Indonesia steps up bid to become regional data centre hub
Indonesia steps up bid to become regional data centre hub
Indonesia’s large digital economy and access to land and power are drawing global cloud companies, but balancing growth with sustainability and talent needs remains a key challenge, say industry players.
JAKARTA/KARAWANG: Indonesia’s data centre industry is expanding rapidly, driven by its booming digital economy and rising demand for artificial intelligence and cloud services.
Nearly 200 data centres of varying sizes are already operating across the country.
More are on the way, as global tech giants and regional players ramp up investments and the country positions itself as a potential data centre hub amid growing competition in Southeast Asia.
ATTRACTIVE LOCATION FOR GLOBAL TECH
In West Java, Microsoft is building a new 48-megawatt data centre at the 1,400ha Karawang International Industrial City.
The facility is expected to begin operations later this year and is part of the company’s US$1.7 billion investment in Indonesia.
The tech firm plans to build three more facilities at the site. Once completed, it will house five data centres, forming a major regional cluster.
Indonesia’s appeal to massive cloud service providers such as Microsoft lies in its position as Southeast Asia’s largest digital economy, along with access to land and power, say industry players.
The government is also taking an active role in supporting the sector’s growth.
“Since data centres are part of our priority in attracting investments coming to Indonesia, this should then be given a very dedicated treatment,” Indonesian Investment Promotion Deputy Minister Nurul Ichwan told CNA.
This could be done through regulations, incentives and creating a favourable investment climate for such companies, he added.
Other Indonesian regions are also competing to attract operators.
In Batam, about an hour by ferry from Singapore, Nongsa Digital Park – a special economic zone (SEZ) – has attracted multinational firms and digital training institutes. It forms part of efforts to build a wider digital ecosystem there, a model that observers say could be replicated in other parts of the country.
POLICY AND LAND CONSTRAINTS
Alongside global tech firms, regional operators are also expanding their footprint. Digital Edge, headquartered in Singapore, operates two data centres in central Jakarta.
Its newest facility, EDGE2, opened in 2024 and has a capacity of 23 megawatts, with space for more than 3,400 server racks.
It also operates data centres across Asia-Pacific, with Indonesia its largest market by both investment value and power capacity.
Its upcoming CGK Campus in Bekasi, West Java, is expected to deliver up to 500 megawatts – its biggest infrastructure project so far, with the first phase scheduled to be ready by end 2026.
The company is urging authorities to designate more data centre clusters as SEZs, which can offer fiscal and non-fiscal incentives to attract investment.
“The more the government can designate a place for SEZ especially in areas where there’s plenty of land, water, power and connectivity, it will be very helpful to attract more data centre investment in Indonesia,” said Stephanus Oscar, CEO of Digital Edge Indonesia.
He also called for more streamlined permit and approval processes for building such facilities.
However, the strong demand for data centres is starting to tighten land supply in parts of Greater Jakarta, and their potential impact on local communities and the environment is a cause for concern.
Farazia Basarah, country head of real estate firm JLL Indonesia, said developers comply with both local and national regulations to minimise disruption to nearby communities, with data centres typically located about 1km to 5km away from residential areas.
She added that sites must also meet strict environmental criteria, including being located in areas with low flood risk, with the land expected to remain safe from flooding for up to 50 years.
POWERING GROWTH SUSTAINABLY
As the industry expands, so does pressure to manage energy and water use.
Data centres require a constant supply of electricity and must operate around the clock to avoid disruptions. Much of that power goes to running servers and cooling systems.
To address this, companies are investing in cleaner energy sources.
Microsoft’s president of cloud operations and innovation Noelle Walsh said the company works closely with utility providers and is partnering Indonesia’s state electricity firm PLN on a 10-year renewable energy supply.
“(PLN) will provide 200MW of solar energy onto the grid here. And that gives us the opportunity to use more green power,” she added.
Data centres also generate enormous heat as they process information and rely heavily on water-based cooling systems to prevent servers from overheating.
Microsoft has pledged to become “water positive” by 2030, meaning it aims to return more water to the environment than it uses.
However, the growing water demand is raising concerns in some parts of Indonesia.
In Batam, for example, where supply depends largely on rainwater reservoirs, observers have warned that data centre expansion must be carefully managed to avoid straining limited resources.
Geothermal energy is another option. Digital Edge is using the renewable power source for its Jakarta facilities and plans to extend this to its Bekasi campus.
The new facility will also deploy direct-to-chip cooling to support AI workloads powered by GPU (graphics processing unit) chips, which generate significantly more heat, said Oscar.
Instead of circulating cold air, a closed-loop system sends liquid coolant directly over the chips, where it absorbs and carries heat away.
In data centre operations, connectivity is just as critical as power and cooling. To ensure stability and low latency, Digital Edge uses horizontal directional drilling – a method of laying cables underground without surface excavation – to install its fibre infrastructure.
“We install our cables about 6m