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How are you? May your business continue to grow rapidly and bring continued success. Unconsciously, we have entered 2025, bringing various new opportunities that are ready to be exploited by construction and infrastructure industry players.
As your partner in understanding risk and insurance, this blog is back to provide the latest insights regarding risk management and relevant protection solutions. We believe that careful planning, proper risk mitigation and optimal insurance protection are the keys to the success of any of your future projects.
This article will examine the great opportunities awaiting the construction industry in 2025, including trends, challenges, and strategies to maximize your potential. We hope this information can be a useful reference for your business.
If you found this article interesting and useful, don’t hesitate to share it with your colleagues who are also playing a role in building the future of the industry. Together, let’s make growth better, safer and more sustainable. Happy reading and good luck always!
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The construction industry is one of the key sectors that has a significant impact on Indonesia’s economic development. This sector plays an important role in strengthening physical infrastructure which is the backbone of economic growth, both in the context of domestic development and global competitiveness. Through various projects such as toll roads, airports, ports, bridges and housing, the construction industry supports mobility, trade and investment, as well as opening up economic opportunities in various other sectors.
The contribution of the construction sector to Indonesia’s Gross Domestic Product (GDP) is quite significant, contributing more than 10% of the total national GDP. In addition, this sector is a large workforce absorber, with millions of workers involved directly and indirectly, ranging from construction workers to experts in engineering and project management.
Its role also includes social development, such as providing affordable housing, reducing infrastructure gaps between regions, and supporting the growth of urban and rural areas. With increasing investment in strategic infrastructure projects, such as the Indonesian Capital City (IKN), the role of construction in future economic development will become increasingly vital, making it the main driver of Indonesia’s economic transformation.
Factors Driving Construction Industry Growth
- Government Infrastructure Projects
One of the main drivers of growth in the construction industry in Indonesia in 2025 is the government’s commitment to accelerate strategic infrastructure development. Large programs such as the National Strategic Project (PSN) include the construction of toll roads, ports, airports and railway lines to improve connectivity between regions.
Toll Roads: Projects such as the Trans-Sumatra Toll Road and the Trans-Java Toll Road will continue to be expanded, with the target of completing several new sections such as the Padang-Pekanbaru section, the Solo-Yogyakarta-Kulon Progo Toll Road.
Port: The Patimban Port Project in Subang, West Java, designed to support vehicle exports, will become a strategic logistics center. This project complements Tanjung Priok Port as the main hub.
Airport: Development of Kertajati International Airport and expanding the capacity of Soekarno-Hatta Airport are priorities to improve air connectivity.
Government policies that focus on green infrastructure are also a driving force, with support for sustainability-based development such as the use of environmentally friendly materials and energy efficiency. The new government in 2025 is expected to continue this infrastructure development agenda, with adaptation to global technological and sustainability needs.
- Private and Foreign Investment
Investment through the Public-Private Partnership (PPP) scheme is increasingly becoming a mainstay for funding large projects. This scheme allows private involvement in infrastructure development, thereby reducing the burden on the government. Some large projects attracting private investment include:
Balikpapan-Samarinda Toll Road and IKN Project (Capital of the Archipelago): IKN has become a magnet for foreign investors, with plans to build public facilities, housing and other infrastructure in the East Kalimantan region.
Batang Integrated Industrial Zone: This project is one of the main focuses to attract global manufacturing investment, including from large technology companies such as Tesla and Foxconn.
Solar and Hydroelectric Power Plants: Investment in the renewable energy sector is also increasing, with projects such as the Cirata Floating PLTS and the Kayan PLTA in North Kalimantan.
Foreign investors’ interest in construction projects in Indonesia is increasing, supported by a stable investment rating and large market potential. Investors from countries such as Japan, China and the United Arab Emirates continue to contribute to the sector through large-scale projects.
- Demand from Residential and Commercial Sectors
Rapid urbanization is the main driver of increasing demand for housing and commercial areas. With urban population growth continuing to increase, the need for adequate and affordable housing has become one of the main focuses.
Housing: Projects such as the One Million Houses Program launched by the government remain relevant, especially to provide housing for low-income people (MBR). On the other hand, large property developers such as Ciputra, Agung Podomoro, and Summarecon continue to build middle class and premium housing to meet urbanization needs.
Commercial Buildings and Industrial Areas: Demand for office buildings, shopping centers and industrial areas is also increasing, especially in metropolitan areas such as Jabodetabek and Surabaya. Projects such as the Delta Silicon Industrial Estate and the Modern Cikande Industrial Estate demonstrate the growth of this sector.
Apart from that, the trend of building smart cities in various cities such as Bandung, Surabaya and Makassar will encourage demand for technology-based construction, such as smart buildings and digital infrastructure.
Construction demand is also strengthened by increases in e-commerce and logistics, which create a need for smart warehouses and other logistics facilities in key industrial areas.
These factors provide a positive outlook for the construction industry in 2025, with a combination of large government projects, private and foreign investment, and the growing needs of the residential and commercial sectors.
Challenges to be Overcome
- Increase in Material and Logistics Costs
Rising material and logistics costs are a major challenge for the construction industry. Prices of raw materials such as cement, steel and asphalt experience fluctuations which are influenced by global market instability and inflation. Another influencing factor is the scarcity of raw materials due to increasing demand in various sectors. For example, increasing infrastructure development in many countries means supplies of steel and other construction materials are limited, causing prices to soar.
