As an archipelago with more than 17,000 islands and a population of nearly 280m people, Indonesia relies on various forms of passenger transport for connectivity and economic growth. The government has increased spending on transport and infrastructure in recent years, further supported by private funding under public-private partnerships (PPPs).
Transport has been dominated by cars for decades, with most transport routes centred around the densely populated capital, Jakarta. In recent years the government under outgoing President Joko Widodo, better known as President Jokowi, has introduced policies to diversify the transport available and create links between major cities, as well as improve connectivity in rural locations through road, rail and maritime development. Notably, in August 2019 Indonesia announced that it would build a new capital, Nusantara in the province of East Kalimantan on the island of Borneo. In August 2024 the Indonesian government hosted Independence Day celebrations in the developing city for the first time.
Structure & Oversight
The government is working on a long-term plan to transform Indonesia from a middle-income country to an advanced-income one under Golden Indonesia 2045, with infrastructure development one of the key components of this vision. Several ministries are involved in developing and managing Indonesia’s transport and infrastructure sectors, including national development planning, finance, energy and mineral resources, industry, transport, and public works and housing. President Jokowi’s government has made strides in terms of economic development, supported by heavy investment in infrastructure and other key segments. Prabowo Subianto, who won the presidential election in February 2024, has said that he will largely continue the policies of President Jokowi when he takes office in October 2024.
There are several long-term and medium-term strategies in place aimed at economic development, which have implications for the transport and infrastructure sectors. In May 2019 the country introduced the Golden Indonesia 2045 economic plan to establish it as an advanced, prosperous country by 2045, which will mark the centennial of its independence. To achieve this overarching strategy, the government introduced the National Medium-Term Development Plan (RPJMN) 2015-19, which was followed by updated versions for 2020-24 and 2025-29.
Investment Strategies
A key aim of the national vision is to diversify the economy beyond Jakarta. In 2011 the government launched the Master Plan for Acceleration and Expansion of Indonesia’s Economic Development, which provides a roadmap for growth through to 2025, including improved transport connectivity in six economic corridors across the country: Sumatra, Java, Kalimantan, Sulawesi-North Maluku, Bali-Nusa Tenggara and Maluku-Papua.
Development policies are supported by national strategic projects (PSNs), the selection and evaluation of which the Committee for Acceleration of Prioritised Infrastructure Delivery began in August 2016. The government will contribute approximately 12.5% of the funding needed to complete the PSNs, while 30% will come from government-owned enterprises and 57.5% from the private sector. In October 2023 the government announced it would be removing several projects from the list of PSNs due to financial constraints, including the Rp5trn ($325m) Ambon New Port on Ambon Island, and the Kisaran-Rantauprapat, Langsa-Lhokseumawe, Lhokseumawe-Sigli and Dumai Sigambal-Rantauprapat-Muara Enim toll roads. However, in March 2024 the government announced 14 new PSNs that would not require government funding. As of February 2024, 195 PSNs had been completed at a cost of Rp1520trn ($98.8bn), with Indonesia aiming to complete an additional 41 projects during 2024.
Among the most notable public infrastructure projects is Nusantara, the new capital. In August 2024 Independence Day celebrations were held in the new city for the first time. An estimated Rp466trn ($30.3bn) is being spent on the project to move the capital to Nusantara, with its population expected to reach 1.2m by 2029. The government plans to develop Nusantara sustainably, aiming for 80% of the city to be reachable by public transport. Significant private investment is needed to develop major projects such as the metro system, bus network and autonomous minibuses, as well as the requisite infrastructure connecting Nusantara with neighbouring cities. Numerous incentives are being offered to entice private investors to participate in the development of the new capital, including a 100% corporate tax exemption for up to 30 years if a company invests at least Rp10bn ($650,000) and super-tax deductions for companies specialising in research and development, and vocational training.
The 2024 State Revenue and Expenditure Budget allocated nearly Rp423trn ($27.5bn) to infrastructure, a 5.8% increase compared to the approximately Rp400trn ($26bn) allocated in 2023. This increase in infrastructure spending is expected to help President Jokowi oversee the completion of several strategic projects before he leaves office, with those projects aimed at driving economic growth; improving connectivity and transport, energy, electricity and food; and completing outstanding PSNs.
