Sector
Construction
As of 2022, Indonesia’s population stands at 275.8 million, a 1.17 percent growth from 272.7 million in 2021. With such a large population, Indonesia exhibits an exceptionally high demand for construction services. The total value of completed construction work in 2022 reached US$98.3 billion, with US$56.26 billion attributed to civil construction, US$32.87 billion to building construction, and the remaining US$9.17 billion to special construction work.
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As of 2022, Indonesia’s population stands at 275.8 million, a 1.17 percent growth from 272.7 million in 2021. With such a large population, Indonesia exhibits an exceptionally high demand for construction services. The total value of completed construction work in 2022 reached US$98.3 billion, with US$56.26 billion attributed to civil construction, US$32.87 billion to building construction, and the remaining US$9.17 billion to special construction work.
Subsequently, Indonesia’s construction sector has experienced accelerated growth. In 2023, its gross domestic product (GDP) reached US$133.7 billion with an annual growth rate of 4.91 percent – more than double the rate of 2022, which stood at 2.01 percent. The sector’s stable growth in 2023 is further reflected on a quarter-basis; from Q2 to Q3, the construction sector grew by 5.87 percent, and from Q3 to Q4, it grew by 5.84 percent.
The prospects of the construction sector are on the rise as the price of construction materials stabilized around 2023 following the end of the pandemic. Notably, the price index for the construction of public facilities, buildings, roads, and bridges recorded a 0.17 deflation from November to December 2023, leading to a slight deflation of 0.08 percent on the price index for construction.
The construction sector has also been seeing increasing interest from foreign investors. Throughout 2023, total foreign direct investment (FDI) that flowed into the sector reached US$281.8 million, a significant increase compared to the total FDI of US$165.3 million that the sector absorbed in 2022.
Meanwhile, the total number of construction businesses has been decreasing slightly over the years from a total of 197,030 businesses in 2022 to 190,677 businesses in 2023. Considering the rapid growth of the sector, this decrease in construction businesses is attributed more to mergers and acquisitions rather than the businesses’ ceasing operations. Additionally, it is worth noting that in 2023, the total number of Construction Labor Certificates (SKK) and registered construction expertise certificates (SKA) reached 261,720 and 38,328, respectively.
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The House of Representatives is entering its most consequential electoral reform since 2017. As Commission II drafts a new Election Law for 2029, the fault line is already clear: the legislative threshold.
This month, seven parties in President Prabowo Subianto 's governing coalition, Gerindra, Golkar, the Prosperous Justice Party (PKS), National Mandate Party (PAN), NasDem, the Democratic Party and the National Awakening Party (PKB), met behind closed doors and agreed to raise the threshold from 4 to 5 percent. Commission II has confirmed this consensus will be the baseline for formal drafting. The Indonesian Democratic Party of Struggle (PDI-P), the only party in the House not in the coalition but which does not see itself as an opposition force, wavers between supporting and rejecting the plan.
On the other side are parties with no seats in the House, the PPP, the Labor Party, Ummat, and the GKSR coalition. They are pushing the opposite way. The GKSR has proposed three alternatives: abolish the threshold, replace it with a 3.5 percent district-based threshold, or keep a national threshold but cut it to 1 percent. Labor wants 1 percent as a ceiling to limit wasted votes. The clash itself is not new. What is new is the legal context.
The case for simplification: For the coalition parties, the argument is institutional. With eight parties in the current House, building majorities for legislation and budgets is already complex. A higher threshold, they argue, forces consolidation before elections rather than after, pushing parties toward real national infrastructure instead of personality vehicles that surface only at election time. It also guards against hyper-fragmentation (a 10-to-12-faction House would make committee work unworkable) and filters out "rental parties" that exist mainly to be bought into coalitions. In this view, the threshold is legitimate political engineering for a more governable democracy.
The case against: The small parties' argument is about representation and wasted votes, and the numbers are concrete. In 2024, the PPP won 5.9 million votes, 3.87 percent nationally, but got zero seats because of the 4 percent rule. At 5 percent, researchers estimate 15–20 million votes could be discarded in 2029. Their critique has three strands.
First, proportionality: Indonesia's open-list system is supposed to link votes to seats, and a high national threshold breaks that link, a vote valid at the ballot box but worthless in seat allocation undermines the principle of equal vote value.
Second, barriers to entry: A 5 percent national bar demands enormous financial and organizational capital, effectively locking out parties rooted in labor, environmental or regional interests even where they are genuinely strong in specific provinces.
Third, diversity: A low or no threshold reflects Indonesia's dispersed electorate in the legislature; a high one homogenizes it, silencing voters who showed up and voted.
The Constitutional Court changed the calculus. It ruled the 4 percent rule (Article 414§1) constitutional for 2024 but only conditionally constitutional beyond that, and ordered the House to revise it before 2029 campaign stages begin, under five conditions: the new threshold must be designed for sustained use, not an ad-hoc figure; it must preserve proportionality, explicitly guarding against large numbers of votes failing to convert into seats; it must still serve genuine party simplification; it must be finalized before 2029 preparations start; and it must come from meaningful public participation, including parties with no House seats, academics and civil society.
The court's sharpest criticism was methodological: where did 4 percent come from, what was the formula, what were the technical and legal grounds?
That is a test the current 5 percent consensus will struggle to pass. An agreement reached among coalition chairmen behind closed doors, with no non-legislature parties present, fails the meaningful-participation test on its face. And a flat 5 percent with no link to district magnitude, Indonesian districts range from 3 to 12 seats, averaging 6.5, will struggle to satisfy the sustainability and proportionality conditions.
The coalition has the votes to pass whatever percentage it wants in Commission II and plenary session. But it can no longer do so by political fiat alone. A law that raises the threshold without an evidence-based formula and inclusive deliberation invites an immediate Constitutional Court challenge, and risks annulment less than two years before the election. Underneath the figures is a choice about what kind of democracy Indonesia wants.
A high threshold favors effectiveness, fewer, stronger parties that can govern decisively, at the cost of leaving millions unrepresented. A low threshold favors representativeness, a House mirroring the full spread of voter preference, at the cost of harder coalition-building. The court's ruling tries to force a middle path: if the House wants simplification, it must prove the number does not create excessive waste, and that it got there democratically. The credibility of the 2029 Election Law will rest less on whether the final figure is 1 percent, 4 percent, or 5 percent, and more on whether the House can show its work.
