Vietnam embraces digital infrastructure, green data centers, and AI

Key targets by 2030

Under Decision 2161, Vietnam has set the following ambitious goals to be achieved by 2030:

• Private enterprises to invest in and own at least four new international undersea cable routes.
• At least 50% of national data center capacity to be supplied by modern, large-scale, and green data centers operated by the private sector.
• Attraction of at least two global technology giants to invest in and operate large-scale data and AI centers.
• Development of at least two leading private digital infrastructure enterprises capable of competing globally and driving the domestic digital ecosystem.

Solutions to promote investment

To achieve these targets, the government has committed to implementing several key solutions:

• Land use planning: Allocating dedicated land funds for data center projects in local land-use plans, with priority given to sites in high-tech zones and areas with favorable technical infrastructure.
• Renewable energy access: Implementing a direct power purchase agreement (DPPA) mechanism, allowing large electricity consumers such as data centers to purchase power directly from renewable energy generators.
• Public-Private partnerships: Promoting a public-private partnership investment mechanism for digital infrastructure, especially for projects related to smart cities and data storage and processing.
• Streamlined procedures: Simplifying administrative procedures for investment, business licensing, and construction in the digital infrastructure sector.

The current legal framework applicable to data centers

The data center legal framework is primarily governed by the Telecommunications Law 2023 and its implementing regulations.

Definitions

• A "data center" is defined as a telecommunications facility, including buildings, stations, cable systems, computer systems, electrical systems, and auxiliary equipment installed to process, store, and manage data for one or multiple organizations or individuals.
• "Data center service" is a telecommunications service that provides processing, storage, and retrieval capabilities for users over telecommunications networks by leasing part or all data centers. Data center service is categorized as a "value-added telecommunications service", further emphasizing its importance within the telecommunications sector.

Opportunities for Foreign Investors

Vietnam's regulatory framework is open to foreign investment in the data center sector. The Telecommunications Law 2023 expressly permits foreign investors to establish wholly-owned entities in Vietnam to engage in data center services.

Alignment with Provincial Master Plans

As data centers are classified as telecommunications facilities, their establishment and operation must align with the provincial master plan for passive telecommunications technical infrastructure, which specifies the data centers to be established in each province. These plans include details such as the names of the data centers, their corresponding commune-level administrative areas, designated land use areas, expected land requirements, and estimated total electricity usage.

Notably, under Decision 2161, the provincial master plans on passive telecommunications technical infrastructure are set to be issued by December 2026.

DPPA Mechanism

Vietnam's ambition to become a regional hub for data centers can only be realized if accompanied by a sustainable green energy policy, given the power demands of AI systems. It is therefore encouraging to see that Decision 2161 lays the groundwork for a DPPA mechanism for renewable energy generators to supply green power to data centers, though the structure will need to be elaborated in further detail. This aligns with international industry trends, with data center developers often incorporating captive renewable energy projects to power facilities, driven by increasingly stringent stock exchange disclosure requirements relating to carbon emissions and reduction plans.

Conclusion

The issuance of Decision 2161 signals a clear strategic shift towards fostering private sector investment in Vietnam's national data center infrastructure. The market is open to foreign investors, as they may entirely own data center projects. Leveraging the PPP legal framework may also offer investors additional incentives and assist them in navigating challenging land and regulatory issues. By committing to a DPPA regime, the government is signaling its commitment to ensuring that data centers are green. Decision 2161 is a step forward to transforming Vietnam's digital ecosystem.

Authored by David Harrison, Gaston Fernandez, Fernando Margarit, and Mai Bao Ngoc.