Singapore’s Data Center Sector: Regulations, Incentives, and Investment Prospects

Singapore is renowned for its highly advanced telecommunications sector, marked by an impressive network infrastructure and exceptional connectivity on a global scale. Supported by a robust government presence that prioritizes innovation and economic expansion, the country has been consistently ranking in the first two positions of the World Economic Forum’s Network Readiness Index (NRI) for over a decade.

Singapore’s economic vitality shines through its impressive GDP exceeding US$466.79 billion in 2022, while its digital economy is estimated to reach US$30 billion by 2025. This thriving digital economy encompasses various elements, including Singapore’s flourishing data center industry. Additionally, within this digital landscape, there exists 2 million fixed-line telephone subscriptions and a substantial 8.57 million mobile telephone subscriptions.

The COVID-19 pandemic further accelerated these conditions, and the country witnessed an increase in the demand for data center services, digitalization, and cloud services by the government and private sectors.

Boasting an impressive roster of 100 data centers, 1,195 cloud service providers, and 22 network fabrics, Singapore’s digital infrastructure is formidable. With a robust network supported by 24 submarine cables, the city-state has emerged as a global cloud connectivity leader, hosting major players such as Amazon Web Services, Microsoft Azure, IBM Softlayer, and Google Cloud. Notably, Singapore has also earned its place as one of the select locations for Alibaba’s US$15 billion global research program, further cementing its status as a tech innovation epicenter.

This article delves into the multifaceted landscape of the Singapore data center sector. We explore the web of regulations that govern data sovereignty, privacy, and security, while also examining the incentives that beckon global investors to the city-state’s shores. Moreover, we will delve into the investment prospects and market trends that underpin Singapore’s attractiveness in this area.

Power supply and energy efficiency

In Singapore, seven percent of total electricity consumption goes to data centers, and this number is projected to reach 12 percent by 2030.

In January 2022, the Singaporean government lifted the moratorium that had been placed on data centers. Initially enacted in 2019, this moratorium was a response to the considerable energy consumption associated with data centers.

Amid global energy challenges, Singapore’s data center landscape showcases reliable power infrastructure. While the nation’s green energy contribution remains at 2 percent, data center enterprises benefit from an array of Power Usage Effectiveness (PUE) scores, ranging between 1.20 and 1.90. The average PUE for Singaporean data centers rests at an enviable 1.47, reflecting the industry’s dedication to energy efficiency.

In addition, with an aggregate power capacity exceeding 569.18 MW, Singapore’s colocation facilities offer a variety of rack power options, spanning from 1.50 kW to 5.40 kW.

Regulatory framework

Data sovereignty and security regulations

Personal Data Protection Act (PDPA)

The Personal Data Protection Act (PDPA) in Singapore serves as a fundamental safeguard for personal data, ensuring responsible handling and protection. Data centers store, process, and manage vast amounts of personal and sensitive information, making compliance with the PDPA crucial.

The PDPA encompasses personal data stored in both electronic and non-electronic formats. Notably, it excludes individuals acting in a personal or domestic capacity, employees performing their duties, and public agencies involved in personal data collection, use, or disclosure. Furthermore, business contact details like names, positions, business phone numbers, addresses, emails, and similar information fall outside the PDPA’s scope.

All types of organizations engaging in activities involving personal data collection, utilization, or disclosure in Singapore must adhere to the PDPA’s data protection obligations.

Cybersecurity Act

The Cybersecurity Act (2018) establishes a comprehensive framework concerning Critical Information Infrastructures (CIIs) within the context of Singapore’s data center industry. This Act imposes specific responsibilities on CIIs’ proprietors, including the mandatory reporting of cybersecurity incidents. Furthermore, it introduces the role of a Commissioner of Cybersecurity, tasked with overseeing and promoting the cybersecurity landscape of computers and computer systems across Singapore.

Under the Cybersecurity Act, the Commissioner of Cybersecurity holds the authority to issue or endorse codes of practice and performance standards for the management of CIIs. These codes offer guidance on cybersecurity measures that CII owners should undertake to ensure the security of their infrastructures. Notably, these codes serve as recommendations and are not legally binding. Currently, the Cybersecurity Code of Practice for Critical Information Infrastructure is one such guideline issued by the Commissioner.

Moreover, the Cybersecurity Act introduces licensing provisions for cybersecurity service providers. Within the context of Singapore’s data center market, service providers engaging in managed security operations center (SOC) monitoring services or penetration testing services fall under this licensing requirement. This step ensures a regulated and secure environment for data centers by holding cybersecurity service providers accountable to established standards.

