Indonesia chases China as middle-class consumption soars

LONDON. May 7. KAZINFORM In May 1998, Indonesia was in turmoil. During the previous 10 months, the currency had plunged 80 percent in value and food prices had soared 200 percent. Rioters were marauding through Jakarta, torching businesses owned by wealthier ethnic Chinese, who were fleeing for their lives.

Safely ensconced in Hong Kong , where he was on vacation, an Indonesian-Chinese retailer named Djoko Susanto could have sat tight. Instead, he flew home to defend his four supermarkets from the mob. As he transited Singapore, where planes were arriving from Indonesia full and returning empty, the airline's crew stared at him in disbelief.

"There were five people on my flight," Susanto recalls. "And I was the only Chinese."

While he couldn't save his stores -- all four were looted to the last light bulb -- Susanto was on hand to seize an opportunity that would make him a billionaire, Bloomberg Markets reports in its June issue.

More than 1,100 people died in the 1998 riots, and the economy contracted 13 percent that year. Doomsayers predicted that the world's fourth-most-populous nation, a former Dutch colony spanning 17,500 disparate islands, would fragment.

Susanto -- who as a child had slept under a mosquito net on the dirt floor beside his impoverished parents' market stall -- bet that Indonesia would survive and that its vast mineral and agricultural resources would enrich many of its 238 million citizens, creating a dynamic consumption-driven economy.

6,000 Stores

When that happened, Susanto reasoned, many Indonesians would prefer to shop locally in air-conditioned minimarts rather than at traditional roadside shacks, or warungs.

In October 1999, barely a year after the riots, Susanto opened the first of what's now a chain of 6,000 stores called Alfamarts.

The investment proved prescient. From 1999 through the end of 2011, Indonesia's annual growth surged from zero to 6.5 percent, swelling the number of middle-class consumers by 50 million to more than 130 million, according to the World Bank .

During the same period, the average wealth per adult jumped fivefold to more than $12,000, Credit Suisse Group AG reported in October.

While some other fast-developing countries such as China struggle to switch from an export-led to a consumption-based growth model, Indonesia is ahead of the game: Consumer spending accounted for 55 percent of gross domestic product in 2011; the comparable figure for China in 2010 was 35 percent.

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