Construction industry in Indonesia - statistics & facts
The construction sector is the fifth-largest contributor to Indonesia’s GDP, and investments in the country’s construction sector are among the largest in Asia. In recent years, the Indonesian government has focused on intensive infrastructure development to increase connectivity between thousands of islands across the archipelago. As a result, the construction industry has been steadily thriving, with promising growth opportunities in the coming years.
Currently, the government is racing to build the National Strategic Projects (Proyek Strategis Nasional), a list of high-priority infrastructure initiatives consisting of the development of roads, railways, airports, public housing, water systems, and other infrastructure works. Notably, this includes the development of Nusantara, a new city in East Kalimantan, set to replace Jakarta as Indonesia’s capital. These strategic projects have driven the construction sector to thrive, with aims to decentralize growth and promote regional equality in the world’s largest archipelago.
Furthermore, most small-sized construction companies in Indonesia struggle to sustain their businesses and compete against large contractors. Smaller construction companies often lack the heavy equipment and capital required in large-scale infrastructure development projects. Close collaboration between the government, foreign investors, and the private sector is important to maximize the industry’s potential.
Reorienting Indonesia’s construction sector: building for equality
For decades, Indonesia’s infrastructure development has been focused on Java Island, its most populous island and home to its current capital, Jakarta. Despite growth in other regions, the value of completed construction works in Jakarta is nearly forty times more than in Bali and over thirty times more than in Papua. The Indonesian government has tried to address disparities by building toll roads across the nation. One of its largest infrastructure projects is the Trans-Sumatra Toll Road, spanning over one thousand kilometers to connect the northern and southern parts of Sumatra, the second-largest island in the archipelago and the sixth-largest globally.Currently, the government is racing to build the National Strategic Projects (Proyek Strategis Nasional), a list of high-priority infrastructure initiatives consisting of the development of roads, railways, airports, public housing, water systems, and other infrastructure works. Notably, this includes the development of Nusantara, a new city in East Kalimantan, set to replace Jakarta as Indonesia’s capital. These strategic projects have driven the construction sector to thrive, with aims to decentralize growth and promote regional equality in the world’s largest archipelago.
Challenges facing the Indonesian construction industry
The majority of Indonesia’s construction establishments are small companies, heavily reliant on local workers. Being a permanent construction worker in Indonesia is still rare today, as most are casual daily wage workers without certification and high formal education. A shortage of qualified labor is one of the major challenges in Indonesia’s construction industry and poses a risk to overall construction quality. Improved access to training and education is crucial to obtaining formal certification and improving workforce skills.Furthermore, most small-sized construction companies in Indonesia struggle to sustain their businesses and compete against large contractors. Smaller construction companies often lack the heavy equipment and capital required in large-scale infrastructure development projects. Close collaboration between the government, foreign investors, and the private sector is important to maximize the industry’s potential.
