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

July 14, 2025

The National Economic Council (DEN) has prioritized the establishment of the Lake Toba Special Economic Zone (SEZ). This plan is being implemented in collaboration with the seven regional governments surrounding the Lake Toba area.

"Each region in the Lake Toba area has different characteristics and potential," said DEN Chairman Gen. (ret.) Luhut Binsar Pandjaitan in a written statement in Medan on July 13, 2025, as reported by Antara.

The Lake Toba area covers 1,145 square kilometers (km2) surrounded by seven regencies of North Sumatra Province, namely Simalungun, Samosir, Toba, Humbang Hasundutan, North Tapanuli, Karo, and Dairi. 

Luhut explained that the establishment of the SEZ takes into account two main factors. First, the characteristics and potential of each region. Second, the proposed business plans submitted by the regional governments.

DEN is promoting the Lake Toba SEZ as a step to increase investment as well as optimize exports and imports. The area's transformation into an SEZ is also expected to accelerate development in the seven regencies surrounding it.

"There are several business activities [that would be focused on by] the SEZ, including tourism, sports, agriculture, energy, education, and health. The regional governments are assessing which business plans are appropriate for their [respective] regions," Luhut said.

Luhut said the central government will provide support in the form of infrastructure, institutions, business entities, and evaluation systems.

"Let's support this together. Everyone works hard together to make this happen. When it is realized, the results will be felt by our people; more job opportunities, increased investment, and a stronger economy," Luhut said.

North Sumatra Province Regional Secretary Togap Simangunsong expressed the North Sumatra Provincial Government's readiness to be a catalyst for the transformation of Lake Toba into a tourism- and agriculture-based SEZ.

"The development of the Lake Toba area is not just about physical development or a tourist destination, but also the responsibility to preserve natural and cultural heritage while improving the welfare of the people of North Sumatra, especially those living around Lake Toba," he said.

The North Sumatra Provincial Government is currently preparing the administrative requirements for the Lake Toba SEZ, including the area's land and supporting documents. The proposal to establish the SEZ is worked on by the province alongside DEN and the seven regencies, and it will be submitted to the National SEZ Council.

"We are collaborating to make this happen. However, we need to understand each person's role so that the establishment of this SEZ runs smoothly, as the Lake Toba SEZ has a significant impact on our community and development," Togap said.

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