Essential Infrastructure and Regulations Needed to Attract Artificial Intelligence Investment in Indonesia: A Comprehensive Analysis

Jakarta, INTI – Artificial Intelligence (AI) is one of the technologies with immense potential to revolutionize various sectors in Indonesia, ranging from manufacturing and healthcare to financial services. Despite this significant potential, the primary challenges Indonesia faces in attracting investment in the AI sector are inadequate infrastructure and unclear regulations. To transform Indonesia into a hub for AI innovation in Southeast Asia, strategic steps are required from the government to improve infrastructure and strengthen supportive regulations.

Digital Infrastructure: The Foundation for AI Growth

Strong digital infrastructure is the essential foundation for the growth of AI technology in Indonesia. Without adequate infrastructure, the development and implementation of AI technology will be hindered, which could reduce investor interest in the sector.

1. Widespread Internet Connectivity
   According to data from We Are Social and Hootsuite in 2024, internet penetration in Indonesia has reached 77%, but there remains a significant gap between urban and rural areas. In urban regions like Jakarta and Surabaya, internet connectivity is relatively good, but in rural and remote areas, access to the internet remains a major challenge. The government must focus on developing network infrastructure, especially in underserved regions, to ensure that AI technology can be widely implemented across Indonesia.
2. Data Centers and Cloud Computing
   AI technology requires significant and rapid computing power, meaning the demand for reliable data centers and cloud computing services is increasing. Data from Bain & Company indicates that investment in data centers in Southeast Asia, including Indonesia, is growing by about 15% annually. However, the availability of adequate local data centers is still limited. The government needs to provide incentives for companies that wish to invest in building data centers and cloud infrastructure in Indonesia to support AI development.
3. Stable and Affordable Energy Supply
   AI and data centers require large amounts of energy. Therefore, the sustainability and stability of energy supplies are crucial factors. Data from the Ministry of Energy and Mineral Resources indicates that Indonesia still faces challenges in providing reliable electricity in several regions. Investment in renewable energy and a more stable electricity grid will be vital to support the growth of AI in Indonesia.

Supportive Regulations: Legal Framework for Innovation

In addition to infrastructure, clear and supportive regulations are key to attracting investment in the AI sector. Inadequate or overlapping regulations can stifle innovation and deter investors.

1. Personal Data Protection Policies
   AI heavily relies on data, and one of the most important aspects is how data is collected, stored, and used. Indonesia enacted the Personal Data Protection Law in 2022, but its implementation still faces many challenges. This policy needs to be strengthened with more detailed implementing regulations and strict oversight to ensure that the data used in AI development is secure and complies with international standards.
2. AI and Ethical Regulations
   The use of AI can raise various ethical issues, such as algorithmic discrimination, security, and privacy concerns. To address these, the government needs to develop a clear regulatory framework related to AI usage, including ethical guidelines that developers and users of this technology must follow. These regulations should cover various aspects, from algorithmic transparency and accountability to the protection of human rights.
3. Incentives for Research and Development (R&D)
   One of the keys to successfully attracting AI investment is providing support for research and development activities. The government needs to offer attractive incentives for companies and institutions that want to invest in AI R&D in Indonesia. This could include tax breaks, subsidies, or funding assistance for research projects with significant potential for innovation.

Objective Analysis: Challenges and Opportunities for AI Investment in Indonesia

The challenges and opportunities in AI investment in Indonesia go hand in hand. Although there are many challenges to overcome, the opportunities offered by this sector are also vast.

1. Challenges
   • Availability of Skilled Talent: Indonesia still faces a shortage of skilled talent in the AI field. Data from the World Economic Forum shows that only about 0.3% of Indonesia’s workforce possesses high-tech skills such as AI and data science.
   • Industry Readiness: Many industries in Indonesia are still in the early stages of adopting AI technology, so the readiness to innovate with this technology is still low.
2. Opportunities
   • Large Market: With a population of over 270 million people, Indonesia offers a vast market for AI applications, both in the public and private sectors.
   • Government Support: The Indonesian government has shown its commitment to supporting AI development, notably through the National AI Strategy launched in 2021. This creates a more conducive environment for investment in this sector.

To attract investment in the AI sector, the Indonesian government must take strategic steps to strengthen digital infrastructure and establish supportive regulations. Widespread internet connectivity, adequate data center availability, and a stable energy supply should be top priorities. Additionally, personal data protection policies, ethical AI regulations, and incentives for R&D should be integral parts of the government's strategy.

With robust infrastructure and supportive regulations, Indonesia has a great opportunity to become an AI innovation hub in Southeast Asia. This will not only attract foreign investment but also drive the development of a more advanced and sustainable domestic industry.