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

January 12, 2025

Alliance World Manufacturing Limited (AWML) subsidiary PT Alliance Consumer Products Indonesia (PTACPI) officially inaugurated Veda 3, its newest factory, within the Sei Mangkei Special Economic Zone (SEZ) in Bosar Maligas District, Simalungun Regency, North Sumatra Province on Jan. 9, 2025. The state-of-the-art manufacturing facility is designed to meet global standards in terms of quality, efficiency, and sustainability.

In addition to supporting internal production needs, Veda 3 is targeted to meet the increasing market demand for soap products in the form of soap noodles and beads. The factory is expected to be able to create a significant amount of local jobs, thereby contributing to regional economic growth.

Veda 3's aims were conveyed by Anil Nagpal and Haris Agarwal, members of the PTCAPI Board of Directors, at its inauguration, which was also attended by the Indian Ambassador to Indonesia Sandeep Chakravorty, National SEZ Council Secretary-General Edwin Manansang, and the Indian Consul-General in Medan Ravi Shanker Goel.

In their remarks, Anil and Harish expressed their gratitude to all partners and stakeholders for the support they have provided so far.

"The inauguration of Veda 3 is an important step in our journey to continue to grow and innovate. The factory is a tangible proof of our commitment to excellence and sustainability," said Anil Nagpal in a written statement on Jan. 11, 2025.

PT Alliance Consumer Products Indonesia is optimistic that Veda 3 will play an important role in driving the company's expansion in both domestic and international markets. With the principle of sustainability as the core of its operations, this factory is projected to be able to set new standards in the manufacturing industry.

PTACPI started its operations in Indonesia after more than 20 years engaging in soap manufacturing in India. The construction of the company's Veda 3 was completed in a short time despite facing challenges due to the COVID-19 pandemic. After acquiring land for construction in September 2021, commercial production at Veda 3 successfully commenced by September 2022.

At present, PTACPI's Veda 1 factory has exported more than 650 million bars of soap to more than 50 countries worldwide. The company aimed to export 1 billion bars of soap by 2026. With more than 750 local workers currently employed, PTACPI is projected to employ 250 more workers for Veda 3. The company also affirms its commitment to continue investing in Indonesia, both in terms of infrastructure and human resources, in order to achieve greater growth in the future.

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