Market Insights: The Rise of Data Centers in Indonesia

Indonesia is becoming an important market for data center growth in Southeast Asia. With over 270 million people and millions of internet users, the country’s digital economy is expanding rapidly as more individuals engage in online shopping, mobile apps, and cloud services. 

Indonesia needs a strong data center infrastructure to support this growth. Local facilities enable businesses to process and store data securely while supporting compliance with applicable Indonesian data governance and sector-specific requirements.

This increasing demand presents significant opportunities for local and global investors. This article will discuss the factors driving data center growth in Indonesia, outline promising investment opportunities, and highlight potential challenges for investors. 

Key Takeaways

• Data center colocation, hosting, cloud infrastructure, and related computing services are covered under KBLI 63102 in the current KBLI classification.
• Business licensing follows Indonesia’s risk-based licensing framework under PP 28/2025, with licenses processed through the OSS system based on the activity and risk level.
• GR 71/2019 does not require all private-sector data to be stored in Indonesia; different requirements apply to public- and private-sector Electronic System Operators.
• On-site electricity generation, including solar power, is possible but remains subject to applicable electricity licensing and technical requirements.

Indonesia Data Center Investment Overview

Area	Current Position	What Investors Should Know
Business activity	Data center colocation, hosting, cloud infrastructure, and related services fall under KBLI 63102	The selected KBLI should match the actual scope of operations
Business licensing	Licensing follows the risk-based framework under PP 28/2025 through OSS	Required licenses depend on the activity and risk level
Data location	GR 71/2019 does not require all private-sector data to be stored in Indonesia	Requirements differ between public- and private-sector Electronic System Operators and may vary by sector
Foreign investment setup	Foreign investors generally establish operations through a PT PMA structure	Company setup, investment planning, and licensing should be aligned from the beginning
Investment incentives	Fiscal and investment facilities may be available depending on the project and location	Eligibility should be assessed based on the specific investment structure, including potential KEK facilities
Power and renewable energy	On-site electricity generation, including solar, may be permitted subject to applicable requirements	Licensing and technical requirements depend on the capacity and configuration of the power system

Market Drivers for Data Center Growth in Indonesia 

Indonesia’s data center market is experiencing rapid growth, driven by the country’s fast-paced digital transformation. Several key factors fuel this expansion, from the rising number of internet users to increasing demand for local digital infrastructure.

Rising Internet Users and Smartphone Growth 

With over 212 million internet users, mostly on smartphones, Indonesia’s demand for fast, reliable data services is higher than ever. This surge requires more local internet data center facilities in Indonesia to handle the load. 

E-Commerce and Fintech Expansion 

The booming e-commerce and fintech sectors need secure, high-capacity data solutions to support millions of daily transactions. Local data centers can improve speed and help businesses meet applicable operational and sector-specific requirements.

Government Regulations and Digital Initiatives 

GR 71/2019 does not impose a blanket requirement for all private-sector data to remain in Indonesia. Public-sector Electronic System Operators generally must manage, process, and/or store their electronic systems and electronic data in Indonesia, subject to limited exceptions.

Private-sector Electronic System Operators may manage, process, and/or store electronic systems and data in Indonesia or abroad, subject to government supervision, law-enforcement access, and applicable sector-specific regulations. Government programs like “Making Indonesia 4.0” also encourage digital growth.

Cloud Services and Edge Computing Adoption 

Global players like AWS, Google Cloud, and Microsoft Azure invest heavily in Indonesia, boosting cloud adoption. Edge computing is also rising, creating demand for faster data processing closer to users. 

Strong Global Connectivity 

Indonesia’s position as a regional hub, supported by multiple submarine cable systems, strengthens its role in global data exchange and enhances the appeal of building data center infrastructure here. 

READ MORE:

• Understanding The New Data Protection Regulations in Indonesia
• Business Opportunity in the Internet Service Providers in Indonesia
• The Future of Financial Technology in Indonesia: Trends and Opportunities

Investment Opportunities in Indonesia’s Data Center Sector 

Indonesia’s data center market is growing and attracting serious capital from global investors and local giants. With digital consumption rising and government support in place, the sector offers high growth potential for those looking to enter it. Recent large-scale investments highlight just how promising this sector has become. 

