No one denies that Southeast Asia (SEA) is one of the most economically developed regions in the world. The region’s digital economy approached US$200 billion in gross merchandize value (GMV).
E-commerce has been a massive driver of growth in SEA with adoption skyrocketing across the region, up to 98% for affluent users and 74% for suburban consumers. For the first time this year digital financial services have begun to overtake e-commerce as SEA’s top investment sector with payments retaining the biggest slice of deal activity. Invigorated by a highly favorable growth environment, the industry has made significant inroads into SEA over the years. All sub-sectors are experiencing growth because of persistent offline to online behavior shifts. Digital banks are new entrants leveraging existing merchant and consumer networks to reach unbanked, underbanked populations and young digital natives. Progressive governance has allowed digital financial services (DFS) enterprises like Grab in Singapore, Tokopedia and GoTo in Indonesia to thrive in digital finance spaces. Commercial banks, recognizing the growth potential of digital banking, have launched their own e-wallets or in some cases partnered with DFS enterprises to fast-track their own digitalization, catalyzing financial inclusion.
Another key driver of growth for digital services and demand for supporting data infrastructure is the uptake of digitization among small and medium-sized enterprises (SMEs). These enterprises are the bedrock of SEA, contributing up to roughly 40% of regional gross domestic product (GDP) and employing up to 67% of the working population. Going digital addresses multiple SME pain points at once such as high operating costs of manual bookkeeping and cash transactions, inaccessible finance due to unreliable financial data, and the inability to scale and reach customers due to being offline.
Our findings in the Global Interconnection Index (GXI) 2023 indicate that organizations are connecting up to three times as many business ecosystem partners and metros, consuming more than twice the amount of interconnection bandwidth on average in the past five quarters than in the previous five years. Rapid deployment presents an opportunity for Equinix to support businesses in the emerging region, enabling them to store and distribute large volumes of latency-sensitive data and applications closer to end users and local markets while enriching global interconnectivity through our digital ecosystem.
Global Interconnection Index (GXI) 2023
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Southeast Asia Expansions Positioned to Meet the Growing Demand for Digital Services
Equinix’s presence in SEA allows us to provide digital infrastructure that enables local businesses to tap into growth opportunities abroad, accelerating their digital footprint growth via Platform Equinix® and develop the connectivity reach of global organizations wishing to access the burgeoning SEA digital economy. In two months, we proactively established a presence in two new SEA markets—Indonesia and Malaysia, strengthening our Asia-Pacific footprint across metros in Australia, China, Hong Kong, India, Japan, Korea and Singapore.
The Indonesian data center market was worth USD 1.67 billion in 2022, and is predicted to reach USD 3.43 billion by 2027, with a CAGR (Compound Annual Growth Rate) of 13.15% from 2022 to 2027. One of the critical sources of growth in the region is its rising internet economy. It is estimated that by 2025, this growth will reach USD146 billion or 40% of the digital economy in SEA will be dominated by Indonesia. The country is forecast to become the second largest public cloud market in Southeast Asia, at about 22% YoY GMV growth, Indonesia’s digital economy hits around USD 77 billion in 2022 and is on course to reach about USD 130 billion by 2025, driven primarily by e-commerce.
The USD 74 million International Business ExchangeTM (IBX®) data center in Jakarta, JK1, will provide more than 1,600 cabinets and more than 5,300 square meters of colocation space when fully built. The new facility will expand Equinix’s global network of linked data centers by adding a strategically significant, high-growth market. Equinix’s entry into Jakarta is aligned with the Indonesian government’s digital transformation initiatives, boosting the country’s digital infrastructure objectives according to goals set out in the Indonesia Digital Roadmap 2021–2024.
Malaysia is an emerging data center market with a mix of domestic and global players building data centers there. According to Synergy Research, the Malaysia data center market is expected to grow at a CAGR of nearly 10% during 2021–2026. Malaysia is on course to achieve a digital economy contribution to GDP of at least 25.5% by 2025. Organizations in Malaysia need access to ecosystems comprised of network, cloud and system integration companies and enterprise customers that are taking advantage of a comprehensive platform service with a global footprint.
In two months, we proactively established a presence in two new SEA markets—Indonesia and Malaysia.
The USD 40 million-dollar investment into the Johor JH1 IBX data center will further support the Malaysian government’s aspirations for digital transformation and businesses’ digital transformation. Expected to officially open in Q1 2024, the two-story facility will provide 500 cabinets and colocation space of 1,960 square meters. Located in Nusajaya Tech Park (NTP) in Iskandar, Johor, just 15 kilometers from Singapore’s Tuas Checkpoint, JH1 is expected to have the ability to address demand from organizations in Singapore in addition to Malaysian domestic demand.
Enriching the Digital Portfolio of Asia-Pacific to Capture Rising Opportunities
The IBX data centers in Indonesia and Malaysia will expand Equinix’s global network of interconnected data centers. These expansions will allow us to help our global customers expand into SEA, while also helping local companies across the enterprise, service provider, cloud and content spaces go global and accelerate their digital transformation journeys via Platform Equinix®. The expansion into Indonesia and Malaysia is the first steps of our overall SEA expansion strategy. We will continue to look for the right opportunity to grow and will be adding new data centers to our pipeline for both regions in the coming future.
Currently, Equinix has more than 245 data centers across 71 metros and 32 countries. Along with our established ecosystems and a reliable interconnection solutions portfolio, the expanded Platform Equinix will provide significant opportunities for enterprises situated in SEA to continue their digital transformation and move their IT infrastructure, applications and services closer to the digital edge in proximity to customers and partners.
 Synergy Research Group, Colocation Forecast, Mar, 2022