Performance & Investment
For several decades improving passenger transport on Java was a focus for successive governments. President Jokowi’s administration has emphasised the geographical diversification of projects, with Sumatra, Sulawesi and Papua among the beneficiaries. According to Budi Karya Sumadi, minister of transportation, as of May 2024 Indonesia had completed 25 PSNs in the transport sector since 2020, with another four expected to be completed in 2024 and two more the following year.
While the development of transport infrastructure has been a cornerstone of President Jokowi’s administration, the government recognised a need for private sector participation in order to transform the country’s transport network. Considering this, the government has increased its reliance on PPPs in recent years, with Presidential Regulation No. 38 of 2015 introduced to make PPPs more attractive to investors. The government uses several mechanisms to encourage investment through PPPs. Specialised institutions provide risk-sharing options for companies entering such partnerships, one being the Indonesia Infrastructure Guarantee Fund, a government-owned enterprise established in December 2009; and Indonesia Infrastructure Finance, a private company providing funding for infrastructure projects established in January 2010. Elsewhere, the Indonesia Investment Authority – the country’s sovereign wealth fund – also helps ensure projects are financially viable by attracting equity investment from international partners.
Public transport use is steadily increasing in line with network expansion and improvements. In the first quarter of 2023 railway transport registered a 69.4% year-on-year (y-o-y) increase in passengers, followed by a 16.1% y-o-y increase in the first quarter of 2024. In the first quarter of 2023 transport by sea and domestic airlines saw rises of 13.3% y-o-y and 32.7% y-o-y, respectively. Meanwhile, during the same period the GDP contribution of the transport and storage sector increased by 15.9% y-o-y. Growth has been maintained since then, with the sector recording a GDP expansion of 8.7% y-o-y in the first quarter of 2024.
International Funding
Foreign investment also has a key role to play in infrastructure development in Indonesia. In April 2023 Janet Yellen, US treasury secretary, and Sri Mulyani Indrawati, Indonesia’s minister of finance, signed the $649m, five-year Indonesia Infrastructure and Finance Compact. Within this agreement, the Advancing Transport and Logistics Accessibility Services project was allotted over $350m in funding to facilitate greater capacity for infrastructure planning and preparation at the municipal level, with the remaining funds split between the Access to Finance for Women-owned/Micro-, Small and Medium-Sized Enterprises Finance initiative, and the Financial Markets Development Project.
A strategic priority of policymakers is reducing the burden of high logistics costs on Indonesia’s economy. To this end, in June 2020 the government introduced a national action plan for the country’s logistics ecosystem to reduce related costs from 24% of GDP to 17% by 2024. This endeavour should be supported by the completion of target projects, including 36 ferry ports by 2024, with 11 completed as of the end of the first quarter of 2023. The plan also includes the building of 10 new airports serving 43 air routes.
Three of the five major construction projects that broke ground in 2023 fall under transport. The first was a container port with a capacity of 3m twenty-foot equivalent units (TEUs) and an accompanying 110-ha industrial logistics park in Gresik, East Java, the construction of which began in the third quarter of 2023 The second was the 6.4-km Velodrome-Manggarai light rail transit (LRT) system being built in Jakarta, with testing expected to begin at end-September 2024. The third is the Nusantara International Airport, which is expected to be operational by late 2024.
Sustainability
In recent years the government has focused increasingly on developing sustainable modes of transport, as it seeks to achieve the country’s commitment to reaching net-zero carbon emissions by 2060. The government relies heavily on financial support from development banks and international donors for its sustainable infrastructure. In 2022 the International Energy Agency helped the Ministry of Energy and Mineral Resources develop a sector roadmap to reach net-zero by 2060.
