INDONESIA FORGES AHEAD.

Indonesia was the country hardest hit by the December 2004 earthquake/tsunami disaster. The epicenter of the quake was located 150 kilometers (93 miles) off the north coast of Sumatra, the largest of Indonesia's 17,508 islands. The loss of life was staggering and tragic, and destruction in some areas of the country was total. On January 19, 2005 Bloomberg News quoted Indonesia's Minister for Economic Planning as saying that it would cost US$4.5-billion to restore infrastructure in North Sumatra and Aceh. Donor conference reports suggest much of the cost is likely to be covered by donations.

What effect is this likely to have on Indonesia's economy? In the same Bloomberg News report the World Bank was quoted as saying the cost of reconstruction, which comes to about 2.3 percent of Indonesia's GDP could slow Indonesia's economic growth.

But the day after the Bloomberg story appeared, the Governor of Bank Indonesia (BI), Indonesia's central bank, told a gathering of bankers from all parts of Indonesia that the BI was expecting GDP to grow between 5 percent and 6 percent in 2005, somewhat better than the 5 percent growth expected for 2004.

The Governor told the audience of bankers, "The government commitment to promoting development projects with added value for the economy, such as toll roads, ports, telecommunications and transportation, and the rail network is a key factor sustaining our optimism for improvement in sources of economic growth and especially investment." He said further, "For the general public, the present conditions provide greater encouragement to take advantage of access to banking credit and has stirred their interest in purchasing consumer durables."

Durables purchases are normally a sign of consumer confidence. And historically Indonesia's GDP is sensitive to consumption expenditures. Likewise, infrastructure improvements stir consumer market development.

UNEMPLOYMENT AND UNDEREMPLOYMENT ARE REAL OBSTACLES TO GROWTH FOR INDONESIA

The population growth rate for Indonesia, the biggest country in the region by far, is equal to the regional average of 22 per thousand for Southeast Asia. Job creation has not kept up with growth of the labor force in recent years, and it is unlikely that the situation will improve much further in 2005. Unemployment is running about 8.7 percent, and this continues to erode consumer confidence. Indonesias population reached 219- million mid-2004, which amounted to 40 percent of Southeast Asias 548-million inhabitants. According to data released by the Population Reference Bureau (PRB), Indonesias population will reach 276-million by 2025. Also, according to that source, Indonesia is going to have a population of 309-million people in 2050. The PRB revealed that a only 42 percent of Indonesias population lived in urban areas during 2004 (it's the world's largest nation made up of islands) and that the countrys population density is a comparatively moderate 297 people per square mile. Another source of demographic data, the CIAs World Factbook, indicates that 30 percent of Indonesias population was birth14 years old in 2004, while 65 percent was 1564 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 1.4 percent in 2004 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 birth14 years old, while 58 percent will be aged 1559, and 22 percent of the populace will be 60 years of age and over.