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 complying with government regulations on data retention. 

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. 

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 the government’s strong push for local data storage.  

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. Localized data centers ensure better speed and compliance. 

Government Regulations and Digital Initiatives 

Policies like GR 71/2019 require specific data to stay within Indonesia, pushing businesses to use domestic data centers. 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 presents high-growth potential for those looking to enter it. Recent large-scale investments highlight just how promising this sector has become. 

Significant Investments with 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, catering to the increasing 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 minimize delay and improve performance. 
• Rising Demand for Cloud Services: Cloud adoption across various sectors accelerates 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 secure a Business Identification Number (NIB) and follow data localization laws, including GR 71/2019, which require specific data to be stored within Indonesia. Navigating these regulations helps avoid legal risks and ensures smooth business operations. 

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 optimizes 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 

Indonesia provides tax holidays and investment benefits for specific sectors, including data centers, especially in special economic zones. Utilizing these incentives can significantly increase profitability and foster long-term growth. 

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. However, the government allows landowners to build private power plants, opening the door for on-site solar energy solutions.  

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 company formation, licensing, or legal compliance assistance, InCorp Indonesia (an Ascentium Company) can ensure a smooth and 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.