25 April 2019
A Google data center. The global search engine and cloud service giant announced last year that it plans to open a Google Cloud Platform (GCP) region in Hong Kong. Photo: Google
A Google data center. The global search engine and cloud service giant announced last year that it plans to open a Google Cloud Platform (GCP) region in Hong Kong. Photo: Google

HK needs to ramp up land supply to become a regional data hub

Hong Kong government is keen to transform the city into a regional data hub. But scarce land supply is a major barrier.

In 2013, Google was looking at building a cloud data center in Hong Kong. But the plan had to be abandoned as the city couldn’t offer suitable land at that time. The internet giant then set up data centers in Taiwan and Singapore, spread over 15 hectares and 2.45 hectares in size respectively.

Now, a second chance is being given to the city. Google announced last year that it plans to open a Google Cloud Platform (GCP) region in Hong Kong, which will be the company’s sixth such platform regions in Asia Pacific. But the question is: where can we find land for it?

Hong Kong has various advantages in developing into a data hub. The city has very stable electricity supply, and the broadband internet speed in the city is ranked the second fastest in the world.

Also, the city is ranked the world’s fourth best in protecting private data and sixth in data security. Hong Kong has solid legal structure and sound information technology infrastructure. Besides, the city is in proximity to the huge mainland China market.

These advantages have lured many multinational cloud service suppliers to establish their presence in Hong Kong. For example, Amazon Web Services, the world’s largest data service supplier, announced in June last year that it is planning to open an infrastructure region this year.

Internet giants such as Microsoft, Alibaba and Tencent have all set up big data centers in Hong Kong. They offer cloud services for their clients in the region. China Mobile also set up its biggest offshore data center in Hong Kong.

The cluster of these companies has not only promoted the use of cloud services in Hong Kong, they are helping drive digitalization and upgrade of local businesses. Also, it has facilitated development of various tech and innovation industries, such as fintech, artificial intelligence, digital healthcare, smart city-related projects, etc.

More companies in data industry and auxiliary services have come to the city as well. It has created a dynamic startup ecosystem, and brought a huge opportunity for the city to diversify its economic structure.

To assess the benefit from cloud service sector in terms of the economic value, one of the leading cloud players, Microsoft, estimates that it will generate over US$9 revenue for its partners from every US$1 cloud revenue. A conservative estimate of the global market value created by cloud service sector would be at US$4.5 trillion.

Currently, there are 10 high-end data centers in industrial estates in Tseung Kwan O, which is regarded as the largest data center cluster in the Asia Pacific. Hong Kong’s big data market has a value of HK$5 billion at the moment, and grows at 15 to 20 percent per year.

The government needs to gear up for the big data trend. However, the land shortage is the city’s biggest roadblock. There are only two pieces of land available for building data centers until 2020, and this has considerably limited the growth of big data industry.

As an attempt to explore options, authorities are studying whether it’s feasible to build up data centers in caverns in the city. The government has also encouraged turning industrial buildings into data centers and developing industrial land sites for such facilities. However, these efforts may have limited impact as they can merely help release scattered land parcels, while data centers normally require a large area of land.

The debate on land supply in the city has long become heated and polarized, rendering the government indecisive and unable to have any real progress on boosting the supply.

As a long-term land supply option, the government should consider restarting land reclamation, which can provide a large area of land for data centers. In the race to host more data centers, Hong Kong authorities need to take further action. But the important thing is such action must come quickly. 

The full article appeared in the Hong Kong Economic Journal on March 19

Translation by Julie Zhu

[Chinese version 中文版]

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Professor, Dept. of Systems Engineering & Engineering Management, CUHK

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