Digital Economy Weekly - October 6, 2024

Story of the Week

Digital Economies in Developing Nations Under Discussion in New York & Elsewhere

As we wrote in this newsletter on August 4, Digital Economies are not reserved just for wealthy, developed countries. In fact, developing nations can benefit more quickly and more dramatically than developed nations from injections of money and technology into their economies, providing better (and faster) access to the Internet, creating communications webs and mobile services in nations that still have majority-rural populations, and bringing hope for the future.

One of the Links of the Week below mentions one such effort, from Mastercard and the African Development Bank, in East Africa. Other efforts were recently discussed at a series of financial forums in New York recently, embracing several sub-Saharan Africa nations, including the DRC, Liberia, Malawi, Nigeria, and Sierra Leone.

IDCA Research finds there are around 60 countries in the world with average per-person annual income of less than $2,500 – compare this to the world average of about $14,000 (comparable to Turkey or Mexico), and the US average of about $80,000.?

These are technically known as the world's Least-Developed Countries, or LDCs. None of them can sit around and wait for their incomes to increase to where it seems like a good time to digitize their economies. The time is now.?

All nations can convert endless mountains of paper forms to online formats, develop mobile government eservices, create centralized online markets for agricultural and manufactured goods, participate in ongoing global logistics streamlining, and improve their transportation grids and traffic flows.?

As hard experience dictates to anyone who has undergone such efforts, the big impediments are always institutional sclerosis and bureaucratic obstruction, often accompanies by corruption-driven inefficiency, and steadily increasing population pressure. LDCs uniformly have underdeveloped electricity grids, too, their populations having to get by on constant blackouts and service that delivers 3% to 5% of the per-person power. One piece of good news is that there are more than 40 LDCs with sustainable power grids that produce at least 40% of their electricity. There is little legacy fossil-fuel energy to deal with, as is the case in the developed world.

In these times, where people are throwing around multi-trillion-dollar visions and plans, it should be refreshing to know that about $400 billion would deliver electricity grids reaching 25% of the developed-world standard to the entire world of LDCs. This jump from the 3% to 5% cited above would go a very long way in enabling LDCs to develop their Digital Economies to a point that brings enormous improvements in the lives of the 1.5 billion people who are destined to live in these places. Digital Economies are essential to lift LDCs into more highly developed states. The challenges are profound, but possible if all of the great discussions like those held last week in New York result in investments, development, and sincere commitments to progress.

Links of the Week

Masayoshi Son's Softbank Said to be Investing $500 Million in OpenAI?

Now that OpenAI has crossed the Rubicon and declared itself a fully capitalistic for-profit company, investors are stepping. Softbank provides a recent example, said to be investing $500 million in OpenAI. This is part of an overall drive for $6.5 billion that would give the company a market cap of $150 billion. These latter figures suggest, in turn, that Softbank would own 0.33% of OpenAI for its trouble. Read here.

Mastercard and African Development Bank Aim to Develop Digital Economy

Mastercard and the African Development Bank believe there is a $1 trillion economic sector in Africa that has remained invisible – farmers. In response, they've developed an initiative called the MADE (Mobilizing Access to the Digital Economy) Alliance, “to provide digital access to critical services for 100 million people and businesses in Africa over the next 10 years.”

The first phase of this project commits $300 million to the cause, and aims to bring 3 million farmers in Kenya, Tanzania, and Nigeria into the Digital Economy.?Read here.

How Big is the AI Boom? McKinsey Speaks Up

The febrile AI environment is bringing some heat to projections about its effect on the data center industry. An example comes from McKinsey, which is projecting double the growth of other research about the data center industry through 2030.

The McKinsey research finds a US and global CAGR of almost 30%, with the US data center footprint projected to reach 80GW by 2030 and the global footprint to reach 160GW. The research outlines the tremendous stress and challenges such growth would place on electricity producers, noting that 12% of the US electricity grid would be consumed if significant new energy sources are not built. Read here.

Google Investing $1 Billion in Data Center in Thailand

Google is planning its first data center in Thailand, and will invest $1 billion to create it. The company said the facility will support its cloud services and also deliver AI-driven services to this Southeast Asian country of more than 70 million people.?

According to IDCA Research, Thailand ranks fourth in Digital Readiness among Southeast Asia's Big Six countries, trailing Malaysia, Singapore, and Vietnam, while ahead of the Philippines and Indonesia. A sustainable electricity grid delivers 19% of the country's power, compared to the world average of 30%. Read here.

China Investment Pouring Into Ireland

Ireland has developed a dynamic digital infrastructure in recent years, first building a reputation as a Euro-denominated alternative to London and the UK, and more recently, as an EU alternative as Brexit takes hold. It may be too dynamic – there are concerns that data centers already consume more than 5% of the small island nation's electricity (compared to 2-3% in the UK and US).?

Also, clever accounting that allows major US companies to be titularly headquartered there has distorted its per-person income to more than $100,000 annually (more than twice that of the UK).? Now comes word of a recent surge in investment from China, something that can be seen as a double-edged sword. Read here.