Significant Investments with a Korean Investor 

One of the standout projects in 2025 is the collaboration between Indonesia’s Sinarmas Group and a Korean investor. Together, they are kickstarting a $300 million data center project, which is expected to be completed in the second half of 2026. This facility will focus on providing high-capacity, secure data storage services to meet the growing demands of e-commerce, cloud services, and fintech companies. 

This project reflects a broader trend where more foreign investors seek partnerships with local firms to navigate regulatory frameworks and tap into Indonesia’s expanding digital ecosystem. 

Hyperscaler Expansion Drives Growth 

Hyperscalers like Amazon Web Services (AWS), Google Cloud, and Microsoft Azure are expanding their infrastructure in Indonesia. Their presence encourages secondary investments from support service providers, including business setup firms, construction companies, and local technology partners. This creates an ecosystem where both large-scale and niche data centers can thrive. 

Edge Data Centers and Regional Hubs 

There are three key factors shaping the future of data center development in Indonesia: 

• Increased Need for Low Latency: Businesses prefer data centers closer to users to minimise delay and improve performance. 
• Rising Demand for Cloud Services: Cloud adoption across sectors is accelerating infrastructure needs. 
• Expansion Beyond Jakarta: Secondary cities like Batam, Surabaya, and Medan are emerging as attractive locations for new data center hubs. 

How to Start a Data Center Business in Indonesia 

Launching a data center business in Indonesia offers immense potential. However, success depends on understanding local rules, choosing the proper setup, and meeting high infrastructure standards. Here’s what investors need to know. 

Meet Legal and Licensing Requirements 

Investors must obtain the applicable business licensing through the OSS system under Indonesia’s risk-based licensing framework pursuant to PP 28/2025 and its implementing regulations. Under the current KBLI classification, data center colocation, hosting, cloud infrastructure, and related computing services fall under KBLI 63102.

The specific licensing requirements depend on the business’s activities and risk level, while data-related obligations should be assessed separately based on the operator, clients, and applicable sector regulations.

Choose the Best Location 

While Jakarta remains the top data hub, cities like Batam, Surabaya, and Medan are becoming attractive alternatives due to lower costs and strong connectivity. Selecting the correct location improves service performance and optimises operational expenses. 

Focus On Compliance and Standards 

To gain client trust, data centers should meet global certifications like ISO 27001 and Uptime Institute Tiers. These standards ensure security and improve your facility’s competitiveness in attracting top clients. 

Leverage Tax Incentives 

Investment incentives may be available depending on the project, business activity, location, and applicable eligibility criteria, including facilities offered in Special Economic Zones. As incentive schemes can vary by project, investors should assess which fiscal and investment facilities currently apply to their planned data center investment.

Challenges in Indonesia’s Data Center Industry 

Investors looking to enter Indonesia’s data center market should consider several key challenges that could impact their success. These hurdles require careful planning and a solid understanding of the local landscape. 

Compliance with Personal Data Protection Law 

One of the main challenges is complying with Indonesia’s relatively new Personal Data Protection Law. Navigating these regulations demands local expertise and a clear understanding of the legal environment to avoid compliance issues. 

Talent Shortage in the Data Center Sector 

Indonesia faces a significant skills gap across many industries, including data center operations. Although education and training programs are improving, the current shortage of qualified professionals makes hiring and retaining talent highly competitive. 

Limited Access to Renewable Energy 

One challenge is the limited availability of renewable energy sources. Many investors may find it difficult to secure clean power for their facilities. On-site renewable energy generation, including solar power, may be possible, but it is subject to Indonesia’s electricity licensing and technical requirements. Depending on the capacity and configuration, an Izin Usaha Penyediaan Tenaga Listrik untuk Kepentingan Sendiri (IUPTLS) and other applicable requirements may apply.

Kickstart Your Data Center Business in Indonesia with InCorp 

With an expanding online economy and increasing demand for local data processing, Indonesia’s data center market offers attractive opportunities for foreign and local investors. 

Having reliable local support can make all the difference for entrepreneurs and companies planning to enter the Indonesian market. Whether you need assistance with company formation, licensing, or legal compliance, InCorp Indonesia (an Ascentium Company) can ensure a smooth, hassle-free process. 

• Business Setup: Assistance with company registration, licensing, and corporate structuring tailored to your business needs. 
• Legal Consultation: Comprehensive legal guidance to help you comply with Indonesian laws, including data protection and investment regulations. 

Fill out the form below to build a solid foundation for your data center business in Indonesia with the right local expertise by your side. 

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