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.

Latest News

October 17, 2025

The newly appointed Finance Minister Purbaya Yudhi Sadewa has wasted no time asserting his fiscal philosophy within just a month in office. One of his first major decisions, rejecting the call for a third round of tax amnesty, has sparked debate in policy circles, pitting the need for short-term revenue against the imperative of restoring long-term credibility to Indonesia’s tax system.

With the government’s urgent need for funds, many question whether rejecting another amnesty could limit much-needed revenue streams at a critical time. Yet Purbaya argued that another amnesty would undermine policy credibility and send the wrong signal that taxpayers can evade their obligations and simply wait for the next forgiveness program.

Tax amnesty schemes, which allow taxpayers to declare previously hidden assets in exchange for reduced penalties or immunity from sanctions, have long been a double-edged sword. They can deliver a quick injection of state revenue and broaden the tax base, but they also risk creating perceptions of injustice, rewarding past evaders while discouraging compliance among honest taxpayers.

Indonesia’s first tax amnesty, launched in 2016 under President Joko “Jokowi” Widodo and Vice President Jusuf Kalla, was hailed a success. It attracted over 956,000 participants, disclosing total assets worth Rp 4,854 trillion (about US$303 billion), comprising of Rp 3,676 trillion in domestic assets and Rp 1,031 in foreign assets. The program brought in Rp 135 trillion in new tax revenues, but it fell short of expectations of asset repatriation as only Rp 147 trillion in offshore assets were repatriated, far below the government’s Rp 1,000 trillion target.

President Jokowi introduced a second round in 2022, known as the Voluntary Disclosure Program. It targeted taxpayers who had joined the 2016–2017 amnesty but underreported their assets. This round attracted 247,918 taxpayers, resulted in declared assets of Rp 594 trillion and tax payments of Rp 61.1 trillion to the government covers, still well below the estimated unreported assets of more than Rp 1,000 trillion.

While both initiatives helped to formalize hidden wealth and provided temporary fiscal relief, they also entrenched a pattern of dependence on exceptional measures. Each round demonstrated that such schemes could raise revenue quickly but failed to nurture a lasting culture of compliance. Repetition of these programs, Purbaya believes, would only send a wrong message: “Just cheat on taxes and wait for the next amnesty.”

Instead, Purbaya emphasized the importance of strengthening and expanding Indonesia’s tax base through robust and sustainable economic growth. In his view, with sustained growth, the nation can still secure fresh fiscal injections without resorting to repeated leniency.

Rather than opening another round of amnesty, the government is finalizing a new market-based scheme designed to attract idle overseas funds back home. This initiative aims to offer appealing incentives for Indonesians to invest their dollar savings domestically.

Equally significant is Purbaya’s internal reform agenda. He has expressed strong backing for the Finance Ministry’s ongoing effort to purge misconduct within its ranks. The recent dismissal of 26 tax officials over ethical and disciplinary violations is seen as part of a broader effort to restore integrity in tax administration. Purbaya regards institutional credibility as a prerequisite for strengthening public trust, an essential ingredient in any effort to raise compliance and expand the tax base.

His stance also reflects a deeper philosophical shift in fiscal management. Indonesia has often relied on one-off policy measures, such as tax amnesties or commodity windfalls, to fill budget gaps. Purbaya’s approach marks a pivot toward structural credibility, emphasizing rule-based fiscal discipline, institutional integrity and long-term tax capacity over short-term fiscal inflows.

The stakes are high. The government faces mounting fiscal challenges of tightening global financing conditions, volatile commodity prices, and a widening fiscal gap. Under such pressure, the temptation to repeat the quick-revenue model of the past is high. Yet Purbaya’s strategy suggests a belief that fiscal stability built on credibility and compliance will prove more durable than transient injections of cash. His message is clear: fiscal strength must be built on trust, not forgiveness.

The real question now is whether the nation’s political and bureaucratic machinery can keep pace with his ambition, while stay committed to the long game he has set in motion. Restoring fiscal credibility is a gradual process, often yielding results only after years of consistency. Yet Purbaya’s early moves indicate a readiness to forgo immediate gains in pursuit of enduring stability, a bet that may define not only his tenure but also the direction of Indonesia’s fiscal governance in the years ahead.

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