Microsoft’s $1 billion data centre investment in Thailand is very good news. It is seen as part of a plan to ignite the digital growth of the kingdom and the AI revolution. Certainly, this week, it offered the country and Prime Minister Srettha Thavisin hope. It comes amid manufacturing decline and global low-cost competition undermining the second-generation Thai economy built in the latter half of the twentieth century, in particular its automotive industry.
The announcement by Microsoft that it was investing in a regional data centre in Thailand on Wednesday was significant. In short, this is not another pie-in-the-sky vision but a key step for Thailand and opportunity. The kingdom has the chance to grow its online digital economy in fast-growing Southeast Asia. Certainly, respected consulting firm Kearney estimates that Thailand has the potential to create up to 20% of its existing economy in this sphere by 2030. In short, a godsend for the Thai government struggling with a faltering manufacturing base. Microsoft’s investment is estimated to be worth $900 million to $1 billion.
While it came in a week where the US giant invested $2.2 billion in Malaysia and $1.7 billion in Indonesia, the commitment to Thailand came after a shorter negotiating period.
Thailand already has AWS, which announced a $5 billion investment in 2022 with an agreement in principle from Google. At the same time, it has an ambitious green energy scheme to make Thailand a low-cost competitor when it comes to energy.
On Friday, Prime Minister Srettha Thavisin cited inward investment as the key to Thailand’s efforts to regenerate its economy.
Before this, on Wednesday, Mr Srettha gave a keynote speech in Bangkok at Microsoft Build: AI Day. The event took place at the Queen Sirikit Convention Centre.
At the event was Microsoft’s Chairman and Chief Executive Officer, Satya Nadella.
It followed a Memorandum of Understanding signed between Thailand and Microsoft last November. This came during Prime Minister Srettha’s visit to the Asia-Pacific Economic Cooperation (APEC) Summit in San Francisco.
Part of the IGNITE THAILAND economic plan to see the country expand as a digital services hub in Southeast Asia. Ambitions also as a green energy centre
Prime Minister Srettha emphasised the government’s IGNITE THAILAND blueprint for growth. That plan aims to transform Thailand into a regional hub across a range of sectors. This includes healthcare, futuristic vehicles, travel, aviation, finance, and digital services.
In addition, as part of Thailand’s vision, the country is transitioning towards more green energy. In short, the kingdom will provide power to data centres with cleaner, greener electricity.
For instance, Thailand plans to generate 9 gigawatts of green electricity by 2030 under its Utility Green Tariff scheme.
This is a plan devised by the Thai government to use the Carbon Border Adjustment Mechanism (CBAM) introduced by the European Union.
In effect, businesses will be attracted to Thailand by established renewable energy firms. Simultaneously, they will be incentivised by the European Union scheme and make Thai business concerns more competitive.
In addition, no less than half of the country’s power will come from renewable sources by 2040.
Microsoft is already a key player in Thailand’s digital economy and it is certainly quite active. Its GitHub service is used by 900,000 Thai tech developers
However, there was immediate good news for Thailand on Wednesday.
In short, the announcement that Microsoft will build a regional data centre in the kingdom.
At the same time, the company will train 100,000 Thai developers and staff on how to use AI.
Certainly, this is no idle promise. Thailand is one of Microsoft’s fast-growing markets. For instance, the US giant owns GitHub.
It supports software and web developers across a range of tasks and activities. This includes writing code, project coordination and transforming ideas into finished services.
There were over 900,000 internet engineers and developers in Thailand who used GitHub in 2023. In brief, the facility grew 24% compared to the year before
Therefore, it means Microsoft is already a key player in Thailand.
AI is a real and promising growth opportunity for Thailand as its manufacturing economy declines due to years of government inertia on structural problems
At the same time, as Thailand struggles to deal with a declining manufacturing economy, the AI technology sector could be a key opportunity.
Consulting firm Kearney, one of the world’s oldest and most trusted, estimates that the industry alone could be worth $1 trillion to Southeast Asia by 2030.
