"From Sabang to Merauke: Indonesia's Population – A Strength or Weakness in its

Economic Growth"

By: Kevin Ariyanto 3220300367

Professor: 陈骁骅

Introduction

Situated in the heart of Southeast Asia, Indonesia stands as an archipelagic marvel, a

nation of unparalleled beauty and diversity. Spanning a vast expanse from the western border

of Sabang to the eastern reaches of Merauke, Indonesia is a country that appeals to exploration

not just for its scenic beauty but for the richness of its resources, the diversity of its people, and

the sheer magnitude of its landmass.

Indonesia is the largest economy in Southeast Asia as well as a member of G-20.

Indonesia had a 4.94% economic growth in 2023 and the GDP of Indonesia based on the data

provided by the Badan Pusat Statistik Indonesia (Indonesia Central Statistical Agency) is

increasing over time. On the other hand, Indonesia is the 4th largest country in the world in

terms of population; according to the Indonesian Central Statistical Agency in 2023, the total

population is 277,534,122 people.

Is Indonesia's population a blessing or a curse? This question lies within the heart of

the nation's economic condition. With over 270 million people residing within its borders,

Indonesia takes pride in its human capital which could be its greatest asset. This essay will dive

deep into whether its large population has a visible effect on its economic situation, dissecting

the potential strengths of a dynamic and diverse workforce. Ultimately, this essay seeks to

uncover the intricate web of opportunity and obstacles woven by Indonesia's population growth,
revealing whether its people are the key to unlocking its economic potential or the lock keeping

it chained to the limitations of the present.

Research Question

This essay aims to provide a clear correlation between population growth and economic growth,

especially in a developing country like Indonesia. Below are the questions I will discuss in this

essay:

1. What factors affect the population growth in Indonesia?

2. How does population growth affect the economic growth of Indonesia?

3. What is the correlation between the population growth and the economic growth in

Indonesia?

Research Method

The data that will be used in this research was obtained through the means of secondary data

obtained from published materials by the official governmental website and research from

researchers who have asked the same question.

Indonesia Demographic

Indonesia's unique geographic composition as an archipelago contributes significantly to the

country's diverse and populous landscape. Comprising over 17,000 islands scattered across the

equator, Indonesia spans a vast maritime expanse. The dispersal of communities across this

extensive archipelago has enabled Indonesia to sustain a large and diverse population, each

island fostering its unique way of life while collectively forming the vibrant mosaic that defines

the nation.
According to the last census done by the Indonesian government in the year 2020, shown in

Figure 1, the population is distributed all across the islands but the area with the largest

concentrated population is in West Java. In Figure 2, it is shown that the dominant generation

of Indonesia’s citizens is Generation Z with the male-to-female ratio not having a big difference

in numbers.

Figure 1- Chart of Indonesia's Population by bps.go.id

Figure 2- Generation and Gender Classification of Indonesia's population in 2020 (Blue: Male) (Black: Female)

The cause of Indonesia’s population growth, in general, is the same as the entire factor that

causes population growth in general, which is the improvement in food production distribution,
improvement in public health, and the conquest of disease. For food production and distribution,

Indonesia has done well, to make it more credible and relevant there is an example from a chart

seen in the figure below that shows the growth of food such as paddy has increased significantly,

the production of paddy in the year 2012 increased by 6 million metric tons per 2015.

Figure: Production of paddy rice in Indonesia from 2012 to 2022

Figures 3 and 4 below show both the birth and mortality rates of Indonesians, although
Indonesia is a country with vast land and natural resources, their

Figure 3 Number of Ever Married Women Aged 10-54 Years by Age Group, Urban/Rural Area, and Number of Children Born
Alive, INDONESIA, 2022
 Figure 4 Number of Deaths according to Number of Households by Region, Urban/Rural Area, and Since January 1, 2017,
INDONESIA, 2022

While Indonesia is a large country, it does not mean that there are countless job opportunities.

Figure 6 shows the rate of unemployment in Indonesia based on its islands, it is in blue and red

that the rate of unemployment was different during February and August.