Global supply chain problems are also a challenge, especially in terms of procuring imported materials. Logistics disruptions caused by pandemics, geopolitical conflicts, or international trade policies often cause delays in the delivery of raw materials to project sites. This affects project efficiency and budgets, and forces construction companies to look for alternative local materials that may not always meet the desired quality standards.
- Skilled Labor Shortage
The high need for skilled labor for large projects, such as the construction of the Indonesian Capital City (IKN) and toll roads, presents significant challenges. The shortage of skilled labor in the construction sector not only slows down project completion, but also increases the risk of technical errors and work accidents.
One reason is the lack of adequate training for local workers to meet modern industry standards, including the use of advanced technologies such as BIM (Building Information Modeling) and automated heavy equipment. In addition, many skilled workers are moving to other sectors with more attractive incentives, such as manufacturing or the service industry.
To overcome this problem, construction companies and governments need to improve training and certification programs for construction workers. This program can be carried out through collaboration with educational and vocational training institutions, and involves learning technology such as virtual simulations. These efforts not only help produce a more competent workforce, but also encourage young people to consider careers in the construction industry.
- Regulation and Environment
Another challenge is meeting increasingly stringent regulations regarding sustainability and carbon emissions. The Indonesian government has introduced various policies that encourage environmentally friendly building practices, such as the use of recyclable materials, reducing construction waste, and adopting renewable energy. However, implementing these regulations is often a challenge for construction companies, especially those with limited funds and access to green technology.
Apart from that, increasingly high safety and quality standards also increase the burden on contractors, especially in large projects involving many parties. These challenges require close supervision and additional investment in safety training and the use of work tools that comply with standards.
These three challenges require integrated solutions, including government support, cross-sector collaboration, and investment in technology and human resource development. With the right steps, the construction industry can face these challenges and continue to grow amidst global competition.
Future Prospects and Strategy
- Strengthening Government and Private Collaboration
Collaboration between the government and the private sector will be key in completing large projects in the Indonesian construction industry by 2025. The Public-Private Partnership (PPP) scheme continues to be a mainstay for funding strategic infrastructure, such as the construction of toll roads, ports and public facilities in the capital city of the archipelago (IKN). This partnership allows the sharing of risks and responsibilities between the government and investors, so that projects can run more efficiently. For example, the development of the Batang Industrial Area involving various parties shows the success of collaboration to attract foreign investment and create jobs.
- Digital Transformation as a Competitive Advantage
Digitalization is one of the main strategies to increase efficiency and productivity in the construction sector. Technologies such as Building Information Modeling (BIM), drones, and the Internet of Things (IoT) enable more precise project planning, real-time monitoring, and reduced errors. Companies that adopt this technology are able to save time and costs, while improving construction quality. In addition, digital platforms for project management facilitate collaboration between teams, thereby speeding up decision making and increasing transparency. Digital transformation not only increases the competitiveness of domestic construction companies, but also expands opportunities to attract international projects.
- Focus on Sustainability for Long-Term Competitiveness
Sustainability is an important element in building long-term competitiveness. Demand for environmentally friendly construction continues to increase, both from a policy and market perspective. Initiatives such as the use of recycled materials, green building development, and energy efficiency provide new opportunities for construction companies to meet market needs while complying with sustainability regulations. By prioritizing sustainability, companies can reach wider market segments and enhance their reputation as responsible industry players.
This strategy will be an important foundation for ensuring inclusive, sustainable and competitive growth of the construction industry in the future.
The Important Role of Project Guarantee and Insurance Provider Services
Project guarantee and insurance services play a crucial role in ensuring the smoothness and sustainability of construction projects, especially those involving high risks. One of its main roles is to provide financial protection against various potential losses, such as material damage, work accidents, or disruptions in project schedules due to natural disasters or technical problems. This not only protects contractors, but also provides certainty for project owners and funders.
Guarantees such as a Performance Bond or Bid Bond help ensure that the contractor is able to complete the project according to the contract and specified specifications. Insurance such as Contractors’ All Risks (CAR) or Erection All Risks (EAR) provides comprehensive protection against the risk of physical damage during construction, including third party liability.
With this service, all parties involved have a higher level of confidence in the project. Additionally, surety and insurance providers often help manage risk proactively through risk assessments and regulatory compliance guidance. As such, they play an important role in creating a safer, more efficient and protected environment in the construction industry.
Why You Should Use the Services of an Official Insurance Broker for Construction Projects
Construction project insurance is an important element to ensure protection against various risks that can disrupt the continuity of the project. In choosing insurance, using the services of an official insurance broker such as L&G Insurance Broker provides significant benefits for project owners, contractors and other related parties.
As an experienced authorized broker, L&G Insurance Broker has expertise in designing insurance solutions tailored to the specific needs of construction projects. With extensive experience in the field of construction insurance coverage, L&G understands deeply the risks faced, ranging from physical damage to projects to legal liability to third parties. This expertise allows them to provide comprehensive protection recommendations, such as Contractors’ All Risks (CAR), Erection All Risks (EAR), and Performance Bonds.
Authorized brokers like L&G also act as independent intermediaries, representing clients’ interests in getting the best coverage from insurance companies. With a wide network in the industry, they can negotiate competitive premiums and ensure an efficient claims process in the event of a loss.
Additionally, L&G not only provides insurance, but also helps manage risk proactively through in-depth risk analysis and technical guidance. By choosing a trusted broker like L&G Insurance Broker, project owners can have certainty and peace of mind in carrying out their construction project, ensuring smooth running and comprehensive protection at every stage.
For all your insurance needs, Contact L&G Insurance Brokers Today!
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