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"Already the highest among ASEAN members states, current estimates predict that Indonesia’s digital economy gross merchandise value (“GMV”) will surpass US$260bn by 2030."
The Indonesian data centre industry landscape is experiencing rapid transformation, driven by the meteoric rise of the digital economy, increased adoption of cloud computing and AI-backed applications and government-backed incentives. In this article, with contributions from Adnan Kelana Haryanto & Hermanto Law Firm (“AKHH”), we examine Indonesia’s data centre industry as well as the opportunities and challenges for participants in the sector.
MARKET OVERVIEW
Indonesia is experiencing an unprecedented digital economy boom. Already the highest among ASEAN members states, current estimates predict that Indonesia’s digital economy gross merchandise value (“GMV”) will surpass US$260bn by 2030.
Despite the country’s vast potential, current “AI-ready” data centres – facilities designed for high density, power intensive cloud computing and AI workloads – are currently estimated to account for approximately only 200 MW or 10% of likely market requirements. Demand for Tier III and Tier IV data centres is surging, and currently accounts for more than half of data centre construction activity as of 2025.
Investment patterns indicate a strong focus on sustainable data centre development. Green and sustainable practices have gained traction and industry participants are increasingly focussed on adopting efficient cooling and renewable energy solutions to reduce their carbon footprint. PLN, Indonesia’s power utility, is at the forefront of the country’s energy transition strategy and provides green electricity through its Green as a Service (“GEAS”) Renewable Energy Certificate (“REC”) programme, which saw sales grow to 10.99 TWh in 2024, an increase of 117% from 2023.
Whilst the majority of Indonesia’s hyperscale data centres are concentrated in Greater Jakarta, significant investments by global companies continue to propel growth in other regions such as Batam in the Riau Islands. Government-backed schemes such as the Making Indonesia 4.0 Strategy have also played a major role in attracting investment and are also expected to further contribute to the construction and expansion of data centres in the country.
REGULATORY REGIME
Classification of data centre business as industrial business activity
Indonesia’s regulatory framework positions data centre businesses within the industrial sector – rather than in telecommunications or IT. This, in turn, offers data centre operators a clear and relatively more stable regulatory environment free from the complexities of telecommunication services.
"Indonesia’s regulatory framework positions data centre businesses within the industrial sector – rather than in telecommunications or IT."
As a result of this classification, companies engaging in the data centre business are required to observe the laws and regulations that are designed for the general industrial sector, including the requirement to operate within industrial estates. This policy is aimed at ensuring access to essential utilities, more streamlined licensing procedures and potential investment incentives. Special exemptions, such as where industrial estates are unavailable, at full capacity or when a location falls within a designated Special Economic Zone – like the Nongsa Special Economic Zone in Batam – offer added flexibility.
Land title
Data centre operators can obtain long-term rights over land and buildings through various legal mechanisms, including through land acquisition or a long-term lease, depending on the business strategy and regulatory considerations.
Under Indonesian Land Law, there are several types of land titles. The most commonly used form of land title for corporate entities, including data centre operators, is generally the Right to Build (“HGB”) title. HGB title grants the holder the exclusive right to construct and use buildings on state-owned or private land for up to 80 years, ensuring long term investment security and operational stability. Alternatively, data centre operators may opt for long-term commercial lease agreements with industrial estate developers or private landowners, which offer flexibility without direct land ownership obligations.
Electricity supply
The requirement for data centres to operate within industrial estates aligns with Indonesia’s regulatory framework and provides significant advantages in securing a reliable power supply. PLN, as Indonesia’s primary electricity supplier, ensures nationwide access to power. Additionally, many industrial estate developers either operate also as Independent Power Producers (“IPPs”) or have affiliated IPPs, offering dedicated electricity supply exclusive to their estates. This setup gives data centre operators the flexibility to choose the most suitable power supply arrangements based on their operational needs. For data centres located outside industrial estates, PLN remains the primary electricity supplier.
Data protection
Indonesia’s data protection landscape is evolving to provide a more robust and investor-friendly regulatory environment. Law No. 27 of 2022 (the PDP Law), which came into full effect in October 2024, marks a significant milestone in Indonesia’s commitment to data protection. The PDP Law – which is closely modeled after the EU GDPR – establishes clear obligations for data controllers and processors, including requirements for obtaining consent, data breaches notification and cross-border data transfers.
Cybersecurity
The regulatory framework for cybersecurity in Indonesia is adapting to the increasing risks associated with digital transformation and data-driven industries. The government has introduced several regulations and institutional measures to strengthen national cybersecurity resilience, with the National Cyber and Crypto Agency (“BSSN”) serving as the primary cybersecurity authority. A new draft law on Cyber Security and Resilience is also under development to further strengthen Indonesia’s cybersecurity regulatory landscape.
One of the key regulations in cybersecurity framework is Presidential Regulation No. 82 of 2022 (PR 82/2022), which designates the information and communications technology (“ICT”) sector as a “strategic sector” and classifies it as Vital Information Infrastructure (“VII”). As entities operating within VII, data centre operators must implement risk-based cybersecurity measures, incident reporting protocols and business continuity plans. These include conducting annual risk assessments to evaluate business vulnerabilities – including human resource risks – and ensuring the protection of VII assets.
"Indonesia has vast renewable energy potential, in excess of 333 GW based on a 2024 study of over 1,500 renewable energy project locations in the country."
