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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With little fanfare, Indonesia’s labor movement has joined President Prabowo Subianto ’s big coalition government, giving it an inside track in the corridors of power to fight for its interests. Although some might argue that it has been co-opted to blunt the movement.
On May 1, Prabowo joined a huge labor rally at the National Monument (Monas) Square opposite the Presidential Palace complex in Central Jakarta, and top union leaders happily embraced him on stage. A week earlier, the President recruited prominent labor activist Muhammad Jumhur Hidayat to his cabinet, though as minister for the environment rather than for labor.
Labor is the missing piece in Prabowo’s big tent coalition government comprising not only most of the political parties, but also major special interest groups, particularly business, Islam, the police and the Indonesian Military (TNI). Time will tell whether joining the coalition means more leverage for the labor movement, or simply co-option.
May 1 is now celebrated in Indonesia as a national holiday and a time for labor unions to show their teeth by holding rallies throughout the country. The one at Monas, attended by hundreds of thousands, was the largest, though not the only one that took place that day.
If past presidents avoided May Day rallies, Prabowo has embraced them. He joined leaders from more than 20 unions on stage and even seen sang some of the Indonesian words to “L’Internationale”, the anthem of the global labor movement. He chanted “Long live labor, long live Indonesia!”, and raised his fist in solidarity with workers.
He took off his safari shirt and threw it to the crowd, and when reduced to a black undershirt, spent the next 15 minutes hugging and shaking hands with the crowd. The workers responded in kind while the song “Kowe Cen Istimewa” (Javanese for “You Are Special”) played in the background. He gave out t-shirts to celebrate Labor Day with the inscription “For you my country, our body and soul” produced by the Palace.
Prabowo has delivered on some of his promises. The bill on the protection of domestic workers, a promise he made at last year’s May Day rally, was endorsed by the House of Representatives in April. In November, he named Marsinah, a woman labor activist murdered by the TNI in 1993, a national hero. On May 1, as a Labor Day gift, he issued a presidential regulation limiting online companies that run ride-hailing services to 8 percent in commission, instead of the going rate of 20 percent, making sure that riders get 92 percent of their fares.
It is too early to conclude that Prabowo is a “pro-labor” president, as against the “pro-business” label given to past presidents. His cabinet is still staffed by many business types.
The former Army general has departed from the TNI tradition of viewing labor with suspicion, as representing the communist ideology. The government only recognized May 1 as Labor Day, and made it a national holiday, in 2013.
The labor movement in Indonesia politically remains small and weak, a reason why past presidents could afford to ignore it or gave only token participation in their governments. The movement has suffered from low unionization rates and fragmentation into groups that often compete against one another.
Statistics Indonesia (BPS) says the size of Indonesia’s workforce was 155 million out of a working-age population of 220 million as of February. Estimates of how many workers are members of labor unions range between 4 and 13 percent. The Manpower Ministry says there are 21 labor confederations, 198 federations and more than 12,000 union shops. The bulk of Indonesian workers, more than 60 percent, are in the informal sector, and not covered by unions.
The ineffectiveness of the labor movement was grossly exposed when the government of president Joko “Jokowi” Widodo swiftly pushed the Job Creation Law through the House in 2023, with little opposition from labor. Despite its name, the legislation is designed to give more concessions to investors, often at labor’s expense.
Several unions have elevated themselves into political parties, but they never got far in elections. Labor is simply not popular among voters.
Their fragmentation means that not all labor groups have joined the Prabowo administration. On May 1, several groups organized a separate rally in Jakarta outside the Senayan Legislative Complex in Central Jakarta to press their demands, including repealing the Job Creation Law, ending outsourcing and better protection for workers who are laid off.
With reports of more companies planning to lay off workers, embracing the labor movement may be not such a bad idea for President Prabowo.
