Indonesia in the Global AI Race

No country becomes an artificial intelligence (AI) powerhouse merely by owning data centres. A nation achieves AI leadership when it connects infrastructure, talent, innovation, energy, and governance into a single national strategy. Amid this global race, Indonesia has secured two strategic moments rarely available to developing nations: the construction of the NVIDIA DSX AI Factory in Batam and its inclusion as a founding member of the World Artificial Intelligence Cooperation Organization (WAICO) alongside 29 other countries. These developments mark a significant shift. Indonesia is no longer positioned solely as Southeast Asia’s largest digital market but is beginning to be considered part of the global AI ecosystem. The question is no longer whether Indonesia can attract AI investment, but whether this momentum can be transformed into technological sovereignty.

The scale of the opportunity is enormous. The AI Factory in Batam is designed with a capacity of approximately 360 MW, with plans to gradually deploy up to 170,000 of NVIDIA’s latest-generation GPUs starting from 2027. Based on announced customer commitments, the project is projected to generate US$25-30 billion in its first six years. Simultaneously, the government estimates that AI could boost the value of Indonesia’s digital economy from around US$13 billion to US$300 billion over the coming decades. AI is thus no longer merely a technology but a new economic infrastructure.

Economist Carlota Perez explained that every technological revolution creates strategic infrastructure as the foundation for economic growth. In the AI era, this role is played by GPUs, data centres, cloud computing, fibre optic networks, and energy. Batam holds a unique position, facing Singapore and connected to international submarine cable networks, placing it at the digital economic hub of Southeast Asia. While Singapore faces land and energy constraints for data centre expansion, Malaysia is developing Johor as an AI corridor through an NVIDIA-YTL collaboration, and Vietnam is accelerating AI talent and semiconductor industry development. Indonesia possesses a combination of advantages that is difficult to match: the largest digital market in ASEAN, a population exceeding 280 million, energy availability, and extensive industrial zones. Referring to Alfred Marshall’s theory of Agglomeration Economy, this combination of geographic proximity and ecosystem connectivity can give birth to new economic growth centres. Batam thus has the potential to become more than just a data centre location; it can evolve into a regional AI hub.

The AI race is determined not only by the ability to develop algorithms but also by the capacity to supply energy. The International Energy Agency (IEA) estimates that global data centre electricity consumption will rise sharply by the end of this decade due to the rapid development of generative AI. AI competitiveness is ultimately determined by three simultaneous factors: computation, energy, and digital connectivity. Therefore, the construction of the AI Factory must be viewed as part of a strategy that integrates digital transformation with energy transition. Indonesia requires a reliable electricity supply, adequate transmission infrastructure, and the development of low-carbon energy to become a long-term AI investment destination. However, infrastructure alone is insufficient. Indonesia’s joining as a founder of WAICO provides a new dimension. For the first time, Indonesia has a greater opportunity to contribute to the formation of inclusive, human-centric global AI governance that respects ethical principles and data sovereignty. If Batam builds computational capacity, WAICO opens space for Indonesia to strengthen its leadership in global AI governance.

The success of mineral downstreaming has demonstrated that Indonesia can increase the added value of its natural resources. It is now time to apply a similar paradigm to the digital economy through digital downstreaming. If mineral downstreaming turns nickel into batteries, digital downstreaming turns data into computation, computation into AI models, AI models into innovation, and innovation into economic productivity. This value chain will determine the nation’s competitiveness in the 21st century. Joseph Schumpeter called this process creative destruction, while Michael Porter asserted that competitive advantage is born from innovation and productivity, not merely from natural resource wealth. Therefore, Indonesia’s success must not be measured solely by the size of investment or the number of GPUs installed, but by the birth of AI talent, research centres, a semiconductor industry, national technology companies, and increased real sector productivity. This momentum must be supported by consistent policies: building a National AI Compute Infrastructure, accelerating AI Centres of Excellence, strengthening research and higher education, developing the semiconductor industry, and utilising Danantara as patient capital to finance strategic digital infrastructure. In line with the thinking of Mariana Mazzucato, the state is not enough as a regulator but must also become a catalyst for investment in future technologies. History shows that every technological revolution creates a new map of economic power. The steam revolution elevated Britain, the manufacturing revolution…