Microsoft Accelerates AI Tempo in Italy

A few years ago, this writer questioned whether Bella Italia was a serious IT destination, given its spectacular beauty and other, non-tech strengths. Yet it remains a consequential EU and G20 nation, with an economy that generates more than $2 trillion annually.?

Microsoft must believe in it, given its recent announcement of an investment reaching almost $5 billion for an AI center in the country's more prosperous, industrialized north.?Read here.

Digital Economies Behoove ESG Inclusion

New York's recent Climate Week was held at the same time as a United Nations General Assembly meeting, so brought the world's true influencers by the thousand to discuss consequential issues of war and peace, sustainability, and economic development through ESG investing.

No ESG, no Digital Economy was an unspoken slogan lying underneath many discussions. And the numbers being thrown around were impressive. There was talk of 90% CO2 reduction, 70% of investment coming back in straight productivity gains, building copious nuclear energy, and the trillions of dollars that will be required to achieve everything. The alternative is “calamity,” according to at least one commenter. Read here.

Structure Research Says Keep an Eye on APAC

Toronto-based Structure Research is projecting serious growth in data center deployment throughout the APAC region. The company recently held a summit in Las Vegas where it proclaimed that “Tokyo is the Northern Virginia of (APAC),” citing its view that the Tokyo area will double its capacity to 2.6GW by 2029. This would be about half of what's expected in Northern Virginia by that time, should local utilities find a way to keep up with regional demand.

Structure also cites Johor, Malaysia as a high growth area, as it continues to absorb growth from crowded, neighboring Singapore. Structure says Johor will reach about 1.8GW by 2029, more than four times its current data center footprint. Read here.

Equinix Announces JV to Raise $15B for US Hyperscale Centers

Equinix has signed a joint venture with Singapore investment firm GIC and the Canada Pension Plan Investment Board to raise more than $15 billion for new hyperscale facilities in the United States.

The company envisions “multiple greater-than-100MW campuses, eventually adding more than 1.5GW of new capacity.” Equinix says it will own 25% of the new entity, with the two partners splitting 75% of it equally. Read here.

Heard in the Industry

“I can guarantee you by 2029 that (worrying about) AI is not going to be the problem (per se). Because the race is on, and everyone wants to be the best at something. It's going to take $100 billion for anyone to get into this race.” – Larry Ellison, Founder and CTO, Oracle. https://www.youtube.com/watch?v=tdXqs_cHi6k

Heard in the Aisle

“We'll see lots more of (hydrogen-fueled data center plans), and it is opening new markets for data center development. This (strategy) is also a linchpin of the DOE's bid to attract data centers at former coal plants.”? – Rich Miller, Founder, Data Center Frontier.

Country Close-up: Sierra Leone

Sierra Leone is a small country of about 9 million people located on the coast of West Africa. It was given its modern name by Portuguese explorers, but became part of British Colonial Africa until independence in 1961.?

Sierra Leone has one of the lowest per-person income levels in the world, with its economy essentially destroyed by a civil war in the 1990s that finally ended in 2002. Today it still relies on agriculture and mining as the basis of its economy.?

Sierra Leone also has a government that seems willing to bring significant progress to the country, through efforts at participating in global discussions and the potential investment they bring. As an example, Hon Ibrahim Sannoh, the country's Deputy Minister of Communication, Technology & Innovation, for example was a panel participant at the Digital Government Africa Summit in Lusaka, held late in 2023. “We are working to enhance sustainable Digital Economy development,” he said. “We are also looking at developing a national data center and developing road maps to leverage where we are (at the moment).” Sannoh's thoughts were echoed by members of the panel from Zambia, Tanzania, Rwanda, and Ghana, with one minister noting, “the challenges across the continent are similar (and) digital infrastructure is the key issue.”?

The IDCA Digital Readiness Index, which integrates hundreds of factors into an overall relative progress score finds that Sierra Leone is primed for a highly dynamic era. Given its very low income, the country is nonetheless progressing at a rate that places it fifth among the more than 60 LDCs across the world. It trails only Rwanda, Ethiopia, Uganda, and Tanzania in this aspect – and each of these countries is making notable progress as well.

Sierra Leone ranks above the world average in the Index in its current pace of progress, and is in the top 50% of all countries in all income categories in its relative progress. It currently generates 75% of its electricity from renewable energy. Despite recent progress, Sierra Leone has a critical need to increase internet access and speed, despite having relatively strong mobile connectivity given its low income. The country also badly needs investors to step up and build real data centers, in the country's coastal capital city of Freetown, as well as in its numerous provincial areas.?

Want to know more about Sierra Leone and other LDCs? Contact us and we're happy to discuss!

Inside IDCA

Sustainability Webinar, Wednesday, October 9

Sustainability is not just a matter of setting year 2030 or 2050 goals for emissions reduction. It involves comprehenive policies that are on the leading edge and address all levels (Scopes 1, 2, and 3) of emissions. With the global data center footprint projected to more than double by 2028, there has never been a more important time to make Sustainability a top priority.

Join IDCA Sustainability Counsel Bruce Taylor for a thought provoker on Wednesday, October 9, 11am-noon eastern time.

Register here.