Indonesia is becoming increasingly aggressive in attracting\ndata-centre investment to support its digital economy and artificial\nintelligence ambitions. But alongside the large investment figures and\ncapacity announcements, an equally important question remains: how much\nbenefit will this bring to the national economy, and who will bear the\nconsequences of its use of electricity, water, land and environmental\nresources?<\/p>\n
Data centres are becoming one of Indonesia\u2019s new magnets for digital\ninvestment. Growth in cloud computing, digital transactions, electronic\ngovernment services and artificial intelligence (AI) is driving demand\nfor infrastructure capable of storing, processing and transmitting data\non a large scale.<\/p>\n
The government sees the sector as a strategic opportunity. Indonesia\nhas a large digital market, an important geographical position in\nSouth-east Asia and growing infrastructure needs. Data-centre\ndevelopment could strengthen the national digital ecosystem while\nattracting high-value technology investment.<\/p>\n
However, the issue requires closer scrutiny. In much of the coverage\nof investment, public attention focuses on project value, land area,\ninvestor names, capacity in megawatts and construction targets. These\nare all important, but they are not enough to establish whether the\ninvestment will genuinely benefit Indonesia in the long term.<\/p>\n
A data centre is not simply a building filled with server racks. It\nrequires large amounts of electricity, reliable cooling systems, water\nsupplies or suitable cooling alternatives, telecommunications\nconnectivity, skilled professionals, cyber security and environmental\nimpact management.<\/p>\n
Therefore, when evaluating the two years of the Prabowo\u2013Gibran\nadministration, the question is not just how much data-centre investment\nhas been secured. It is whether Indonesia has prepared an ecosystem in\nwhich that investment can grow without compromising public needs or\nallowing most of its economic value to flow overseas.<\/p>\n
Investment is growing and capacity is expanding<\/strong><\/p>\n The scale of the opportunity is evident in the development of the\ndata-centre industry. In August 2025, the Ministry of Communications and\nDigital Affairs\u2019 Directorate General of Digital Infrastructure said\nIndonesia had around 185 data centres with a capacity of 274 MW, and set\na target of more than 2,000 MW by 2029. These figures reflect an\nestimate and target announced in 2025, not a current measurement of the\ncountry\u2019s operational capacity.<\/p>\n Batam is one of the locations attracting particular attention. Its\nproximity to Singapore, availability of industrial estates and place in\nthe regional connectivity network make it attractive to data-centre\ndevelopers.<\/p>\n In September 2026, BP Batam said the existing, committed and pipeline\ndata-centre capacity in Batam totalled 1.47 GW of IT capacity. This\nfigure needs to be interpreted carefully: existing capacity, projects\nbacked by commitments and pipeline projects do not all mean that\nfacilities have been completed or are operational.<\/p>\n One project illustrating the sector\u2019s energy requirements is an\nagreement between PLN Batam and DayOne in April 2026 for an electricity\nsupply of 511 MVA, or around 450 MW, for phased data-centre\ndevelopment.<\/p>\n These large figures reveal two sides of the opportunity. Investment\ncould strengthen Indonesia\u2019s position in the regional digital industry\nvalue chain. At the same time, energy needs and supporting\ninfrastructure must be planned from the outset, rather than addressed\nonly after facilities begin operating.<\/p>\n Large investment does not automatically translate into large economic\nbenefits. Announced capacity must be distinguished from capacity\nactually in operation, while investment commitments must be\ndistinguished from realised capital expenditure and domestic value\nadded.<\/p>\n Electricity: data centres must not outgrow the energy\nsystem<\/strong><\/p>\n Electricity is the most fundamental requirement for data centres.\nServers must run continuously, while cooling systems, networks, security\nand supporting facilities also need a reliable power supply. Outages can\naffect digital services used by businesses, financial institutions and\nthe public.<\/p>\n The issue is not only whether electricity is available now, but\nwhether generation capacity, transmission and distribution networks, and\nsystem reserves will be sufficient to meet demand in the coming\nyears.<\/p>\n In September 2026, BP Batam estimated that data-centre electricity\ndemand would become a major challenge for Batam\u2019s power system. Its\nprojections indicated that the sector\u2019s demand could exceed half of\nBatam\u2019s peak electricity load by 2029. BP Batam also cited a forecast\nincrease in overall peak demand from 841 MW in 2026 to 2,540 MW in\n2035.<\/p>\n These projections show the need for integrated energy planning. The\ngovernment and power providers must factor in digital industry demand\nalongside growth in households, public facilities, manufacturing,\ntransport and other economic sectors.<\/p>\n There is also the question of the source of electricity. If\ndata-centre growth is met mainly by fossil-fuel power stations,\nemissions could rise. This could conflict with the sustainability\ncommitments of global companies and Indonesia\u2019s energy transition\ntargets.