As the gates of digitalization open wider, Indonesia has emerged as one of the main focal points for data center development in Southeast Asia. This development is not only driven by the increasing domestic demand but also by the growing interest of large local players and foreign investors eager to take a bite of this promising digital infrastructure business. Nowadays, we see more and more major corporations entering the data center business, while multinational companies are racing to form joint ventures (JV) with local partners to strengthen their presence in the country.
Surging Demand: Following the Digital Economy’s Expansion Footprint
Indonesia is the fourth most populous country in the world, with over 212.9 million active internet users as of 2023. It’s no surprise that its digital economy is growing rapidly. With the rise of e-commerce, social media, and the widespread use of digital applications in various sectors, the demand for data storage facilities has skyrocketed. Data centers have now become the backbone of digital infrastructure, ensuring smooth online operations for businesses and the public.
This high demand has made data center development a strategic and lucrative business opportunity. A report from Cushman & Wakefield mentioned that in 2023, the data center capacity in Indonesia grew by around 22% annually, with a projected growth of up to 30% over the next five years. This creates a huge opportunity that attracts both local and global investors to dive in and capture a share of the market.
Large Groups Enter the Data Center Business
Major companies in Indonesia do not want to miss out on the momentum. Various conglomerates have ventured into the data center business, recognizing the long-term potential of digital economy growth and the continued demand for data. For instance, the Lippo Group, through PT Multipolar Technology Tbk (MLPT), has established a large-scale data center in Cikarang. Meanwhile, Djarum Group, one of the oldest conglomerates in Indonesia, has also expanded its data center business through its subsidiary, PT Sarana Menara Nusantara Tbk, operating under the name EDGE DC.
Besides these two major players, state-owned telecom giant Telkom Indonesia has expanded its data center business through NeutraDC. This subsidiary operates several data center facilities scattered across Indonesia, ready to meet the increasing demand from cloud service providers, fintech firms, and other technology companies.
The involvement of these large groups reflects their seriousness in building a more robust and integrated digital ecosystem. It also demonstrates their readiness to compete on a global scale with operational and security standards comparable to international players.
Rising Global Interest
Indonesia, with its massive market potential and rapid growth, has captivated the interest of global data center players. Several well-established international companies are beginning to seek ways to enter the Indonesian market, whether by building infrastructure from scratch or through joint ventures (JV) with local companies.
One example is the presence of U.S.-based data center company Equinix, which partnered with PT Astra International Tbk to form a joint venture named PT Astra Digital Xperience (ADX). This partnership is a strategic move for Equinix to leverage Astra’s extensive business network and deep local knowledge.
Moreover, there is also a joint venture between Singapore’s Princeton Digital Group (PDG) and PT XL Axiata Tbk, which launched PDG Jakarta 1, one of the largest data centers in Indonesia. With the growing demand from multinational companies and cloud service providers, these collaborations not only support their operational needs but also accelerate the development of the data center business in Indonesia.
Major players like Amazon Web Services (AWS), Google Cloud, and Microsoft Azure are also actively expanding their operations in Indonesia. They are partnering with local companies to comply with the increasingly stringent regulations on data storage and cybersecurity while capitalizing on the large-scale advantages offered by the Indonesian market.
Market Attraction
Why is the data center business in Indonesia so appealing? Aside from being driven by the growth of internet users and the digital economy, one of the main factors is the government’s efforts to build better telecommunications infrastructure and implement regulations that are starting to favor businesses in this sector.
Government policies such as Government Regulation No. 71 of 2019 concerning the Implementation of Electronic Systems and Transactions (PSTE) provide clearer guidelines for business players, both local and foreign. The regulation requires companies engaged in public services to store their data domestically. This opens up a huge opportunity for data center businesses to meet the local data storage needs of various industry sectors.
However, building and operating data centers is not without its challenges. The need for strategic locations, stable electricity supply, and high operational costs often pose obstacles for business players in this field. Indonesia, despite its market advantages, also faces some drawbacks, such as uneven electricity infrastructure and higher construction costs compared to neighboring countries.
Becoming a Regional Data Hub
Given the current developments, the future of the data center business in Indonesia looks very bright. Some analysts predict that Indonesia will become one of the largest data hubs in Southeast Asia in the coming years, rivaling Singapore, which has long dominated the sector.
Support from the government, interest from foreign investors, and the entry of local companies into this business demonstrate that the data center ecosystem in Indonesia is heading toward rapid growth. With its large population, high digital adoption rate, and supportive regulations, the data center business is set to become one of the key pillars in Indonesia’s digital transformation.
Amidst the increasingly fierce competition, data center companies that can provide high-quality services, energy efficiency, and strong data security guarantees will come out on top. Meanwhile, for local and global players looking to enter, the key to success lies in strategic partnerships that can maximize market potential while addressing existing challenges.
In the end, the data center business in Indonesia will not only serve as a provider of technological infrastructure but also as a major enabler driving digital transformation across all economic sectors.
