Indonesia in the Global AI Race
Setiawan Budi Utomo, CNBC Indonesia
19 July 2026 09:54
No country becomes an artificial intelligence (AI) powerhouse simply by building data centers. Nations emerge as AI leaders when they successfully integrate infrastructure, talent, innovation, energy, and governance into a coherent national strategy.
Amid the global AI race, Indonesia has gained two strategic advantages that few developing countries possess: the development of the
NVIDIA DSX AI Factory in Batam and its participation as a
founding member of the World Artificial Intelligence Cooperation Organization (WAICO) alongside 29 other countries.
Together, these developments mark an important shift. Indonesia is no longer viewed merely as Southeast Asia's largest digital market, but is increasingly being recognized as part of the global AI ecosystem. The question is no longer whether Indonesia can attract AI investment, but whether it can transform this momentum into technological sovereignty.
The scale of the opportunity is significant. The
Batam AI Factory is designed with a planned capacity of approximately
360 megawatts (MW) and aims to deploy up to
170,000 next-generation NVIDIA GPUs in phases beginning in
2027. Based on publicly announced customer commitments, the project is expected to generate
US$25–30 billion in revenue during its first six years.
At the same time, the Indonesian government estimates that AI could expand the country's digital economy from approximately
US$13 billion today to
US$300 billion over the coming decades. AI is therefore no longer simply a technology—it is becoming a new economic infrastructure.
Batam on Asia's AI Infrastructure Map
Economist
Carlota Perez argues that every technological revolution is built upon strategic infrastructure that underpins economic growth. Just as railways, electricity, and the internet powered previous industrial transformations, the AI era is being driven by
GPUs, data centers, cloud computing, fiber-optic networks, and energy infrastructure. Computing has become a new factor of production, as essential as capital and labor.
Within this context,
Batam occupies a unique strategic position. Located directly across from Singapore and connected to international submarine cable networks, Batam sits at the center of Southeast Asia's digital economy.
As Singapore faces land and energy constraints on further data center expansion, Malaysia is developing
Johor as an AI corridor through the NVIDIA–YTL partnership, while Vietnam is accelerating investment in AI talent and semiconductor manufacturing.
Indonesia possesses a combination of advantages that is difficult to replicate: ASEAN's largest digital market, a population exceeding
280 million, abundant energy resources, and extensive industrial zones.
Drawing on
Alfred Marshall's theory of agglomeration economies, the combination of geographic proximity and interconnected industrial ecosystems can create new engines of economic growth. Batam therefore has the potential to become more than a data center location—it could evolve into a regional AI hub.
AI Requires Energy and Governance
Success in the AI race depends not only on developing advanced algorithms but also on securing reliable energy supplies.
The
International Energy Agency (IEA) projects that global electricity demand from data centers will rise sharply by the end of this decade as generative AI continues to expand. Ultimately, AI competitiveness rests on three pillars:
computing capacity, energy availability, and digital connectivity.
For that reason, the Batam AI Factory should be viewed as part of a broader national strategy that integrates digital transformation with the energy transition. Indonesia will require reliable electricity supplies, stronger transmission infrastructure, and expanded low-carbon energy generation to remain an attractive long-term destination for AI investment.
Infrastructure alone, however, will not be sufficient.
Indonesia's decision to become a founding member of
WAICO adds another strategic dimension. For the first time, Indonesia has a greater opportunity to contribute to shaping a global AI governance framework that is
inclusive, human-centric, ethically grounded, and respectful of data sovereignty.
If Batam strengthens Indonesia's computing capacity, WAICO provides a platform for expanding Indonesia's role in global AI governance.
Digital Downstream Industrialization as a National Strategy
Indonesia's success in downstream mineral processing has demonstrated that the country can increase the value added of its natural resources. The same strategic approach should now be applied to the digital economy through
digital downstream industrialization.
If mineral downstream processing transforms nickel into batteries, digital downstream industrialization transforms
data into computing, computing into AI models, AI models into innovation, and innovation into economic productivity. This value chain will define national competitiveness in the twenty-first century.
Economist
Joseph Schumpeter described this process as
creative destruction, while
Michael Porter argued that competitive advantage is created through innovation and productivity rather than natural resource endowments alone.
Accordingly, Indonesia's success should not be measured solely by the size of AI investments or the number of GPUs deployed, but by the emergence of AI talent, research centers, semiconductor industries, domestic technology companies, and sustained productivity gains across the broader economy.
This momentum should be supported by consistent national policies, including the development of a
National AI Compute Infrastructure, acceleration of
AI Centers of Excellence, stronger research and higher education institutions, expansion of the semiconductor industry, and the use of
Danantara as a source of patient capital to finance strategic digital infrastructure.
Consistent with the ideas of
Mariana Mazzucato, the state should act not only as a regulator but also as a catalyst for investment in future technologies.
From User to Rule Maker
History shows that every technological revolution reshapes the global balance of economic power. The steam revolution elevated Britain, the manufacturing revolution strengthened the United States, and the digital revolution created today's global technology giants. The AI revolution will determine the next generation of economic leaders.
Indonesia now has an opportunity unlike any in its history. Batam provides the country's computing foundation, while WAICO opens new avenues for international AI diplomacy and governance. The challenge is to ensure that these two initiatives do not evolve independently but become integral parts of a unified national strategy.
If downstream mineral processing has become Indonesia's strategy for capturing greater value from natural resources,
digital downstream industrialization should become its strategy for capturing value across the AI economy.
The ultimate objective is not simply to build more data centers or attract foreign investment, but to achieve
technological sovereignty founded on innovation, talent, energy security, and effective governance.
The twentieth century was defined by those who controlled oil. The twenty-first century will be defined by those who command computing power while helping shape responsible AI governance. If Indonesia successfully capitalizes on the momentum created by Batam and WAICO, it has the potential not only to become Southeast Asia's largest AI market, but also to emerge as one of the architects of the global AI ecosystem. That is the strategic significance of today's AI race in realizing Indonesia Emas 2045.
Indonesia berambisi menjadi pemimpin AI global dengan pembangunan AI Factory di Batam dan keanggotaan WAICO, mengintegrasikan inovasi, energi, dan tata kelola.
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