Indonesia's digital economy is on a meteoric rise, with projections estimating its gross merchandise value could reach approximately USD 360 billion by 2030, potentially making it the largest in Southeast Asia. The proliferation of e-commerce, fintech, and digital services has intensified the demand for robust data infrastructure, necessitating the expansion of data centers to support this digital ecosystem.
This growth is underpinned by a substantial increase in internet penetration and mobile connectivity. As of early 2023, the country boasted over 210 million internet users, a number that continues to climb.
Moreover, the Indonesia data center market is expected to grow at a CAGR of 5.91% from 2023-2029, reaching USD 3.63 Billion by 2029. This rapid growth is driven by rising digital adoption, increasing demand for cloud services, and the expansion of hyperscale data centers to support emerging technologies such as AI and 5G.
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Conducive Investment Environment
Recognizing the critical role of digital infrastructure in economic development, the Indonesian government has implemented several initiatives to foster the growth of data centers. The Digital Indonesia Roadmap 2021-2024 aims to expand digital infrastructure and skills, while the simplification of licensing processes aims to encourage further investment. Additionally, the 100 Smart Cities Movement and National AI Strategy (STRANAS KA) are driving demand for advanced data center capabilities,
Similarly, the ‘Making Indonesia 4.0’ strategy aims to accelerate digital transformation across industries and will support the development of the data center market. Additionally, the government's commitment to digitalizing public services in 2025 is expected to further drive demand for data storage and processing capabilities.
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Strategic Foreign Investments
Indonesia’s favorable investment climate has attracted significant foreign participation in its data center development.
In 2023, foreign investor, Princeton Digital Group (PDG), a major player in the region, expanded its footprint with the launch of Jakarta Cibitung 2 (JC2), a hyperscale data center in Greater Jakarta. The facility integrates energy-efficient technologies to reduce its environmental impact while catering to Indonesia’s surging data consumption.
STT GDC Indonesia's launch of its 2023 data center campus marks a significant investment in the country’s digital ecosystem. The facility is equipping hyperscale cloud providers and enterprises seeking high-performance computing infrastructure. Similarly, EDGNEX, a digital infrastructure arm of DAMAC, is developing a 15 MW data center in Jakarta, further solidifying the capital’s position as a critical hub for digital innovation in Southeast Asia and the power of foreign investment.
Notably, Telkom Indonesia has enlisted Goldman Sachs and Mandiri Sekuritas to assist in securing a strategic investor for its data center business, NeutraDC. Telkom Indonesia’s SVP of Corporate Communication and Investor Relations, Ahmad Reza, emphasized the importance of this initiative.
“We hope that by unlocking this data center business, it will give the best value for all Telkom stakeholders.”
NeutraDC operates 29 data centers, including five global and three enterprise facilities within the country, along with numerous edge data centers. The company currently runs one hyperscale data center in Jakarta and is developing two more, including a new hyperscale facility in Batam that broke ground in June, 2024, to support artificial intelligence (AI) infrastructure.
Strengthening its regional presence, Telkom integrated its Telin Singapore data centers under the NeutraDC brand in March 2024. These developments underscore Telkom’s commitment to expanding its digital ecosystem. As Reza noted, “NeutraDC is positioned to be a key player in Indonesia’s digital economy, providing seamless access to businesses and users across the region.”
Furthermore, global tech giants like Microsoft have announced substantial investments, such as a USD 1.7 billion commitment to expand cloud services and AI capabilities in Indonesia. This initiative aligns with Indonesia’s Golden Indonesia 2045 vision, which aims to transform the nation into a global economic powerhouse. The investment will support AI infrastructure development, train 840,000 Indonesians, and foster initiatives to grow the local developer community.
Equinix, Inc. and PT Astra International Tbk have also joined forces to establish a joint venture that aims to build Indonesia’s digital infrastructure and address the growing demand for secure, scalable, and interconnected digital solutions.
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Regional Dynamics and Competitive Advantages
Indonesia's strategic location and abundant resources offer distinct advantages. While Singapore has traditionally been referred to as the data center hub of Southeast Asia, constraints like limited land and power availability are prompting operators to explore alternatives. Indonesia, with its ample land and energy resources, is emerging as a prime destination.
Indonesia's data center market is also growing due to the increased interest in green infrastructure. While the green building sector is still in its early stages, evidenced by only 98 green-certified buildings by the Green Building Council Indonesia (GBCI) as of 2023, there is notable progress, including a 15% increase in green commercial areas in Jakarta. With 35 operational data centers in Greater Jakarta and five hyperscale projects underway in Batam, including the 221 MW Nongsa Digital Park bridging Singapore and Indonesia, the country's total data center capacity reached 514 MW by the end of 2023.
However, despite the promising landscape, investors will need to navigate challenges, such as ensuring reliable power supply and robust infrastructure to combat risks related to power capacity and infrastructure adequacy during execution.
Additionally, political uncertainties could influence policy continuity and investment climates. However, the government's proactive stance on digitalization and infrastructure development provides a stable foundation for long-term growth.
As businesses and government agencies accelerate digital transformation initiatives, the demand for secure, high-performance data infrastructure continues to surge. Strategic investments from both local and global players further reinforce Indonesia’s position as a key data hub in Southeast Asia.
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