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Bisnis Indonesia - Proyek Strategis Nasional: Selektif bangun infrastruktur
13 May 2025
By Afiffah Rahmah Nurdifa and Alifian Asmaaysi
Infrastructure development in Indonesia is being undertaken more selectively to support President Prabowo Subianto’s target of achieving 8% annual economic growth.
The first-quarter 2025 economic growth report for Indonesia has not been encouraging for all parties. Statistics Indonesia (BPS) announced that the country's economic growth in the first three months of the year reached only 4.87% year-on-year (YoY).
BPS reported that Indonesia’s Gross Domestic Product (GDP) at current prices for the January–March 2025 period was Rp5,665.9 trillion, while GDP at constant prices for the same period stood at Rp3,264.5 trillion.
Concerns were also voiced by Agus Harimurti Yudhoyono, the Coordinating Minister for Infrastructure and Regional Development. He stressed that the 4.87% YoY growth rate must be positively addressed by all ministries and agencies (K/L).
"We are aware of the economic growth figures for the first quarter. We must work hard and make an even greater effort to improve our economic performance," he stated at the regional consultation last weekend.
President Prabowo Subianto has previously outlined a programme aimed at achieving an 8% annual economic growth rate.
Agus emphasised that attaining this target will require dedication and hard work. He therefore urged all ministries and agencies under the Coordinating Ministry for Infrastructure and Regional Development to actively drive infrastructure development forward.
If this effort succeeds, Agus is confident that efficient infrastructure projects could help reduce poverty levels while simultaneously stimulating economic growth.
"We are striving to ensure infrastructure development contributes to poverty reduction. Furthermore, we hope to support sustained economic expansion in parallel," he asserted.
In addition to calling for extra efforts from ministries and agencies, Agus also announced that the Coordinating Minister for Infrastructure and Regional Development will soon tender the Giant Sea Wall megaproject. This initiative aims to protect Java Island while supporting national economic growth.
He intends to showcase this National Strategic Project (PSN) at the upcoming International Conference on Infrastructure (ICI).
"We want to present several infrastructure projects that require collaboration and backing from various stakeholders," he explained.
To attract potential investors for the Giant Sea Wall project, Agus highlighted that the design is currently being fine-tuned.
The project is envisioned not merely as a massive flood barrier but also as a catalyst for regional development.
"This will enhance land value, creating what is known as land value capture," he noted.
For this reason, he believes that a well-structured design is essential to ensuring the megaproject benefits Indonesia while also appealing to investors. "Investors will see the value not only in building the seawall but also in the opportunities to increase land assets," he emphasised.
Although Agus did not provide specific details, he mentioned that the megaproject would include residential areas and sports facilities.
"The development could encompass housing, business hubs, tourism centres, and sports facilities—offering multiple benefits," he remarked.
At present, Minister of Public Works Dody Hanggodo is conducting studies on funding options and feasibility assessments for the project’s implementation.
Dody stressed that the megaproject must be complemented by infrastructure for raw water provision to minimise groundwater extraction, which contributes to land subsidence.
"These initiatives are part of the broader vision for the Giant Sea Wall," he said.
The construction of the seawall is not a standalone measure. The Ministry of Public Works is integrating flood control with water supply programmes, including projects at Karian and Jatiluhur Dams, as well as wastewater treatment at river estuaries through the Jakarta Sewerage System.
Dody also highlighted the necessity of balancing flood mitigation efforts with clean water provision, ensuring residents reduce reliance on groundwater and mitigate land subsidence—one of the primary causes of flooding in Jakarta and surrounding areas.
The Ministry of Public Works is currently conducting funding and feasibility studies for the next stage of the seawall project, known as Stage B, which will span 21 km.
One key aspect under review is the design approach, whether to follow the Integrated Flood Safety Plan for Giant Sea Wall Stage B Jakarta prepared in 2020 or to adopt the 2016 Masterplan developed by Bappenas.
Beyond Jakarta, seawall projects are also underway in Central Java, aligning with the construction of the Semarang–Demak Toll Road and Semarang Harbour Toll Road.
Meanwhile, Bob Azam, Head of Employment at the Indonesian Employers Association (Apindo), has proposed increasing the tax-free income threshold (PTKP) to boost consumer spending, particularly among middle-income earners.
He noted that although government-funded tax incentives under Article 21 for labour-intensive industries are beneficial, they have not provided substantial stimulus.
"Any incentive has value, but ideally, we should be raising the PTKP for the middle class," Bob stated.
He stressed that increasing the PTKP threshold would lighten the tax burden on middle-income groups. However, he did not specify the ideal amount for the adjustment.
Ministerial Regulation No. 101/206 on PTKP Adjustments sets the current tax-free income threshold at Rp54 million per year for single individuals without dependents, equivalent to Rp4.5 million per month.
"Increasing PTKP effectively acts as an incentive for the middle class," he explained.
He pointed out that despite government tax incentives for labour-intensive industries, household consumption slowed in the first quarter of 2025.
This downturn has been partly attributed to weak spending among middle-class consumers and a contraction in government expenditure, which BPS reported declined by 1.38% YoY.
Most middle-class individuals do not qualify for social assistance, limiting their spending flexibility. However, they play a crucial role in consumption due to their purchasing power and large demographic presence.
To support economic growth, Apindo is urging the government to consider raising the PTKP threshold, allowing middle-income households greater spending capacity. This could also positively impact tax revenues, particularly through VAT collections.
"The focus now should be on providing incentives for the middle class to encourage spending, as our economy still relies on trickle-down effects benefiting higher-income groups," Bob observed.
For reference, the government introduced Article 21 tax incentives for workers in labour-intensive industries throughout 2025 under Ministerial Regulation No. 10/2025. However, household consumption in the first quarter of 2025 grew only 4.89% compared to the same period last year.
This sluggish consumption has contributed to slower economic growth, which fell to 4.87% in the first quarter, down from 5.02% in the previous quarter.
Bob also identified key factors behind the widespread layoffs occurring across various sectors and neighbouring countries.
According to records from the Ministry of Manpower, layoffs affected 24,036 workers as of 23 April 2025. Early-year trends indicate a sharp increase, with 18,610 layoffs recorded in February—nearly six times higher than January’s figure of 3,325 workers.
Bob stressed the need to anticipate the consequences of large-scale layoffs, warning that the labour market could soon become saturated with job seekers lacking sufficient employment opportunities.
