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Article - April 4, 2012
Center for production and processing of natural resources and the nation's energy reserves
The Sumatra Economic Corridor is being heralded by the Master Plan as Indonesia’s “center for production and processing of natural resources and the nation’s energy reserves”. Its strategic location can also potentially propel it to become “the front line of the national economy into the European, African, South Asian, East Asian and Australian markets”.

However, in order to realize the MP3EI’s targets, Sumatra must address various issues – namely in terms of infrastructure, finance and human resource development – in order to boost its core strengths of palm oil, rubber, coal, steel and shipping.

Alex Noerdin, Governor of South Sumatra, sums this up when describing his region’s dilemma: “Our province is one of the richest in Indonesia, but only in terms of potential.”

Sumatra is home to some 70% of Indonesia’s oil palm plantation area and 65% of natural rubber production, yet productivity here – and nationwide in general – is far below the productivity of its neighbors and competitors. This has been blamed on low seed quality, non-optimal land utilization, and inadequate use of fertilizers (two problems linked with small holders and their limited budgets) as well as long transport times. With approximately 42% of oil palm land and 80% of rubber tree plantations in the hands of small holders, it is clear that these hurdles must be addressed if Sumatra is to boost its production.

The MP3EI envisions increasing research to produce superior quality seedlings, the establishment of research centers, and the provision of financial assistance, training and education for small holders, in addition to improving regulations and incentives for the development of downstream industries. The Plan also tackles infrastructure challenges, such as developing port and power capacities, onshore logistics networks and access to ports.

Sumatra’s coal industry will also benefit from updated and expanded infrastructure. Half of Indonesia’s exports of steam coal come from Sumatra, yet production remains low as most coal reserves are found in the middle of the island, far from seaports and railways.

In line with the region’s infrastructure program is the MP3EI’s strategy to grow the shipbuilding industry and construct the Sunde Straits Bridge to connect Sumatra with Java. And in line with these objectives lies the plan to develop Sumatra’s steel industry, thanks to its possession of 8% of the country’s laterite iron ore reserves.