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

September 27, 2024

The Meteorology, Climatology, and Geophysics Agency (BMKG) has warned that the global temperature rise due to climate change poses a serious challenge to the country’s plantation sector.

Citing a 2023 World Meteorological Organization (WMO) report during a discussion on Monday in Medan, North Sumatra, acting BMKG head Dwikorita Karnawati said last year was the hottest year globally in the 174 years since temperature records began.

She noted that last year’s global temperatures even surpassed the previous records in 2016 and 2020, adding that 2023 was the second-hottest year on record in Indonesia, after 2016.

Dwikorita said North Sumatra was among the country’s key climate observation centers for monitoring air temperature.

"Air temperature monitoring has been conducted by the Deli Serdang Climatology Station in North Sumatra for more than 70 years," she said at the National Climate Change Exposition, titled "Towards a Century of Climate Observation in North Sumatra".

The current increase in global temperatures was having adverse effects, including more frequent and intense heat waves, storms and extreme weather, Dwikorita said. If this situation was not addressed promptly, it could lead to economic losses that affected human lives.

She noted that the plantation and agriculture sectors were among those most affected by the global temperature rise, as warmer air temperatures led to lower rainfall and subsequently, water scarcity.

"North Sumatra will be the region most affected by the negative impacts of climate change because it has a large number of plantations," Dwikorita said.

The province is a major plantation hub and home to three large state-owned plantations, as well as hundreds of large private plantations, which produce key commodities including palm oil, rubber, coffee, cocoa and tobacco.

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