Vietnam’s data center market is increasingly attracting the attention of international investors, while also raising important questions regarding the appropriate investment structures and market-entry models.
Under the Telecommunications Law No. 24/2023/QH15, data center services are classified as a type of telecommunications service, providing the capability to process, store, and retrieve information through telecommunications networks, while data centers are classified as telecommunications infrastructure works. Point (a), Clause 1, Article 29 of the 2023 Telecommunications Law provides that enterprises providing data center and cloud computing services may conduct investment and business activities without any limitation on the foreign ownership ratio of shares or contributed capital, or on the foreign investor’s contribution ratio under a business cooperation contract. This provision creates a relatively favorable legal framework for foreign investors to consider various market-entry structures. The following are the key investment structures available to foreign investors seeking to enter Vietnam’s data center market.
1. Establishment of a 100% Foreign-Owned Enterprise and Development of a New Project
A foreign investor may establish a 100% foreign-owned enterprise in Vietnam to directly develop a data center project under a Greenfield Investment (GI) model. This structure allows the investor to maintain control over the entire process, from site selection, investment and land-related procedures, construction, and design to technical infrastructure deployment and data center operations.
The key advantage of this model is the high degree of control it provides over:
Ownership and governance structure;
Data center design and technical standards;
Project development schedule;
Commercial and operational strategy;
Security, safety, and scalability standards.
However, the investor must also directly address challenges relating to the identification of suitable land, power availability, telecommunications connectivity, planning and zoning, investment and construction procedures, and project implementation timelines. In addition, this model requires a significant upfront capital commitment from the early stages of the project.
2. Establishment of a 100% Foreign-Owned Enterprise and Acquisition of an Existing Data Center
A foreign investor may establish a 100% foreign-owned enterprise in Vietnam and use this entity to carry out an M&A transaction, acquire shares/contributed capital, or acquire the assets of an enterprise that owns and operates an existing data center under a Brownfield Investment (BI) model. Upon completion of the transaction, the investor may take over, upgrade, expand, or restructure the assets to meet its operational requirements and technical standards.
The key advantages of this model include:
Shortening the time required to enter the market and bring the asset into operation;
Leveraging the existing infrastructure, power systems, telecommunications connectivity, customer base, and operational team of the existing data center.
However, this model also presents significant challenges. The supply of high-quality data centers that meet requirements relating to location, power capacity, connectivity, technical standards, and scalability remains limited, while suitable assets may be offered at relatively high valuations.
In addition, investors should pay particular attention to outstanding liabilities and risks that may be inherited from the existing legal entity following the transaction. These may include legal, tax, land, environmental, construction, customer/supplier contractual, and operational matters arising prior to the completion of the M&A transaction.
3. Joint Venture with Vietnamese Partners through the Establishment of a New Legal Entity
A foreign investor may cooperate with one or more Vietnamese partners to establish a new legal entity in Vietnam, with the parties contributing capital and participating in the management and operation of the enterprise in accordance with their respective ownership interests and contractual arrangements.
The joint venture company will act as the direct project entity, responsible for completing investment, land, and construction procedures, as well as developing and operating the data center.
Article 29 of the 2023 Telecommunications Law does not impose a foreign ownership cap on investment and business activities involving data center services. Accordingly, in principle, a foreign investor may hold an ownership interest consistent with its investment strategy, including a controlling interest of up to 100%.
This model is particularly suitable where the Vietnamese partner already has:
Suitable land or land-use rights;
Experience in project development;
Established relationships with local contractors and suppliers;
Knowledge of local legal procedures and the business environment;
The capacity to support project implementation.
In return, the investor should conduct thorough due diligence on the legal, financial, tax, technological, and environmental aspects of the target company or assets before proceeding with the transaction.
4. Joint Venture with a Vietnamese Partner through a Business Cooperation Contract (BCC) without Establishing a New Legal Entity
Another option is for a foreign investor to enter into a Business Cooperation Contract (BCC) with a Vietnamese partner to jointly implement a project without necessarily establishing a new legal entity. Under this structure, the parties retain their respective independent legal status and directly perform their rights and obligations in accordance with the BCC.
This structure may enable the parties to:
Reduce the time required to establish a new legal entity;
Allocate capital and responsibilities flexibly based on the parties’ agreement;
Leverage the assets, resources, and implementation capabilities of the Vietnamese partner;
Flexibly structure revenue and profit-sharing arrangements and control mechanisms.
However, a BCC requires the parties to establish clear mechanisms governing management, capital contributions, asset utilization rights, profit sharing, legal responsibilities, asset disposition, and exit arrangements, as there is no jointly owned legal entity to automatically coordinate these relationships.
5. M&A Model Based on Co-Building: A New Approach
How can a foreign investor achieve a high degree of control while simultaneously mitigating legal, capital, and implementation risks? In response to this challenge, DCompass proposes an M&A model based on Co-Building, involving cooperation between an international investor and a Vietnamese partner through a Special Purpose Vehicle (SPV) specifically structured for each project.
Instead of choosing between acquiring an existing data center and developing a data center project from scratch, an investor can participate in the project from its early stages, leveraging the local capabilities of the Vietnamese partner while deploying capital progressively as project risks are gradually mitigated.
Under this model, the Vietnamese partner may support land-related matters, local procedures, project development, and initial implementation activities, while the international investor gradually contributes capital, technology, operational standards, customers, and data center operating capabilities.
As the project progresses and its legal and technical conditions become increasingly established, the investor may progressively increase its ownership interest, voting rights, or control rights in the SPV, depending on the transaction structure and the parties’ agreement.
The key advantages of this model include:
Mitigating project risks;
Leveraging the capabilities, resources, and legal/local advantages of the Vietnamese partner;
Gradually increasing ownership and control as the project approaches operational readiness.
For a data center project, ownership is only one part of the equation. Factors such as land, planning and zoning, power supply, telecommunications connectivity, investment, construction, environmental matters, information security, data, and operations can all have a significant impact on the project timeline and investment efficiency.
Therefore, an effective investment structure needs to address both control and execution risk. This may be a structure worth considering for international investors seeking to enter the Vietnamese market quickly and flexibly.
As Vietnam’s data center market continues to develop rapidly, selecting the appropriate investment structure will be a critical factor determining an investor’s ability to enter the market, level of control, and project execution efficiency.
From Brownfield Investment (BI) and Greenfield Investment (GI) to various joint venture structures, each model presents its own advantages and risks. Among these, M&A based on Co-Building is emerging as a notable approach, enabling investors to leverage the resources and existing platform of local partners, shorten project implementation timelines, and optimize the overall market-entry process.
