Indonesia is taking an important step in its technological investment, specifically in AI technologies. A highlight is the creation of the sovereign wealth fund, an investment initiative focused on the domestic development of AI-enabled technologies. By combining long-term government investments with global partnerships, Jakarta aims to accelerate AI innovation and strengthen its position in the international digital economy.
Government outlines roadmap for AI hub ambitions
Authorities overseeing the development of artificial intelligence in Indonesia have proposed a “sovereign AI fund” to finance the archipelago’s ambitions to become a regional hub for the fast-growing technology, a government document showed. Last month, Reuters reported that Southeast Asia’s largest economy would release its first national roadmap on AI in a bid to attract foreign investment as it looks to join the global AI and chip-making race.
The race has seen neighboring Malaysia secure billions of dollars from global tech firms seeking to build critical infrastructure to meet growing demand for cloud and AI services.
Regional competition raises stakes for Jakarta
In this context, Indonesia’s initiative appears as a response to regional competition, particularly with Malaysia’s rapid progress in securing partnerships with international giants. The sovereign AI fund is seen by policymakers as a strategic step to avoid falling behind and to ensure that global investors also view Jakarta as a long-term destination for advanced digital infrastructure.
The Indonesia strategy, released in the form of a 179-page white paper seen by Reuters, recommends, among other things, a sovereign AI fund mainly handled by the country’s new sovereign wealth fund Danantara Indonesia, which controls over $900 billion in assets. Danantara Indonesia did not immediately reply to a request for comment.
Financing and incentive strategies under discussion
The paper did not specify the amount that would be needed, but estimated a 2027 to 2029 timeline to set up the fund, and a public-private model to finance Indonesia’s AI push. It also suggests increasing fiscal incentives for domestic investors in AI, without providing details.
By linking public resources to private sector engagement, the government hopes to ensure stable, long-term funding for AI projects. The emphasis on tax incentives is a key effort to attract local capital while also creating a bridge for global technology companies to contribute to the development of AI ecosystems in Indonesia.
The strategy paper, which the communications and digital ministry said still awaits public feedback before the final draft, maps Indonesia’s computational readiness for AI and makes recommendations for AI-related policy strategies until 2030. “Indonesia right now is in the early stages of AI adoption,” the document reads. Industry players including Chinese giant Huawei and Indonesia’s biggest technology company GoTo GOTO.JK contributed to the report.
Challenges and opportunities for Indonesia’s AI path
An April report by the Boston Consulting Group said ASEAN nations were positioned for substantial AI-driven gains, with GDP contributions ranging from 2.3% to 3.1% by 2027, and Indonesia could see the highest impact in terms of absolute gross domestic output growth.
The roadmap also details challenges for Indonesia including a lack of talent, low research funding, uneven connectivity outside big cities, risks of misinformation and data leaks. Global tech companies have courted the AI drive in Indonesia, including NvidiaNVDA.O and MicrosoftMSFT.O.
Indonesia’s AI fund is yet another example of how the global market is focused on improving and optimizing its processes through this technology. If successfully implemented, the sovereign wealth fund has great potential to shape Indonesia’s digital future. Still, like any major investment, the initiative is likely to encounter structural hurdles, including limited connectivity and shortages in skilled labor. Yet, by fostering international partnerships, Jakarta holds the chance to reshape its economic landscape and emerge as a key hub in the fast-moving world of artificial intelligence.
GCN.com/Reuters