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
The administration of Prabowo Subianto is reforming the disbursement of fuel and electricity subsidies to improve state budget efficiency. These subsidies have long been criticized for disproportionately benefiting upper-middle-class households, who consume more energy, rather than the poor and vulnerable groups they are intended to support. As a result, the government now aims to better target subsidy distribution and reduce its long-standing fiscal burden. The urgency to optimize subsidy spending has also grown amid rising expenditures for several major government programs.
Finance Minister Purbaya Yudhi Sadewa outlined the subsidy reform plan during a joint working meeting with state asset fund Daya Anagata Nusantara (Danantara) and House of Representatives Commission XI on Dec. 4. He acknowledged that the well-off, and even the ultra-wealthy, remain among the beneficiaries of energy subsidies. The reform aims to significantly reduce access for households in income deciles 8–10, redirecting support toward lower-income groups in deciles 1–4.
According to the National Integrated Social Economic Data (DTSEN), income deciles 1–5 cover individuals from extreme poverty to the middle-income bracket, while deciles 6–10 range from middle- to upper-income levels. The Finance Ministry has been given six months to finalize the subsidy distribution strategy, with the entire policy reform design expected to be completed jointly with Danantara within two years. Meanwhile, the Energy and Mineral Resources Ministry revealed that the reform will cover subsidies for liquefied petroleum gas (LPG) and electricity.
The subsidy reform will be formalized through a new presidential regulation (Perpres) that amends existing frameworks, including Perpres No. 117/2021, the third revision of Perpres No. 191/2014 on fuel provision, distribution and retail pricing, and Perpres No. 70/2023, which updates Perpres No. 104/2007 on the provision, distribution and pricing of 3-kilogram LPG cylinders.
On the financial administration side, the Finance Ministry has issued Ministerial Regulation No. 73/2025 on the provision, calculation, payment and accountability for compensation funds related to fuel pricing and electricity tariffs. Previously, compensation to Pertamina and PLN was disbursed quarterly or even semi-annually. Under articles 8 and 11 of the new regulation, Pertamina and PLN may now receive up to 70 percent of their compensation for subsidized fuel and household electricity tariffs following a monthly review by the Finance Ministry's Inspector General. The remaining portion will be disbursed after an annual audit by the Development Finance Comptroller (BPKP), as stipulated under Article 28. The initial compensation portion may also be adjusted based on overall budget conditions or previous audit findings from the Supreme Audit Agency (BPK).
Danantara CEO Rosan Perkasa Roeslani emphasized that energy subsidy reform would improve the cash flow of state-owned enterprises (SOEs) tasked with public service obligations. He noted that previous cooperation between Danantara and the Finance Ministry in shifting fertilizer subsidies toward a more market-based mechanism had progressed well.
As of October, realized government spending on subsidies reached Rp 314.9 trillion (US$18.91 billion), or 66.3 percent of the 2025 state budget allocation. This includes Rp 194.9 trillion in subsidies and Rp 120 trillion in compensation payments. Distribution of subsidized fuel reached 13,915 kiloliters (kL), or 72 percent of the 19,410 kL target; subsidized 3-kg LPG distribution reached 6.35 million kg (78 percent of the target); and electricity subsidies reached 42.5 million consumers, exceeding the target of 41.3 million.
Energy subsidy reform is necessary given the fiscal burden it imposes and the resulting constraints on priority government programs. However, overly aggressive cuts, an inherent risk amid current austerity, could have negative social impacts, weaken consumer spending and dampen economic growth. The government should explore ways to curb subsidy spending without introducing additional bureaucratic costs.
