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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Special climate and energy envoy Hashim Djojohadikusumo, President Prabowo Subianto’s younger brother, has revealed a proposal to distribute free smartphones to social assistance (Bansos) recipients, but Coordinating Economy Minister Airlangga Hartarto has denied its existence. The conflicting statements have raised questions about how the initiative came to be announced, particularly as the government pursues a separate program to open bank accounts for 200 million people.
Hashim announced the free smartphone plan on Oct. 13, presenting it as a way to help Bansos recipients access digital banking services and receive government transfers. He linked the proposal to the government’s broader financial inclusion agenda, suggesting that smartphones would bridge the gap between opening bank accounts and enabling recipients to use them.
Following the announcement, Airlangga clarified that the government’s current plan involved opening bank accounts for up to 200 million people, with an initial deposit of Rp 50,000 (US$2.76) per account.
The rollout is expected to begin in the fourth quarter of 2026, supported by a budget of around Rp 3.8 trillion. The program will be implemented through state-owned lenders Bank Rakyat Indonesia (BRI) and Bank Syariah Indonesia (BSI).
Airlangga’s denial leaves the status of the free smartphone proposal unclear and raises questions about whether it was properly coordinated with the government’s existing plans.
Hashim’s proposal initially seemed plausible because it addressed a practical challenge left unanswered by the mass account opening program: how recipients would access and use their new accounts. Providing smartphones alongside bank accounts could give recipients a direct channel for managing their finances and receiving social assistance, potentially reducing their reliance on intermediaries.
This apparent synergy, however, does not necessarily mean that distributing devices is the most effective or economical way to achieve financial inclusion.
Bundling smartphones and mobile data plans or phone credit with social assistance would introduce substantial logistical and financial costs. Large-scale distribution would require additional procurement, delivery and maintenance arrangements. Meanwhile, ensuring that recipients used the devices for their intended purpose would be difficult.
Compared with providing cash or enabling access through existing devices and banking channels, the proposal could impose significant additional costs without guaranteeing better outcomes.
There is also a risk that recipients could pawn or resell the phones to meet more immediate financial needs, undermining the program’s intended benefits. Similarly, phone numbers distributed alongside the devices could be transferred or sold to third parties.
These possibilities raise a broader question: whether providing hardware is necessary to expand digital access, particularly when the government could instead focus on ensuring that recipients can use existing devices to access banking services securely.
The risks extend beyond the devices’ potential resale. Mobile phone numbers have become valuable gateways to financial accounts and digital services, as they are widely used for identity verification and account registration. Distributing SIM cards or registered phone numbers on a large scale could therefore create opportunities for misuse, including the transfer of registered numbers to third parties or their exploitation in fraudulent activities.
This concern is particularly relevant to Indonesia’s efforts to combat online gambling, which is illegal along with all forms of gambling. Operators have circumvented restrictions by exploiting bank accounts and phone numbers registered under third-party identities.
A large-scale distribution program could expand the pool of accounts and numbers available for resale or misuse, potentially making enforcement more difficult. Without adequate safeguards, an initiative intended to promote financial inclusion could inadvertently create new vulnerabilities in the digital financial system.
Ultimately, both the mass account opening program and the free smartphone proposal reflect the government’s focus on populist policies. But the recent mix-up further amplifies concerns about policy coordination and consideration of potential risks and impacts.
The episode also invites scrutiny of the political motivations behind the government’s increasingly ambitious promises, particularly amid concerns over public approval ratings. If the administration is seeking to rebuild public support through programs that offer immediate, visible benefits, it risks political urgency taking precedence over planning.
