This article was first published in The Jakarta Post on September 1, 2026.
Indonesia has the scale to drive AI demand, but without an urgent policy pivot into tech manufacturing and infrastructure, it risks becoming just a lucrative consumer market while its neighbors capture the real value.
CoreWeave’s plan to build three data centers in Indonesia signals that the global artificial intelligence boom is reaching Southeast Asia’s largest economy.
With over 280 million people and a thriving digital market, the country will have no shortage of demand for AI. The real challenge is whether it can capture the value this technology creates rather than simply consuming tools developed abroad.
The AI expansion is reshaping global trade, investment and growth, but the gains will not be spread evenly. For countries that import costly chips and cloud services without generating tech exports of their own, AI could widen the trade deficit, putting long-term pressure on current accounts and local currencies like the rupiah.
Across Asia, economies with established tech manufacturing are already cashing in. In mid-2026, Korea saw surging export growth fueled by semiconductors, while Malaysia posted strong gains driven by electronics manufacturing and data center expansions, and Vietnam continues to climb into the chip supply chain on the back of its deep electronics base.
Crucially, while these nations buy advanced tech, they also earn substantial foreign exchange by building and exporting it.
World Bank data highlights a stark contrast. High-tech products make up roughly 60 percent of manufactured exports in Singapore and Malaysia, around 44 percent in Vietnam and 36 percent in Korea.
In Indonesia, that figure sat at just 8.7 percent in 2024, lower than it was a decade earlier.
This gap matters because AI is far more than software. Running generative AI depends on a massive physical supply chain: critical minerals, advanced materials, chip design, fabrication, assembly, testing, servers, clean power grids and local application layers.
Regional peers have already staked out their turf: Korea dominates memory chips; Malaysia leads in packaging and testing while scaling up as a data hub; Vietnam serves as a major electronics assembly engine and Singapore anchors the region with advanced fabrication, research and headquarters.
Indonesia risks becoming a lucrative consumer base for this regional network if it does not carve out a production role of its own. While adopting AI can increase productivity and improve public services, the economic upside will be limited unless paired with domestic capabilities and deeper supply chain integration.
The country does not need to dominate every stage or jump straight into cutting-edge wafer fabrication; it simply needs targeted footholds, such as advanced materials processing, niche electronics, data services and localized software solutions.
Why is Indonesia lagging? Part of the answer is structural and historical. Semiconductor and electronics ecosystems take decades to mature. Malaysia honed its testing capabilities across successive waves of foreign investment, while Vietnam embedded assembly work into a broader industrial network.
Indonesia built its economic momentum elsewhere: commodities, resource downstream and consumer-facing digital platforms. As a result, it entered the AI era with a relatively thin, mid-tech industrial base.
Persistent bottlenecks have widened the divide, including historically low research and development spending, shortages of advanced technical talent and strained power grids that must supply massive volumes of clean, reliable energy. A large domestic market creates demand, but it does not automatically build export capacity.
Yet Indonesia has important advantages: economic scale, critical minerals, a large digital market, strategic geography and considerable renewable-energy potential. Turning these advantages into an AI ecosystem requires three fundamental shifts.
First, broaden the development agenda. While infrastructure, mineral downstream and digitalization remain vital, the foundations of global competitiveness are shifting. Indonesia’s downstream strategy must move beyond raw mineral processing into advanced materials, electronics and tech-heavy manufacturing.
To support this pivot, workforce upskilling, R&D funding, clean and reliable power as well as digital infrastructure should sit squarely at the core of national economic policy.
Second, create an environment built for innovation, not just subsidies. Tax breaks alone will not secure long-term tech commitments.
Regulatory predictability, streamlined licensing, strong IP protection, skilled talent and friction-free access to global supply chains matter just as much.
Instead of trying to subsidize its way into the AI era, Indonesia needs to become a market where tech leaders actively want to build, innovate and expand.
Third, translate foreign capital into domestic capability. Investment in data centers and semiconductor facilities will have a greater impact if it develops local suppliers, trains engineers, collaborates with universities and transfers knowledge through the domestic economy. These linkages will not emerge naturally; they require deliberate policies and partnerships.
Indonesia needs to go beyond AI adoption. While the government’s 2026-2029 AI road map is a solid start, the country needs a unified strategy that aligns industrial, energy, education and trade policies around climbing the value chain.
The previous digital wave turned Indonesia into Southeast Asia’s largest consumer market, but much of the highest-value activity was created elsewhere. AI offers another opportunity.
The question is whether the country will remain primarily a market for technologies built elsewhere or become a producer and exporter that captures more of the value created by the AI economy.