Jakarta, INTI - The rapid adoption of artificial intelligence (AI) is creating unprecedented demand for data centers across Southeast Asia, and Indonesia is positioning itself as one of the region's most attractive investment destinations. Backed by abundant land, competitive energy costs, and strong natural resources, the government believes the country has the potential to become a leading digital infrastructure hub.

Coordinating Minister for Economic Affairs Airlangga Hartarto identified three key advantages that make Indonesia appealing to global data center investors during the 10th anniversary celebration of the Indonesian Data Center Provider Organization (IDPRO) in Jakarta on Wednesday, June 24, 2026.

"First, Indonesia still has available land, while Singapore has very limited space," Airlangga said.

Beyond land availability, he explained that Indonesia offers significantly lower electricity prices than both Singapore and Johor, Malaysia, with energy costs estimated at only 50–60 percent of those in neighboring markets.

Indonesia also benefits from abundant water resources required for data center cooling systems. In addition, the country's Agreement on Reciprocal Trade (ART) with the United States is expected to support the development and utilization of semiconductor technologies, strengthening Indonesia's digital ecosystem.

Airlangga emphasized that reliable electricity infrastructure remains a critical requirement for large-scale data center operations. One of the remaining challenges, particularly on Java Island, is ensuring sufficient transformer capacity to convert high-voltage electricity into the lower voltages required by data center facilities.

He cited Amazon Web Services (AWS) as an example, noting that the company held extensive discussions with the government regarding infrastructure readiness before selecting Karawang as an investment location.

"Today, we are seeing many global players becoming increasingly interested in entering Indonesia. Compared with other ASEAN countries, I can confidently say Indonesia is better prepared," he said.

Airlangga added that Indonesia, Malaysia, and Singapore are currently considering a trilateral partnership to strengthen regional data center development, particularly in supporting disaster recovery capabilities and improving operational reliability.

Danantara Evaluates Strategic Data Center Investments

Meanwhile, Danantara Indonesia's Senior Director of Investment, Sunata Tjiterosampurno, revealed that the sovereign investment agency is currently assessing four potential data center investment opportunities across Indonesia.

He explained that the market is generally divided into three major segments: facilities serving Western hyperscalers such as Amazon and Microsoft, data centers supporting Asian hyperscalers including ByteDance, Tencent, and Baidu, and co-location providers serving enterprise customers.

Each segment offers distinct investment characteristics. Western hyperscalers typically provide long-term contracts with greater certainty, while Asian hyperscalers also offer extended agreements under different commercial structures. Co-location facilities generally generate higher returns but involve shorter contract durations.

"Understanding these characteristics is essential because our investment mandate is commercial. We aim to make sustainable investments that create long-term value," Sunata said.

Rather than acting as a developer or operator, Danantara's role is to allocate capital by partnering with experienced data center developers and operators. He noted that most global hyperscalers now prefer leasing capacity from established platforms instead of constructing facilities independently.

As a result, Danantara plans to invest in leading regional data center platforms that are expanding in Indonesia, enabling the organization to accelerate domestic digital infrastructure development while gaining broader exposure to Asia's rapidly evolving data center industry.

Sunata also emphasized that talent development forms a key pillar of Danantara's investment strategy. The organization continues to expand secondment programs and professional learning opportunities to strengthen expertise in technology, AI, and digital infrastructure.

Indonesia's Resource Advantage Creates Long-Term Potential

IDPRO Chairman Hendra Suryakusuma said the rapid expansion of data centers in Johor, Malaysia, was initially driven by Singapore's 2019 moratorium on new data center projects because of land and energy constraints.

However, Johor is now facing its own challenges related to water and electricity supply, creating new opportunities for Indonesia.

"There are growing issues surrounding water and energy availability. This presents a significant opportunity for Indonesia," Hendra said.

According to Hendra, Indonesia possesses abundant energy and water resources, including one of the world's largest geothermal reserves. Around 70 percent of the country's geothermal capacity is currently managed by Pertamina Geothermal Energy, offering significant potential for powering future data centers with renewable energy.

IDPRO is actively collaborating with Pertamina Geothermal to encourage greater adoption of clean energy within Indonesia's growing data center industry.

Indonesia currently has approximately 637 megawatts (MW) of installed data center capacity, a figure projected to increase to around 1.6 gigawatts (GW) by the second quarter of 2027.

Although most facilities remain concentrated on Java Island due to its mature electricity grid and availability of skilled professionals, Hendra believes Indonesia is well positioned to support the next phase of regional digital infrastructure growth as demand for AI computing and cloud services continues to accelerate.

Conclusion

With strong advantages in land availability, competitive energy costs, abundant water resources, and growing renewable energy potential, Indonesia is well positioned to become Southeast Asia's next major data center hub. Supported by government initiatives and strategic investment from organizations such as Danantara, the country is accelerating the development of digital infrastructure to meet the rising demand driven by AI, cloud computing, and the digital economy.

Read more: