Indonesia Loses Nvidia’s $200 Million AI Center too Vietnam: A Deep Dive into the Investment Battle
Indonesia’s struggle to attract foreign investment has once again come to the forefront,as the country lost a high-stakes competition with Vietnam to secure a $200 million artificial intelligence (AI) research and advancement center from Nvidia Corporation. The US-based tech giant, known for its cutting-edge GPU technology, had initially considered indonesia for the project but ultimately chose Vietnam, leaving Indonesian officials and economists to reflect on the reasons behind the loss.
The nvidia Investment: A Missed Possibility
Table of Contents
- Why Vietnam is Outpacing Indonesia in Attracting Global Investors
Nvidia’s planned AI center, valued at $200 million (approximately Rp. 3.26 trillion), was set to include a state-of-the-art research and development facility and a data center. The project promised to bolster the host country’s technological infrastructure and create opportunities for local talent. However, despite a visit by Nvidia founder Jensen Huang to Indonesia in November 2024, the company opted for Vietnam, a decision that has sparked discussions about Indonesia’s competitiveness in the global investment landscape.
Why Vietnam Won the Race
Several factors contributed to Vietnam’s victory in securing Nvidia’s investment. According to Piter Abdullah, Director of the Segara Institute, Vietnam’s economic growth, which exceeds 7%, is a important draw for investors. Additionally, Vietnam’s streamlined licensing processes and lower investment costs make it a more attractive destination compared to Indonesia, which is often plagued by bureaucratic hurdles and hidden expenses.
“Indonesia is still haunted by bureaucratic difficulties and lots of hidden costs.High-cost economy. Other factors include employment, land availability, etc.,” Piter told detikcom on January 11, 2025.
Esther Sri Astuti, Executive Director of indef, highlighted four key areas where Indonesia falls short:
- Investment Regulations and Licensing: Vietnam offers simpler agreements and fewer bureaucratic obstacles.
- Cooperation Agreements: Vietnam has established numerous multilateral and bilateral agreements with European countries and the US, giving it an edge in international collaboration.
- Labor Costs: Indonesian wages are higher than those in Vietnam, where the government controls wage levels.
- Cost of Doing Business: Operating costs in Indonesia are considerably higher, making Vietnam a more cost-effective option for companies.
“Many companies prefer Indonesia’s neighboring countries. Indonesia did not benefit at all from the US and China war. This is all because of these four things,” Esther explained.
Infrastructure and Workforce Challenges
Economist Bhima Yudhistira, Executive Director of the Center of Economic and Law Studies (CELIOS), pointed out additional hurdles for Indonesia. the lack of renewable energy in industrial areas and inadequate infrastructure are major deterrents for high-tech investments. In contrast, Vietnam’s power wheeling policy, which allows for the sharing of transmission networks, ensures a steady supply of clean energy.
“Then the quality of Indonesian workers in the hi-tech sector is still lagging behind compared to Vietnam. If you want to build a factory, you have to find skilled workers first. Vocational schools and job training centers do not meet the needs of the hi-tech industry,” Bhima noted.
A Comparative Look: indonesia vs. Vietnam
To better understand the disparities, here’s a summary of key factors influencing Nvidia’s decision:
| Factor | Indonesia | Vietnam |
|————————–|—————————————-|————————————–|
| Economic Growth | Below 7% | Above 7% |
| Bureaucratic Efficiency | High bureaucratic hurdles | Streamlined processes |
| Labor costs | Higher wages | Government-controlled wages |
| Infrastructure | Inadequate | Advanced and renewable energy-ready |
| International Agreements | Limited | Extensive |
The Road Ahead for Indonesia
Indonesia’s loss of Nvidia’s investment underscores the urgent need for reforms in investment regulations, infrastructure development, and workforce training. As neighboring countries like Vietnam continue to attract major global players, Indonesia must address these challenges to remain competitive in the rapidly evolving tech landscape.
For now, the $200 million AI center will serve as a reminder of what could have been—and what Indonesia must achieve to secure future opportunities.
What do you think Indonesia needs to do to attract more foreign investments? Share your thoughts in the comments below.
Why Vietnam is Outpacing Indonesia in Attracting Global Investors
Indonesia,a nation rich in resources and potential,is facing stiff competition from Vietnam in the race to attract foreign investment. While Indonesia struggles with high logistics costs and bureaucratic inefficiencies, Vietnam has emerged as a preferred destination for global giants like Apple, Nike, and Chery. What makes Vietnam so attractive, and where is Indonesia falling short? Let’s dive into the details.
The Logistics Challenge in Indonesia
One of the primary hurdles for Indonesia is its expensive logistics costs. According to experts, the central government’s collaboration with regional governments (Pemda) needs significant improvement. Revitalizing facilities in existing industrial areas could be a game-changer,but progress has been slow.
In contrast, Vietnam has streamlined its infrastructure and reduced bureaucratic red tape, making it a more appealing choice for investors.