According to the roadmap, Indonesia’s transport sector accounted for one-third of the country’s energy consumption and emitted approximately 40% of its CO volumes. Trucks tended to be the biggest emitters, producing approximately 50m tonnes of CO compared to 35m tonnes from cars and 15m tonnes from shipping and aviation. In addition, fuel subsidies provided by the government have led to the overconsumption of petrol-fuelled vehicles, including twowheeled vehicles, cars, trucks and buses.
Electric Vehicles
Indonesia’s electric vehicle (EV) market is expecting to see a substantial expansion over the coming decades. Guided by the country’s nationally determined contribution to help it achieve the objectives of the Paris Agreement, its goal of becoming a net-zero economy by 2060, and the LongTerm Strategy for Low Carbon and Climate Resilience 2050 published in 2021, the government hopes to electrify much of its transport sector. Indonesia targets the production of 600,000 EVs by 2030, while also aiming for EVs and related components produced in Indonesia to comprise 60% of EVs sold in the country by 2027. The aim is to have 13m electric motorcycles, along with 2.2m new and retrofitted electric cars on the roads by 2030. In June 2021 the Indonesian government announced that the country would be selling only EVs by 2050, with all motorcycles sold to be electric by 2040 and all cars by 2050.
Investment has been made in developing EV charging stations across the country. According to the Ministry of Energy and Mineral Resources, approximately 31,850 charging stations are required to support the widespread usage of EVs. Perusahaan Listrik Negara (PLN), the country’s sole electricity distributor, projects that there will be more than 24,700 charging stations by 2030. However, the International Council on Clean Transportation noted in a February 2024 report that the methodology used by the ministry and PLN to reach these figures was unclear.
There is significant potential for EV battery manufacturing in Indonesia, as the country is home to the world’s largest nickel reserves and produces around 40% of the world’s nickel, with the potential to increase this share to 75% by 2030. South Korea’s Hyundai and China’s Wuling Motors have launched production facilities in Indonesia, which is expected to boost domestic manufacturing and support job creation (see Industry chapter). In May 2024 President Jokowi met with Elon Musk, CEO of US-based Tesla, to propose building a company plant in the country.
The development of green infrastructure is being supported at the government level by Indonesia’s foreign partners. In October 2019 the governments of Indonesia and Germany agreed on the terms of the bilateral Indonesian-German Green Infrastructure Initiative, with financing provided by the German Development Bank KfW. The project supports the development of climate-friendly green infrastructure projects in Indonesia, with loans of up to €2.5bn and technical assistance. Elsewhere, the Comprehensive Investment and Policy Plan – led by Japan and the US, and signed at the November 2022 G20 summit in Bali – will provide funding for Just Energy Transition Partnership Indonesia to support emissions reductions. The plan provides $20bn in funding from global lenders to reduce Indonesia’s reliance on coal and help develop renewables capacity.
Roads & Bridges
Road transport has long been at the centre of Indonesia’s transport policy, as it is the predominant mode of transport. Growing urban populations and an expanding middle class have led to a higher number of cars on roads, creating challenges such as pollution, traffic congestion and road fatalities. The road network has expanded significantly in recent years, improving connectivity between cities and connecting rural parts of the country with urban centres. The government plans to invest in road projects to improve intra-island and inter-island transport links, and establish Indonesia as a gateway to South-east Asia and the Pacific.
In addition to enhancing road connectivity beyond Java, the government is aiming to reduce congestion and improve mobility in the capital. In July 2024 construction is scheduled to begin on the JORR Elevated Cikunir-Ulujami Toll Road, which aims to reduce traffic density in the capital under the oversight of the Ministry of Public Works and Housing (MPWH). The road is expected to open in April 2027. One of the largest road projects currently underway is the MPWH-managed Trans-Papua Highway, which is expected to increase economic development in the Papua and West Papua provinces, as the islands were previously only connected by air.
The new capital of Nusantara is expected to be home to around 1.2m people by 2029, meaning there is a need for new road networks in the region. The nearby port of Balikpapan will be a gateway to the new capital, connecting people and trade. The commute currently takes around two hours and 15 minutes, covering 95 km. However, a new toll road under construction between the two cities will shorten the travel time to approximately 45 minutes and 57 km, with the route 90% complete as of July 2024.