For instance, Thailand has the potential to generate $117 billion or ฿4.3 trillion in the same time frame. In short, that is up to 20% of the kingdom’s current economy.
Undoubtedly, this could be an escape card for Thailand’s Pheu Thai government from the economic mess caused by decades of inertia. In short, the failure of past governments to tackle the country’s structural problems.
There are fears for the Thailand’s manufacturing sector especially after 18 months of decline. In particular, the country’s automotive industry, previously the backbone of its industrial output.
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By Thursday and Friday this week, analysts were looking at announcements from Microsoft for Indonesia and Malaysia.
Sources tell the media that the Thai investment was lower than Malaysia and Indonesia because Thailand came late to the table. However, it is competitive
The US tech giant committed to a $2.2 billion investment in Malaysia. Indeed, this is the single biggest investment for Thailand’s southern neighbour in 32 years.
It will also train up to 200,000 Malaysians.
On the same day as the Bangkok event, Microsoft simultaneously announced a $1.7 billion investment in Indonesia. In that country, 840,000 people will receive training and certification.
A Thai source close to the government briefed the media.
Firstly, the scale and value of the investment in Thailand have yet to be ascertained. Some suggestions put it at $900 million to $1 billion. In truth, the value of the investment was still being discussed with Microsoft.
However, the same source made it clear that Thailand is well-positioned. Not only does it already have AWS or Amazon, which announced a massive $5 billion investment in 2022, but it also has a number of key Chinese investments.
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Moreover, the kingdom has also signed an agreement with Google for it to invest in Thailand.
Thailand has just emerged from a ‘frozen’ era of junta and semi-junta rule since Prime Minister Srettha Thavisin’s government took office in September 2023
The source made it clear that the reason why Thailand’s scale of investment was lower is to do with timing.
Thailand has only just emerged as an option for Western technology firms. Before, the country suffered a ‘frozen period’ for inward investment. In short, during the junta rule and the post-junta government of General Prayut Chan-o-cha.
The new government of Prime Minister Srettha Thavisin only came to power in September 2023.
‘Thailand does not lack potential as a data centre. We just started slower than our neighbours,’ an industry analyst told reporters.
In the meantime, Thailand has managed to secure Chinese investments through firms such as Alibaba and Huawei.
Alibaba established a $1 billion data centre in Thailand in 2021. As part of that programme, 1 million Thai people were offered training. In addition, the venture aimed to assist 100,000 Thai startups.
US firms may not use Chinese cloud infrastructure
However, US firms are beginning to dominate the cloud computing market in the Asia Pacific.
The reason is the accessibility of US software and systems. At the same time, the US government encourages its firms not to use Chinese networks or cloud services.
In brief, they pose a significant security risk while the scope of US sanctions is also expanding.
At the same time, the growth of cloud computing in China is starting to taper off.
Previously, this began in 2021 with the pandemic-era downturn. The industry has failed to return to past levels of growth. In the meantime, American firms are taking over the market.
Chinese firms today survive by offering cloud-based services at lower costs. The going rate is approximately 50% of what the US players are charging.
A dual internet ecosystem is emerging with Chinese firms and users on one side and the American and Western markets on the other. Thailand still in both
One such firm is Thailand’s Narai Intertrade, the firm which promotes Naraya lifestyle products as a brand.
Notably, it uses the Alibaba cloud infrastructure network to deliver its offerings. In turn, the reason for this is that many of its customers are in China.
Nevertheless, the market for Chinese cloud computing still grew 8% in 2022.
Last year in Southeast Asia, both AWS or Amazon, Microsoft, and Google accounted for 67% of the cloud computing market.
This is growing while Chinese influence is weakening. At the same time, the market for cloud computing is growing by 25% per year.
Certainly, we are moving towards a dual-internet system with the United States and Western countries on one side and China on the other.
Yet, for now, Thailand, like other countries, still maintains links with both as part of its internet ecosystem.
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