Jakarta, INTI - Indonesia has emerged as one of Southeast Asia’s largest digital markets. In 2025, the country’s digital economy was estimated to approach US$100 billion, making it the largest in the region.

However, a large digital market requires robust infrastructure to support its growth. As digital activities expand and artificial intelligence (AI) advances, demand for computing capacity continues to increase.

The wave of billion-dollar data center investments highlights the growing strategic value of data. With AI development accelerating, data centers are no longer merely facilities for storing information.

Instead, they serve as the foundation for countries to build computing capacity, develop technology, and capture a greater share of the economic value generated by the expanding digital ecosystem.

Indonesia’s Coordinating Minister for Economic Affairs, Airlangga Hartarto, has described this development as part of the country’s broader national economic growth agenda.

“Indonesia aims to achieve growth of more than 8%, and one of the key drivers is the digital economy. The key is, of course, AI, and AI can only develop if the supporting infrastructure, particularly data centers, is well established,” Airlangga said.

Similarly, Deputy Minister of Communication and Digital Affairs Nezar Patria emphasized that strengthening AI infrastructure and computing capacity is essential if Indonesia is to move beyond being a technology user.

“We do not want to be merely a market or a user. We want to secure a strategic position in the global AI industry value chain,” Nezar said.

This issue is becoming increasingly relevant as digital activities across Indonesia continue to expand. Banking transactions, online shopping, digital services, and business operations are generating growing volumes of data.

However, data does not automatically translate into economic value. It must be processed, stored, and accessed through computing infrastructure. This is where data centers play a critical role.

“Such infrastructure underpins a wide range of services, from cloud computing, fintech, and e-commerce to AI, cybersecurity, digital government services, and various technology-driven businesses,” Nezar explained.

The economic potential is substantial. The government has recorded additional investment interest of approximately 1.3 GW in Indonesian data centers, valued at US$15 billion to US$20 billion. This means every additional 100 MW represents approximately US$1.2 billion to US$1.5 billion in investment.

Nevertheless, the benefits of data center investment extend beyond facility construction. Building and operating these facilities also generates demand across multiple sectors, including construction, energy, networking, technology, maintenance, and skilled labor. These activities could expand economic value chains while increasing the country’s revenue base.

Chile offers an example of how data center investment can generate broader economic benefits. Amazon Web Services (AWS) has committed more than US$4 billion to three data centers in the country, an investment projected to contribute approximately US$10 billion to GDP and support more than 7,000 full-time-equivalent jobs annually.

Indonesia Races to Expand Its Computing Capacity

Demand for computing power is increasing alongside AI development. While the early stages of digitalization relied heavily on connectivity, the next phase requires a more complex combination of infrastructure, including large-scale computing, graphics processing units (GPUs), cloud platforms, networks, electricity, and data centers.

A large digital market does not automatically give Indonesia a competitive advantage. The ability to develop technology and transform data into value-added products and services will also determine the country’s position in the global digital and AI economy.

Competition to expand computing capacity is becoming increasingly evident across Southeast Asia. World Bank data for the first half of 2025 recorded Indonesia’s total data center capacity at approximately 1.17 gigawatts (GW). This remained below Malaysia’s 3.17 GW and Singapore’s 1.25 GW.

Indonesia’s capacity, however, is expected to continue growing. CSIS Indonesia estimates that national data center capacity could expand at an average annual rate of 16.8% through 2029, reaching approximately 1.41 GW.

This growth presents significant economic opportunities. However, data center expansion also brings challenges that cannot be overlooked, particularly concerning electricity and water consumption.

Data centers require substantial amounts of electricity. Depending on the cooling technology employed, these facilities may also consume significant volumes of water.

Institut Teknologi Bandung (ITB) researcher Prof. Reini D. Wirahadikusumah said energy requirements would be a critical consideration in AI development.

“Energy and artificial intelligence (AI) technology will become important pillars of development. AI itself requires enormous amounts of energy to operate,” she said.

Beyond Building Data Centers

Indonesia has several important advantages for developing its AI capabilities, including a large digital market, growing computing demand, and significant energy resource potential.

However, the country still faces challenges in translating these investments into efficient, productive, and sustainable AI capabilities. Therefore, the success of data center development should not be measured solely by the number of facilities built or the amount of investment attracted.

The more important question is: How much added value can these investments generate for Indonesia’s economy?

If data center investments are integrated with technology development, workforce upskilling, stronger local supply chains, and the growth of domestic digital industries, their economic impact could extend far beyond infrastructure construction.

Data centers can provide a critical foundation for Indonesia to strengthen its position in the global digital and AI economy, not merely as a technology market, but as a country capable of creating, developing, and capturing economic value from technological innovation.

Conclusion 

Indonesia’s growing data center investments present significant opportunities to accelerate digital transformation and strengthen its position in the global AI economy. However, long-term benefits will depend on the country’s ability to develop local technology capabilities, strengthen domestic supply chains, and ensure sustainable energy and water resources. By turning infrastructure investment into broader economic value, Indonesia can move beyond being a digital market to becoming a key player in global technology innovation.

Read more: Data Center Investments in Indonesia Drive Rising Demand for Clean Water