Data centre operators eyeing Batam as new digital hot spot

Nongsa Digital park has been designated a special economic zone.
Nongsa Digital park has been designated a special economic zone.PHOTO: NONGSA DIGITAL PARK

SINGAPORE - Twenty data centre operators are eyeing the possibility of setting up shop in a technological park on Indonesia's Batam island, with one sealing the deal after President Joko Widodo granted the park special economic zone (SEZ) status.

"Most of them were waiting first for the SEZ to happen and started conversations only around the beginning of this year," Nongsa Digital Park senior executive director Marco Bardelli told The Straits Times.

"We have already signed with one party and I am having dialogues, at different stages, now with 19 different data centre parties," he added.

The data centre market in South-east Asia is poised to grow by US$10.57 billion (S$14 billion) between 2019 and 2023, according to market research company Technavio in its March 2020 report.

Expectedly, governments - including from Indonesia - are hoping to see a revenue boost from this sector.

Coordinating Minister for Economic Affairs Airlangga Hartarto said in a statement on Saturday (June 12) that "the government continues to encourage investment realisation, especially for data centres, as an effort to improve and develop the digital economy".

Mr Bardelli said some 25ha of the park - about the size of the Singapore Zoo - has been allocated to develop the data centres in the first phase, with plans for expansion in the future.

He added that 13 international submarine fibre-optic cable segments landing only 2.5km away with direct links to Indonesia, Singapore, and the US West Coast would make the park a potential location for operators looking to target the Asia-Pacific market.

Data centre operators told The Straits Times that Batam is relatively sheltered from natural disasters, geographically close to Singapore, and provides access to a huge market of 270 million people.

Mr Darren Webb, chief executive of Singapore-based start-up Evolution Data Centre, also cited reasons such as a moratorium on constructing new data centres in Singapore as well as growing data usage as more people work from home and shop online during the Covid-19 pandemic.

"Data is just booming because people are now spending more screen time," he said. "It's almost like a perfect storm that has been created, which makes Nongsa more attractive and relevant now than it was two to three years ago."

Singaporean Kavin Wong, chief executive of Data Center First, said he has bought 2.75ha of land at the park to build multiple data centres customised for clients such as banks, telecommunications companies and e-commerce businesses.

Mr Wong said the data centre market growth is expected to intensify in the region, driving demand for "edge data centres" located closer to the end users so they can benefit from lower latency, higher security and greater control of their data.

All the data centres in Indonesia are currently located in the capital, Jakarta, and Batam will gain prominence as business epicentres grow in cities on Sumatra island such as Palembang, Medan and Pekanbaru, he added.

"These cities are so far from Jakarta, but closer to Batam. Despite its strategic location and faster speed of network from Batam, people, Indonesians even, tend to consider the island a small fishing village," said Mr Wong, who had worked at a data centre in Jakarta for a few years.

He added that the Singapore Economic Development Board has been supportive of Singapore businesses, including data centres, in the digital park.

Treating Indonesia as a business partner rather than a competitor will bring bigger gains to both countries, said Mr Wong, adding: "It's about expanding the pie, as opposed to sharing the pie."