On December 5, 2024, Nvidia, a leading U.S. technology company, formalized its commitment to advancing artificial intelligence (AI) in Southeast Asia with the opening of a new AI research and development center in Hanoi, Vietnam. This move follows an agreement signed in the presence of Vietnamese Prime Minister Pham Minh Chinh and Nvidia CEO Jensen Huang, highlighting Vietnam’s strategic position as a tech investment hub.

The research center is designed to tap into Vietnam’s thriving ecosystem of STEM talent, which includes local industry players, universities, government agencies, and startups. Nvidia aims to foster innovation in AI software development, making use of the country’s rapidly growing engineering workforce. “We are very pleased to open the Nvidia research and development center to accelerate Vietnam’s AI journey,” Huang remarked, underscoring Nvidia’s commitment to collaboration and technology advancement in the region.

The establishment of Nvidia’s center strengthens Vietnam’s position in Southeast Asia’s technology sector. In addition to Nvidia's new venture, the Vietnamese tech company FPT also announced plans earlier this year to construct a US$200 million AI factory utilizing Nvidia’s advanced graphics chips. These initiatives come at a time when Southeast Asia is witnessing heightened competition for foreign investments in the fast-growing tech sector.

Vietnam’s rising prominence as a preferred investment destination stands in contrast to Indonesia, which has faced significant challenges in attracting similar levels of foreign interest. Despite Nvidia’s visit to Indonesia just weeks earlier in November 2024, where Huang was invited by President Prabowo Subianto to explore investment opportunities, the country appears to be lagging behind its regional counterparts.

Teuku Riefky, an economist at the University of Indonesia’s Institute for Economic and Social Research (LPEM UI), identifies several obstacles contributing to Indonesia's slow pace in securing foreign investment in AI development. Riefky cites cumbersome administrative processes, with Indonesia requiring 11 documents to start a business compared to Vietnam’s 8. Furthermore, Indonesia’s taxation system demands 26 tax documents, while Vietnam asks for only 6, creating a more investor-friendly environment in its neighbor.

The decline in the quality of Indonesian human resources also poses a threat to the country’s competitiveness. “The quality of Indonesian HR, which used to be superior to Vietnam, is now starting to lag behind,” said Riefky. This shift, combined with challenges in financing, innovation, and legal certainty, risks leaving Indonesia behind in the race for tech-driven foreign investment.

Riefky pointed out that Indonesia's restrictive approach to foreign investment further hinders the country's appeal, noting that Indonesia is among the G20 countries most closed to foreign investment, only surpassing the Philippines in this regard. Without substantial reforms to streamline administrative processes, improve human resource quality, and enhance legal certainty, Indonesia could face significant missed opportunities in the tech sector, particularly in AI.

As Vietnam continues to attract major tech investments, it remains to be seen whether Indonesia will take the necessary steps to reverse these trends. Experts emphasize that simplifying bureaucratic procedures, investing in human capital, and creating a more open legal and economic environment are essential to regaining competitiveness in the region’s rapidly evolving tech landscape.

In the face of mounting regional competition, the challenge for Indonesia is clear: adapt quickly to the demands of the modern tech industry or risk falling further behind in the race for AI and technology investments.