new economy

　　

Indonesia is emerging as a new investment destination for big tech companies. Recently, the heads of two of the world's biggest technology companies, Apple and Microsoft, visited Indonesia and announced a series of investment plans. At the same time, Nvidia chip company is also planning to invest in building data centers in Indonesia.

On April 17, local time, Apple CEO Tim Cook visited Indonesia and announced that he would invest in an Apple developer Academy and expressed interest in investing in a factory in Indonesia. Two weeks later, Microsoft CEO Satya Nadella also visited Indonesia and announced that he would invest $1.7 billion over the next four years to build a new Indonesian cloud and AI infrastructure and provide AI training for 840,000 people. This is Microsoft's largest single investment in Indonesia in 29 years.

Indonesia is the only common destination for executives from the two tech giants on their Southeast Asian tour. In addition to Indonesia, Cook also visited Vietnam and Singapore, and Nadella visited Thailand and Malaysia. According to Budi, Indonesia's Minister of Communications and Information, Nvidia has also committed to invest $200 million to build an artificial intelligence center in Solo city in partnership with Indonesian Satellite Company, which will be implemented in the near future.

Indonesia's huge market potential is an important factor in stimulating the investment interest of tech giants. Indonesia is the largest economy in Southeast Asia with a population of about 280 million, with steady economic growth and rapid digital transformation. According to Indonesia's National Strategy White Paper released in 2023, the digital economy in the ASEAN region will reach $2 trillion by 2030, of which Indonesia will account for 40 percent, or $800 billion. By 2023, Indonesia's digital economy will be worth $82 billion.

Andy Rigoli, president of Internet Indonesia, an Indonesian digital infrastructure provider, said that in order to meet customer demand, Indonesia must have 1,000 megawatts of data center capacity in the next 10 years, but Indonesia now has only 150 to 200 megawatts of data center capacity. At the same time, Indonesia needs to add 9 million digital talents to meet the needs of digital transformation development.

At present, compared with some countries in Southeast Asia, Indonesia is at a disadvantage in attracting investment from tech giants. Although Indonesia is one of the key markets for Apple phones, accounting for 85 percent of the 2.8 million iphones imported in 2023, the company has not opened an official store in the country. According to Apple's 2022 statistics, the company has only two suppliers in Indonesia, far behind Malaysia, Thailand and Vietnam. Moreover, Indonesia has received relatively little investment so far. According to the report, with Apple adding another developer academy, Apple's investment in Indonesia is only about $99 million. In Singapore, Apple decided to invest more than $250 million to expand its business there. More than $16 billion was invested in Vietnam. Apple had planned to set up a factory in Indonesia in 2016, but ultimately failed to materialize due to environmental concerns. In the new round of investment in Southeast Asia, Microsoft's investment in Malaysia is also higher than Indonesia, reaching $2.2 billion.

At the same time, the final landing of investment in Indonesia is also facing uncertain factors. Neither Microsoft nor Nvidia's investment has been detailed until now. Apple has pledged to invest but has yet to formally apply to Indonesia's investment authority. At the same time, Indonesia has higher barriers to investment than other Southeast Asian neighbors, such as the need for companies to use a certain percentage of local components in production and a severe shortage of talent.

The Indonesian government says it can offer more favorable policies as long as these technology companies are willing to invest. Indonesia's coordinating Minister of Maritime Affairs and investment, Luhut, said that if Apple invests in Indonesia, Indonesia can offer the same incentives as other countries, including changes in regulations and duty-free imports of parts that cannot be produced locally.