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

April 30, 2025

KIS Group Chief Executive Officer (CEO) Raghunath KR and AEP Group Mills and Engineering Head Shashi Kumar Govindan inaugurated the biomethane compressed natural gas (bio-CNG) project, a collaboration between KIS Group subsidiary PT KIS Biofuels Indonesia and Anglo Eastern Plantation (AEP) Group subsidiary PT Tasik Raja. It is the second bio-CNG project in Indonesia and the largest such factory in Southeast Asia.

Also attending the inauguration are South Labuhanbatu Deputy Regent Syahdian Purba Siboro, Invesment and Downstream Ministry/Investmetn Coordinating Board (BKPM) Investment Climate Development (PIPM) Deputy Riyatno, Energy and Mineral Resources (ESDM) New and Renewable Energy and Energy Conservation (EBTKE) Directorate General Investment and Bioenergy Coordinator Trois Dilisusendi, and ESDM Ministry EBTKE Directorate General Bioenergy Engineering and Environment Coordinator Efendi Manurung.

The factory, located in South Labuhanbatu Regency, North Sumatra Province, will sell its products to Unilever Group subsidiary PT Unilever Oleochemical Indonesia in the Sei Mangkei Special Economic Zone (SEZ) in Simalungun Regency, North Sumatra. The plant aims to produce 182,000 million British thermal unit (MMBtu) of bio-CNG per year and is claimed to reduce carbon dioxide (CO2) emissions by 52,000 tons per year.

Raghunat said that the clean energy comes from palm oil mill effluent (POME), liquid waste from palm oil processing into crude palm oil (CPO) thaat contains many organic compounds which can pollute the environment if left raw.

Moroever, five other bio-CNG projects will be built by PT KIS Biofuels in 2025 once all required permits are complete. The company also targets 25 first phase bio-CNG projects to be completed by 2027 with a total investment of US$125 million, reaching 100 projects by 2030 with an estimated investment of US$500 million.

"Each project employs 30 local people, [creating] green jobs. The third project is under construction [and is] planned to start production by December 2025," said Raghunat on Apr. 25, 2025.

"We contribute towards sustainable energy and economy. Today's steps are not only for the company, but also for the future of Indonesia," said PT KIS Biofuels Head of Legal Yasmine Surachman

She added that the bio-CNG will be delivered to Unilever using a bio-CNG-fueled truck, which is the first usage of such trucks in Indonesia used for commercial purposes.

"Following the success of the first project, this second project strengthens KIS Biofuels' position in the development of BioCNG in Indonesia," Yasmine said.

Previously, PT KIS Biofuels and PT Tolan Tiga Indonesia began construction of the first commercial bio-CNG plant in South Labuhanbatu regency in October 2024. The 120 square meter (m2) factory with an investment of US$3.6 million is located in the Perlabian plantation palm oil mill area owned by SIPEF Group, and it aims to produce 320-350 MMBTU of bio-CNG per day.

The factories built by KIS Group, three of which are in North Sumatra, all sell bio-CNG to Unilever. The other four factories have non-commercial status, one of which is located in Pangkalan Bun District, Kotawaringin Regency, Central Kalimantan. According to its agreement, the factory will operate for 15 years.

SIPEF Group President Director Peter Bayliss said that PT Tolan Tiga's 8,000 hectare (ha) oil palm plantation is capable of producing 55 tons of oil palm fresh fruit bunches (FFB) per hour, resulting in 33 tons of waste every hour or around 1,100-1,200 tons of waste per day. The POME from CPO production is re-produced into 30,000 cubic liters of biogas.

"With the factory, 60 percent of production will be upgraded into bio-CNG [that will be] bottled and sold. This project is in line with Indonesia's goal of switching to more sustainable and renewable energy sources," said Peter.

SIPEF Group has operated five biogas plants throughout Indonesia. Two additional plants are being built through a partnership with KIS Group.

"Construction has just begun," he added.

South Labuhanbatu Deputy Regent Syahdian gave support for bio-CNG plants in the region, adding that the most recent project is an important step for improved sustainable economic development that  has a positive impact on the environment and benefits the region and its people.

The factory, said Purba, is expected to create more jobs, encourage energy infrastructure development, contribute to the regency's economic growth, as well as open up opportunities for improving the skills of the local workforce in managing renewable energy.

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