OPPORTUNITIEs
Renewable energy
Indonesia has vast renewable energy potential, in excess of 333 GW based on a 2024 study of over 1,500 renewable energy project locations in the country. Under PLN’s new electricity supply business plan for 2025-2034 (RUPTL), PLN aims to add 39.5 gigawatts (GW) of power capacity over the next decade, of which 76% will come from renewable sources.
Given PLN’s exclusive mandate to sell and distribute electricity, corporate renewable power purchase agreements (“CPPAs”) have historically faced significant implementation challenges. However, clean energy procurement has evolved dramatically in line with Indonesia’s ambitious 2060 net zero targets and, in 2022, Amazon AWS signed the first ever offsite CPPA in Indonesia with PLN to source power from four solar projects located in Bali and Java. PLN has indicated it plans to roll out similar initiatives for other strategically important projects, signaling impending opportunities for the CPPA market and data centre operators looking to secure dedicated green energy for their projects.
Foreign Direct Investment (“FDI”) and GOI initiatives
Through the Making Indonesia 4.0 Strategy, a national initiative to accelerate digitisation across Indonesia’s key manufacturing sectors, the Indonesian government is actively encouraging FDI for international investment in data centres through a range of tax and non-tax incentives such as:
- relaxation of foreign ownership restrictions, allowing 100% foreign ownership in data centre companies;
- corporate tax holiday of up to 20 years;
- exemptions from withholding tax on dividends; and
- simplified procedures for repatriating profits.
In addition, the Indonesian government has made firm commitments to digitalising public services in 2025 through the Electronic-Based Government System (“SPBE”) and other government-wide initiatives, which are expected to further drive demand for data storage and processing capabilities.
Financing opportunities
The financing landscape for data centre infrastructure in Indonesia is rapidly evolving. Cross-border financing opportunities remain strong, and sustainability-linked financings are gaining increased traction following ING’s US$403.8m sustainability linked loan to EdgeConneX in 2023 – the first ever data centre sustainability-linked loan in Indonesia. In line with national energy policy, local banks are also expanding their lending remit to include infrastructure facilities that incorporate government sustainability measures and meet local content requirements. Significant support for the industry is also being provided through the Indonesia Investment Authority (“INA”), which plays a critical role in mobilising investments for infrastructure development in collaboration with development banks and major infrastructure developers such as GDS, with whom the INA is partnering to create a data centre campus in Batam.
"Recent regulatory reforms have significantly liberalised the data centre industry."
Regulatory regime
Recent regulatory reforms have significantly liberalised the data centre industry. Following the implementation of Government Regulation 71 of 2019 on the Implementation of Electronic Systems and Transactions (GR 71/2019), the private sector is no longer required to store critical data locally and may place their systems and data outside of Indonesia, unless otherwise regulated. A new draft regulation is also under development which aims to clarify the application of the PDP Law for the benefit of both the public and private sector.
Regional opportunities
Indonesia’s abundant land, renewables’ resources and strategic geographic location provide significant opportunities for regional collaboration. In February 2025, Hong Kong-based Gaw Capital and Sinar Primera Group announced the opening of the first phase of the 5.2 MW Golden Digital Gateway Tier III data centre in Batam’s Nongsa Digital Park, the special economic zone (“SEZ”) launched by Indonesia and Singapore in 2018 as a “digital bridge” between the two countries. Batam is poised to support substantial data centre operations with announced plans to develop over 400 MW of data centre capacity in the coming years.
CHALLENGES
Realising Indonesia’s potential as a data centre hub will require the country to overcome several significant hurdles.
Current grid infrastructure in several regions outside of Java still lacks the reliability to support hyperscale data centres and presents a significant risk to data centre uptime and operational efficiency. Upgrading such infrastructure remains a major priority for the Indonesian government and PLN is also in the process of building a green super grid that could increase the renewable energy baseload to 34 GW by 2040.
Whilst Indonesia’s energy policy has made significant strides, the offsite CPPA market remains under development and risks slipping behind jurisdictions such as Singapore and Malaysia. Reports suggest that Indonesia is reconsidering power wheeling under an upcoming Renewable Energy Bill, which would allow renewable energy producers to sell electricity directly to consumers through transmission networks owned by PLN. However, detailed guidance on the implementation of this policy has not yet been provided and it is unclear when, if at all, such measures would take effect.
"Indonesia’s data centre market is heavily influenced by local content regulations, which encourage the use of domestically sourced technology and services."
Indonesia’s data centre market is heavily influenced by local content regulations, which encourage the use of domestically sourced technology and services. Without access to local partners and specialised advice, such regulations can be perceived as significant barriers to entry for foreign firms. Similarly, whilst the PDP Law is generally perceived as a major improvement on data protection and cybersecurity landscape in Indonesia, no implementing regulation or guidance has been formally issued and the Indonesian government has still not yet formed a data protection authority.
In February 2025, Indonesian president Prabowo announced the establishment of Danantara, the country’s newest sovereign wealth fund. Modelled on Singapore’s Temasek, the fund is intended to manage state assets worth US$900bn and includes a broad pipeline of potential investments, including AI infrastructure. Though Danatara has been charged with attracting foreign investment, details of its proposed investment strategy and how it will operate have not yet been released and the impact that its establishment will have on the data centre industry is still unclear.
OUTLOOK
The data centre industry in Indonesia remains on track for substantial growth. Whilst grid infrastructure reliability and the evolving state of data centre regulation represent substantial challenges, public and private sector support for the industry is strong and plenty of opportunities remain for data centre operators, investors, financiers and technology providers to enter the market. To navigate this fast-changing industry, participants will need to be prepared for changes in regulation and move quickly to adapt to and capitalise on the unique potential of Indonesia’s digital economy.
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