Jakarta, INTI - Indonesia is seen as having significant potential to capture spillover demand for data centers (DC) from Singapore and Malaysia. Land, power, and water constraints in both countries are expected to encourage data center expansion into other markets across the region, including Indonesia.
In addition to its large digital market, Indonesia offers relatively lower development costs, a fairly open investment environment, and significant potential for expanding power capacity.
These factors could position Indonesia as one of Southeast Asia’s emerging data center growth hubs.
UOB Kay Hian analyst Andrew Agita Buntoro and his team said Indonesia is strategically positioned to benefit from the next wave of data center expansion.
In a research report published on August 14, 2026, they projected that infrastructure capacity constraints in Singapore and Malaysia could redirect some data center demand toward Indonesia.
Singapore Faces Infrastructure Constraints
Singapore previously imposed a moratorium on new data center developments from 2019 to 2022 amid resource constraints, particularly involving land, electricity, and water.
Following the end of the moratorium, the Singaporean government introduced the Data Centre Call for Application (DC-CFA) scheme, with stricter sustainability requirements.
Under the policy, data center development in Singapore must take into account energy efficiency, resource utilization, and other sustainability considerations.
These constraints subsequently pushed some demand toward Johor, Malaysia, which offers geographic proximity to Singapore, lower development costs, and greater land availability.
Johor Comes Under Growing Resource Pressure
However, rapid data center growth in Johor has begun placing pressure on local resources.
Malaysia has subsequently tightened its screening of data center projects requiring large amounts of electricity and water. In 2026, Johor also restricted the development of facilities with high water consumption.
These conditions could create opportunities for other countries in the region to capture some of the data center demand that cannot be accommodated by Singapore and Malaysia.
UOB Kay Hian identified Indonesia as one of the markets with the greatest potential to benefit.
Indonesia has a large digital market, while data center penetration remains relatively low compared with the potential demand generated by its growing digital economy.
Global Operators Expand Data Center Presence in Indonesia
The opportunity is reflected in the growing activity of international data center operators in Indonesia.
Several global companies, including DayOne, Princeton, AirTrunk, and NTT, have expanded their presence in the Indonesian market.
On the domestic front, several companies are also developing large-scale data center capacity and project pipelines, including PT Telkom Indonesia (Persero) Tbk (TLKM), PT Indosat Tbk (ISAT), and Sinar Mas.
The entry of global operators and expansion by domestic players demonstrate the strengthening prospects of Indonesia as a regional digital infrastructure destination.
With computing demand continuing to rise due to the growth of artificial intelligence (AI), cloud computing, digital services, and the data-driven economy, demand for data center capacity is expected to continue increasing.
Indonesia has an opportunity to capitalize on this momentum by strengthening its power supply, connectivity, land availability, and supporting infrastructure.
If it can address these challenges, Indonesia could evolve beyond being a data center market into a major digital infrastructure hub for Southeast Asia.
Conclusion
Indonesia is well positioned to benefit from the growing demand for data center capacity in Southeast Asia as Singapore and Malaysia face increasing land, power, and water constraints. With a large digital economy, expanding infrastructure, and growing interest from global operators, Indonesia has the opportunity to strengthen its position as a regional data center and digital infrastructure hub.
Read more: Habib Aboe Bakar and BKSAP Examine Batam’s Role as an ASEAN AI and Data Center Hub