Sector

Transportation

With a population exceeding 280 million people, Indonesia relies heavily on a robust transportation network encompassing sea, air, and land routes to connect its vast island chain and facilitate economic activity effectively. This reliance has made the transportation sector a leading sector in the country.

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Transportation

With a population exceeding 280 million people, Indonesia relies heavily on a robust transportation network encompassing sea, air, and land routes to connect its vast island chain and facilitate economic activity effectively. This reliance has made the transportation sector a leading sector in the country.

In 2022, the sector contributed Rp 983 trillion to the national gross domestic product (GDP) at current prices. Notably, regions where transportation is a leading sector include Aceh, West Sumatra, Bengkulu, Lampung, West Java, the Special Region of Yogyakarta, and Central Kalimantan. Additionally, North Kalimantan, Gorontalo, North Sulawesi, Maluku, East Nusa Tenggara, and Bangka-Belitung consider the transportation sector as a leading sector.

The sector has also experienced a significant boost in recent years, with the transportation and warehousing subsector achieving a staggering GDP growth of 15.93 percent year-on-year (YoY) in the first quarter of 2023.

During the COVID-19 pandemic, Indonesia’s auto industry was severely affected, leading to a decline in both vehicle sales and production. Despite this decline, the transportation sector as a whole continued to attract foreign direct investments (FDI). In 2023, foreign companies poured roughly US$2 billion into the country’s vehicle and other transportation subsectors, highlighting the continued potential that investors see in this sector.

In terms of land transportation, infrastructure projects supporting rail transport such as the Light Rail Transit (LRT), started operations in mid-August 2023. Additionally, the development of Phase 2 of the Mass Rapid Transit (MRT) Jakarta, which includes new routes, is currently underway, with 6 kilometers already completed out of a total of 13.3 kilometers. Moreover, railway transportation saw a year-on-year increase of 69.37 percent in the number of passengers nationwide.

Sea transportation is also an important subsector of the transportation industry, primarily due to the trade sector’s heavy dependence on this mode of transportation. It is highly favored for its perceived economic efficiency in transporting goods. Although sea transport may not be the main method of transportation for many individuals, the number of passengers using sea transport in 2023 increased by 13.30 percent compared to the previous year.

Furthermore, air travel in Indonesia continues to rise with the increase in economic activity. The number of passengers using domestic air transportation increased by 32.69 percent year-on-year. Additionally, Soekarno Hatta International Airport has surpassed Singapore’s Changi Airport to become Southeast Asia's busiest airport in April 2024. According to reports, the airport's flight seat capacity has also reached 3.34 million, the highest among airports in the Southeast Asia region.

Latest News

April 25, 2025

The Indonesian stock market experienced a modest but meaningful recovery this week, buoyed by an announcement from United States President Donald Trump that the implementation of his import tariffs would be delayed for the next 90 days for most countries, excluding China, Mexico and Canada. This pause offered global markets a reprieve from an escalation in trade tensions, and Indonesia was no exception.

Just before Trump’s announcement on April 9, the Jakarta Composite Index (JCI) dropped to a low of 5,967. As news of the tariff pause broke and market sentiment began to shift, the JCI had rebounded by the following Monday (April 14) to 6,445 up 8 percent. Improved investor outlook was also reflected in trading volumes that surged to 15 billion shares on April 21, up from 11.8 billion recorded on April 11 and 12.2 billion at the end of March.

This upward trend in market confidence is largely attributed to growing optimism that Washington might recalibrate its tariff policy during the 90-day pause. The US is currently facing significant economic strain, not just in its financial markets but also in the real economy. Trump's tariff policy, which aims to revitalize domestic industries and bring jobs back to the country, has run into practical roadblocks. While its objective is to redirect US capital away from foreign investments and back into domestic production, the reality is that many sectors of the US industrial base are ill-equipped to absorb this influx of capital efficiently, potentially leading to significant waste.

Building the US’ industrial capacity is not something that can be accomplished overnight. Recognizing this, many analysts believe that Trump's current approach of exempting select countries while maintaining pressure on key competitor China and major trade partners like Canada is a compromise strategy, allowing the US to maintain some continuity in international trade as it attempts to reconfigure the economic architecture. Unless there is a sudden shift in the condition of the US economy, this blanket tariff policy is widely expected to undergo some revision in the months ahead.

From Indonesia’s standpoint, the current situation presents a valuable opening. As the US has become increasingly entangled in trade spats, particularly with China and the European Union, its export options have narrowed. Retaliatory tariffs from these major trading partners have restricted US access to some of its largest markets and opened a window for countries like Indonesia to fill the gap.

In response, the government is preparing a strategic proposal to increase its imports of US energy commodities, particularly crude oil and liquefied petroleum gas (LPG). According to Energy and Mineral Resources Minister Bahlil Lahadalia, Indonesia is looking to import up to US$10 billion worth of these commodities, or roughly Rp 168 trillion. According to the ESDM's estimates, they expect to increase the portion of US crude oil from 4 percent of total crude oil imports to 40 percent.

The government is currently evaluating the logistical and financial implications of such a significant change. As a basis for comparison, Indonesia's imports from the US throughout 2024 were only $430.87 million for crude oil and $3.79 billion for LPG. Currently, the US supplies around 54 percent of Indonesia's LPG imports, so the new import increase policy would be primarily for crude oil.

Bahlil noted that US crude oil prices were comparable with those in the Middle East. Nevertheless, Jakarta sees this energy import initiative as a bargaining chip in broader trade discussions. Given that the US exports large volumes of crude oil to the Netherlands and LPG to China, there is reason to believe that surplus inventory would allow Indonesia to negotiate more favorable prices.

Whether or not this new policy will come to pass is still up in the air, especially as China has recently begun lobbying against Indonesia's plans for concessive trade negotiations with the US. On April 21, Chinese officials met with representatives of the Defense Ministry and Foreign Ministry to discuss a possible coalition against the US' tariffs.

Chinese Foreign Minister Wang Yi said the US' tariffs are an unprovoked aggression that disrupted the flow of international trade. There is little guarantee that attempts to placate the US would prevent similar abuses in the future, which is why other countries need to come together instead to stand against the US' policies.

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