INDONESIAN CONSUMER DEMAND TO GROW.

Internal consumption has been the engine driving Indonesias economic growth in recent years, and it should take on even more importance during 2004.

A recent report released by the Central Bank of Indonesia, projected that private sector demand for goods and services could rise by as much as 5 percent during 2004, but it is more likely that growth will be closer to 4.5 percent. Internal private sector consumption accounts for approximately 70 percent of Indonesias GDP.

Grass roots expenditure on goods and services will get a boost this year as about 24 of the nations political parties start campaigning seriously in anticipation of federal elections. The parties will distribute funds and resources to low income households in rural areas in order to sway unsophisticated voters.

Poor distribution of wealth is one of the factors that inhibits broad-based growth in household expenditure. Households with discretionary income are highly concentrated in Jakarta and a few other large metropolitan areas. Rural residents, which account for about 60 percent of Indonesias total population, are isolated from formal channels of consumption by poverty as well as poor distribution of goods and services.

Slow growth in real household income has not affected demand for telecommunications services. Almost 7 percent of Indonesias population has cellular phones at the moment, and that leaves room for considerable growth over the next few years. The number of cellular phone customers is projected to grow more than 40 percent during 2004, reaching a total of 20 million by 2005. Leading telecommunications providers estimate that 65 to 75 percent of revenues during 2004 will be generated by their cellular phone business.

Demand for paper and office supplies should experience healthy gains this year. Indonesias Pulp and Paper Industry Association predicts that paper production will rise 6 percent in 2004 in anticipation of increased internal sales. Sales of other office supplies will grow at a slower pace as business spending emerges from the doldrums.

_{JOB CREATION FALLS SHORT OF LABOR FORCE GROWTH The population growth rate for Indonesia is similar to the average for Southeast Asia and the birth rate of 22 per thousand inhabitants is equal to the regional average. Job creation has not kept up with growth of the labor force in recent years, and the situation will improve only slightly during 2004. Unemployment is running about 10 percent, and this continues to put downward pressure on consumer confidence.}

Indonesias population reached 221 million people during 2003, which amounted to just over 40 percent of Southeast Asias 544 million inhabitants. According to data released by the Population Reference Bureau (PRB), Indonesias population will reach 282 million people in 2025, or 28 percent more than the level in 2003. Also, according to that source, Indonesia will have a population of 316 million people in 2050, or 43 percent more than in 2003.

The PRB revealed that a scant 40 percent of Indonesias population lived in urban areas during 2003, and that the countrys population density stands at about 300 people per square mile. By the year 2050, Indonesias population density should reach 429 people per square mile.

Another source of demographic data, the CIAs World Factbook, indicates that 30 percent of Indonesias population was birth-14 years old in 2003, while 65 percent was 15-64 years old, and 5 percent of the populace was 65 years of age and over.

CIA statistics revealed that the countrys population growth rate was 1.52 percent in 2003, and the net migration rate was zero. According to the United Nations Population Division, in the year 2050, 20 percent of Indonesias population will be birth-14 years old, while 57 percent will be aged 15-59, and 23 percent of the populace will be 60 years of age and over.