Indonesia’s Small Islands under Threat of Tourism Investment and Climate Crisis

May 6, 2022

To achieve the non-tax state income of 50 billion IDR (3.500.000 USD) by 2022, the Indonesian Government, through the Ministry of Marine and Fisheries Affairs (MMFA), will boost the program for the utilisation of marine, coastal and small island areas through the opening of foreign investment. Foreign investors are currently interested in projects related to tourism on small islands.

According to the MMFA, 29 foreign investors are currently exploring the use of small islands for tourism development. By referring to the MMFA’s Regulation No. 53 of 2020 concerning Administration of Permits for Utilisation of Small Islands and Surrounding Waters in the Context of Foreign Investment, MMFA will grant a utilisation permits for 30 years from the issuance of the permit, with an option for these permits to be extended for another 30 years.

To legitimise tourism projects on small islands, MMFA uses Regulation of Minister of Agrarian and Spatial Planning (MASP), No. 17 of 2016 concerning Land Arrangement in Coastal Areas and Small Islands. With the MASP’s Regulation, MMFA stipulates 70 percent of the small island area for foreign investors to develop tourism.

The Government’s policy of opening up foreign investment for tourism in small islands, especially for tourism projects, is based on Law No. 11 of 2020 concerning Job Creation, in particular Article 26A, as written: “In the context of foreign investment, the use of small islands and the use of the surrounding waters must meet the Business Permit from the Central Government and following the provisions of the laws and regulations in the investment sector.”

When compared with Law No. 1 of 2014, in particular Article 26A Paragraphs 1-3, the Job Creation Law seems to have liberalised the management of natural resources in coastal, marine, and small islands with the following two indicators, namely: first, the Job Creation Law does not provide limitations and conditions to foreign investors as regulated in great detail in Law No. 1 of 2014; second, eliminating social considerations, especially the life of coastal communities, and ecological considerations, especially the ecosystem of small islands and the surrounding waters.


Defying the Constitutional Court’s Decision

The Indonesian Government’s plan to open foreign investment for tourism in small islands will revive the concession rights for coastal waters (Hak Pengusahaan Perairan Pesisir or HP3). HP3 is considered to have legalised the privatisation of natural resources in coastal areas, seas, and small islands. The Constitutional Court mentioned that HP3 would legalise the division of coastal areas and small islands to be made private ownership and close ownership to individuals, legal entities, or certain communities.

Furthermore, the Government’s policy of opening up foreign investment for tourism in small islands also contradicts the Constitutional Court’s Decision No. 91 of 2021, which states the Job Creation Law is conditionally unconstitutional and must be corrected within two years. Furthermore, this policy contradicts point 7 of the Constitutional Court’s Decision, as it is written: “states to suspend all strategic and broad-impact actions/policies, and is not justified in issuing new implementing regulations related to the Job Creation Act.”


Two Big Problems on Small Islands of Indonesia 

A policy that prioritises small islands for foreign investment, especially for tourism, would obscure important issues that occur on small islands. For example, the sinking of small islands due to the climate crisis and agrarian conflicts are issues that need to be immediately addressed.

According to experts, there will be hundreds of small islands submerged in the next decade or two. Especially for the outermost small islands, researchers at the Center for Research and Development of Marine Geology, Ministry of Energy and Mineral Resources, stated that as many as 83 small islands will be submerged, and 55 islands will sink. Thus, as many as 111 small outer islands are in danger. As a result, if the outermost small islands are submerged, the sovereignty of the Unitary State of the Republic of Indonesia will continue to decrease. This is one of the small island problems that the government must immediately find a solution to. 

The second critical issue in small islands is the ongoing agrarian conflict between the community and companies that the government licenses. Various disputes have placed the people of small islands at a disadvantage. For example, those who have defended their land from a nickel mining company in Wawonii Island, Konawe Kepulauan Regency, Southeast Sulawesi Province, have faced the threat of criminalisation.


Evaluation of Business Permits on the small island

Thus, encouraging foreign investment for tourism in small islands does not answer the critical problem, namely the sinking of small islands due to the climate crisis and agrarian conflicts. At this point, the Government of Indonesia must immediately evaluate various business licenses that burden the capacity of small islands. Business permits that burden small islands, such as mineral and nickel mining and tourism, have proven to be devastating, accelerating the sinking of small islands.

In addition to destroying and accelerating the sinking of small islands, business permits that burden small islands also prolong endless conflicts between the people who have lived and managed the island’s natural resources and the company.

In encouraging the administration of small islands in Indonesia, the government has to follow the basic law of 1945 of The Constitution of the Republic of Indonesia and follow the Decision of Constitutional Court guidelines for managing natural resources in small islands of Indonesia.


For more information contact:
Parid Ridwanuddin
Coastal and Marine Campaign Manager of WALHI National Executive/FoE Indonesia