JLL: Indonesia has opportunity to become regional data centre hub
Property consultancy Jones Lang LaSalle, or JLL, assesses that Indonesia has the opportunity to become a data centre investment destination in Southeast Asia amid rising demand for digital infrastructure and the development of artificial intelligence technology.
JLL Indonesia Country Head and Head of Logistics & Industrial Farazia Basarah said during a media briefing in Jakarta on Tuesday that data centre investment flows into Indonesia are influenced, among other factors, by development constraints in several neighbouring countries.
According to her, around five to seven years ago Singapore was one of the main locations for data centre development. However, the Singapore government subsequently imposed a moratorium on data centre construction due to the sector’s high electricity consumption.
“After that, data centre development eventually shifted to Malaysia and Batam. In Malaysia we see it in Johor Bahru, everything was drawn to Johor Bahru,” Farazia said.
However, data centre construction in Johor Bahru then encroached on commercial and residential areas. This situation prompted feedback from local residents because data centre development was seen as disturbing the surrounding environment.
According to Farazia, the Johor Bahru government eventually imposed a moratorium, meaning data centre expansion in the area could no longer proceed expansively.
“As a result, demand ultimately went directly to Indonesia, namely to Batam and also Jakarta,” she said.
Farazia said Jakarta has been a data centre development location since around 2018-2019, primarily to support cloud services. However, the scale of development is now much larger amid rising data needs.
According to her, Indonesia has a number of factors supporting the growth of the data centre industry, including a large population and an internet penetration rate of around 81 percent.
“Of the 290 million population, and we see Gen Z and millennials who are truly data- and social media-literate, that also adds to the requirement for data centre capacity,” she said.
“That is one of the potentials behind why Indonesia is now becoming a data centre destination hub,” she added.
Nevertheless, Farazia cautioned that data centre investment has different characteristics from the manufacturing industry in terms of labour absorption.
She gave the example that building a factory on the same land area could potentially create more jobs than a data centre facility.
“If you build a factory, for example a car factory, it might absorb 500 to 1,000 workers. Meanwhile, a data centre on 20-40 hectares may not employ many workers,” Farazia said.
For that reason, she said, the government needs to ensure that data centre growth delivers a multiplier effect through the formation of supporting industries and a domestic technology ecosystem.