Indonesia data center growth faces environmental and social hurdles

Indonesia is emerging as a target market for artificial intelligence (AI) infrastructure and data center investors. However, officials and investment leaders warn that environmental and social concerns could stall these projects.

Agus Harimurti Yudhoyono, Coordinating Minister for Infrastructure and Regional Development, noted that while digital adoption makes data centers essential, their high demand for electricity and clean water must be carefully managed. He emphasized that development must not compromise the community's right to a healthy environment or access to basic resources.

Pandu Sjahrir, Chief Investment Officer of Danantara, highlighted that investors must look beyond Internal Rate of Return (IRR) and account for environmental risks and public protests early in the process. He cited the temporary suspension of the BDx Data Centers project in Jatiluhur due to environmental and licensing issues as a cautionary example. Sjahrir suggested that Indonesia should aim to develop broader economic benefits from digital infrastructure, similar to the downstreaming of the nickel industry.