As Thailand focuses its economic development strategy on data centres and electric vehicles (EVs), some are questioning…

As Thailand focuses its economic development strategy on data centres and electric vehicles (EVs), some are questioning if those sectors can really deliver on growth given the high cost.

The rapid development of data centres globally to fuel the artificial intelligence (AI) revolution has drawn scrutiny from environmental groups for their high energy needs, water use and lack of transparency.

On June 23, the UN called on major AI companies to publicly disclose the full environmental cost of their data centres and use renewable power, according to Reuters.

By ‌2030, data centres could use more power than all but five countries, and enough water to meet the basic needs of all 1.3 billion residents of sub-Saharan Africa for an entire year, UN Secretary-General António Guterres said at an address during London Climate Action Week as he launched the UN's AI Environmental Transparency Initiative.

Thailand's investments in data centres are projected to reach US$4.31 billion by 2030, representing average annual growth of 18% from 2024 and achieving total capacity of 2.93 gigawatts, according to CGS International Securities.

The Board of Investment reported the number of applications for tax support in the first quarter this year tallied 624 projects valued at 1.01 trillion baht, of which 874 billion baht was for investment in data centres and cloud services.

PROS AND CONS

Sathapon Patanakuha, chief executive of Guardian AI Lab and a committee member of the AI Entrepreneurs Association of Thailand, said hyperscaler investment brings both benefits and drawbacks.

On the positive side, local cloud regions provide strategic digital infrastructure. Thai businesses no longer need to host workloads in Singapore, Japan or the US.

Lower latency, better reliability and improved regulatory compliance benefit AI, financial services, e-commerce, healthcare, logistics and the digital economy, said Mr Sathapon.

Hyperscaler investment is also a significant foreign direct investment, contributing to GDP, improving national digital infrastructure and strengthening Thailand's position as a regional cloud hub.

However, the headline investment numbers can be misleading. A large share of the capital expenditure is spent on imported equipment, particularly high-value components such as graphics processing units. This means only part of the announced investment translates into domestic economic activity, he noted.

The local economic benefits come primarily from construction, land leases, power infrastructure, electricity consumption, facility operations, maintenance, security and other local services.

In addition, Thailand may become a primary cloud region or disaster recovery site for organisations across Asia-Pacific, which creates export revenue from digital infrastructure services, said Mr Sathapon.

However, cloud remains structurally a net capital outflow business. Customers pay foreign hyperscalers for cloud services, while a significant share of the profits ultimately flows back to multinational companies headquartered overseas.

Local cloud regions might improve data residency, allowing organisations to keep data physically inside Thailand. However, this should not be confused with data sovereignty because the cloud platforms are still owned and operated by foreign companies, he noted.

The real value of hyperscaler investment lies not merely in building data centres, but in using that infrastructure as the foundation for a broader digital economy.

Cloud providers typically invest beyond physical infrastructure, including university partnerships, technical training, workforce development, startup programmes, cloud credits and access to advanced cloud and AI platforms, said Mr Sathapon.

These initiatives can help countries develop technical talent, strengthen innovation capacity and create new digital businesses.

"However, the economic benefits are not automatic. A country's ability to capture long-term value depends heavily on the strength of its innovation infrastructure," he said.

Singapore and Japan benefited from hyperscaler investment because they paired world-class cloud infrastructure with strong universities, active startup communities, venture capital, competitive technology firms and sustained digital transformation across the private and public sectors, said Mr Sathapon.

TWO SCENARIOS

Thailand could face two very different outcomes. With a weak structure, hyperscalers build data centres and Thai companies migrate existing workloads to the cloud, but most spending flows to foreign providers, he said.

In this scenario, few local software companies emerge, knowledge transfer remains limited and Thailand continues to act mainly as a consumer of digital technology rather than a producer and exporter.

"Under this model, the country gains modern digital infrastructure but captures only moderate long-term economic value," said Mr Sathapon.

With a stronger structure, hyperscaler investment becomes a catalyst for wider economic transformation. Universities expand education in cloud computing, AI and cybersecurity, while startups develop digital and AI-driven products, he noted.

Enterprises adopt cloud-native solutions built by Thai companies, venture capital becomes more active and local system integrators and managed service providers scale their capabilities.