<\/p>\n Data-centre development should therefore be accompanied by a clear\nenergy supply roadmap, including a more reliable grid, energy\nefficiency, verifiable use of renewable energy, and measures to ensure\nindustrial demand does not undermine the reliability and affordability\nof electricity for the public.<\/p>\n The government must also distinguish between electricity capacity\nalready available, capacity under contract and capacity that remains\nonly a plan. These have different levels of certainty.<\/p>\n The principle is simple: do not merely count how many megawatts\ninvestors are requesting. Establish who will supply the electricity,\nwhen the network will be ready, how much it will cost and how it will\naffect the energy system as a whole.<\/p>\n Water: digital investment must not take precedence over\nresidents\u2019 needs<\/strong><\/p>\n Water is often less prominent in the promotion of data-centre\ninvestment. Yet water may be required for direct cooling, supporting\nfacilities and indirectly through the generation of electricity.<\/p>\n The amount consumed depends greatly on facility design, cooling\ntechnology, climate, server utilisation and energy sources. It is\ntherefore wrong to assume that all data centres use the same amount of\nwater. Nevertheless, water needs must be calculated at the planning\nstage.<\/p>\n Batam is an important example. In September 2026, BP Batam promoted\nthe development of Sea Water Reverse Osmosis (SWRO), or seawater\ndesalination, to supply data-centre industry needs without affecting\nreservoir water supplies for residents.<\/p>\n This approach deserves attention because it recognises that utility\nreadiness cannot be judged solely by the availability of land and\nelectricity. Raw water availability, treatment capacity, distribution\nnetworks and supply resilience during dry seasons are also crucial to a\nproject\u2019s viability.<\/p>\n However, SWRO is not a consequence-free solution. It requires energy\nand investment, and the management of concentrated brine from\ndesalination must be addressed to prevent damage to the marine\nenvironment. Water quality, operating costs and distribution\ninfrastructure must also be considered.<\/p>\n The government should therefore require large projects to have\nmeasurable water plans, including disclosure of projected consumption\nand supply sources, efficiency strategies, water reuse where possible,\nand plans for dealing with drought.<\/p>\n Most importantly, industrial needs must not be quietly passed on to\nthe public through reduced clean-water supplies, higher service costs or\nincreased pressure on local water resources.<\/p>\n The success of data-centre investment should be judged not only by\nits ability to meet investors\u2019 needs, but also by whether it protects\nresidents\u2019 right to safe and affordable water.<\/p>\n Talent: will Indonesia provide only the buildings and hire\nexpertise from abroad?<\/strong><\/p>\n Data centres are physical infrastructure, but their economic value is\nincreasingly determined by human expertise. Modern facilities need\nprofessionals in networking, computing systems, cyber security,\nfacilities management, cooling, electrical systems, automation and cloud\nservices.<\/p>\n This is where the benefits of investment need closer examination.<\/p>\n Data-centre construction can create jobs in building, installation\nand operations. But the number of construction workers is not the same\nas the number of professionals needed once a facility is running. Highly\nautomated data centres can involve large investments while requiring\nrelatively few direct employees compared with labour-intensive\nindustries.<\/p>\n For example, BP Batam said an AI data-centre project backed by Range\nIntelligent Computing Technology Company Limited was expected to employ\naround 700\u2013800 professionals in data centres and digital technology\nthrough recruitment collaboration and talent development with\nuniversities in Batam.<\/p>\n That figure is a projection announced for one specific project, not\nan estimate of total employment across Indonesia\u2019s data-centre industry.\nNevertheless, it illustrates the importance of linking investment to the\ndevelopment of local skills.<\/p>\n The government must ensure that investment does not stop at hiring\nworkers for construction and support roles. There must be clear pathways\nfor Indonesian professionals to take technical, managerial and strategic\npositions.<\/p>\n Companies could be encouraged to establish training, internship and\ncertification programmes, partnerships with universities, and measurable\nknowledge-transfer initiatives. Success should be measured not just by\nthe number of training participants, but by how many local workers\nsecure good-quality jobs, improve their skills and progress to more\nsenior positions.<\/p>\n Without such an agenda, Indonesia risks becoming the physical site of\nglobal digital infrastructure while continuing to depend on foreign\nexpertise, equipment, software and higher-value services.<\/p>\n Environment: data centres need clear\naccountability<\/strong><\/p>\n Environmental impacts go beyond electricity and water consumption.\nData-centre construction also requires land and building materials,\ncooling systems, electronic equipment and backup batteries, and\narrangements for waste disposal when equipment reaches the end of its\nlife.