Province

North Sumatra

Overview Economy

North Sumatra, a large salad bowl of people

North Sumatra, whose capital is Medan, ranks as the fourth most populous province in Indonesia, following West Java, East Java, and Central Java, with up to 15.1 million residents as of 2022. Rather than being a melting pot, the province is best described as a large bowl of salad, comprised of diverse ethnicities, cultures, and religions.

Ethnically diverse, North Sumatra is home to several indigenous groups. The Malay people reside along the east coast, while the Batak people inhabit the west coast and the central highlands region around Lake Toba. The Batak people are further categorized into six groups based on region, culture, and location: Pakpak, Angkola, and Mandailing on the west coast, and Toba, Simalungun, and Karo in the central highlands. Additionally, North Sumatra is home to the Nias people, who are natives of the Indian Ocean Island of Nias and its surrounding islets.

Residents of Chinese and South Asian descent together constitute a small but significant minority in North Sumatra, along with descendants of historical migrants from Java and migrants from other surrounding regions. These regions include the Minangkabau people of West Sumatra, the Palembang people of South Sumatra, and the Acehnese.

Furthermore, North Sumatra is home to a predominantly Muslim population, constituting over 60 percent of residents, followed by Christians (Protestant and Catholic) and Buddhists. Despite this great diversity, the province maintains generally harmonious inter-ethnic and inter-religious relations. However, at the same time, primordialism plays a role in both society and political life.

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North Sumatra’s economy, leading sectors

North Sumatra is one of the leading economies on the island of Sumatra, experiencing positive economic growth in recent years. For instance, in 2022, the province's economy expanded by 4.73 percent, a significant increase from 2.61 percent in 2021 and a notable recovery from -1.07 percent in 2020.

Several sectors are driving North Sumatra's economic growth: agriculture, trade, and construction.

As one of the country’s plantation centers, North Sumatra relies on key commodities such as palm oil, rubber, coffee, cocoa, and tobacco in its agriculture sector. Palm oil plantations owned by the people of North Sumatra are primarily concentrated in Asahan regency, accounting for over 15 percent of all palm oil plantations in the region, while coffee (robusta and arabica) is produced in the regencies of North Tapanuli, Simalungun, and Dairi.

Trade is also a key sector in North Sumatra’s economy, with the province exporting agricultural products like coffee, tea, and spices, as well as industrial products, specifically animal and vegetable fats and oils. As of 2022, the leading export commodity is vegetable fats and oils, reaching a significant export value of US$4.71 billion. Typically, these commodity exports from the province find their way to the Asian region, particularly China, as well as the United States. In terms of imports, North Sumatra's imports are predominantly raw/auxiliary materials, followed by capital goods and consumer goods.

Furthermore, North Sumatra's economy has increasingly relied on the non-trade sector, dominated by services, notably construction. North Sumatra’s Regional Gross Domestic Product (GRDP) in the construction sector has risen from Rp 64 trillion (US$4 billion) in 2018 to an estimated Rp 70 trillion (US$ 4.4 billion) in 2022. Moreover, the construction sector has become a major contributor to North Sumatra's employment industry.

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Latest News

August 25, 2025

North Sumatra Governor Muhammad Bobby Afif Nasution will provide incentives in the form of tax cuts to businesses in North Sumatra. The incentives are part of efforts to continue increasing investment growth in the province.

"We hope that [North Sumatra's] regional governments will do the same by providing tax incentives to businesses investing in North Sumatra," Bobby said during the 2025 North Sumatra Investment Innovation Week (PIISU) and Indonesia Savings Day at Maimun Palace in Medan City, North Sumatra on Aug. 20, 2025.

"We return the incentives provided in the form of taxable goods," he added

In an example given by the governor, if a regent or mayor provides a Land and Building Tax (BPHTB) cut, the discount will be reimbursed by the North Sumatra Provincial Government in the following fiscal year in the form of taxable goods.

"We are doing this to accelerate investment realization in North Sumatra. This activity can encourage and support economic growth. We hope that all regional heads in North Sumatra will follow suit with the incentives we provide," he said.

Bobby reminded that Indonesia's economic growth target is around 8 percent year-on-year (yoy) in 2025. Of that growth, North Sumatra Province itself is targeting 6.8 to 7.2 percent yoy economic growth. To achieve the target, Rp 53 trillion in investment is needed in North Sumatra. Therefore, the tax cuts are expected to boost North Sumatra's investment value and thus drive its economic growth.

On the same occasion occasion, Bobby distributed 1,000 passbooks to high school students, each with Rp 5,000 in the account balance. This distribution was in commemoration of the Indonesia Savings Day.

"Please collaborate with the North Sumatra Education Office to make the savings movement more innovative. For example, utilizing trash as a channel for savings where it could be exchanged for money, or through various other activities. This way, the savings could be maintained until the students graduate," he explained.

PIISU 2025 featured 82 booths from micro, small, and medium enterprises (MSMEs) across North Sumatra, the launch of the "Si Indah" application (app), cultural performances, a presentation of innovative products, a free halal certification registration program, and more.

Also in attendance were North Sumatra Province Regional Secretary Togap Simangunsong, members of the North Sumatra Regional Leadership Communication Forum (Forkopimda), Consuls General of several countries, a number of local government heads, heads of state-owned enterprises (SOEs) and region-owned enterprises (BUMD), heads of regional government offices in North Sumatra, hundreds of high school students, and other invited guests.

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