Indonesia has made remarkable progress in embracing digital technology over the last few years. From mobile-driven shopping habits to government services going online, the country has emerged as one of Southeast Asia’s most dynamic digital players. But when it comes to artificial intelligence (AI)—often seen as the next big leap in tech-led efficiency—the momentum hasn’t quite caught on in the same way.
The latest East Ventures Digital Competitiveness Index (2025) shows that more than 80% of Indonesian businesses claim to have introduced some form of AI into their operations. At first glance, this seems like a win. However, a closer look reveals that most of these applications are relatively simple—things like chatbots, workflow automation, or basic data handling.
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Only a small fraction—around 13%—are using AI in ways that could be called advanced. We’re talking about tools that can predict trends, support complex decisions, or fuel smarter products. So while AI is definitely on the radar, its more transformative potential has yet to become a daily reality for most Indonesian companies.
The investment story tells a different tale
Ironically, while AI adoption remains shallow in most industries, investment in AI-led ventures is surging. In 2024, funding for AI startups in Indonesia reached US$542.9 million, representing a staggering 141.5 per cent increase from 2020. This influx of capital shows that investors believe in the potential of AI to reshape Indonesia’s digital landscape, even if that transformation hasn’t quite materialised yet.
The growing interest can be attributed to the country’s expanding internet penetration, tech-savvy youth population, and government policy aimed at fostering innovation. These conditions create fertile ground for startups to experiment with AI solutions across sectors—from financial services to healthcare. But the question remains: why isn’t this momentum translating into broader enterprise use?
A fragmented digital map
The answer partly lies in Indonesia’s geography. As a sprawling archipelago, the country presents unique logistical and infrastructural challenges. Digital competitiveness is not evenly distributed across provinces. The EV-DCI 2025 notes that DKI Jakarta continues to lead the nation in digital readiness, benefitting from its position as a tech and business hub. By contrast, Highland Papua remains at the bottom of the index, reflecting limited access to connectivity, talent, and infrastructure.
This digital divide has a direct impact on AI uptake. Businesses based in Java and major urban centres are far more likely to have the capacity—both in terms of talent and tech stack—to experiment with and implement advanced AI. Outside these zones, adoption slows to a crawl.
It’s not simply a question of resources. There’s also a matter of local priorities. In regions where the basics of digital infrastructure are still being laid down, AI understandably takes a backseat. As a result, the national average gets pulled down by the stark contrasts in digital maturity across the country.
Policy is moving, but execution lags
To address these gaps, Indonesia introduced the National AI Strategy 2020–2045, a long-term roadmap designed to foster collaboration among government agencies, academia, and industry players. The strategy focuses on five priority sectors: healthcare, education, bureaucratic reform, food security, and mobility.
In theory, this comprehensive framework should place Indonesia on the path toward becoming a regional AI leader. But in practice, the rollout has been uneven. Implementation bottlenecks—such as unclear regulatory guidelines, lack of public-private synergy, and limited incentives for SMEs—continue to slow progress.
Crucially, many organisations still struggle with fundamental questions: How do we ensure data privacy while scaling AI? What ethical frameworks are needed? And how do we upskill a workforce that’s still adjusting to digital basics?
Business leaders are still on the fence
Adding to the complexity is a lack of confidence among senior decision-makers. A 2023 PwC survey of Indonesian CEOs found that 53 per cent had not implemented generative AI technologies in their businesses. The reasons ranged from uncertainty around regulation to limited in-house capabilities.
Interestingly, the same survey highlighted that Indonesian executives are generally optimistic about AI’s long-term potential. However, optimism hasn’t yet turned into action. Many are adopting a wait-and-see approach, citing the need for clearer government direction and proven business cases.
This hesitation is understandable. Implementing AI at scale isn’t just a matter of buying the right software. It demands significant changes to business models, workflows, and skill sets. And for companies already stretched thin by digital transformation fatigue, AI can feel like one leap too far.
The road to AI maturity
Indonesia is not alone in its struggle to move from AI enthusiasm to AI maturity. Globally, even in more developed economies, businesses are grappling with similar issues: how to balance innovation with regulation, how to ensure fairness and transparency in algorithmic decisions, and how to reskill workers for the age of automation.
But Indonesia’s position is unique. With one of the fastest-growing digital economies in Southeast Asia and a swelling base of young digital natives, the country has an opportunity to leapfrog stages of technological development—if the right support systems are put in place.
This includes developing AI-specific training programmes, streamlining regulations to encourage responsible experimentation, and ensuring that public infrastructure investments reach beyond Jakarta and Java. It also means encouraging corporates to move beyond pilot projects and towards full-scale deployments that embed AI across the value chain.
A cautious optimism
Indonesia has laid the groundwork for digital growth, and the results are starting to show, both in connectivity numbers and investor sentiment. But for AI to become more than a buzzword, stakeholders across the public and private sectors must do more than signal ambition. They must build ecosystems that can support real, measurable impact.
The numbers don’t lie: only 26 per cent of businesses are truly using AI in transformative ways. But with rising investment, national policy backing, and a digital generation coming of age, the conditions are in place for a shift.
Whether Indonesia makes that leap in the next five years will depend not just on technology or capital, but on vision, execution, and the ability to bring all parts of the country along for the ride.