<\/p>\n In some locations, the growth of industrial estates can put greater\npressure on spatial planning and local infrastructure. Impact\nassessments should therefore reflect the conditions of each area, rather\nthan relying solely on uniform general standards.<\/p>\n National and local governments must ensure that data-centre\ndevelopment complies with spatial plans, has adequate waste management\nand does not impose a disproportionate environmental burden on nearby\ncommunities.<\/p>\n Energy efficiency should also be a key indicator. Developers can\ndisclose measures such as Power Usage Effectiveness (PUE), which\ncompares a facility\u2019s total energy consumption with the energy used by\nits IT equipment. However, PUE alone cannot capture the full\nenvironmental impact, as it does not directly measure water use, energy\nemissions or supply-chain impacts.<\/p>\n Sustainability reporting should therefore cover more than one\nindicator. The government can encourage disclosure of electricity and\nwater consumption, emissions intensity, renewable energy use, electronic\nwaste management and plans to improve efficiency.<\/p>\n Claims that a data centre is \u2018green\u2019 should be supported by\ntransparent and verifiable measurement methods. Sustainability labels\nmust not be merely marketing material.<\/p>\n The most important question: what remains in\nIndonesia?<\/strong><\/p>\n This is the central issue that should be at the heart of the\ninvestment euphoria: how much value added from each data-centre project\nwill Indonesia actually retain?<\/p>\n Investment can generate benefits through taxes, jobs, infrastructure\ndevelopment, use of local services, skills development, technology\ntransfer and improved productivity in the digital economy. But these\nbenefits do not arise automatically simply because a facility is built\nin Indonesia.<\/p>\n Much of the initial project expenditure may go towards hardware,\ncooling systems, electrical equipment and technology supplied from\noverseas. Some high-value technical services may also come from global\ncompanies. This does not mean the investment is without benefit, but it\nhighlights the need for a strategy to widen the participation of\nIndonesian businesses and workers.<\/p>\n The government should measure project benefits using a broader set of\nindicators, including:<\/p>\n Realised investment:<\/strong> capital expenditure\nactually delivered, rather than announced commitments alone.<\/p><\/li>\n National and local revenue:<\/strong> taxes and other\nreceipts in accordance with regulations, taking account of any\nincentives granted.<\/p><\/li>\n Job quality:<\/strong> the number of local workers, skill\nlevels, wages and career progression.<\/p><\/li>\n Strengthening domestic industry:<\/strong> the share of\ngoods and services procured from local suppliers that meet quality and\nsecurity standards.<\/p><\/li>\n Technology transfer:<\/strong> training, certification,\njoint research and improvements in the capabilities of Indonesian\ncompanies.<\/p><\/li>\n Economic multiplier effects:<\/strong> contributions to\nlocal businesses, professional services and connectivity, as well as the\nuse of digital services by productive sectors.<\/p><\/li>\n Resource efficiency:<\/strong> electricity and water use\nper unit of computing service, renewable energy use and waste\nmanagement.<\/p><\/li>\n Community benefits:<\/strong> effects on public services,\nregional infrastructure and the affordability of essential\nneeds.<\/p><\/li>\n<\/ul>\n These indicators would help the government distinguish projects that\nmerely add physical capacity from those that also build national\neconomic capabilities.<\/p>\n The links between data centres and other industries must also be\nconsidered. Computing infrastructure will have greater strategic value\nif it helps Indonesian companies develop AI, strengthen manufacturing,\nimprove productivity among micro, small and medium-sized enterprises,\nbuild digital health services and improve public services.<\/p>\n If data-centre capacity grows but domestic companies lack competitive\naccess to computing, talent and technology services, some of the\nopportunities for economic transformation may not be fully realised.<\/p>\n From investment incentives to ecosystem-readiness\nstandards<\/strong><\/p>\n The government need not reduce its ambition to attract data-centre\ninvestment. Instead, Indonesia should improve the quality of its\napproach to make it more competitive and sustainable.<\/p>\n One step to consider is a data-centre ecosystem-readiness framework\nfor large-scale projects. This would not simply add bureaucracy, but\nhelp ensure that investment is suited to the capacity of each\nregion.<\/p>\n Before projects receive relevant support and incentives, assessments\nshould cover electricity and network readiness, sustainable water\nsources, connectivity, spatial planning, environmental impact, cyber\nsecurity, talent availability and plans for local economic benefits.<\/p>\n Each project should also have a contingency plan. What happens if\nelectricity demand rises faster than expected? What happens when water\nsupplies decline? How will the facility maintain services during an\noutage?<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/indonesias-data-centre-boom-what-should-the-government-do-1792180250",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}\n