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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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.
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 lack of supporting facilities and infrastructure has made the Aceh Industrial Zone (KIA) Ladong unattractive to investors. Therefore, the Aceh Provincial Government has been urged by the private sector to be more serious about developing basic infrastructure to make the area a truly viable investment destination.
Indonesian Chamber of Commerce and Industry (Kadin) Aceh Chair Muhammad Iqbal stated that several investors who had visited KIA Ladong complained about limited facilities, particularly for logistics and sea transportation. The area's shipping access is considered inadequate, with ships entering the Port of Malahayati only about once a month.
"This situation certainly makes it difficult for investors. The question is, how will the logistics distribution be if the industry enters KIA Ladong? Could the Port of Malahayati truly support it? In fact, the number of ships entering is very minimal," Iqbal said when asked after a focus group discussion (FGD) at Moorden Coffee on Feb. 5, 2025.
Nevertheless, Iqbal noted that investor interest in Aceh is currently growing. Several Chinese companies are reportedly interested in investing in KIA Ladong, including for the construction of an electronic cigarette (e-cigarette) factory.
"In addition to targeting the local and national markets, these investors are also aiming for exports to the Middle East, Europe, and South Asia," he revealed.
Iqbal added that Aceh is considered geographically strategic because it is closer to these international markets than other industrial areas in Indonesia. In addition, there are also plans to invest in a milk factory.
However, the challenges of limited basic infrastructure, such as electricity, clean water, and other industrial support facilities, remain. This situation is making investors reconsider their plans.
"How can investment come in if the government is not fully prepared? If investment proceeds, the multiplier effect is enormous, ranging from job creation, technology transfer, to regional economic growth," Iqbal noted.
He compared KIA Ladong to developed industrial areas such as those in Cikarang, West Java Province, and the Medan Industrial Area (KIM) in North Sumatra Province. The managers of those industrial areas both provide land and complete supporting infrastructure, including warehouses that investors can rent or purchase. Therefore, the Aceh Provincial Government is being asked to prioritize KIA Ladong in its 2026 regional budget, with the implementation including the provision of vacant land and basic facilities in the industrial area so investors only need to bring production machinery and equipment.
"Especially storage warehouses. Because this is crucial for investors to store their goods," Iqbal stressed.
Other options are also recommended should Aceh's actions are constrained by a limited budget, including cooperation with the private sector or land acquisition through the Right to Build (HGB) scheme.
"This is to prevent KIA Ladong from just being a potential, unproductive area," Iqbal concluded.
