Batam: the next hotspot for data centres in Indonesia

With Batam’s strategic location, attractive tax incentives and good infrastructure, the island is well-positioned to become Indonesia’s next data centre hub.

September 12, 2023
Batam's emergence as a data centre hub

The data centre market in Southeast Asia is bursting at the seams, as Singapore―the region's leading data centre hub has put a pause on new data centre construction. In 2019, the Singapore government imposed a moratorium in response to concerns about their environmental impact. The moratorium was lifted a year ago, but new data centre expansions will still be subject to strict regulations. Since demand for data centres is not slowing down, data centre operators are looking to other places in Southeast Asia, such as Batam―the largest city in the province of Riau Islands, Indonesia, and Johor―a state in southern Malaysia linked to Singapore by causeways.

Located just 20 km off the coast of Singapore, Batam is quickly becoming a hotbed for data centres. The island has over one million people and is a major economic hub in the region. In June 2021, the Indonesian government designated one region in Batam, named Nongsa, as a Special Economic Zone for digital economy and tourism. Nongsa and Batam are poised to become the "digital bridge" between Singapore and Indonesia, as they have the potential to meet the growing demand for technological talent, sustainable electricity, land for data centres, and capacity.

A well-positioned location for a data centre

Batam has a number of attractive advantages for data centre operators. First, Batam has a reliable power grid. This is important for data centres, as they require a constant power supply. The island has several power plants, including coal-fired power plants, natural gas power plants, and renewable energy power plants. Data centre operators in Batam can be confident that they will have a reliable source of power to meet their needs.

Second, Batam is well-connected to the global internet via submarine cables and fibre optic networks. This means that data centre operators in Batam can easily connect to the rest of the world. Several submarine cables connect Batam to Singapore, Malaysia, and other countries in Southeast Asia, while several fibre optic networks connect Batam to the rest of Indonesia and the world.

Another lucrative advantage is the tax incentives offered by the Indonesian government for data centre operators investing in Batam, including a tax holiday for the first five years of operation, a reduction in import duties on equipment and corporate income tax, which will help data centre operators make their operations more cost-effective.

As a result of these advantages, Batam has seen a surge in data centre investment in recent years. Some of the world's leading data centre operators, including Princeton Digital Group, GDS, Data Centre First, and Singtel, have all announced plans to build data centres in Batam.

Batam is ideally positioned to become Indonesia’s next data centre hub after Greater Jakarta. The island has several advantages, making it an attractive location for data centre operators. The Indonesian government is also committed to developing Batam as a digital hub, which is expected to boost further the growth of the data centre industry on the island.