With Southeast Asia evolving into a global hub for digital innovation, sustainable energy and advanced manufacturing, the region is ripe for strategic investments. From data centres powering the digital economy to green hydrogen projects leading the energy transition, Southeast Asia is building the foundation for a prosperous and sustainable future.
Data centres
The steady growth of artificial intelligence (AI), cloud computing and e-commerce has led to a wave of investments into digital infrastructure, an emerging asset class in the region.
Singapore is a frontrunner with over 100 data centres, accounting for 60 per cent of Southeast Asia’s total capacity. In an effort to reduce energy consumption, new data centres have been mandated to meet higher efficiency standards. This has further attracted investor interest in the sector. In line with this, in September 2023, KKR acquired a 20 per cent stake in Singtel’s data centre unit, Digital InfraCo, for $800 million.
Malaysia is rapidly establishing itself as a prominent data centre hub in Southeast Asia. The country has recently attracted significant investments from major tech-focused companies such as Google, Nvidia and Microsoft. In May 2024, Google committed around $2 billion to build the country’s first data centre. Additionally, Johor Bahru city has emerged as the fastest growing market in the region, boasting a total data centre capacity of 1.6 GW. Moreover, recently, AirTrunk has commissioned a 10.3 hectare, 150 MW hyperscale data centre in the city, offering over 50 MW of capacity. This is being funded under the company’s sustainability-linked loan framework. AirTrunk raised a corporate sustainability-linked loan worth $4.6 billion in 2023 from lenders including BlackRock, Clifford Capital, Fukoku Mutual Life, Hong Kong Mortgage Corp, and Revolution Asset Management.
Thailand has made a significant leap forward in November 2023 with Amazon, Google, and Microsoft committing to investing around $8.5 billion in data centres. It is already home to over 30 data centres. Amazon Web Services will invest $5 billion over the next 15 years to build a new data centre, contributing to a major milestone in the nation’s digital development. Google has committed $1.7 billion investments in AI and cloud facilities. These investments from leading tech companies are attracting more foreign direct investment into the country.
In May 2024, Vietnam lifted its 49 per cent foreign ownership cap on data centres, opening the market to major tech companies. This policy framework is expected to bring in significant investments. Following this, STT GDC and Alibaba have already announced plans to build data centres in the region.
Electric vehicles
Global interest in electric vehicles (EVs) is surging. Countries worldwide are adopting sustainable technologies to meet stringent carbon emission targets fuelled by growing climate change concerns. Consequently, the region is seizing this opportunity. South Korea’s Hyundai Motor Group and LG Energy
Solution (LGES) has inaugurated Southeast Asia’s first battery cell production plant in Indonesia with an investment worth $1.1 billion. Prior to this, in 2022, VinFast secured a $135 million climate financing package from the Asian Development Bank (ADB). Thailand has welcomed two new production facilities, BYD Company Limited’s first EV production facility with an investment of $1.3 billion, capable of producing 150,000 units per year and GAC AION for $64.03 million investment with a capacity of 50,000 units.
Green hydrogen push
Green hydrogen is crucial in combating climate change. The region’s largest refineries in Indonesia, Thailand and Singapore produce approximately 30-70 kilotonnes per annum (ktpa) of hydrogen.
A major milestone is the commencement of Malaysia’s largest green hydrogen project in Perak in 2024. Semarak Renewable Energy will build a 60 MW facility powered by floating solar panels, backed by a $400 million investment from Capitale Ventures.
Sarawak, Malaysia, is emerging as a hub for green hydrogen, with hydropower electricity playing a crucial role in this transition. Currenty, hydropower accounts for more than two-thirds of the state’s electricity supply. The Sarawak Economic Development Corporation Energy (SEDCE), a state-owned developer, is finalising deals worth $4.2 billion for two massive projects. The H2biscus project, a joint venture with Samsung Engineering, Lotte Chemical and Posco, aims to produce 150 ktpa of green hydrogen, and converting it to ammonia for export to South Korea. The H2ornbill project will see SEDC partnering with Sumitomo and Eneos with a production capacity target of 90 ktpa, and shipping green hydrogen as liquid organic hydrogen carrier methylcyclohexane (MCH).
The Malaysian government has launched a road map which envisions a potential revenue of $136 billion from hydrogen exports by 2050. With these ambitious projects under way, the country is well positioned to become a global leader in the green hydrogen economy.
Desalination
In regard to the global water crisis, Southeast Asia stands out as one of the most severely affected regions, with approximately 110 million people grappling with water insecurity. In response, technological advancements offer hope, particularly through the deployment of seawater desalination facilities.
Singapore depends significantly on desalination for its clean water supply and operates five desalination plants. The latest addition, the Jurong desalination plant, commissioned in 2022, can produce up to 137,000 cubic metres of water daily. The facility is managed by a joint venture between Tuas Power and Singapore Technologies Marine Consortium (TP-STM), along with the Public Utilities Board, Singapore’s national water agency. Covering nearly 30 per cent of Singapore’s water needs and being 5 per cent more energy efficient than conventional desalination plants, the project will cost an estimated $217 million. Major financial backers include DBS Bank, KBC Bank, ING Bank and Standard Chartered Bank, with DBS Bank serving as the lead arranger.
Another significant milestone in Southeast Asia’s efforts to improve water supply was marked in June 2022, when the East Economic Corridor (EEC) Committee implemented a public-private partnership (PPP) for seawater desalination projects in Map Ta Phut and Pattaya, Thailand. The PPP deal, valued at THB 7.7 billion, is a joint investment managed by the EEC office and the Industrial Estate Authority of Thailand.
Future outlook
In essence, Southeast Asia is witnessing significant investments across new-age infrastructure. The rise of digital infrastructure is underscored by major commitments from tech giants, with major investments allocated to data centres in Singapore, Malaysia and Thailand. The green hydrogen sector is also attracting considerable funding, particularly in Malaysia, as the region aims to become a leader in this emerging market. As these investments materialise, Southeast Asia will solidify its position as a global hub for innovation and a leader in transitioning to a greener economy. The commitment from both the public and private sectors will play a vital role in shaping a resilient and prosperous future for the region, ensuring it remains competitive on the world stage.
