The Numbers That Define the Opportunity
Indonesia is a country of contrasts that matter deeply for AI adoption. It is Southeast Asia's largest economy. It is home to more than 65 million micro, small, and medium enterprises that employ over 120 million people and account for roughly 60% of national GDP. Its digital economy is projected to exceed USD 130 billion by 2026. And yet, only 26% of Indonesian organizations have implemented AI tools (Pertama Partners SEA SMB AI Adoption Index 2026).
That gap between scale and adoption is not a weakness. It is the definition of an untapped market.
The Pertama Partners SEA SMB AI Adoption Index 2026 assigns Indonesia a score of 27 out of 100, placing the country in the "Early Experimentation" stage. That score sits below the regional average of 31 and well below Singapore's 52. But scoring low on a maturity index when you represent the largest addressable market in the region is not a cause for pessimism. It is a signal about where the growth is going to happen.
Understanding Indonesia's AI Starting Position
What the Score Tells Us
Indonesia's 27/100 Index score is a composite of six dimensions that paint a nuanced picture:
- Awareness (50/100): Growing recognition of AI's potential, but 37% of MSMEs are not yet using basic digital tools for daily operations
- Experimentation (38/100): AI application revenue grew 127% year-on-year — the highest in Southeast Asia — signaling strong experimentation momentum
- Implementation (20/100): Only 26% organizational AI implementation; most MSME digital tool usage remains basic
- Integration (12/100): Infrastructure barriers cited by 84% of respondents limit AI integration beyond experimentation
- Optimization (8/100): Early stage; most AI use remains trial-based
- Culture (30/100): 93% of businesses express confidence in their ability to deploy AI, but just 45% have adequate digitally skilled talent
(Pertama Partners SEA SMB AI Adoption Index 2026)
The pattern is clear: Indonesia has awareness and momentum, but a significant gap between confidence and capability. 93% of Indonesian businesses express confidence in their ability to deploy AI, yet only 26% have actually done so (Pertama Partners SEA SMB AI Adoption Index 2026). Closing that gap is the central challenge — and the central opportunity.
The Confidence-Capability Paradox
Indonesia's IBM AI Adoption Study (2025) captures a fascinating paradox. While 85% of businesses report significant operational gains from AI and 93% express confidence in their ability to deploy it, these figures represent sentiment rather than demonstrated capability. Among small businesses specifically, only 63% report having a clear AI strategy, compared to 80% of medium-sized organizations.
This paradox is actually encouraging. It means that Indonesian business leaders are not resistant to AI. They are not skeptical about its relevance. They believe it can help them. What they lack is the infrastructure, skills, and structured pathways to convert that belief into operational reality.
Why Indonesia's Market Size Changes the Math
Discussions of AI adoption often focus on percentage rates — what share of firms are using AI, what percentage have moved past experimentation. For most markets, this framing works. For Indonesia, it misses the point.
Consider the arithmetic. If Indonesia's 26% adoption rate increases to 30% — a modest 4 percentage point gain — that represents roughly 2.6 million additional MSMEs adopting AI. That single increment exceeds the total number of SMEs in many Southeast Asian markets. Singapore's entire SME population is approximately 300,000. Malaysia has roughly 1.2 million. Indonesia's scale means that even small percentage movements translate into enormous absolute numbers of businesses entering the AI market.
This is why the Pertama Partners SEA SMB AI Adoption Index 2026 predicts that Indonesia will become the largest AI SMB market by revenue in Southeast Asia before 2028, despite its lower per-business AI spending. The sheer volume of potential adopters creates a market gravity that will attract vendors, drive down costs through competition, and build a self-reinforcing adoption ecosystem.
The Digital Economy Substrate
Indonesia's digital economy provides the foundation for AI-driven transformation. The region's broader digital economy surpassed USD 300 billion in gross merchandise value in 2025 (Pertama Partners SEA SMB AI Adoption Index 2026), and Indonesia is the largest contributor. The country's e-commerce market, ride-hailing sector, digital financial services, and SaaS ecosystem have created a digital infrastructure layer that AI can build upon.
Critically, 63% of Indonesian MSMEs actively use digital tools for daily operations — primarily social media, messaging apps, and e-commerce platforms. While this is a lower digital penetration rate than Singapore's or Malaysia's, it represents a significant improvement from prior years and establishes the basic digital literacy needed for AI tool adoption. The step from "using WhatsApp Business for customer service" to "using an AI-powered customer service tool integrated with WhatsApp" is smaller than the step from "not using digital tools at all."
Where the Growth Is Happening
Indonesia's AI application revenues grew by 127% from H1 2024 to H1 2025, the highest growth rate in Southeast Asia (Pertama Partners SEA SMB AI Adoption Index 2026). That growth is not distributed evenly. It concentrates in sectors where data availability, competitive pressure, and use case clarity align.
Financial Services and Fintech
Indonesia's financial technology sector is the most advanced AI adoption story in the market. The country has over 300 licensed fintech companies, serving a population where approximately 50% of adults remain underbanked or unbanked. AI applications in credit scoring using alternative data (social media activity, mobile phone usage patterns, e-commerce transaction history), fraud detection, customer onboarding (KYC automation), and personalized financial product recommendation have clear, measurable ROI.
