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Beware, Indonesia Is being

Overtaken By Malaysia To Seize

The IDR 4,600 Trillion Treasure

Jakarta, CNBC Indonesia The data center industry is growing rapidly to meet the needs of artificial intelligence (AI) technology. Data centers are crucial AI infrastructure for managing data, training data, and storing data.

It takes a lot of money to build a data center, reaching trillions of rupiah. Electricity and water resources are also the main requirements for running the function of a data center.

The global data center market is predicted to be worth US$ 301 billion (IDR 4,683 trillion) and will double to US$ 622.4 billion (IDR 9,685) trillion by 2030, according to P&S Intelligence.

It is no wonder that many parties are competing to build this new ‘treasure’. Not only from companies with large capital, but also smaller-scale startups.

Many startups are competing to build more sustainable data centers, because one of the challenges is the environmental impact.

Data centers are projected to consume 4% of the total electricity capacity today, according to the Electric Power Research Institute. That number is expected to jump to 9% by 2030.

Data centers, and the tech giants that rely on them, are looking for new sources of energy. Last month, Microsoft signed a deal with Constellation Energy to start a nuclear reactor at Three Mile Island, to meet its power needs.

Startups like Incooling and Submer are also looking at ways to make cooling technology for data centers less hot and more environmentally friendly.

Another startup, Phaidra, is using software to help data centers manage their cooling systems more efficiently.

And Verrus is building more flexible data centers with microgrids. Sage Geosystems is building a way to use the heat pressure of water to power data centers instead of electricity.

Amid questions about data centers bringing about power and water crises, many tech giants are already targeting Southeast Asia, which has large land areas, plenty of water, and enough electricity to build data centers.

Foreigners Invade Malaysia

One of the countries that is quickest to take the opportunity to attract foreign investors is Malaysia, specifically in the Johor region.

Some companies that have invested in data centers in Malaysia are ByteDance, which has invested US$ 350 million and Microsoft, which bought 49 hectares of land for US$ 95 million.

There is also Google, which invested US$ 2 billion last June. The investment is to build the country’s first data center and cloud region.

Recently, Blackstone paid US$ 16 billion to buy data center operator AirTrunk, one of whose locations is in Johor. Then, Oracle also announced an investment of US$ 6.5 billion for the data center sector in Malaysia, although it did not mention the specific location.

Overall, data center investment in Johor that can be used for AI and cloud computing is estimated to reach US$ 3.8 billion this year according to Maybank.

“At first glance, Johor is not attractive. But if you look at it again, it makes sense [to invest in Johor],” said Blackstone senior managing director Peng Wei Tan, who led the AirTrunk acquisition, as quoted by the Wall Street Journal.

The Malaysian government is focusing on Johor as a hotbed for AI data centers to meet the overwhelming need for storage, management, and training of AI systems.

In fact, three years ago, Johor was land designated for the palm oil plantation industry. Now, 100 miles from these tropical trees, data center buildings are being built, forming the world’s largest AI construction project.

Previously, Northern Virginia, United States, was known as the world’s largest data center market because of its adequate electricity, land, and water capacity. However, the supply is increasingly eroded.

Tech giants also cannot rely on just one location in the US to build many data centers. So, tech giants are looking at other regions that also provide large amounts of land, electricity, and water.

Johor is attractive because it accommodates all of these needs. Moreover, Malaysia also has good relations with the US and China, thus reducing political risks for companies looking to invest.

Another important factor is its proximity to the Singapore border, the world’s most densely populated undersea internet cable route.

“The development of facilities in Johor is not only to serve Malaysia. But AI is also distributed globally,” said Princeton Digital Group CEO Rangu Salgame.

Princeton Digital Group is a data center operator that has some of the world’s largest technology giant clients.

Indonesia Does This

The Chairman of the Indonesian Data Center Association (IDPRO) Hendra Suryakusuma said that the Malaysian government has given many incentives for data center players. Even for companies that use green technology, the incentives are increased.

In Indonesia, this has not happened yet, but if the government through the EBT Bill (New and Renewable Energy Bill) which is currently being drafted in Commission VII of the Indonesian House of Representatives succeeds in providing additional incentives from the green initiative side, it will greatly encourage the growth of the data center industry in Indonesia which is currently growing 20-30 percent per year,said Hendra in Profit on CNBC Indonesia, some time ago.

Malaysia has also reduced bureaucracy which makes it easier for business investment to enter the country.

In Malaysia, foreign companies can only use high-level design to obtain building permits. While in Indonesia, it must go down to detailed engineering design, which means it takes time and is not cheap.

To catch up and capture the data center market, the Minister of Communication and Information (Menkominfo) Budi Arie Setiadi said that there are 4 steps that have been taken.

The first is to review related regulations, such as what issues are obstacles to data center investment in Indonesia.

Second, namely resources such as ensuring the welfare of land, water, electricity, especially green energy so that Indonesia can compete with other countries.

Third is taxation that is given incentives. The government has reviewed that Malaysia provides many incentives that make investors interested in building data centers in neighboring countries of Indonesia.

And the fourth is licensing that is made simple and cut so that bureaucracy becomes easier.

“So I’ll give an example about price. In Malaysia, they are able to provide an incentive of 8 cents per kwh for electricity,” said Budi some time ago.

Then the second is to let CPU and GPU equipment enter, they exempt taxes. And the third is that their licensing is very simple to build data centers,” he added.

He admitted that he was optimistic about competing with other countries, as long as they made various breakthroughs.

“We are a country with abundant sources of electrical energy that we have not realized all of. Our renewable energy is still abundant. The sun, besides water, and so on.” he said.

SOURCE : CNBC INDONESIA