The data center market in Indonesia is seeing tremendous growth, despite the country relaxing its data sovereignty regulation.

Introduced in 2012, the Implementation of Electronic Transactions and Systems law required various data to be stored domestically in Indonesia. Now, the relaxed laws allow private sector data to be stored abroad.

It was feared that this would damage the local data center market. Alex Budiyanto, chairman of Indonesia Cloud Computing Association, said the change would kill local businesses’ prospects because they are smaller in capital size compared to global organisations.

But there is hope for the Indonesian market. Growth is expected to be fuelled by established data center organisations including Space DC and Princeton Digital Group as well as tech giants in the cloud services space. 

Tech giants to move Indonesia into the clouds

Indonesia is predicted to witness the fastest growth among the ASEAN countries in the cloud computing market. 

In the past five years, cloud has grown at an annual rate of 48%, which is much higher than the global annual growth rate. This is likely why tech giants are taking an interest in expanding their cloud services in Indonesia.

While mainstays like Alibaba Cloud has already built its second data center in Indonesia, Google has announced it will open a data center in the country this year to provide reliable cloud infrastructure for its local customers. 

Microsoft, one of Indonesia’s major cloud service providers, is also eying up the possibility of building a data center by investing US$2.5 billion to develop cloud-computing systems.

Joko Widodo, President of Indonesia, said at DevCon – Digital Economy Summit 2020 in Jakarta: “Microsoft wants to invest immediately in Indonesia.”

The largest public cloud provider in the world, Amazon Web Services, has announced plans to build several interconnected data centers by 2022. Industry Minister Agus Gumiwang said: “This investment can boost Indonesia to become a strategic digital hub.The AWS region in Indonesia will certainly support the startup ecosystem so it can grow rapidly.”

To provide a regional alternative to these global tech giants, Telkom, Indonesia’s largest telecommunication service provider, is also looking to shift its main source of income into the data center and cloud computing space. Construction of these cloud data centers costing Rp 1 trillion is slated to begin this year.

This is just the beginning for the rise of Indonesia’s digital economy

There is no doubt this is just the beginning for Indonesia’s booming digital economy when 150 million Indonesians are expected to access the internet by 2023.

Google’s managing director in Indonesia Randy Jusuf said the country’s ‘digital economy has become the largest in Southeast Asia’ and is projected to reach US$124.1 billion by 2025, triple the Rp 548.2 trillion it recorded in 2020.

The Government’s proposed data protection law and recent data localization regulations, which will once again require companies to store their data in Indonesia may positively impact both the local data center and cloud services market.

With global interest in Indonesia’s digital infrastructure and changes in regulation, it is no surprise that over US$1 billion of investment is expected in the country’s data center market within the next five years.

It is an exciting time to watch Indonesia’s growth in the digital industry, and investors should take note of the potential opportunities.