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Alibaba to build Vietnam data center to follow local storage law

Written by Nikkei Asia Published on   3 mins read

The Chinese tech group is renting server space from state-owned partners in the meantime.

Alibaba plans to build a data center in Vietnam to store data locally in compliance with legal requirements, while it currently relies on government-owned facilities.

The Chinese tech group told Nikkei Asia that, for now, it rents space for computer servers from telecommunications companies Viettel and VNPT, providing one example of how companies have responded since a contentious law took effect in 2022. Google, Amazon and others fought hard against Vietnam’s plan to force them to keep data in the country, but the policy ultimately went through towards the end of that year.

As a result, businesses have been looking for cross-border options.

Dang Minh Tam, solution architect lead at Alibaba Cloud, said the company uses colocation—a term for renting out space from data center operators—partnering with the two state companies to park client data locally. But it also backs up data at clients’ request at its own server farms located across the region, from Indonesia to Singapore.

Alibaba plans to build a data center in Vietnam to keep pace with demand in one of Asia’s fastest-growing economies, Tam said. He said he did not yet know the cost and declined to give a timeline for the project, as the details have not been made public. The cost of building a data center can exceed USD 1 billion.

“Vietnam is a very [high] potential market,” Tam said in an interview. “There’s a lot of space to grow.”

One reason companies like Alibaba might want to build their own servers, in addition to cost considerations, is to ensure greater security and control over their information.

Liability can be an issue when multiple companies are involved in managing the same data, said Leif Schneider, counsel at law firm Luther.

Contracts must be clear “so you always know who bears what risk and responsibility,” he said at a cloud and data center conference in Ho Chi Minh City last week.

Local companies, meanwhile, share Alibaba’s bullish outlook on the market.

Viettel IDC, run by Vietnam’s military, told Nikkei that its customers from Alibaba to Microsoft are demanding environmental, social, and governance (ESG) improvements.

It calls its approach “ESGT,” with the added use of technology. For example, tech can be used to track and optimize water use, which is used to keep computers cool and can rack up big costs. Viettel does not currently use much renewable energy but is aiming to make renewables count for 30% of its power consumption by 2030, said technical department manager Nguyen Dinh Tuan.

“We need to prepare for the data center boom,” he said in an interview. “We need to prepare for the sustainability trend.”

Viettel projects the Southeast Asian country’s data center market will expand 15% a year for the foreseeable future, and likely more if a big cloud company like Alibaba invests there.

The expansion is fueled in part by the data localization rules, which Hanoi admits violate its free trade agreements, but which ease the one-party state’s ability to access data. The rules have been a boon for cloud providers that already have server farms in Vietnam, including gaming unicorn VNG and IT company CMC, which said it will construct at least two data centers in the next few years, potentially doubling its capacity.

Vietnam should look to Malaysia and Thailand, whose markets really took off once international players entered the competition, said Evolution Data Centers CEO Darren Webb.

“The countries that try to protect their domestic markets, that doesn’t work,” he said at the industry conference. “The pie doesn’t get bigger.”

This article first appeared on Nikkei Asia. It has been republished here as part of 36Kr’s ongoing partnership with Nikkei.


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