Figure 5 Indonesia's Number and Percentage of Working and Unemployed Population in 2023
 Figure 6 Indonesia's Unemployment Rate in 2023 in Percentage Based on each Island

The distribution of Indonesia’s Labor force based on its business field indicates that 31.54% of

the population would go to business trade, 23.00% choose to go to jobs related to health, and

11.66% would go to businesses that provide accommodation.

Distribution of Labor according to Business Field Categories

What Makes an Economy Grow

Economic growth is measured by an increase in gross domestic product (GDP), which is

defined as the combined value of all goods and services produced within a country in a year.

GDP is used as an economic situation comparison to the previous year, for example, if the GDP

is increasing by 2% it means that the progress of the economy in a given country has grown by

2% compared to the last year.

GDP can be increased if there is an expansion of the inputs used to produce the services or the

goods. Hence if a country has more resources to use in its process production it may mean that

this country can produce more and use this excess resource to expand its total services or goods,

however, it does not necessarily mean this country shall produce more. This input sometimes

can be called capital, where it is said that there are five types of capital (Goodwin, Nelson, &

Harris, 2008), first and second is the land and natural resources, both of these capitals are the

capital that is provided by the land of a country. The third and fourth capital is the social and

financial capital; these capitals refer to the system and engagements from an institution or

government that make production achievable. The last capital is the human capital also called

the manufactured capital to differentiate it from the other capitals. In this paper, we will discuss

more on human capital.

There are three ways to measure the GDP:

• Output measure: This is the nominal all the goods and services produced by all sectors

of the economy for example from energy, construction, manufacturing, agriculture, the

service sector, and government (BBC News: A GDP)

• Expenditure measure: This is the degree which a household and government buy a

number of goods and services, then they invest these goods or services into machinery

and buildings. It also includes the value of exports minus imports (BBC News: A GDP)
 • Income measure: The value of the income generated mostly in terms of profits and wages.

(BBC News: A GDP)

Indonesia's GDP Growth Over the Past Years

In Indonesia, economic growth often is driven by consumer spending and business investment.

If consumers are buying homes, for example, home builders, contractors, and construction

workers will experience economic growth. Businesses also drive the economy when they hire

workers, raise wages, and invest in growing their businesses. A company that buys a new

manufacturing plant or invests in new technologies creates jobs and spending, which leads to

growth in the economy.

Population Growth and Economic Growth Theory

Thomas Robert Malthus (1766–1834) was a British economist and demographer best

known for his theory on population growth and its relationship to resources. Malthus gained

fame with the publication of his essay, "An Essay on the Principle of Population," first

published in 1798. Malthus argued that while the population tends to grow exponentially (i.e.,

doubling at a constant rate), the availability of resources such as food grows at an arithmetic
rate. According to his theory, this mismatch between population growth and resource

availability would inevitably lead to a "Malthusian crisis," characterized by famine, disease,

and other forms of population checks that would naturally curb population growth and bring it

back in line with available resources. Malthus believed the imbalance between population

growth and food supply would be corrected by natural forces, such as earthquakes and floods.

He also believed the imbalance would be corrected by human actions like wars and famines.

Criticisms of the Malthusian Theory of Population

A. Population growth

Malthus’s dire prediction hasn’t played out in the real world. For example, in Western

Europe, populations have grown, and food production rate has increased as well due to

technological advancements

B. Food Production

Food production has seen a dramatic increase over the past century, thanks to multiple

advances in agriculture. In many cases, the food production rate has increased more

rapidly than the population growth rate. For instance, in the 1930s United States, a

quarter of the population worked in the agricultural sector, and the total GDP was less

than $100 billion. But today, less than 2% of the population works in the agricultural

sector, and the total GD is more than $14 trillion.

C. Global Trade

Malthus's theory on the constraints of food production was based on the limited

availability of land at that time. But thanks to globalization, we can now trade goods

and services for food. This results in a rise in the amount of food that a country can

consume.

D. Calculations
 Malthus didn't provide calculations for the arithmetic growth of food and the geometric

growth of populations. Since he came out with his theory, experts have pointed out that

the current growth rates are not consistent with the predictions put forth by Malthus.

