Ecological Crisis Looms over ASEAN Data Centre Race

Southeast Asia is increasingly attracting global data-centre developers. But can the region, including Indonesia, benefit from this opportunity?

One striking feature of the development of artificial intelligence (AI) is not only how users are becoming more dependent on its capabilities, but also the environmental harm caused by AI data centres in a number of countries.

The construction of AI data centres in various countries is drawing public attention, much of it focused on their negative environmental impact. Noise and air pollution, as well as water shortages, are concerns for people when these facilities are built near their homes.

In the United States, a Gallup survey this year found that 71 per cent of respondents opposed data-centre construction in their area. Half of those opposed felt that AI data centres used too much water and energy.

The Gallup findings seem paradoxical, given that the US has the world’s largest data-centre ecosystem. The New York Times reported that in the four years since ChatGPT emerged, more than 100 data-centre buildings may have been constructed in the US each year.

Opposition to AI data-centre construction has also emerged in Indonesia. Environmental activists and a civil-society coalition have opposed the CGK4 Jatiluhur AI data-centre project, located just five kilometres from Jatiluhur Dam.

The project has raised concerns that it will consume large quantities of water and affect the dam’s water availability. The dam is also a source of raw water for Jakarta. The project, run by BDx Data Centers, was halted by West Java Governor Dedi Mulyadi on 1 October 2026 because it lacked an environmental impact assessment (AMDAL) and building approval (PBG), Kompas reported on 1 October 2026.

Opposition to data-centre projects has also taken place in the Nongsa Special Economic Zone in Batam. Residents staged a demonstration after their neighbourhood had been without a water supply for three months. They suspect the disruption is linked to data-centre infrastructure being built in the area, Kompas reported on 13 October 2026.

In light of this opposition, what is the current outlook for data-centre growth? Can investment in these projects be justified in terms of benefits to nearby communities and the environment?

Data-centre hubs are not new. In Indonesia, data-centre services have existed since at least 1997. Services run by PT Telkom Data Ekosistem began operating in Serpong, Banten, in 2000. The country’s data-centre sector has since grown, particularly as global investment has increasingly targeted Southeast Asia as a promising hub.

Singapore was initially the main target for technology companies and global data-centre developers, and came to dominate the Southeast Asian market. Data presented by The Straits Times showed that in 2021 Singapore had 483 megawatts (MW) of power capacity for data centres, compared with 89 MW in Jakarta, representing Indonesia.

Global technology companies including Microsoft, Google, IBM and Dell have established Singapore as one of their main data-centre ecosystems in Southeast Asia. Its role as a global business and financial centre, coupled with strong digital infrastructure, has made it a strategic location. PwC estimates that Singapore’s cumulative data-centre investment will reach US$330 billion over 2026–2050, more than in any other ASEAN country.

But other countries, including Malaysia and Indonesia, are now catching up. Singapore’s 2019 moratorium on new data-centre construction has created greater opportunities for Malaysia and Indonesia to attract investors. The Singaporean Government introduced the moratorium over concerns about excessive water and electricity use by new data centres.

Over the past four years, Malaysia has secured US$34 billion in data-centre investment. Contributors include global technology companies such as Google’s parent Alphabet, with US$2 billion; Microsoft, with US$2.2 billion; and Amazon, with US$6.2 billion.

Malaysia’s government aims to have 81 data centres built by 2035. Johor has become a key development hub because of its proximity to Singapore.

Indonesia has also benefited from investment flows following Singapore’s moratorium and from its geographical proximity to the city-state. Batam is one of the target areas for data-centre development. In 2021, Chinese data-centre company GDS built a hyperscale facility there with a capacity of 28 MW. Firmus, meanwhile, has partnered with chipmaker Nvidia, while data-centre company DayOne plans to build an AI data centre with a capacity of 360 MW.

The data-centre ecosystems in Malaysia and Indonesia are expected to continue expanding. In terms of potential cumulative investment, the two countries rank second and third in Southeast Asia, behind Singapore.

PwC estimates that Malaysia could receive a cumulative US$287 billion in investment over 2026–2050, while Indonesia could attract US$257 billion over the same period.

The potential economic value of data-centre investment has prompted Southeast Asian countries to compete for development opportunities. For investors, the region’s geopolitical neutrality and lower operating costs are particularly attractive for data-centre development, especially for AI.

Although this investment can bring economic benefits, the social and environmental effects of data centres must also be considered. Singapore’s earlier moratorium shows that even when data-centre construction brings benefits, it also carries unavoidable risks.

At the time, the 60 data centres in Singapore consumed 7 per cent of the country’s domestic electricity. Most of Singapore’s energy supply was still generated from fossil fuels, meaning data-centre operations also contributed significantly to carbon emissions, Kompas reported on 22 October 2021.

After lifting the moratorium, Singapore tightened the rules for new data-centre construction. Requirements to use green energy and meet high energy-efficiency standards are now among the conditions companies must satisfy when applying to build new facilities.

This experience offers a lesson for Indonesia and other Southeast Asian countries. The economic benefits of developing data centres, particularly for AI, must be accompanied by strict rules and oversight.

As the AI data-centre boom in Southeast Asia gathers pace, ASEAN has issued guidelines for sustainable data-centre development. One useful foundation is the “Doughnut Economics” framework developed by Oxford economist Kate Raworth.

Under this framework, new data-centre development in the AI era should take account of the limits to growth beyond which the natural environment’s capacity would be damaged. Development must also not prevent people from accessing their rights or living decent lives.

This framework could be incorporated into policies in Indonesia and other Southeast Asian countries. As ASEAN members compete to attract data-centre investment and expand the sector, economic opportunities should not come at the expense of community welfare or environmental sustainability.