The conflict between Iran and Israel, along with the weakening of the rupiah against the US dollar, is feared to impact the data center business in Indonesia.
Chairman of the Indonesian Data Center Association (IDPRO), Hendra Suryakusuma, said that while direct impact of the Iran-Israel conflict and the strengthening of the dollar on Indonesia’s data center business remains uncertain, its indirect impacts are imminent.
“If we look at it, the war [Iran-Israel] potentially leads to an increase in world oil prices. So, rise in energy prices will cause inflation, which usually leads to stagnation on the investment side,” Hendra said on Monday, April 22, 2024.
In response, he urged data center players to optimize electricity tariffs as a precautionary measure against the Iran-Israel conflict.
“What we need to anticipate is how to optimize electricity tariffs in Indonesia, which are currently monopolized by PLN,” he said.
From the telecommunications industry, PT Indosat (ISAT) or Indosat Ooredoo Hutchison sees that geopolitical condition and the weakening of rupiah against the US dollar have no significant impact on the company’s data center business.
“The geopolitical landscape and fluctuations in the exchange rate of the US dollar against the rupiah do not have a significant impact on Indosat’s data center business, as most of its operations are conducted in rupiah,” Indosat Ooredoo Hutchison’s Senior Vice President for Corporate Communications, Steve Saerang, said.
Indosat has enhanced collaboration with PT Telkom Indonesia (TLKM), particularly in the field of data centers. The collaboration between the two telecommunications companies provides Indonesia with the capability and capacity for artificial intelligence (AI) in the data center business and position the country as a global AI cloud nation player.
Additionally, ISAT has announced its performance throughout 2023, where the company, majority-owned by Ooredoo Hutchison Asia Pte. Ltd., recorded revenue growth. However, the company’s net profit experienced a contraction. ISAT generated revenue of Rp51.22 trillion (US$3.16 billion), up 9.57 percent year-on-year (YoY), with a net profit of Rp4.5 trillion, down 4.95 percent YoY.
Similarly, PT Mora Telematika Indonesia (MORA) or Moratelindo said that the current conflict between Iran and Israel has not directly significantly affected the company’s data center business.
“Regarding the exchange rate, most of our transactions are in rupiah, so fluctuations in the US dollar exchange rate do not have a significant impact on our company,” Moratelindo’s Chief Financial Officer, Genta Andhika Putra, said.
Previously, the exchange rate of the rupiah against the US dollar fluctuated but was at risk of closing weaker in the range of Rp16,210 to Rp16,300 in the early trading of the week on Monday, April 22, 2024, as tensions between Iran and Israel escalated. In the trading at the end of last week, Friday (April 19, 2024), the rupiah closed weaker, dropping by 81 points or 0.50 percent to Rp16,260 per US dollar. At the same time, the US dollar index weakened by 0.09 percent to 106.05.
Director of Laba Forexindo Berjangka, Ibrahim Assuaibi, said in his research that the sentiment arose from various US data indicating that the Federal Reserve might postpone its first interest rate cut since 2020. Moreover, the escalation of the Iran-Israel conflict is also in focus.
New York Fed President John Williams also said that there is no urgent need to lower interest rates at the moment, given the strength of the US economy. On the other hand, the escalation of the Iran-Israel conflict came into focus after reports of explosions in several regions of Iran. Some US media outlets reported that US officials said Israel had retaliated against Iran for last week’s attack.