While road connectivity is vital for economic growth and reducing poverty in rural areas, there are environmental concerns regarding their development around Indonesia’s forests and shorelines. The Balikpapan-Nusantara road has faced opposition, as it cuts the forest connection between Sungai Wain Forest and Balikpapan Bay. Such concerns have previously led to delays in developing transit networks in Indonesia.
Rail
The rail network has expanded in recent years in line with the stated national targets and objectives. The RPJMD for 2020-24 targets 7451 km of railway lines by 2024, and in July 2022 the government announced that it was aiming to expand the network to more than 10,500 km by 2030. As of May 2024 both freight and passenger rail were mainly concentrated in Java. As part of its plans for economic diversification, in July 2023 the Ministry of Transportation (MoT) announced it would prioritise the development of railway lines connecting Nusantara with Balikpapan and Sepinggan Airport, as well as one connecting the new capital’s administrative centre.
The MoT hopes to attract more private and international funding to further develop railways to increase competition and improve services. China was a major funder of the 142-km Jakarta-Bandung high-speed rail network, which began commercial operations in October 2023, cutting the travel time between the two cities from three hours to 40 minutes. The $7.3bn project was part of the China-led Belt and Road Initiative for transnational infrastructure development, and was built by Kereta Cepat Indonesia-China, a joint venture between four Indonesian state-owned enterprises and China Railway International.
Several other rail projects have recently been completed or are under development. In March 2023 President Jokowi inaugurated an 80-km railway line between the Maros and Barru districts in South Sulawesi. This line is part of the Makassar–Parepare railway, the first phase of the 145-km Trans-Sulawesi Railway that plans to connect two major port cities, and provide another transport option for the Makassar, Parepare, Barru, Pangkep and Maros districts once complete. It is expected to create a new economic corridor and support the livelihoods of rural communities.
Urban Transport
Jakarta has undergone a major transformation in recent years thanks to significant investment in toll roads; modern public transport systems, such as the Mass Rapid Transit (MRT) and LRT systems; and the new Soekarno-Hatta International Airport. These have enhanced connectivity and helped alleviate congestion. Indeed, Jakarta has experienced some of the most extensive infrastructure growth in South-east Asia. For instance, the city’s bus rapid transit system, which launched in 2004, transports more than 1m passengers per day, offering 240 routes and covering more than 250 km.
As of December 2022 residents of Jakarta were estimated to be spending as much as 20% of their monthly income on transport around the city. Informal options, such as motorcycle taxis, play a major role in Jakarta’s transport system. In recent years they have become more digitalised, formalised and regulated, thanks in part to the emergence of ride-hailing applications, such as Gojek and Grab.
In 2024 Jakarta’s MRT system projects to transport more than 33.6m passengers in total, accounting to roughly 92,000 per day. At the end of 2023 the system carried more than 33m passengers, or approximately 91,000 per day, compared to the operator’s initial target of 70,000 per day for the year. Providing further options, the LRT connecting various places in Greater Jakarta came into operation in August 2023. The project cost Rp32.6trn ($2.1bn) to develop and can transport 114,000 passengers per day, equivalent to 41.6m per year. In 2018 the 23.4-km, 13-station Palembang LRT system launched in South Sumatra. The line is owned and operated by the government-owned transport firm Kereta Api Indonesia, and it connects the city’s Sultan Mahmud Badaruddin II International Airport with Jakabaring Sport City.
Aviation
As of August 2024 Indonesia had 35 commercial airports managed by the government-owned companies Angkasa Pura I (AP I) and Angkasa Pura II (AP II). AP I operates mainly in the east of the country, while AP II manages airports in the west. Jakarta’s Soekarno-Hatta International Airport serves the largest number of international flights. Approximately 6.8m international passengers passed through Indonesia’s airports in 2022, down from a pre-Covid-19 pandemic total of approximately 18.5m in 2019. In addition, in 2022 there were 52.8m domestic passengers, down from 76.2m in 2019. Although Statistics Indonesia (BPS) had yet to release full-year figures for 2023 as of May 2024, there are indications that arrivals increased y-o-y in 2023, with AP II reporting a 30% annual increase in passengers at its 20 airports in comparison to the previous year.
