As Lim explains, this is a trend that has been ripe for change across Asia for a while – but recent events have accelerated investment requirements. “Even prior to the pandemic, we had the view that data and connectivity are fundamental to everyday life and to global economic activity. And while that trend was emerging, the pandemic accelerated it,” she explains.
As Asia’s populations navigated the pandemic by isolating at home, the saving grace for a lot of people was the ability to still be able to work, shop and communicate online. In turn, Asia’s spike in online adoption further amplified digitalisation pressures across Asia. “In terms of our portfolio, we've now invested close to 40 per cent of our latest regional infrastructure fund across the digital sector,” says Lim. “As a trend, it's definitely a unifier across the region.”
In many cases, it also served to highlight those markets where the region’s supply of fast data transfer lagged behind demand – a concern that quickly became a strategic weakness. For Macquarie, this presented an opportunity to drive value for our clients in digital infrastructure, namely data towers, data centres and fibre networks, as well as the adjacent technologies associated with those three core assets.
Quickly, governments in markets such as Indonesia and the Philippines recognised that in times of crisis, resilient and sustainable infrastructure is a strategic priority, and one that must be fast-tracked.
For example, in 2016 laws passed in Indonesia stipulated that the ownership of telecoms towers in the country was completely closed to foreign ownership. In current times, the nation’s Presidential Regulation No. 10 of 2021, dubbed the New Investment List, completely removed such restrictions.2 Later that year, the Philippines followed suit, with its government removing its cap on foreign ownership in several industries, including telecoms.3
The Association of Southeast Asian Nations (ASEAN) Secretariate sees this trend accelerating further, forecasting that Southeast Asia will be “one of the world’s fastest-growing data centre markets in the next few years, exceeding the growth in North America and the rest of Asia-Pacific”.4
A recent report co-commissioned by the UN Conference on Trade and Development predicted that the data centre market in ASEAN, worth $US1.9 billion in 2019, “is expected to grow to $US3.5 billion by 2024, at a compound annual growth rate of 13 per cent. In 2020, ASEAN hosted more than 295 data centres.”5
Such trends will be heightened further by the new Regional Comprehensive Economic Partnership (RCEP) free-trade agreement, which came into force in January 2022, uniting the ten member states of ASEAN (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, Vietnam) and its five FTA partners (Australia, China, Japan, New Zealand and South Korea).6 As of 2020, ASEAN accounted for 23 per cent of all data centres within RCEP member nations.7
By 2021, over 40 per cent of data centres in ASEAN were foreign-owned or involved in joint ventures.8 “The regulatory environment is now looking even more favourable,” says Lim. “Particularly given the way digital adoption had been lagging other neighbouring countries. I think the fact that there is more of a government push for foreign or private sector investment in these areas, has sparked the opportunity for investors to come in and take a deep look into certain opportunities, particularly in Indonesia and the Philippines.”
Earlier this year, a consortium led by Macquarie Asset Management acquired a stake in Bersama Digital Infrastructure.9 The company currently has a 73.3 per cent stake in Tower Bersama, a leading independent telecom towers business in Indonesia with over 20,500 towers and 39,000 tenancies.
Meanwhile, in the Philippines, a recent landmark deal by PLDT to sell 5,907 telecommunications towers for PHP77 billion ($US1.5 billion), the largest-ever sale of Philippine assets to international investors10, quickly turned heads for those eyeing the region.
A brighter Asia picture
Lim says that the maturation of megatrends such as digitalisation, energy transition, urbanisation and consumption have helped lift the sentiment when it comes to interest in, and the outlook for investment into the region.
“From an investor flow perspective, we're seeing a lot more capital coming into Asia,” she says. “When I moved to Singapore about 15 years ago, there weren't that many other fund managers or players looking at Asia as a market – people were more focused on developed markets like Europe, the US or Australia. Now people are starting to diversify away from these, and towards more emerging markets, to capture the growth potential in Asia.”
As the markets mature, Asia’s deal sizes have grown. “In the past, we were looking at relatively small ticket sizes but now we're looking at investments that allow us to offer co-investment opportunities to our investors, something that weren’t readily available in the past.”
For a company that sees itself as a partner to bridge the gaps between public and private investment channels, Lim says Macquarie welcomes greater competition in the region – both as a way of boosting the credibility of the Asia fund management space, and to heighten the value of the assets that come under the spotlight.
“The benefit of greater capital coming into Asia means there is a deeper universe of liquidity and more universal buyers willing to value these assets. And ultimately, it is helping to drive transformative opportunities in infrastructure.”