"Over time, Thai software companies begin exporting digital products and services, creating high-value jobs, strengthening domestic technology firms and improving the country's long-term competitiveness," said Mr Sathapon.

To capture greater value from hyperscaler investment, he said Thailand must develop its infrastructure, including cloud, cybersecurity and AI talent at scale, while also strengthening university-industry collaboration and supporting Thai startups.

"Hyperscaler investment should be viewed as enabling infrastructure, not the end goal," Mr Sathapon said.

The real objective should be to build a digital economy that generates Thai intellectual property, Thai technology companies, Thai talent and digital exports, he said.

"Without that support structure, Thailand may host world-class infrastructure while capturing only a small share of the value it enables," said Mr Sathapon.

ML Nongkran Chompoonut, chair of the Digital Council of Thailand, said foreign investment in technology and data centres is supported by government policy, but must be carefully managed due to its impact on critical resources such as electricity and water.

To maximise the value of foreign investment, she said Thailand must prioritise technology and knowledge transfer.

INSEPARABLE ELEMENTS

Vatsun Thirapatarapong, country manager at Amazon Web Services (AWS) Thailand, said growth and sustainability must be integrated, not traded off against each other.

"The infrastructure that uses energy and water is the same infrastructure that generates economic value. They're inseparable," he said.

AWS is investing more than $5 billion in Thailand, projected to contribute over $10 billion to the country's GDP and support more than 11,000 jobs annually.

"That economic benefit exists because of the data centres we build and operate here, and we're committed to building them responsibly," said Mr Vatsun.

Regarding energy, AWS achieved 100% renewable energy matching in 2023, seven years ahead of target, and its investments add new clean energy to the grid in the communities where it operates, he noted.

"We're committed to being water-positive by 2030 and are 75% of the way there. Organisations building on our cloud infrastructure benefit from systems that are up to 4.1 times more energy-efficient than on-premises alternatives, meaning Thailand gets more digital capability per unit of resource consumed," said Mr Vatsun.

Drew Byrnes, director and head of global infrastructure Asia-Pacific at Google, said the firm's core philosophy is clear: AI infrastructure must be developed the right way.

Google applies a comprehensive approach that emphasises sustainability, connectivity and community engagement to drive a net-positive impact, he said.

In Thailand, this means building advanced, energy-efficient data centre infrastructure, ensuring responsible energy growth and water use, said Mr Byrnes.

"Google's $1 billion investment in Thailand means the country will soon host some of the most advanced digital infrastructure in Asia, which acts as a catalyst for innovation and enables Thai communities and businesses to be at the forefront of solving challenges once thought impossible," he said.

RISING CONSUMPTION

Electricity consumption for data centres worldwide is projected to reach 565 terawatt-hours (TWh) in 2026, up from 447TWh in 2025, a gain of 26%, according to Gartner Inc, a business and technology insights company.

"Surging demand for compute-intensive AI workloads is driving unprecedented data centre power growth, while AI capacity is now constrained by power availability, making data centre power security the new battleground for scaling and protecting margins in the global AI race," said Linglan Wang, director analyst at Gartner.

With data centre power consumption estimated to exceed 1,200TWh by 2030, grid supply will be insufficient to meet the demands of future data centre construction, affecting all data centre users, noted Gartner.

She suggested infrastructure and operations leaders prioritise efficiency upgrades and secure grid access.

According to Kasikorn Research Center (K-Research), Thailand's data centre capacity is expected to grow by 59% per year, with concentration shifting to the Eastern Economic Corridor (EEC) from Bangkok and its surrounding provinces.

The Bangkok metropolitan area is Thailand's data centre hub, accounting for roughly 52% of the country's total capacity, while the EEC accounts for around 41%.

The government is upgrading the EEC power grid by an additional 1,150 megawatts, consisting of 400MW already in operation and another 750MW under development, noted K-Research.

POWER TARIFF REDEFINED

Energy officials are preparing to introduce a new electricity tariff structure specifically for data centres, reflecting their intensive and continuous use of power and water.

The Energy Ministry plans to classify data centres as "large-scale electricity users" under a new category known as Type 9 consumers. The regulation is expected to take effect in the third or fourth quarter of this year, according to officials.

