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Asia300

Alibaba extends grip in emerging Asia with local data centers

Chinese internet conglomerate aims to outpace Amazon in cloud business

Rudiantara, Indonesia’s Minister of Communication and Information Technology (fourth from left), poses with Alibaba Cloud executives and others at a ceremony in Jakarta on March 15. (photo by Wataru Suzuki)

JAKARTA -- Alibaba Group Holding is expanding its cloud computing business in Asia's emerging economies by building local data centers, aiming to outpace U.S. rivals like Amazon in the race to capture the region's fast-growing technology market.

Alibaba Cloud on Thursday announced that its first data center in Jakarta has commenced operations, mainly targeting local startups. The company said it can offer faster and more customized cloud services that meet local demands better than those offered by larger competitors such as Amazon, Microsoft and Google.

"We are the first global player that has a local data center in Indonesia," said Raymond Ma, Alibaba Cloud's general manager for the Association of Southeast Asian Nations, Australia and New Zealand, at a press conference in Jakarta. "From the latency and service quality perspective, we are probably better than vendors who have data centers outside of this country."

Ma declined to elaborate on Alibaba Cloud's investment figures or capacity but said it plans to continue investing in services and local talent, including an initiative to train 300 people this year. It has partnered with DCI, a local data center developer, which provided infrastructure such as the building, connection services and electricity.

Alibaba's cloud business, which it launched in 2009, is still smaller compared with those of Amazon and Microsoft but it is growing rapidly. The company reported a 104% year-on-year increase in cloud computing revenue for the three months ended December.

Alex Li, Alibaba Cloud's general manager for Asia-Pacific, said it began expanding overseas in 2015 and now has data centers in 18 regions, mostly in Asia. It recently opened new locations in India and Malaysia.

Southeast Asia's internet economy will reach $200 billion in 2025 from an estimated $50 billion in 2017, according to a report by Google and Singapore sovereign fund Temasek Holdings. The push into Indonesia highlights Alibaba's ambitions to stay ahead in a fast-growing region that is increasingly attracting attention from U.S. competitors.

Amazon, which launched its e-commerce business in Singapore last year, is planning to enter Vietnam, while Google recently announced an investment in Indonesian ride-hailing app Go-Jek.

Alibaba has spent billions of dollars investing in local startups in the region. Offering cloud services, which can be a significant chunk of an internet company's operating costs, can also help them gain an advantage. Tokopedia, a large Indonesian e-commerce company backed by Alibaba, said it has already migrated 60% to 70% of its cloud operations to Alibaba Cloud.

Gaining a foothold in emerging Asian markets, where local governments are generally open to technology-related investments, is crucial for Alibaba, which has faced roadblocks in more developed markets like the U.S. and Europe. Jack Ma Yun, Alibaba's charismatic founder, has been appointed as an adviser for the Indonesian government to develop its e-commerce industry.

"We need friendly foreign investors like Alibaba Cloud, who can add value to business processing in the country," said Rudiantara, Indonesia's Minister of Communication and Information Technology in a speech during Alibaba Cloud's launch ceremony on Thursday.

Rudiantara added that he has proposed training courses for ministry officials at Alibaba's corporate campus in Hangzhou.

"Its like a Shaolin temple. We send warriors to learn kung fu," he said, "in order for Indonesia to make sure that we will be the biggest digital economy in the region."

Nikkei staff writer Mariko Tai in Hong Kong contributed to this story.

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