In early 2023 the MoT announced a budget of approximately Rp1.2trn ($78m) to build seven new airports to improve connectivity within the country – Banggai Laut Airport, Pahuwato Airport, Bolaang Mongondow Airport, Sobaham Airport, Singkawang Airport, Mandailing Natal Airport and Siboru Fakfak Airport. Between 2015 and 2023 President Jokowi’s government built 25 new airports, as well as renovated or expanded 38 more, several of which connect previously isolated regions of the country. In November 2023 ground was broken on the 347-ha Nusantara International Airport in the new capital. The airport, which is expected to cost Rp4.2trn ($273m), is projected to be operational by the end of 2024.
As Indonesia’s tourism market expands, the government is planning to construct a secondary airport for Bali. The government also hopes to develop other regions to alleviate the burden on the island and attract tourists to those parts of Indonesia, as Bali draws an estimated 40% of the country’s international visitors. Destinations include Lake Toba on Sumatra; Mandalika, a resort area on Lombok; and Likupang in North Sulawesi, a popular diving and snorkelling site. This expansion may also lead to the construction of new airports and the expansion of existing ones.
Ports
Sea transport plays an important role in connecting Indonesia’s 17,000 islands. The country is home to around 636 ports, comprising 102 commercial ports and 534 non-commercial ports, with the country’s National Port Master Plan (NPMP) outlining the development of a further 1321 ports. Indonesia’s freight and logistics market size is projected to be $122.2bn in 2024, according to Indian market research firm Mordor Intelligence. The sector is expected to grow at a compound annual growth rate of nearly 6.5% to $178.1bn by 2030. Indonesia ranks among the top-20 countries in terms of container traffic, with UN Trade and Development reporting a container port throughput of 12.4m TEUs in 2022, down from 12.9m in 2021. While the largest islands are well connected by government and privately-owned ferries, inland waterways are not well established except in parts of Eastern Sumatra, Papua and Kalimantan.
Historically, Indonesia’s port infrastructure had been underfunded, leading to much of its maritime infrastructure being outdated and insufficient for the country’s current transport and freight needs. In response to this, the NPMP provides a development path through 2030. In August 2020 the MoT announced that Indonesia would require $47bn in funding to meet the NPMP targets. This amount includes $12.9bn for ports in Sumatra, $15.3bn for ports in Java, $2.4bn for ports in Bali and Nusa Tenggara, $4.6bn for ports in Kalimantan, $3.9bn for ports in Sulawesi and $7.9bn for ports in Papua. Around 32% of the financing is expected to come from the government, with the rest coming from the private sector.
One company that has entered the market is Dubai-headquartered DP World, which manages an estimated 9% of the world’s handling capacity. In June 2023 the company which announced that it planned to invest in Belawan, the largest port in Sumatra, expanding its capacity from 600,000 TEUs to 1.4m TEUs, and managing operations at the Belawan New Container Terminal. In 2021 DP also signed a $1.2bn long-term deal with Indonesia’s Maspion Group to build an international container port and industrial logistics park in the city of Gresik in East Java, putting it in a position to take advantage of the port’s location on the Malacca Strait, one of the world’s busiest sea lanes. In October 2023 a groundbreaking ceremony was held to mark the beginning of construction on the new container terminal in Gresik, which is expected to be capable of handling up to 3m TEUs once completed.
Outlook
Indonesia’s transport sector has undergone a rapid expansion in recent years, supported by substantial government investment and increased participation from entities in the country’s private sector. The government’s long-term infrastructure strategies have created a clear framework for transport development through 2030 and beyond. The expansion of road, rail, sea and air networks in islands across the country is expected to support the development of new economic corridors. Greater connectivity should enhance job opportunities and help improve the lives of people living in rural areas, while the building of new air and sea ports is expected to spur further expansions in both trade and tourism.
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