Indonesia is the worlds largest archipelago consisting of five major islands and roughly 13,700 islands scattered over

5,120 kilometers (Hartanto, 2010). Fifty six percent of islands are unnamed and only seven percent of them are inhabited. Transportation and communication links are very limited between islands. There are more than 300 ethnic groups and more than 250 languages are spoken in Indonesia. Indonesian population is increasing year by year. Known from the data of BPS, in 2000 the population of Indonesia is 205.132.000. In 2001, it reaches 207.995.000. And lastly, in 2010, the number of population in Indonesia is 234.181.000. Counted from 1960, the population of Indonesia that is 95.259.000 compared with the population in 2000, there is a doubled size of population within 40 years. There are a lot of things that influence the increasing of population in Indonesia. The factors would be the increasing of health facility and technology that can reduce death rate, the increasing of fertility rate, and the migration. The number of people comes in and out is also counted as the factor of increasing in population The high population of Indonesia when compared with the vast territory should not raise the high density level when it is evenly distributed along the areas. In fact, the spread of population in Indonesia is concentrated on certain islands or big cities although Indonesian citizen mostly live in rural areas. Indonesia's population is concentrated in Java and big cities such as Jakarta, Bandung, Surabaya, Medan, Makasar, etc. Compared with the land areas of Java Island, the number of people still very large concentrated resulting in a high density on the island. This matter happened for so many reason of living. These reasons such as soil fertility, climate, topography, water resources, transportation, employment, education, etc. The distribution and population density for every province and island in Indonesia can be seen in below table.

Indonesian Population Density in 2010 We can see from above table that population of Indonesia is concentrated in Java island. The gap between the number is so high. More than 136.000.000 people is concentrated in Java. It is calculated from the summation of DKI Jakarta, West Java, East Java, Central Java and Banten. It covers a half of the total number of Indonesian population. While Java is home to more than 2,000 people per square mile, many of Indonesias other islands are less densely populated (http://www.indonesianembassy.org.uk/transmigration-8.htm).

Some residents will occupy a certain region on the earth and will raise a variety of characteristics. The condition of the population in the region is very influential on the growth and development of the region they occupy. Thus, the growth and development of the region as well as a country is highly dependent on the condition of the population as one factor. In addition, population growth in the earth's surface also closely related to the development of human civilization. Stated by Bintaro (1987), uneven distribution of the Indonesian population can certainly various problems, such as: a. In the area / densely populated island there is a decrease of quality environment. For example, forest area is reduced, appears critical land, the high level of pollution of water / land / air, natural resource inventories thinning. b. In the area / island whose inhabitants rarely, use of natural resources not optimal. For example, shifting agricultural system, the value of benefits of low natural wealth. c. Happened inequality progress (development) between regions / islands so that have the potential socio-political jealousy towards backward regions the more developed regions.
d. The government faces difficulties to make fairly distributed development, because

cause

in

the

region

whose

inhabitants

seldom

labor

shortages

educated / skilled. The main objective of national development is the fair distribution of its results which depends to a considerable degree on the population situation and population distribution. In Indonesia, a programme of unequal developmental distribution would only increase the gap between regions. Those participating in the development programme have become a source of labour and in important element of efficacy. And

yet, at the regional level, development has taken on variable characteristics and there should be bridges spanning the regions. The regional development programmes operating within the framework of the Presidential Instructions system (INPRES) have had an impact on the regional economies, as can be seen from the increased levels of employment and the multiplication of national products. As reported in Country Reports on Local Government Systems: Indonesia, Java Island is the biggest contributor of Gross Regional Domestic Product (GRDP), with about 56.6 per cent. By province, West Java is the biggest contributor (15.8 per cent) and Southeast Sulawesi province the smallest (only 0.4 per cent). This trend indicates an unbalanced economic development among the regions. The economic crisis, which began in mid-1997, devastated the Indonesian economy. As a result of the crisis, poverty levels increased substantially, especially in urban areas, with the island of Java suffering the most. The urban population living below the poverty line increased significantly from around 7.2 million (9.7 percent) to 17.6 million (22 percent) of the total population by 1998. Impact resulted challenges for running the business and also indirectly affect business through governmental policy. The result would be consisted of two different perspectives; firstly it would be from the high population density side which here we refer to Java islands the destination and from less density area or in other words the non-Java islands. But we cant simply judge that other than Java Island is more rural area because todays regional development impact on higher population density in some other areas than Java such as in Medan, Batam, Balikpapan, Makassar tends to prove that urban area is also growing in outside Java though its not as attractive as Java yet. The thing can make more investment deploy in Java. It causes the more jobs provided in the island. The more the job, the higher the salary because firm must competes with other firms to get the best talent. The higher the salary in Java and Bali creates higher segment market that means the more demand on normal goods and luxury goods especially in more urban areas. This condition could be seen as opportunity from growing high segment market to do business in such areas such as leisure business,

beauty and skin care business, jewelry, electronic home appliances, IT and personal computers, mobile phone, luxurious cars, convenience store etc. Therefore, demand for business which relates to after-sales services or complimentary product from those sectors are also tends to be increasing. Also, higher salary can contributes positively to the growth of small business in Indonesia especially in the low inflation time people would tends to reinvest their money rather than deposit the money. This higher segment market also demands for high quality of education from the basic elementary school until the graduates levels. It explains why Indonesian best universities and international college are mostly located in Java. This business also tends to be the important drivers that keep people to come to Java. Besides the business perspective, social perspective is also considered. To some extent higher population density can cause several social and environmental problems. Social problems would consist of the increasing numbers of unemployment (since supply of labors is exceeding demand), which then relates to increasing poverty rate. Somehow it seems like a contrast to our analysis in previous passage. The bottom line here is that actually there is a rising gap between poor and rich as the impact of the high population density. From above explanation, we can see that centralizing of population density in Java can be a big opportunity to conduct a business. High GDP, a lot of consumer and the high infrastructure development is affecting in the business success. But the uneven distribution of population also cause bad effect such as social and environmental problems that will be also concentrated in the high density area. REFERENCES Bintarto, R. 1987. Urbanisasi dan Permasalahannya. Ghalia Indonesia. Jakarta. Biro Pusat Statistik, 2002. Jakarta. Hartanto, Wendy, 2010, The 2010 Indonesia Population Census, Statistics Indonesia. -------------, Indonesia Population Imbalance, Indonesia Embassy can be accessed through http://www.indonesianembassy.org.uk/transmigration-8.html

TOPICAL PAPER

GENERAL BUSINESS ENVIRONMENT

(Demographical Environment)

The Gap of Population Density in Indonesia

Lecturer: Dr. Anna Marie Watie, MA.

Prepared by: Ifti Wulansari 10/310069/PEK/15242 Batch 55 International Class

MASTER OF MANAGEMENT PROGRAM FACULTY OF ECONOMICS AND BUSINESS GADJAH MADA UNIVERSITY YOGYAKARTA 2011