Environmental regulations and sustainability initiatives

Singapore Standard for Green Data Centers

The SS 564 Green Data Centers Standard (SS 564) is a significant certifiable benchmark for sustainable and energy-efficient data centers in Singapore. Developed collaboratively by the IT Standards Committee (ITSC), the Infocomm Development Authority of Singapore (IDA), and SPRING Singapore, this standard, known as the Singapore Standard for Green Data Centers – Energy and Environmental Management Systems, addresses the critical challenge of reducing carbon emissions associated with data center operations.

Modeled after the ISO 50001 Energy Management Systems (EnMS), SS 564 establishes a robust framework to systematically enhance energy efficiency and curtail energy consumption within data centers. This framework is built upon the Plan-Do-Check-Act (PDCA) methodology, strategically crafted to identify potential energy wastage risks and optimize energy utilization within data centers.

By embracing SS 564, organizations can seamlessly integrate energy-efficient and sustainable practices into their data center operations, culminating in a substantial reduction in annual energy consumption.

Incentives for data center investments

Pioneer Certificate Incentive

The Pioneer Certificate Incentive (PC) is a program designed to encourage companies to enhance their capabilities and engage in novel or expanded activities within Singapore. This incentive extends to companies involved in global or regional headquarters (HQ) activities that encompass managing, coordinating, and controlling business operations for a group of companies.

Key highlights are included in the table below.

Pioneer Certificate Incentive: Key Takeaways
Tax Benefits	Companies approved under the PC incentive are eligible for corporate tax exemptions or a reduced tax rate of either 5 percent or 10 percent on income generated from qualifying activities.
Incentive Period	The duration of the incentive is limited to five years. The possibility of an extension exists, contingent upon the company’s commitment to undertaking further expansion efforts.
Separate Accounting	During the incentive period, the company must maintain a separate account for any non-qualifying activities. Income generated from non-qualifying activities does not qualify for the incentive.
Source: EDB

Companies operating within Singapore’s data center sector have an opportunity to qualify for this incentive, which has been purposely crafted to drive significant investment contributions to the economy and foster advancements in globally leading industries – thus aligning with the characteristics and potential of the data center sector.

For consideration under the PC, companies must introduce advanced technology, skillsets, or know-how to their industry, substantially surpassing the prevailing standards in Singapore. They should also engage in pioneering activities that contribute substantively to the economy.

Data Center Carbon Footprint Assessment (DC-CFA) program

In July 2022, the Singapore government introduced a first pilot round of incentives known as the Data Center Carbon Footprint Assessment (DC-CFA) program, signifying a strategic shift towards private-led efforts for building sustainable data centers. This initiative follows a series of government-led or funded projects aimed at achieving sustainability in Singapore, a nation that lacks abundant renewable energy sources due to its small size and climate.

The DC-CFA initiative emphasizes private-sector innovation and commitment to sustainability, with a specific focus on decarbonization. Proposals are sought for renewable energy usage or innovative energy pathways to offset carbon emissions.

The eligibility criteria are summarized in the table below.

Eligibility Criteria for Singapore’s DC-CFA Pilot Program
Criteria	Details
Best-in-class and efficient data center	Applicants must outline plans for running the most efficient and best-in-class data center. Design, construction, and operation should aim for superior efficiency and effectiveness.
Green mark for data center Platinum Certification	Selected applicants are required to certify their new or expanded capacity data center under the BCA-IMDA Green Mark for New Data Centre (GM-NDC) criteria; after, they can attain their Platinum Certification for sustainability.
Power usage effectiveness (PUE)	Applicants must design, build, and operate a data center with exceptional efficiency. A Power Usage Effectiveness (PUE) of 1.3 (at 100 percent IT load) or better must be achieved. PUE measures the annual energy used by the data center over the annual energy used by IT equipment.
IT energy efficiency	Demonstrated optimization of IT energy efficiency. Equipment should meet or surpass industry-leading IT energy efficiency standards. Implementation of strategies in collaboration with users to enhance equipment utilization.
Decarbonization strategies	Applicants must present proposals detailing strategies to achieve sustainability goals. Plans to invest in innovative energy pathways, such as hydrogen or Building Applied Photovoltaics / Building Integrated Photovoltaics, to offset carbon emissions.
Source: Infocomm Media Development Authority, Singapore

In addition, in 2023, the Singaporean government, represented by the Economic Development Board (EDB) and the Infocomm Media Development Authority (IMDA), launched a new round of the DC-CFA exercise and will award approximately 80 MW of new capacity to four data center operators.

