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 Army is creating 750 new battalions of combat troops in the next four years to ensure presence in every district nationwide, but in the absence of a credible explanation of where the new external threats are coming from, the plan raises speculations about the real motive.
It reinforces the notion of creeping militarization of the country under the government of President Prabowo Subianto. Since taking charge in October 2024, the former Army general has brought in more military types, active or retired, to help him run the administration, including assigning jobs normally reserved for civilians.
Defense Minister Sjafrie Sjamsoeddin recently gave more details of the plan to strengthen the Army from the existing 120 battalions of infantrymen. A battalion, whose size varies between 300 and 1,300 depending on its mission, would be deployed in each of the 514 regencies and municipalities in the country. The new recruits would be trained in both military disciplines and some civic skills, including farming.
Sjafrie, who was Prabowo's peer during their military years, said the Army expansion is consistent with the 2025-2029 National Mid-Term Development Plan (RPJMN). Neither he nor anyone else in the Indonesian Military (TNI) had bothered to spell out what kind of threats to the national defense the massive deployment will deal with, raising the specter of the military intruding further into national security, which by law is the domain of the police.
The Army expansion does not appear to be affected by the current austerity measures imposed by the Finance Ministry on most other government agencies to release more funds for Prabowo's signature policy of feeding all of Indonesia’s nearly 83 million children with free nutritious lunches daily. The National Nutrition Agency, created to manage the Free Nutritious Meal (MBG) program, is run mostly by military officers. The military is also helping to run some MBG kitchens and distribute the free meals to schools.
The Army territorial expansion is consistent with the ongoing TNI plan to set up an Army regional command (Kodam) in every single province in the country. Prabowo inaugurated six Kodam in August, bringing the total to 21. TNI still has 17 more to go.
A new TNI Law enacted in March also extended TNI’s mandatory retirement age to 55 years, 58 for mid-ranking officers, and up to 67 for senior rankings.
Under Prabowo, TNI development is being reoriented towards strengthening the Army. Previously, the focus had been on building the Navy and the Air Force under the Minimum Essential Force (MFE) concept to strengthen TNI's capability to deal with external threats. When the 15-year MFE program ended last year, TNI only reached less than 80 percent of the target. Prabowo was defense minister in 2019–2024.
A defense white paper, which was last updated in 2015, took note of the growing tension over territorial disputes in the South China Sea between China and some Southeast Asian countries. Indonesia publicly claims it has no dispute with China, although its Navy must frequently deal with trespassing Chinese fishing boats accompanied by fully armed China Coast Guard vessels in the Natuna Sea, an area Beijing regards as a traditional fishing ground.
The massive Army territorial development also runs counter to the demand for TNI to return to the barracks, widely echoed during the massive nationwide street protests in late August that turned violent. It was one of the more than two dozen demands, including ending police brutality and police reforms to make them publicly accountable. Prabowo, at the time, said these demands could be discussed.
The violence ended only after Prabowo ordered the military to intervene when police were clearly overwhelmed as they became the target of the protesters.
The current law allows the TNI to take part in internal security to assist the National Police. The TNI is already effectively in charge of security in the six Papuan provinces, where there have been clashes with armed rebels seeking independence from Jakarta.
When the Army territorial expansion plan is completed in 2029, Indonesia will look more like what it was 26 years ago under dictator Soeharto, who ruled the country for over three decades with the support of the military. The dual-function policy of the Armed Forces (ABRI), which then included the National Police, allowed it to play an active role in politics and deploy members to take up many civilian jobs.
The military presence, which was also widely felt then, will likely be more pronounced in 2029 with the deployment of a battalion of combat troops in every single regency and municipality.