For fintech SMBs, AI is not a "nice to have" — it is a core competitive requirement. The ability to assess credit risk for customers who lack traditional credit histories depends entirely on AI models trained on alternative data. This creates a sector where the 26% average adoption rate significantly understates actual AI deployment.
Retail and E-Commerce
Indonesia's e-commerce market is Southeast Asia's largest, anchored by platforms like Tokopedia (now merged with TikTok Shop), Shopee, Lazada, and Bukalapak. The merchant SMBs operating on these platforms are adopting AI through two channels.
First, platform-embedded AI. Recommendation engines, demand analytics, pricing optimization tools, and advertising targeting are built into the platforms themselves. Many merchant SMBs are using AI without having made a deliberate adoption decision, because their platform has embedded it.
Second, independent AI tools. More sophisticated merchant SMBs are adopting standalone AI solutions for inventory forecasting, customer segmentation, content generation (product descriptions, social media posts), and customer service automation. The competitive intensity of Indonesian e-commerce — where margins are thin and customer acquisition costs are rising — creates strong incentives for AI-driven efficiency gains.
Manufacturing
Indonesia's manufacturing sector, anchored by the "Making Indonesia 4.0" industrial strategy, presents a longer-horizon AI opportunity. The sector contributes approximately 20% of GDP and employs millions, but most manufacturing MSMEs operate with limited digital infrastructure. Predictive maintenance, quality control via computer vision, and supply chain optimization are the highest-value AI applications, but they require a level of digitization — IoT sensors, connected equipment, digital production records — that most small manufacturers have not yet achieved.
The opportunity here is sequential: digitize first, then apply AI. Firms and consultants that can offer a combined digitization-and-AI pathway will find a receptive market among Indonesia's manufacturing MSMEs.
Professional and Creative Services
Indonesia's creative economy — digital agencies, design firms, content producers, marketing consultancies — is a natural fit for generative AI adoption. These firms produce text, images, and multimedia content at volume, and generative AI tools directly augment their core workflows. Early adoption in this sector is already visible in Jakarta and other major cities, with firms using AI for content drafting, translation, design iteration, and client reporting.
Barriers: Infrastructure First, Everything Else Second
The Pertama Partners SEA SMB AI Adoption Index 2026 identifies consistent barriers across all Southeast Asian markets: talent shortages (55% of firms), cost constraints (40%), and integration complexity (38%). In Indonesia, these barriers exist but are dominated by a more fundamental challenge: infrastructure.
The Infrastructure Gap
The Cisco AI Readiness Index assigned Indonesia a 23% readiness score, with infrastructure challenges cited by 84% of respondents as the top barrier (Pertama Partners SEA SMB AI Adoption Index 2026). This is not just about internet connectivity — although that remains uneven across an archipelago of 17,000+ islands. It encompasses the entire stack: reliable power, data center access, cloud computing affordability, and the basic digitization of business processes that AI requires as input.
For MSMEs outside Java and Bali, infrastructure limitations are particularly acute. AI tools that work well in Jakarta may be impractical in Kalimantan or Sulawesi, where internet speeds, power reliability, and access to technical support are all significantly lower.
The Digital Talent Gap
Digitally skilled talent is cited as a barrier by 45% of Indonesian firms (Pertama Partners SEA SMB AI Adoption Index 2026). Indonesia produces a large number of university graduates, but the pipeline of AI-specific talent — data scientists, ML engineers, AI product managers — is not yet sufficient for a market of 65 million businesses. The talent that does exist concentrates in Jakarta and, to a lesser extent, Bandung, Surabaya, and Yogyakarta, leaving MSMEs in secondary and tertiary cities with even fewer options.
The Strategy Gap
Among small businesses specifically, only 63% report having a clear AI strategy, compared to 80% of medium-sized organizations. This strategy gap means that many MSMEs that attempt AI adoption do so without a clear problem to solve, without defined success metrics, and without a plan for moving from experimentation to production.
Vietnam as a Comparison Point
Vietnam offers an instructive comparison. With a score of 34/100 on the SEA SMB AI Adoption Index, Vietnam sits 7 points above Indonesia and has emerged as the region's fastest mover. Vietnam's enterprise AI adoption grew by 39% year-on-year, with 47,000 new enterprises implementing AI in 2024 alone, bringing total adoption to nearly 170,000 firms (Pertama Partners SEA SMB AI Adoption Index 2026).
What Vietnam Has That Indonesia Can Learn From
Regulatory clarity. Vietnam's passage of a comprehensive AI law in December 2025 — effective March 2026 — provides a framework that reduces uncertainty for businesses considering AI investments. Indonesia's regulatory environment for AI is less defined, creating hesitation among firms that worry about compliance risks.
Concentrated geography. Vietnam's economic activity concentrates in two urban corridors (Hanoi and Ho Chi Minh City), making infrastructure investment and ecosystem development more efficient. Indonesia's archipelago geography makes equivalent coverage orders of magnitude more complex and expensive.
