The Philippines is positioning itself to lead Southeast Asia’s digital infrastructure race with the plan to expand its data center capacity by 18 gigawatts over the next decade, as the government court’s investment from global technology giants.

Information and Communications Technology Secretary Henry Aguda said they aim to transform the country into a regional powerhouse, with 1.5 gigawatts of additional capacity expected to come online by the end of 2027.

Following that initial surge, Aguda said the government targets adding at least one gigawatt of capacity annually.

In a market brief, the International Trade Administration (ITA) expects the Philippine data center market to reach an estimated $810.98 million by 2029, up 27 percent from about $638.75 million last year.

The foreign agency said the country is emerging as a strategic hub for data center development in Southeast Asia, driven by robust digital demand, a favorable regulatory environment, and growing investments from both foreign and local investors.

Despite this, the ITA noted that high electricity costs and power reliability concerns remain major hurdles to the projected growth.

Aguda said the country’s power distributors have been expanding capacity to meet the significant power requirements of data center operations. He said these efforts are positioning the country as an attractive hub for investors to build data centers.

Last month, Aguda announced that United Arab Emirates (UAE)-based technology firm Group 42 Holding Ltd. plans to invest up to $500 million to establish data center operations in the country.

This followed an earlier investment pledge by another UAE firm, DAMAC Digital, which is planning to build the largest data center in the country, with a capacity of up to 250 megawatts (MW).

“I don’t think demand will be a problem. The problem will be the speed of the other ASEAN countries because all of them have AI (artificial intelligence) ambitions. So we have to move ahead of them,” said Aguda.

At present, the Philippines has a data center capacity of nearly 500 MW, based on the aggregated capacity of companies that joined forces to form the Data Center Operators of the Philippines (DCPH).

The DCPH comprises VITRO Inc., ST Telemedia Global Data Centres (Philippines), YCO Cloud, Digital Edge Philippines, Digital Halo, and A-FLOW.

The industry group aims to strengthen the country’s position as Southeast Asia’s next digital hub by fostering robust data center infrastructure development and industry collaboration.

On the government's part, Aguda said last year that the Department of Information and Communications Technology is assessing the feasibility of converting the long-mothballed Bataan Nuclear Power Plant (BNPP) into a hyperscale data center.

While such study remains to be seen, the proposed facility could potentially add as much as 600 MW to the country’s data center capacity.

Through these efforts to expand capacity, Aguda said the country could eventually export computing capacity and other digital services.

This, he said, could help fill the $12 billion gap that members of the Association of Southeast Asian Nations (ASEAN) collectively lose each year as companies rely on the likes of the United States (US) and China to meet their demand.

“So, if you're going to do that in ASEAN, at least you keep the $12 billion,” Aguda said.

He added that the country will prioritize exports to ASEAN before potentially expanding to other markets, such as the Middle East and the US.