The eligibility criteria are illustrated in the table below.

Eligibility Criteria for Singapore’s DC-CFA 2023 Exercise
Criteria	Details
Energy efficiency	A focus on adopting state-of-the-art liquid cooling and energy-efficient core-IT equipment, with the goal of obtaining Green Mark DC Platinum Certification.
Connectivity	Enhancing international connectivity through increasing submarine cable capacity and establishing carrier-neutral exchanges.
Compute capacities	Anchoring critical computing capacities, including AI/ML computing and High-Performance computing, while establishing links with offshore data centers to complement Singapore’s capacity.
Economic commitments	Demonstrating significant economic contributions to Singapore beyond direct DC investments.
Source: Infocomm Media Development Authority, Singapore

Infrastructure-related incentives

Waivers on Goods and Services Tax (GST) and Import Duty Exemption

Waivers on Goods and Services Tax (GST) constitute a significant aspect of Singapore’s tax framework, offering a vital advantage to businesses and companies, including those operating within the data center market. GST waivers are aimed at exempting or reducing the tax burden on certain goods and services, thus fostering economic growth, incentivizing investments, and bolstering various sectors, including the data center industry.

Data centers are integral components of a digital economy, serving as vital infrastructure for numerous industries. Recognizing their strategic significance, Singapore offers GST relief on the importation of data center equipment, including servers, networking gear, and cooling systems.

This exemption reduces the cost of acquiring essential technology, facilitating the establishment and expansion of data centers.

Similarly, Import Duty Exemptions for data center (and related industries) equipment may also be applicable.

Investment prospects

Sustainable (green) energy

The global data center industry in recent years has been putting a growing emphasis on environmental sustainability and the adoption of alternative energy sources.

In such a domain, Singapore’s data center sector offers an ideal platform for foreign investors to engage in R&D initiatives focused on refining renewable energy technologies. Geothermal and wave energy solutions, which hold the promise of stable and continuous power generation, present untapped opportunities for innovation. Foreign investors can actively participate in piloting and advancing these emerging technologies within the data center context.

Moreover, the dependence on diesel generators during power outages represents another sustainability challenge that Singapore’s data center sector has to face. Foreign investors can explore investments in advanced backup power solutions, such as lithium-ion batteries, which align with carbon-free objectives. Collaborative efforts to refine these technologies can enhance the reliability of backup power while minimizing the environmental impact.

Prefabrication and modular solutions

Prefabrication and modular (PFM) solutions are gaining traction as efficient alternatives to traditional construction methods. These solutions involve manufacturing and assembling data center components off-site before transporting them to the desired location for installation. This approach offers benefits such as reduced construction timelines, controlled quality, and minimized on-site disruption.

As hyperscalers and enterprises continue to allocate substantial funds for expanding their capacities, a unique investment avenue emerges within the fragmented realm of PFM solutions. The strategic positioning of Singapore, coupled with the current challenges faced by traditional construction methods, sets the stage for potential investors to capitalize on the PFM sector’s growth trajectory.

In 2022 alone, hyperscalers allocated around US$9 billion worldwide to expand their infrastructure—a trend projected to experience annual growth of over 4 percent until 2030.

By capitalizing on this trend, investors can not only yield favorable returns but also contribute to the growth and innovation of Singapore’s data center ecosystem.

Why invest in Singapore’s thriving data center ecosystem?

In today’s interconnected digital landscape, data centers serve as essential hubs of information exchange. Singapore has rapidly emerged as a prime destination for this pivotal industry, embodying technological prowess, regulatory strength, and enticing incentives.

With its strategic geographical position and robust telecommunications infrastructure, Singapore has attracted global giants to establish their data centers within its borders, solidifying its role as a key player in the sector.

The nation’s commitment to data security and privacy is reflected in its regulatory framework, notably the Personal Data Protection Act (PDPA) and the Cybersecurity Act. These measures not only ensure responsible data handling but also foster a trustworthy environment for data center operations.

Moreover, Singapore’s dedication to sustainability shines through initiatives such as the SS 564 Green Data Centers Standard and the Data Center Carbon Footprint Assessment (DC-CFA) program. In addition, the allure of incentives such as the Pioneer Certificate Incentive (PC) and GST waivers has positioned Singapore as an attractive destination for data center investments.

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