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Jofie Yordan · · 4 min readWhy Indonesia trails in AI investment in Southeast Asia
US$51.5 billion. That’s how much tech giants like Microsoft, Google, and Amazon have committed to pouring into AI-related investments in Southeast Asia since 2023, according to Tech in Asia data.
However, the majority of these investments are not flowing into Indonesia, despite being the region’s largest market as well as the biggest contributor to Southeast Asia’s digital economy.
Of the US$51.5 billion figure, only US$1.9 billion went to AI-related investments in Indonesia, or just 3.7% of the total. This came from two sources: Microsoft with US$1.7 billion and Nvidia with US$200 million.
Why is Indonesia attracting less AI investment than its smaller neighbors?
Limitations of infrastructure and talent
One of the main reasons is the country’s still limited AI infrastructure. For example, the number of AI chip manufacturers in Indonesia is far fewer compared to its neighbors.
Gregorius Natanael, an AI researcher from Bina Nusantara University, believes that Indonesia also lacks skilled human resources for AI implementation.
According to data from the OECD, Indonesia’s AI talent concentration – which it defines as the percentage of LinkedIn members in the country with AI-related jobs and/or skill sets – stood at only 1.1% in 2022.
Natanael also notes that most AI talent in Indonesia are based in big cities, which slows down adoption of the tech in the country.
Another reason for the low level of AI-related investment is the lack of industry-specific regulations. Muhammad Angga Muttaqien, CEO of Indonesia AI, argues that investor interest is influenced by a country’s readiness for AI development.
So far, the Indonesian government has only issued ethical guidelines that businesses should follow in using and developing AI, but which do not have the force of law. It plans to issue comprehensive regulations by the end of this year.
In contrast, Singapore and Malaysia already have roadmaps for AI development in their countries, which include regulatory frameworks.
In addition, lengthy and complex licensing processes often become investment barriers in Indonesia. Not to mention the still limited incentives for AI-related projects in the country, unlike in Singapore and Malaysia.
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Since 2023, tech giants have committed US$1.9 billion for AI-related investments in Indonesia, which is only 3.7% of the total sum for the region.
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