JAKARTA, Oct 17 — Indonesian Minister of Communication and Information Budi Arie Setiadi has highlighted key factors contributing to foreign investors’ hesitation to invest in the republic’s data centre sector, noting that many prefer to establish facilities in Malaysia, especially in Johor.

He said investments in Johor’s data centres, which support artificial intelligence (AI) and cloud computing, are projected to reach US$3.8 billion this year, citing a Maybank report. Malaysia offers three key advantages: competitive electricity prices, tax exemptions, and legal certainty, making it a more attractive destination for foreign investors.

"Their electricity costs are eight cents per kWh, they have tax exemptions for capital goods, and thirdly, there is legal certainty in investments,” he stated, as quoted by local online portal TrenAsia recently.

He stressed the need to improve the republic’s investment climate and reputation to attract foreign investors, advocating for a simpler investment process and stating his goal of reducing electricity prices for data centres to make them more affordable for operators.

In support of this initiative, Digital Data Centres (BDDC) officially launched the South East Jakarta 1 Tier IV Data Centre on Oct 9, which will also function as the second Indonesia Internet Exchange (IIX-JK2) in partnership with the Indonesian Internet Service Providers Association (APJII).

Malaysia is rapidly becoming a data centre powerhouse in Southeast Asia, driven by rising demand for cloud computing and AI, as reported by CNBC in June.

The country has attracted billions in investments from major tech firms like Google, Nvidia, and Microsoft, particularly in Johor Bahru, a capital city of the state of Johor, located on the border with Singapore.

Data centre intelligence firm, DC Byte, APAC managing director James Murphy predicts that Johor Bahru will soon surpass Singapore to become the largest data centre market in the region, growing from virtually zero two years ago.

The city has also been recognised as the fastest-growing market in Southeast Asia in DC Byte’s 2024 Global Data Centre Index. — Bernama