Natee Sithiprasasana, chairman of the Renewable Energy Industry Club of the Federation of Thai Industries, said the move is appropriate given the sector's 24-hour demand for stable electricity.

Mr Natee urged the government to diversify the geographic distribution of data centres, as many are concentrated in the EEC. He suggested expanding to western provinces such as Ratchaburi, which hosts one of the country's largest power plants operated by Ratch Group.

Concentration in the EEC could strain power and water transmission systems, said Mr Natee.

While fossil fuels may dominate the early stages of data centre development, he said clean energy must play a central role in the medium term. Mr Natee linked this transition to Thailand's long-term carbon neutrality goal, which requires renewable energy to account for at least 70% of total power supply by 2050, up from 22% in 2024.

Without such a shift, Thailand risks losing industrial competitiveness and facing trade barriers from the EU regarding carbon-intensive manufacturing.

He proposed two strategies: investing in new renewable power generation facilities and allowing ageing solar and wind farms, many built two decades ago, to sell electricity directly to industries such as food processing, automotive and electronics.

This method would reduce reliance on state electricity agencies, which currently purchase renewable power at high tariff rates. According to energy officials, these costs, combined with other policy-related expenditures, account for about 4% of household electricity bills.

By enabling direct sales from renewable operators to factories, Mr Natee argued, the government could cut unnecessary spending and lower electricity prices for households.

Industries other than data centres would gain access to affordable clean power, helping Thailand meet its climate commitments while keeping energy costs under control.

MULTI-VEHICLE APPROACH

In the automotive industry, Thailand's drive to promote battery EV (BEV) production as part of its ambition to become a regional EV hub needs careful consideration, given the country's diverse manufacturing base spanning oil-powered cars and hybrid vehicles that has made it one of the world's largest car producers, said industry leaders.

The government needs to broaden its support for different types of vehicles, not just BEVs, as the current incentive schemes EV3.0 and EV3.5 favour one segment of the car industry too heavily, said Wallop Chalermvongsavej, managing director of Hyundai Mobility Thailand, a subsidiary of South Korea-based Hyundai Motor Group.

Under the EV3.0 and EV3.5 schemes, the government offers tax cuts and subsidies to foreign EV makers in return for investment in local assembly.

Through its "30@30" policy, Thailand wants BEVs to account for 30% of total auto output by 2030, comprising 725,000 zero‑emission cars, 675,000 electric motorcycles, and 34,000 electric buses and trucks.

With EV3.0 already concluded and EV3.5 set to expire in 2027, the end of the incentives has raised concerns that automakers may opt to import BEVs rather than produce them locally -- a shift that could undermine domestic car manufacturing and the auto parts industry.

"Thailand is not only a BEV producer, but also a base for internal combustion engine cars, hybrid EVs, plug-in hybrids and increasingly range-extended EVs [REEVs]," Mr Wallop said.

Traditional automakers and local suppliers have invested in Thailand for decades, supporting jobs and strengthening the supply chain, he noted.

To maintain Thailand's reputation as an automotive hub, Mr Wallop said the government must ensure domestic sales growth and protect existing investors.

Thailand recently slipped to 11th for global vehicle production, down from 10th.

Hyundai, which operates 14 factories worldwide including one in Thailand, aims to use the country as its main export base in Southeast Asia. The company sources 46% of its EV component costs locally, surpassing the 40% minimum requirement, he said.

Cedric Cui, president of Omoda & Jaecoo (Thailand), a subsidiary of China's Chery Automobile, called on the government for longer-term support.

He urged the government to extend EV3.5 or introduce a new EV4.0 programme, noting sustained incentives are crucial to reducing reliance on costly oil and stabilising the industry amid global conflicts.

"China needed more than 10 years of continuous support before consumers clearly shifted from combustion engines to EVs," Mr Cui said.

Thailand's current time frame is too short to achieve a similar transition, he noted.

Chery recently launched the Jaecoo 6T REEV, a range-extended EV powered entirely by an electric motor, but equipped with a small combustion engine that generates electricity for the battery.

Mr Cui said the company plans to expand production in Thailand to include REEVs and increase local parts manufacturing, ensuring the market sees the value of Chery's technology.