How data center ownership rules are changing

Countries are relaxing rules to boost capacity and attract investment

Governments in Asia Pacific are easing regulations on data center ownership to increase domestic capacity and encourage foreign investment.

In July, Vietnam removed a 49% cap on foreign ownership for data centers, mirroring China’s earlier pilot program to relax foreign investment limits in the telecom sector, which encompasses data centers.

Even before these policy changes, Vietnam had attracted significant interest from global data center operators.

Through joint ventures with local partners, Japan’s NTT Corporation and Singapore’s ST Telemedia Global Data Centers (STT GDC) have announced plans to establish large data centers in the country this year. For instance, STT GDC’s second facility in Vietnam will have an IT load of up to 60 megawatts.

The loosening of foreign ownership restrictions is a positive step in the right direction for Vietnam’s regulated data center industry, according to Dr. Glen Duncan, Head of Data Center Research, Asia Pacific, JLL.

“In terms of data center capacity, Vietnam is still a developing market compared to the regional hubs,” says Duncan. “Foreign operators will bring additional skills and capabilities to build large-scale data centers in the country, accelerating its digital economy.”

Bold ambitions

Unlike Vietnam, China's primary goal of opening up restrictions is to attract investment that will level up its competitiveness, a common aim of its economic reforms in recent years.

“The policy move is a game-changer,” says Ben Teh, Senior Director, Capital Markets, East China, JLL. “While many foreign operators are already active in China through strategic alliances, the relaxed regulations signal a more open market that inspires confidence among investors, potentially encouraging new entrants and facilitating market exits.”

The regulatory change aligns with the country’s broader ambitions to become a global artificial intelligence (AI) leader capable of attracting capital, talent, and ultimately increasing its market share.

Catalyst for growth

Vietnam’s policy change follows the blueprint in leading data center markets across Asia Pacific, namely Australia, India, Japan, Malaysia, and Singapore.

“Most of these hubs have more liberal foreign ownership policies, which have been a key catalyst for their rampant data center growth,” says Duncan.

Despite this positive step, Vietnam still has work to do.

“Its existing infrastructure primarily caters to traditional hyperscaler and enterprise needs,” says Duncan. “A paradigm shift is required as the industry moves towards data centers capable of handling AI workloads.”

Vietnam’s revised policy stance comes amid a growing trend of data sovereignty laws in the region.

“Governments are increasingly restricting data flows and mandating data localization to encourage domestic businesses and promote a thriving digital economy,” says Duncan. “They are also taking steps to safeguard citizen data and ensure personal privacy in a global digital environment with unrelenting cybersecurity threats.”

This shift will create a competitive advantage for data centers located within these countries, as more data will be repatriated and stored locally.

Data center dominance

Currently, both China and Vietnam still face challenges in establishing themselves as major data center hubs.

China grapples with geopolitical factors that impact supply chains, including access to essential components, equipment, and high-performance graphics processing units, Teh says.

Meanwhile, Vietnam’s local operators can benefit from the deep understanding, strategies, and expertise of global and regional data center players.

“International operators have sophisticated business models, connectivity, cloud ecosystems, AI capabilities, and operational efficiencies, which can lead to lower costs and greater sustainability,” Duncan says.

However, he believes Vietnam can enhance its competitiveness by building up its existing capabilities with global expertise.

“By collaborating with international partners and adopting best practices, the country can eventually position itself as a sub-regional data center hub for neighboring countries like Cambodia, Laos, and Myanmar," he says.

This article was first published on JLL’s Trends & Insights.