermore, one of the objectives of the Thailand 4.0 initiative is to “create a value-based economy that is driven by innovation, technology and creativity”, which can be done via promoting the adoption of IoT technology for smart city initiatives and digital transformation of industries.

    The final pillar of the Thailand 4.0 initiative is that of sustainability, as the government strives toward building a low carbon society. This was highlighted in the Thai government’s 20-year National Strategic Plan as well, where its goal is to provide “security, prosperity and sustainability to the nation” by transforming the country into a developed market with economic sustainability.

    The partnership between Raimon and Nautilus is aligned with this: Nautilus’ TRUE (Total Resource Usage Effectiveness) technologies enable the company to provide an environmentally innovative, water-cooled data centre infrastructure. This is said to reduce energy costs, water consumption, wastewater production, and harmful refrigerant use, without impacting fish or wildlife. With ESG increasingly at the forefront of companies’ agendas, the partnership is a mutually beneficial one for both companies: Nautilus provides a sustainable data centre infrastructure and services while leveraging Raimon’s expertise in the Thai market. Together, the companies can support the adoption of cloud technologies that will be crucial to the digital transformation of the economy.

    The main downside risk to the collaboration will come in the form of competition, with US vendors Amazon Web Services and Microsoft being the leading vendors in Thailand's cloud market. In May 2022, Alibaba Cloud, the digital technology and intelligence backbone of Alibaba Group, launched its first data centre in Thailand with an emphasis on cybersecurity. Nevertheless, we believe that the data centre development by Raimon and Nautilus will be a successful one, especially with its focus on sustainability. We are also expecting the companies to venture into other markets in Southeast Asia in the medium term to leverage the strengths of the market in the region.

    This report from Fitch Solutions Country Risk & Industry Research is a product of Fitch Solutions Group Ltd, UK Company registration number 08789939 ('FSG'). FSG is an affiliate of Fitch Ratings Inc. ('Fitch Ratings'). FSG is solely responsible for the content of this report, without any input from Fitch Ratings.

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