Vietnam is currently becoming one of destinations for foreign investors with a serious potential in the field of information and communication technology. With the rapid development of the internet and the sudden increase in the number of internet users, the demand for data centers in Vietnam is also increasing significantly.
With the aim of serving this demand, new internet data centers will be established in Vietnam. With the participation of foreign investors, these data center industry will be equipped with the most modern equipment and technology to ensure the safety and stability of customers’ data. The establishment of an internet data center in Vietnam will bring many benefits to both users and the IT industry in Vietnam. In addition, modern data centers will be a crucial platform to promote digital transformation and along with that will be the driving force for the startup and innovation ecosystem in Vietnam.
This article will provide for an overview of the conditions for foreign investors to establish an internet data center (IDC) in Vietnam.
Market access conditions
Data center operations are composed of various services. Its typical services include data processing (CPC 843), data storage and computer rental services over time (CPC 84330). According to WTO commitments, Vietnam does not limit the percentage of capital contributed by foreign investors for these services. This is similarly committed in the Free Trade Agreement between the European Union and Vietnam (EVFTA) and the Regional Comprehensive Economic Partnership Agreement between ASEAN and 6 partners that have FTAs with ASEAN, namely China, Korea, Japan, India, Australia, and New Zealand (RCEP).
With this commitment from Vietnam, investors can:
- Ensure the establishment of enterprises with 100% foreign capital; or
- Buy back 100% of capital contribution/share for Vietnamese enterprises.
Scope of activities and relevant provisions of Vietnamese law
Data center service business (CPC 130) belongs to the list of conditional business lines in Vietnam. However, at present, Vietnamese Law does not have detailed regulations on the mode of service provision and operation of data centers.
According to Clause 1, Article 3 of Circular 03/2013/TT-BTTTT, a data center is defined as a construction work, including technical infrastructure (station house, cable system) and a computer system and ancillary equipment installed therein to store, exchange and centrally manage data of one or more organizations and individuals.
Before being put into operation, data centers must apply the following minimum standards and technical regulations:
- National standard TCVN 9250: 2021 (or standard ANSI/TIA-942-B:2017), or Tier standard of Uptime Institute;
- National technical regulation on lightning protection for telecommunications stations and peripheral telecommunications cable networks, symbol QCVN 32:2020/BTTTT;
- National technical regulation on grounding for telecommunication stations, symbol QCVN 9:2016/BTTTT;
- National technical regulation on fire safety for houses and buildings, symbol QCVN 06:2021/BXD.
According to the draft of the Law on Telecommunications, data center services include the following services:
- Data center space rental is a service that provides space for customers to design and install servers and/or other storage devices by themselves;
- Server rental service is a service that provides customers with a server along with available equipment and information infrastructure of the data center for their own use;
- Data storage space rental service is a service that provides storage space for organizations and individuals.
The aforementioned legal draft also states that data center service businesses must comply with all the following conditions:
- Comply with standards and technical regulations during the design, construction, operation, and exploitation of data centers, and at the same time comply with information security standards and technical regulations in network, protect data of service users, and altogether, must be consistent with the planning of information and communication infrastructure.
- Publicly and transparently disclose information related to the enterprise, the degree of compliance with standards and technical regulations as prescribed.
- When signing a service provision agreement with the user, it must ensure at least the contents as prescribed.
- Not to perform acts of competition restriction, unfair competition, acts of coercion or preventing other enterprises from doing business.
- Not to perform acts of restricting or not providing services to users for unwarranted reasons.
Before the data center goes into operation, enterprises are required to carry out licensing procedures in the form of registration on the Portal of the Ministry of Information and Communications. This is a new requirement under the draft Telecommunications Law.
Steps to establishing a company/project
The establishment of an internet data center is usually done through the following steps:
Step 1: Choose a location and evaluate investment incentives (if any)
Step 2: Sign a memorandum of understanding for the rental location
Step 3: Preliminary assessment of environmental impact (if any)
Step 4: Register to establish a new project/company
Step 5: Sign the lease contract where the project is located
Step 6: Apply for a building permit
Step 7: Carry out the procedures for announcing the data center’s conformity with technical standards and regulations.
Currently, the Government of Vietnam is submitting a new draft Law on Telecommunications to the National Assembly, which stipulates legal corridors to unify regulations governing this business. Therefore, there will be changes and adjustments to this activity in the near future.
