‘Data residency law to drive up investments in data centers’

MANILA, Philippines — Requiring local storage of applications and information, even those held by the private sector, would encourage data center builders to move here and list publicly, industry players said.

Interviewed by The STAR, they said it is necessary for the government to legislate a measure on data residency for the Philippines to keep up with regional peers.

Further, a law could persuade Filipinos to invest in the initial public offering (IPO) of data center operators like PLDT Inc. unit VITRO Inc., which is aiming to raise as much as P24.2 billion.

Colliers Philippines research director Joey Bondoc said a law would mean the Philippines is devoted to long-term expansion of data centers. Currently, there is growing opposition to such infrastructure due to their massive power and water requirements.

As of 2024, the International Energy Agency estimates that data centers take up about 1.5 percent of global electricity consumption. Large data centers also use up to five million liters of water daily to cool processor chips.

Bondoc said a measure, approved by a majority of legislators and signed by President Marcos, would signal that the government is ready to stand by data centers against critics.

“Honestly, you need the strength of a law to drive up data centers (in the Philippines),” Bondoc told The STAR.

What the data center industry has right now is Executive Order (EO) 119 approved by President Marcos, mandating the local storage of top-secret data owned by the government.

VITRO president and CEO Victor Genuino said the EO would suffice for now given that the aim is to start with government data. However, he agreed that a law would be necessary if the policy has to cover privately held data.

“Given that the scope for EO 119 is purely public sector data, the EO will suffice. If this will be extended to private sector data, then a law would be needed,” Genuino told The STAR.

Regional peers ahead of the Philippines in the data center race have taken the drastic measure of requiring even private data to be stored locally.

Vietnam, for instance, mandates that all personal data of its citizens, whether held by the government or businesses, must be kept domestically for national security.

Personal information in critical sectors like finance, health and telco must also be stored in local data centers in other Southeast Asian countries such as Indonesia and Malaysia.

These economies are leading Southeast Asia on data center capacity. Based on a report from Cushman & Wakefield, Malaysian state Johor offers 111 gigawatts of capacity as of June, while Jakarta operates 356 MW.

Manila, on the other hand, is lagging with just 90 MW. Manila’s data center vacancy rate is also the highest among the three at 43.6 percent, unlike Jakarta’s 20.4 percent and Johor’s 0.7 percent.

Still, the Philippines is showing signs it could keep up with Southeast Asian counterparts, as the local stock market will soon welcome its first data center listing in VITRO.

VITRO will sell up to 48.95 percent of its shares to the public, hoping to raise as much as P24.2 billion for future projects and debt payment.

Even though data centers are criticized for their environmental impact, they play a crucial role in the digital era, as they store applications and information that run the online world.