Sector

Agriculture

Indonesia, with its archipelago of volcanic soil and plentiful rainfall, offers a natural abundance that sustains the nation and plays a crucial role in its economic prosperity. One of the country’s leading sectors is agriculture, supporting the livelihoods of millions and making a significant contribution to Indonesia’s Gross Domestic Product (GDP). From rice paddies to coffee plantations, this diverse range of crops reflects the country’s unique geography and climate, making it a powerhouse in the global agricultural market.

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Agriculture

Indonesia, with its archipelago of volcanic soil and plentiful rainfall, offers a natural abundance that sustains the nation and plays a crucial role in its economic prosperity. One of the country’s leading sectors is agriculture, supporting the livelihoods of millions and making a significant contribution to Indonesia’s Gross Domestic Product (GDP). From rice paddies to coffee plantations, this diverse range of crops reflects the country’s unique geography and climate, making it a powerhouse in the global agricultural market.

In 2022, Indonesia’s agricultural sector generated approximately Rp2.4 quadrillion in GDP. This sector alone accounts for 12.4 percent of the country’s GDP, underlining its importance to the national economy. The following year, the country experienced a steady growth rate of 1.3 percent in this sector.

Agriculture serves as a key sector for the national economy in various Indonesian provinces, including Aceh, North Sumatra, West Sumatra, Riau, Jambi, Bengkulu, and South Sumatra. Additionally, the provinces of Lampung, Bangka Belitung, West Java, Central Java, East Java, and West Kalimantan, among others, also consider agriculture as a key sector.

This sector offers a rich variety of commodities, including paddy, corn, soybean, sweet potato, and cassava – all staple commodities that play a vital role in sustaining Indonesia’s food supply. Additionally, crops such as cocoa, coconut, coffee, and palm oil are essential for export income and providing job opportunities. In terms of employment, the agriculture sector employs nearly 28 percent of the country’s workforce.

The country’s agricultural sector has also attracted significant foreign investment in 2023, with roughly US$2 billion in direct contributions. With this sector helping sustain Indonesia’s food supply, the country’s paddy production statistics that same year indicate that roughly 10.2 million hectares of land were harvested, yielding an estimated 56.63 million tons of dried unhusked rice (GKG). Once processed for consumption, this translates to approximately 30.9 million tons of rice available for the population.

In a move to strengthen its agricultural foothold within Southeast Asia, Indonesia seeks to expand cooperation with Vietnam in both agriculture and aquaculture. Indonesia and Vietnam are forging a partnership to modernize their agriculture and aquaculture industries. This collaboration will leverage digitalization for improved efficiency and invest in research and development to enhance the quality and global competitiveness of their agricultural and fishery products.

Latest News

November 6, 2026

Indonesia is facing mounting economic and diplomatic costs from forest and peatland fires this year as a prolonged dry season coincides with a strong El Niño and a positive Indian Ocean Dipole (IOD). The fires have caused widespread damage, placed a substantial burden on public health and economic activity and sent haze across national borders. The combined economic and health costs are estimated to have reached as much as Rp 123.1 trillion (US$6.79 billion), while the resulting pollution has strained relations with neighboring countries.

According to a study by CELIOS, economic losses from the fires in January-August 2026 are estimated to range between Rp 39.29 trillion and Rp 123.1 trillion. The upper-end figure is equivalent to 49.1 percent of the projected gross regional domestic product (GRDP) of Central Kalimantan this year, illustrating the scale of the potential damage and the economic stakes of avoiding seasonal fires from becoming an annual crisis.

The lower-end estimate comprises Rp 29.54 trillion in damage to physical assets and disruption to economic activities as well as Rp 9.75 trillion in healthcare costs. The final figure could be much higher if the fires continue to the year-end. Meanwhile, potential losses in local tax revenue are estimated at Rp 269.86 billion.

The government has allocated approximately Rp 1.2 trillion in emergency assistance to manage the fires and address related impacts, which has been distributed in two phases to affected provinces and districts. The first funding phase, worth Rp 760 billion, was disbursed on Sept. 7, followed by a second disbursement of around Rp 475 billion on Oct. 22.

The assistance is intended to support firefighting operations, evacuations, medical treatment for smoke-related illnesses, logistical supplies and postfire peatland restoration.

Industrial land clearing is a central cause of this year's fires, with environmental researchers pointing to deliberate burning for agriculture and plantations alongside decades of deforestation and peatland conversion.

Between January and July, 285,914 hectares of land burned nationwide, according to independent forest monitoring platform Nusantara Atlas. Around 23.9 percent of that area, or approximately 68,324 ha, fell within industrial concessions and includes 15,146 ha in oil palm concessions, 12,120 ha in mining concessions and 10,485 ha in pulpwood concessions.

Deliberate burning to clear land for agriculture and industry often allows fires to spiral out of control. The fires were further exacerbated by a prolonged dry season that left vegetation and peatlands unusually dry, which served as fuel for fires to spread beyond their initial land clearing sites.

Unlike surface fires, peat fires can persist below ground and reignite, requiring sustained efforts to extinguish them fully. Satellite monitoring revealed that in September, fires were burning both above and beneath the ground in peatlands, with underground fires likely to burn until sufficient rainfall returned to the country.

The fires have also become a source of diplomatic tension at a particularly sensitive time for regional cooperation, and ASEAN foreign ministers are expected to discuss transboundary haze ahead of the bloc’s annual summit in November. Smoke from the fires has spread from Indonesia into Singapore and Malaysia, exposing disagreements over the accountability of businesses operating across borders and the extent to which affected governments can intervene.

The dispute is particularly consequential for Singapore, given its close bilateral ties with Indonesia. The island country has been Indonesia's largest source of foreign investment since 2014, and its investments totaled Rp 230.46 trillion in the first nine months of this year alone.

Diplomatic friction intensified in October, when Singapore invoked its Transboundary Haze Pollution Act to hold accountable companies linked to the haze. Singapore issued preventive measure notices (PMNs) to Indonesian companies with concession areas linked to the fires, while separately requesting information from Singapore-registered businesses about corporate ties to Indonesian concession holders and their fire prevention efforts.

The two neighbors have since sought to prevent the dispute from escalating. On Oct. 27, Foreign Minister Arrmanatha Nasir and Singaporean Foreign Minister Vivian Balakrishnan met in Jakarta and agreed to establish a joint task force to share information, gather cross-border evidence and investigate companies linked to the fires. Nasir welcomed Singapore's offer to share corporate information and financial intelligence, while Balakrishnan said Singapore was prepared to pursue locally registered companies that were found responsible.

Indonesia’s recurring forest and peatland fires pose a threat not only to domestic economic activity and public health but also to its relationships with regional trading partners and investors. The substantial economic costs of the fires, combined with the risk of diplomatic friction over transboundary haze, demonstrate how environmental mismanagement can undermine investor confidence and complicate cross-border economic cooperation.

Although Indonesia’s wildfires have become a familiar feature during the dry season, their recurrence should not make them an accepted cost of doing business. Without sustained action to prevent deliberate burning to clear land, the damage risks compounding with each fire season.

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