North Sumatra is aggressively offering investment opportunities in tourism, highlighting the IDR245.2 billion potential of Lake Toba resort and natural park. The province also offers IDR3.86 trillion investment in economic sector, particularly the aluminum extrusion industry.
North Sumatra is a province in Indonesia with an area of 71,680.7 square kilometers. Apart from its two potential investment opportunities, the province also offers investment in three industrial centers, 10 airports, 21 ports, 138 educational facilities, 105 hotels and 132 hospitals.
Potential in Lake Toba resort
Lake Toba resort and natural park have a net present value (NPV) worth IDR96.83 billion, a payback period of 7.92 years and internal rate of return (IRR) of 12.98%. The investments is to bring accessibility, enthusiasm and support to developing tourism in the region.
The largest volcanic lake in the world has Samosir island – which is the same size of Singapore – in its center. The Ministry of Tourism and Creative Economy (Kemenparekraf) has named Lake Toba as one of its 10 Super Priority Tourism Destinations (DSP), or the new Bali. The lake is one of UNESCO’s Global Geoparks. It brings positive outcomes for tourism in the area, inviting over 400,000 tourists visiting the lake annually.
The investment project brings 5-star facilities and services while not changing any of its natural landscapes and minimalizes damage. The place is supported by an Arboretum facility as a place for education, conservation, a stone park, water sports, amphitheater and diorama houses about the Batak culture and Lake Toba. The ministry also tries to protect the traditional natural stones in the area to preserve the Batak culture there.
The ministry also provides incentives in tax allowances based on Government Regulation (PP) No. 78/2019 and Finance Ministry Regulation (PMK) No. 11/PMK.010/2020 in lieu of Finance Ministry Regulation No. 96/PMK.010/2020. These regulations stipulates that entrepreneurs or small- and medium-enterprises (SME) will receive a tax deduction of 5% and asset investment of six years, 30% reduction in net income, accelerated depreciation and accelerated amortization, 10% final tax on dividends and compensation of loss more than five years but no more than 10 years.
Challenges to North Sumatra tourism
Despite the rosy pictures of the potential North Sumatra can offer, there is a major issue on its geographical location. As Lake Toba is located near the Sumatra Fractured Zone, earthquakes prone to happen.
A team from the research and development center of the Meteorology, Climatology and Geophysics Agency (BMKG) said around 80% of Indonesia archipelago sit on the Eurasian plates. The intensity of earthquakes from January to May 2021 reached 142 times in around Lake Toba and Samosir Island.
According to the Directorate of Volcanology and Geological Hazard Mitigation (DVMBG) and Ministry of Energy and Mineral Resources (ESDM), Indonesia is vulnerable to earthquakes and tsunamis especially in Aceh and North Sumatra. A total of 227,898 people died during the Aceh tsunami on December 26, 2004.
North Sumatra also has road infrastructure problem. The province needs more funds for the construction of roads and road repair. The administration prioritized the construction of 450-kilometers road and has allocated IDR2.7 trillion for the constructions of road, bridges and drainage.
“One kilometer of road repair needs IDR5 billion,” said North Sumatra Governor Edy Rahmayadi on January 24, 2022.