High AI trust. Vietnamese consumers show the highest confidence in AI applications among regional peers, creating a receptive market for AI-enabled products and services.
What Indonesia Has That Vietnam Does Not
Market scale. Indonesia's 65+ million MSMEs dwarf Vietnam's enterprise base. This scale creates market gravity: as adoption increases, the sheer number of businesses attracts AI vendors, drives competition, reduces costs, and generates local success stories that accelerate further adoption.
A digital economy platform layer. Indonesia's e-commerce and digital financial services ecosystem is larger and more mature than Vietnam's, providing embedded AI channels that reach millions of merchant SMBs without requiring independent adoption decisions.
A young, mobile-first population. Indonesia's median age of 29, combined with one of the highest smartphone penetration rates in Southeast Asia, creates a consumer market that is receptive to AI-enabled products and services, pulling business adoption along behind consumer demand.
What This Means for SMB Leaders
If You Are an Indonesian MSME
The data is clear: the early adopters in your market are gaining measurable advantages. SMBs with active AI deployments are 1.8 times more likely to experience revenue growth (Pertama Partners SEA SMB AI Adoption Index 2026). Waiting for the infrastructure to improve or for AI to become "easier" is a strategy that has a measurable cost in lost competitive advantage.
Start where your data is strongest. If you are an e-commerce business, your transaction data is your AI foundation. If you are in financial services, your customer data is the asset. If you are in manufacturing, begin with the digitization that makes AI possible — sensors, digital records, connected systems.
Leverage platform-embedded AI before building independent capability. If you sell on Tokopedia, Shopee, or Lazada, you already have access to AI-powered analytics, recommendation tools, and advertising optimization. Use these fully before investing in standalone AI solutions.
If You Are Investing in or Selling to the Indonesian Market
Indonesia's low adoption rate combined with high confidence and strong growth trajectory creates a specific opportunity profile:
The SME AI services market is undersupplied. Demand for AI implementation support will outstrip supply for several years, particularly outside Jakarta. Consulting firms, managed service providers, and AI solution vendors with Indonesian language capability and MSME-sector experience will find a receptive market.
Infrastructure-light AI solutions will win. Given the 84% infrastructure barrier citation rate, AI solutions that can operate on limited bandwidth, work on mobile devices, and require minimal local computing power will outperform those that assume enterprise-grade infrastructure.
Bahasa Indonesia language capability is a differentiator. Many global AI tools are optimized for English. Solutions that natively support Bahasa Indonesia — in customer-facing applications, document processing, and voice interfaces — will have a significant advantage in a market of 275+ million people.
If You Are a Policymaker
Singapore's experience (detailed in the companion article on Singapore's SME AI adoption tripling) demonstrates the impact of addressing infrastructure, curating solutions, and subsidizing implementation. For Indonesia, the priority sequence should be:
- Compute and connectivity investment — particularly outside Java
- A curated AI solution marketplace — helping MSMEs navigate a fragmented vendor landscape
- Implementation support — moving beyond awareness and training to subsidized deployment
- Sector-specific playbooks — recognizing that AI adoption in fintech looks fundamentally different from AI adoption in manufacturing
The Trajectory Ahead
Asia-Pacific AI spending is projected to reach USD 175 billion by 2028 at a 33.6% compound annual growth rate (Pertama Partners SEA SMB AI Adoption Index 2026). Indonesia's 127% year-on-year growth in AI application revenues suggests the country is capturing a growing share of that investment.
The Pertama Partners SEA SMB AI Adoption Index 2026 predicts that the regional score will rise from 31 to 38-42 by end of 2027, with the acceleration driven primarily by SMBs moving from experimentation to implementation. For Indonesia, the specific prediction is that the country will become Southeast Asia's largest AI SMB market by revenue, driven not by per-business spending but by the unmatched volume of its MSME base.
The question for Indonesian SMBs is not whether AI adoption will happen in their market. The growth trajectory — 127% AI revenue growth, 65+ million addressable businesses, a government committed to Making Indonesia 4.0 — makes that outcome near certain. The question is whether individual businesses will be among the leaders who capture the advantages of early adoption, or among the majority who adopt later at higher cost and lower competitive advantage.
For the complete analysis including country-by-country scores and methodology, read the full SEA SMB AI Adoption Index 2026.
Ready to move your organization beyond AI experimentation? Book a consultation with Pertama Partners.
Frequently Asked Questions
Indonesia has 65 million MSMEs with only a 26% digital adoption rate, creating enormous untapped potential. The combination of a young population, growing mobile internet penetration, and government support through Making Indonesia 4.0 and Kartu Prakerja makes it one of the most promising AI markets in Asia.
The highest-impact use cases for Indonesian MSMEs include customer service chatbots (Bahasa Indonesia), inventory and demand forecasting, digital marketing automation, bookkeeping and financial management automation, and logistics optimisation — all leveraging readily available and affordable AI tools.
Key barriers include limited digital literacy, infrastructure gaps in rural areas, cost sensitivity, language limitations of many AI tools, and lack of awareness about practical AI applications. Government programmes like Kartu Prakerja are addressing the skills gap but infrastructure and awareness remain challenges.