Correlation of Population Growth and Economic Growth

Table 1 highlights the population and economic growth rate in Indonesia from 2009 to 2018.

It illustrated an increase in population growth from 1.22% to 1.46 in 2010, the economic growth

also rose from 4, 6% in 2009 to 6.2% in 2010. It portrays that an increase follows the increase

in population growth in economic growth. Also, population growth had decreased continuously

to be 1.19% in 2019. Meanwhile, the economic growth had declined for 4 consecutive years

from 2011, which had not changed. Then it decreased to 4.9% in 2015. However, economic

growth again experienced an incline from 5.0% in 2016 to 5.2% in 2018. The number of

populations is an essential indicator in a country.

Positive Correlation

• Increased Labor Force: Indonesia boasts a young and growing population, providing a

vast pool of potential workers. This can lead to a larger domestic market, and economies
 of scale, and potentially drive innovation. Between 2000 and 2020, Indonesia's

working-age population (15-64 years old) grew by over 50%, contributing significantly

to economic expansion. Population growth is a new source of employment. Briefly, it

is a factor of economic growth. In this case, the workforce can work productively and

finally can encourage economic growth. As a result of economic growth, people's

livelihoods will have improvements, increasing work productivity. A more meaningful

effect of population growth on economic development is given by the population,

which acts as a labor source. In this sense, the population is a source of productive

energy on the one hand, which guarantees economic development. On the other hand,

guaranteeing full employment opportunities for existing workers is the main condition

for their development. The population has multiple functions in the economy. In the

context of the market, it exists both on the demand and supply sides. On the demand

side, residents are consumers, the source of demand for goods and services. On the

supply side, residents are producers; if they are entrepreneurs’ traders, or workers, they

are only workers.

• Urbanization and Productivity:

Both Indonesia’s urban and rural populations grew moderately until the 1980s, the rural

population considerably outnumbering the urban one. Having witnessed a rapid

increase for the past 40 years, urban dwellers became the majority for the first time in

2011, preceded and accompanied by a slight but steady decrease in the rural population.

This trend is projected to continue throughout the next decades.

As Indonesia urbanizes, its workforce concentrates in cities, fostering knowledge

spillovers, specialization, and higher productivity. Studies suggest a 1% increase in

 urban population correlates with a 4% rise in GDP per capita in developing countries

like Indonesia.

Figure 3 Urban and Rural Population of Indonesia

• Domestic Demand and Consumption: A larger population translates to a bigger

domestic market, potentially boosting demand for goods and services and stimulating

economic activity in sectors like retail, manufacturing, and construction.

• Rapid population growth will result in an abundance of labor and then the need for the

population will also increase as the population increases, the government must be able

to empower high levels of human resources because this can have good potential if the

management is carried out effectively and sustainably.

Negative Correlation
 • Infrastructure Strain: Rapid population growth can put pressure on existing

infrastructure, leading to congestion, pollution, and inadequate access to necessities like

water and sanitation. This can hinder economic productivity and create social tensions.

• Job Market Pressures: A large and growing workforce needs sufficient job

opportunities to prevent unemployment and social unrest. If economic growth doesn't

keep pace with population increase, it can lead to underemployment and hinder poverty

reduction.

• Investment and Resource Allocation: A significant portion of government resources

might be directed towards basic needs and social services for a growing population,

potentially limiting investments in critical areas like education, healthcare, and

infrastructure development, which are crucial for long-term economic growth.

Conclusion

This essay has shown that there is a positive correlation between population growth and

economic growth in Indonesia. The high number of populations in Indonesia has a positive

impact on economic growth. But it does not mean that the high number population can stand

alone to help the economic growth, the role of government is also important. Assistance from

the government is needed to achieve not only the number of the population but also the

increasing quality of its population. The capital factor also has a role in Indonesia's economic

growth, but the role is not too significant. The reason is due to Indonesia’s market is dominated

by labor-intensive industries. Yet the existence of the capital is important because this capital

helps to support the population and its growth. Furthermore, with good support from the capital,

the quality of the population can be increased, such as good education or better health facilities.
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