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.
Latest News
President Prabowo Subianto’s plan to give more power to the Indonesian Military (TNI) to counter terrorism raises the specter of Indonesia reverting to the days when the military practically ruled the country under President Soeharto for more than three decades.
The draft of a presidential executive order, which has been circulating among policy circles, it may have even been leaked, has prompted civil society organizations to call out Prabowo, saying that besides getting more power to oversee national security, the military under the current wording in the draft could equate government critics with terrorists.
The Civil Society Coalition for Security Sector Reforms, grouping more than 20 non-governmental organizations, recalls that Prabowo had already used the word “terrorist” in describing students as perpetrators of the violent riots in August.
The Presidential Palace said Prabowo had not signed the order but had sent notice to the House of Representatives of his intention. An executive order does not require the approval of the House although the government may invite discussions before the formal signing.
Under the Prabowo plan, the TNI’s involvement in counterterrorism includes “prevention”, which the coalition says would pave the way for domestic intelligence operations and abuse of this power to intrude into the activities of legitimate individuals and civil organizations.
While the 2018 Terrorism Law allows for military involvement, the coalition says it should be regulated by a law rather than an executive order.
If the executive order is signed, it would spell doom for democracy, the coalition warns.
Dismissing the concerns, State Secretary Prasetyo Hadi said people should not rush into drawing conclusions about the substance and impact of the decree. TNI involvement in counterterrorism measures would be conditional, he said without giving further details.
Soeharto ruled with an iron fist by frequently invoking the Subversion Law that allowed the military to take action against any threat it perceived as endangering the nation. The law, which was used to silence and jail critics, was repealed not long after he stood down in 1998.
The 2002 State Security Law provides a clear division of labor between TNI and the National Police, the first focusing on national defense against external threats, and the latter on internal security. The law, however, allows for the military to assist the police in managing internal security under certain circumstances, including in terrorism.
President Prabowo ordered the military to intervene in the midst of the nationwide violent riots in August when police were clearly overwhelmed by the unrest, some of which was directed at the police for their brutal handling of the protests.
The plan to expand the powers of the military nevertheless fits a pattern since Prabowo took office in October 2024 of giving more powers to the TNI to deal with internal security matters.
Prabowo, a retired Army general, has brought in more military figures, both active or retired, into his government. His signature program of providing free nutritious meals for 82 million schoolchildren is mostly run by military figures.
The new TNI Law expands the number of civilian jobs that active TNI officers can hold and extends the mandatory retirement age up to 65 years. The TNI is also bolstering the size of its personnel with the creation of more than 100 Army battalions. The TNI is expanding the number of territorial commands (Kodam), from originally 15 to 21 since August, and the plan is to have a Kodam in each of the 38 provinces in the country.
This contrasts with developments during much of the 15 years until 2024, when the TNI focused on building its capacity to deal with potential external threats under the Minimum Essential Force (MEF) concept. Indonesia was then spending billions of dollars on modernizing its armaments, focusing on Navy and Air Force capabilities. Even then, by 2024, Indonesia had only achieved less than 70 of the MEF target, meaning that the country remains highly vulnerable to external threats.
Now under Prabowo, the focus is more on beefing up the Army, even though the President has repeatedly warned that Indonesia must be prepared for the possibility of a World War III.
Prabowo has denied claims that he is restoring the “dual function” doctrine of the military that was used by Soeharto to justify the military’s active involvement in politics and civilian affairs besides defense.
The trend since he assumed power indicates otherwise.
TNI chief Gen. Agus Subiyanto did not mince words when he said he is not gunning for dual function, but a more “multi-function” military.