Vietnam’s Tax Strategy: A Winning Formula
Vietnam’s government has mastered the art of fiscal reform. By reducing the Value Added Tax (VAT) rate to around 8%, Vietnam has created a competitive edge. This low VAT rate not only attracts foreign tourists but also encourages businesses to set up shop in the country.
“Vietnam will also get the blessing of industrial relocation in the midst of the trade war because people’s purchasing power in Vietnam is quite strong,” said an expert. Additionally, Vietnam has downsized ministries to cut personnel costs and bureaucratic expenses, further enhancing its appeal.
Major Companies Choosing Vietnam Over Indonesia
Apple and Nike Lead the Charge
Indonesia recently lost out to Vietnam in securing a massive $15.8 billion investment from apple. this move underscores Vietnam’s growing dominance in the tech manufacturing sector. Similarly, many Nike shoe factories have relocated to Vietnam, drawn by its favorable business environment.
Chery’s Strategic Shift
The Chinese automotive company Chery chose to invest $800 million in Thai Binh, Vietnam, bypassing Indonesia entirely. “Indonesia is only being used as a market for Chery cars without creating an industry,” noted Bhima, highlighting Indonesia’s missed opportunity to build a robust automotive sector.
Other Notable Relocations
- PT Hung-A, a South korean tire manufacturer, relocated to vietnam earlier this year. the company exports over 70% of its production to Europe, including to the renowned Dunlop brand.
- Full ding Furniture Co. LTD, a Taiwanese company, moved to Vietnam in 2015.
- PT ECCO Indonesia, a Danish footwear company, shifted part of its production to Vietnam in 2018.
According to World Bank data,during the first trade war in 2018,5 out of 8 Chinese companies preferred Vietnam over Indonesia.
Key Comparisons: Indonesia vs. Vietnam
| factor | Indonesia | Vietnam |
|————————–|—————————————-|————————————–|
| Logistics Costs | High | Competitive |
| VAT Rate | Higher than Vietnam’s 8% | 8% |
| Bureaucratic Efficiency | Inefficient | Streamlined |
| Foreign Investment | Losing major investors | Attracting giants like Apple and Nike|
What Indonesia Can Learn
Indonesia’s fiscal reforms have been described as ”one of the worst in the region.” To compete, Indonesia must prioritize infrastructure development, streamline bureaucracy, and adopt competitive tax policies. Collaboration between the central and regional governments is crucial to revitalize industrial areas and reduce logistics costs.
Final Thoughts
Vietnam’s rise as an investment hub is no accident. Its strategic tax policies,efficient governance,and strong purchasing power have made it a magnet for global companies. Indonesia, with its vast potential, must act swiftly to address its challenges and reclaim its position as a leading investment destination.
What steps do you think Indonesia should take to attract more foreign investment? Share your thoughts below!
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This article is based on insights from industry experts and data from the World Bank.
Om Apple. The tech giant chose Vietnam for its manufacturing hub, citing the country’s favorable business surroundings, lower labor costs, and efficient infrastructure.Similarly, Nike has shifted a significant portion of its production to Vietnam, leveraging the country’s skilled workforce and competitive operational costs.
Chery’s Strategic Move
Chinese automaker Chery also opted for Vietnam over Indonesia for its regional manufacturing base. The decision was influenced by Vietnam’s streamlined investment processes, lower production costs, and robust supply chain networks. This move underscores Vietnam’s growing reputation as a hub for high-tech manufacturing and innovation.
Indonesia’s Missed opportunities
While Vietnam continues to attract global investors, Indonesia faces several challenges that hinder its ability to compete effectively:
- High Logistics Costs: Indonesia’s logistics expenses remain significantly higher than those in Vietnam, making it less attractive for cost-sensitive industries.
- Bureaucratic Inefficiencies: Complex licensing processes and regulatory hurdles deter potential investors.
- Infrastructure Gaps: Inadequate infrastructure, especially in industrial areas, limits Indonesia’s appeal to high-tech and manufacturing firms.
- Labor Costs: Higher wages in Indonesia compared to Vietnam make it a less cost-effective option for labor-intensive industries.
What Indonesia Needs to Do
To regain its competitive edge, Indonesia must address these critical areas:
- Streamline Bureaucratic Processes: Simplifying licensing and regulatory procedures can make Indonesia more investor-amiable.
- Invest in Infrastructure: Enhancing infrastructure, particularly in industrial zones, can attract high-tech and manufacturing investments.
- Reduce Logistics Costs: Improving logistics efficiency and reducing costs can make Indonesia a more attractive destination for global businesses.
- Enhance Workforce Skills: Investing in vocational training and education to meet the demands of the hi-tech industry can bridge the skills gap.
Conclusion
Vietnam’s success in attracting global investors highlights the importance of a favorable business environment, efficient infrastructure, and competitive costs. For Indonesia to compete effectively, it must undertake significant reforms to address its current challenges.By streamlining bureaucratic processes, investing in infrastructure, and enhancing workforce skills, Indonesia can position itself as a viable alternative to Vietnam in the global investment landscape.
What do you think Indonesia needs to do to attract more foreign investments? Share your thoughts in the comments below.
