Indonesia's Data Center Growth Needs More Than Investment

Indonesia's growing artificial intelligence (AI) economy is driving demand for data centers, creating new investment opportunities across the country's digital infrastructure sector. However, as more projects enter development, questions are emerging about whether existing electricity, water, and connectivity infrastructure can support this expansion without putting additional pressure on local communities.

IBC's latest navigator affirmed that Indonesia had about 356 megawatts (MW) of operational data centre capacity in the first half of 2026, with another 395 MW under construction and 1.3 gigawatts (GW) planned for expansion. This growing investment pipeline highlights Indonesia's potential to become a regional computing hub, while also underscoring the need for infrastructure readiness and sustainable development.

Recent developments in Jatiluhur, West Java, and Batam illustrate these challenges. Concerns over water consumption and resource availability have prompted local opposition to data centre developments, demonstrating how digital infrastructure investments can compete with the needs of surrounding communities and industries.

Fadli Jihad Associate Policy & Program IBC emphasized that Indonesia's competitiveness in the AI infrastructure economy should not be measured solely by the volume of investment or additional computing capacity. "Attracting more data center investment is important, but we also need to consider where these facilities are built and what value they create for Indonesia. Projects should reflect local infrastructure capacity, minimize pressure on existing resources, and contribute to stronger domestic capabilities," Fadli said.

The 23rd edition of Navigator highlights the need for a more deliberate, location-specific approach. Greater Jakarta could continue accommodating latency-sensitive cloud services and AI inference, while Batam could strengthen its position as a regional connectivity gateway. More resource-intensive AI training facilities could be directed toward locations with sufficient power capacity, reliable connectivity, sustainable cooling solutions, and access to renewable energy.

Policy incentives could also better target investments that expand supporting infrastructure, strengthen domestic supply chains, develop local talent, and encourage advanced computing capabilities.

As regional competition intensifies, Indonesia's opportunity extends beyond hosting additional computing facilities. The longer-term priority is ensuring that digital infrastructure investment creates broader economic value while remaining compatible with local resource availability and environmental sustainability.

Read the full issue of IBC Navigator Volume 23.2026 at https://navigator.ibc-institute.id/