Nvidia, the leading producer of chips for AI processing, has seen its stock skyrocket more than sevenfold since then, while global demand for data centers, along with the green electricity needed to power them, has surged significantly.

On paper, Indonesia should be well-positioned to capitalize on this momentum. It is a large country with a growing, tech-savvy population and ample domestic demand. 

More importantly, the archipelago sits just near Singapore, the digital nerve center of Southeast Asia. With land scarcity limiting the city-state’s ability to host additional infrastructure, Indonesia should be the natural next stop for hyperscalers and cloud giants looking to expand.

Then there’s the energy equation.

The global AI race isn’t just about computers anymore, it’s also about sustainability. Data centers require massive power inputs, and global tech firms are demanding cleaner energy sources. Indonesia’s untapped geothermal and solar potential offers a rare competitive edge.

But instead of seizing the opportunity, the country is already falling behind. Malaysia has moved swiftly, positioning Johor Bahru as a data center hub to absorb Singapore’s overflow and reaping parallel gains in green energy investment. 

Meanwhile, Indonesia’s momentum is stalling, and an ongoing trade negotiation with the United States may make things worse. A proposed concession allowing the transfer of Indonesian citizens’ personal data to the US in exchange for a tariff reduction from 32 to 19 percent, has become a key sticking point.

While the government insists the issue is “still under negotiation” and the scheme is “common practice”, the fact that it is explicitly mentioned in the US negotiation framework suggests it is far from routine.

If the deal goes through, US tech companies may no longer need to build data centers in Indonesia at all. They could simply serve the market remotely via Google Cloud, AWS or Microsoft Azure’s overseas infrastructure.

That’s a nightmare scenario for local investors, many of whom have either bet or were just beginning to bet on data localization rules as a magnet for long-term infrastructure investments.

Some have already warned that local facilities could end up relegated to “edge computing nodes” or hybrid cloud support, no longer the central hubs for data processing they were envisioned to be.

Analysts have also described the digital trade deal as “unfair,” arguing that the agreement favors US-based data storage companies over the protection of personal data. 

Worse still, none of our regional peers, Malaysia, Thailand, Vietnam or the Philippines, have had to make similar concessions despite receiving comparable tariff reductions. Major economies such as Japan, South Korea and the European Union also enjoy lower tariffs of 15 percent without offering the same concessions.

So far, the government has tried to frame the 19 percent tariff deal as a win. In truth, it looks more like a one-sided compromise: Indonesia gave up more and got less.

With the Aug. 7 deadline looming, two things are now critical.

First, the government must be transparent with the public and local investors about what’s really at stake. It must clearly explain the deal’s implications, particularly around data storage, to the domestic data center industry. Papering over the issue with vague reassurances will only backfire if the agreement ultimately undermines long-term ambitions.

Second, a decision must be made on whether Indonesia wants to be a serious player in the global AI and data center ecosystem or miss out on the defining technological transformation of the century.

The window is closing fast. If the government is not careful, Indonesia could squander a once-in-a-generation opportunity to ride the wave of AI and data center development.