PURWAKARTA/MEDAN, Indonesia -- Juniadi Adinda has lived in a village on Batam, an Indonesian island a roughly one-hour ferry ride away from Singapore, for 26 years, during which he never had any problem with water supply.

But that has changed since the beginning of the year, around the same time that a data center in nearby Nongsa Digital Park, an area designated as a special economic zone by the Indonesian government, began operating. More recently, water supply interruptions have gotten even worse.

"At the start of the year, water was available only from morning until midday, but for the past three weeks it runs only at night," Adinda, 53, told Nikkei Asia.

"We're clearly facing a water shortage," he said, adding that he and 400 other villagers staged protests earlier this month outside the industrial park, to no avail.

Owing to its proximity to Singapore, Batam is emerging as a new Southeast Asia hub for data center investment, drawing billions of dollars' worth of new projects that involve major players such as DayOne, Firmus and Nvidia. Land, power and regulatory constraints in Singapore have pushed operators to expand elsewhere, while the Malaysian state of Johor, which has captured much of the spillover demand, is itself facing growing power constraints.

However, like in other parts of the world data centers are facing growing rejection in Indonesia, this year in particular, as drought brought by a strong El Nino is straining water sources and concerns are rising on whether electricity supply can keep up with fast-growing data center demand.

Indonesia recorded 468 megawatts of operational data center capacity in the first half of 2026, below Malaysia's 1.3 gigawatts and Singapore's 1.1 GW, according to property consultancy Cushman & Wakefield. But nearly 2 GW of additional capacity are under construction or planned in Southeast Asia's largest economy, driven by growing cloud computing and AI-related demands.

Research firm BMI said in an Oct. 22 note that Batam has 70 MW of live data center capacity, with 747 MW of publicly disclosed additional capacity expected over the next few years.

In Nongsa Digital Park, Hong Kong-headquartered Gaw Capital Partners and local property developer Sinar Primera run a 5.2 MW facility, with a plan for a fourfold capacity expansion. Singapore-based DayOne is developing a 72 MW facility, touting "infrastructure built to green data center standards." BW Digital, the Singapore-based digital infrastructure arm of Norway's BW Group, is building a 144 MW campus. None of the companies responded to Nikkei Asia's request for comment. More projects are coming.

In June, Australia's Firmus announced a tie-up with Nvidia that includes the development of a 360 MW data center campus in Batam, saying it will offer "the world's most advanced AI accelerated computing stack." DCI Indonesia, the country's largest listed data center operator, is planning a major development on Bintan Island next to Batam, with a potential capacity of around 1 GW and expansion plans that could double the figure.

Local residents say BDx's 640 MW data center campus project near Indonesia's largest reservoir, in Purwakarta city, West Java, offers job opportunities. But water resources are a growing concern as the area already suffers from unreliable supply.

Nearer to Jakarta, Singapore-based broke ground last month for a 640 MW campus near the Jatiluhur dam, the site of Indonesia's largest reservoir, in Purwakarta city, West Java. But just over a week later, construction halted after West Java Gov. Dedi Mulyadi inspected the site on Oct. 1, questioning the environmental and building permits.

Purwakarta's environmental agency told Nikkei Asia on Thursday that an environmental approval has since been issued, but other permits are still required. BDx did not provide a comment.

Hidayat, who lives about two kilometers from the site, said local residents were already dealing with unreliable water supplies before the project started, but added that they are apathetic because "people here don't know the side effects of data centers." "As long as they don't sacrifice residents' water needs, there's no problem," Hidayat told Nikkei Asia. Power supply is another rising obstacle.

Batam was recently hit by recurring blackouts, but the local office of state utility Perusahaan Listrik Negara (PLN) denied that those were due to data centers. PLN Batam President Kwin Fo said the island's power capacity of 930 MW was around 80% utilized, so it is "still very ready for data centers." He added that the utility planned to add up to 400 MW to the local grid by the end of 2027, according to state news wire Antara.

A data center facility inside Batam's Nongsa Digital Park, which is designated as a special economic zone by the Indonesian government. (Trend Asia) The Batam Free Trade Zone Authority has estimated that existing, committed and planned data center projects on the island could reach 1.47 GW in combined capacity, Antara reported.

Coordinating Minister for the Economy Airlangga Hartarto on Oct. 6 said expansion of digital and AI-related services could help Indonesia achieve its 8% economic growth target, adding that the country had land, electricity and water resources needed to support a data center industry that "the whole world is racing to develop." Singapore-based brokerage CGS International in a recent report says Indonesia is emerging as "a key beneficiary" of Southeast Asia's demand for AI-ready data centers due to growing capacity constraints in Singapore and Malaysia. But it warned that access to reliable electricity, water, financing and customers would be crucial to turning investment plans into operational facilities.

Zaki Amali, a researcher at energy and climate think tank Trend Asia, said the government should not favor data center development at the expense of local residents.

"We shouldn't let residents lack water and electricity, while data centers receive them 24/7," Amali said, urging Indonesia to better regulate the sector. "Without that, data centers will become a new source of human rights violations." Fathiya Dahrul and Tonggo Simangunsong are contributing writers.