Prohibition on Foreign Parties to Own Reclamation Islands

PERTANYAAN

What is the regulation in Indonesia regarding the construction of artificial islands? If there are foreign citizens who want to build artificial islands in the most outer islands (outlying islands/ outermost islands) of Indonesia, are they allowed to build artificial islands?

INTISARI JAWABAN

Reclamation can be carried out by the government, regional governments, and any individual/person, however, Presidential Regulation Number 122 of 2012 on Reclamation on Coastal Areas and Small Islands does not mention whether these individuals are foreigners or only Indonesians. The important thing to remember is that in carrying out reclamation, planning and obtaining a location permit and a license for the implementation of reclamation must be made.

It should be noted that reclaimed land does not automatically become the land of the party who is reclaiming it, the status of the land is land controlled by the state. Therefore, any person who wants to control or own land on a reclamation island must first apply for land rights to the government.

The reclaimed land (artificial island) may be granted land rights in accordance with the provisions of laws and regulations, namely Law Number 5 of 1960 on Fundamental Provisions on Agrarian Principles. It should be noted that the land rights which are granted to foreigners as well as foreign legal entities that have representatives in Indonesia, are only usufructuaries or leases (usufructuary rights or lease rights).

Therefore, reclamation islands may not be owned by foreigners or by foreign legal entities.

Please read the review below for a further explanation.

ULASAN LENGKAP

This article is an English translation of Larangan Pihak Asing Memiliki Pulau Reklamasi which was written by Sovia Hasanah, S.H. and was published on Wednesday, 6 December 2017.

All legal informations which are available through Klinik hukumonline.com have been prepared for educational purposes only and are general in nature (read the complete Disclaimer). In order to obtain legal advice specific to your case, please consult with Justika Partner Consultant.

Thank you for your question.

We do not have clear information from your statement here. For this reason, we assume that foreigners who are going to create artificial islands or reclamation on small artificial islands have the intention of owning those artificial islands.

Island Reclamation

Regulation of small islands, in general, can be seen in Law Number 27 of 2007 on The Managements of Coastal Areas and Small Islands (“Law 27/2007”) as amended by Law Number 1 of 2014 on the Amendment to Law Number 27 of 2007 on The Managements of Coastal Areas and Small Islands ("Law 1/2014") and is further regulated under Regulation of the Minister of Agrarian Affairs and Spatial Planning/ Head of National Land Agency Number 17 of 2016 on Land Management on Coastal Areas and Small Islands (“Ministerial Regulation 17/2016”).

Reclamation is an activity carried out by any person to increase the benefits of land resources in terms of the environment and socio-economic point of view, by land backfilling, land drying, or drainage.[1]

Creating artificial islands or reclamation activities on Coastal Areas and Small Islands are conducted in order to increase the benefits and/or to add value of Coastal Areas and Small Islands in terms of technical, environmental, and socio-economic aspects. The implementation of Reclamation must maintain and pay attention to:[2]

1. sustainability of Community life and livelihood;
2. the balance between the interests of utilization and preservation of environmental functions of Coastal and Small Islands; as well as
3. technical requirements for material extraction, dredging, and stockpiling.

According to Article 3 Section (1) Presidential Regulation Number 122 of 2012 on Reclamation on Coastal Areas and Small Islands ("Presidential Regulation 122/2012") the Government, regional governments, and any person who will carry out the reclamation are obliged to make a reclamation plan. Then the Government, regional governments, and any person concerned who will carry out the reclamation must obtain a location permit and a license for the implementation of the reclamation.[3]

In order to obtain location permits and licenses for the implementation of the reclamation, the Government, regional governments, and any person must first submit applications to the Minister of Agrarian Affairs and Spatial Planning ("Minister"), governors, or regents/mayors. The Minister shall grant location permits and licenses for the implementation of reclamation in Certain National Strategic Areas (“Kawasan Strategis Nasional Tertentu”), inter-provincial reclamation activities, and reclamation activities in fisheries ports which are managed by the Government.[4]

The granting of location permits and licenses for the implementation of the reclamation in Certain National Strategic Areas and inter-provincial reclamation activities shall be granted after obtaining consideration from the regents/mayors and governors. Meanwhile, Governors and regents/mayors shall issue location permits and licenses for the implementation of the reclamation within the region in accordance with their authorities and reclamation activities in fisheries ports which are managed by regional governments.[5]

Therefore, reclamation can be carried out by the government, regional government and any person, however, Presidential Regulation 122/2012 does not explicitly mention whether any of these people are foreigners or only Indonesians. The important thing to remember is that in carrying out reclamation, planning and obtaining a location permit and a license for the implementation of reclamation must be made.

Reclamation Land Status

It should be noted that the reclaimed land does not automatically become the land of the party who is reclaiming it. According to the Circular Letter of the State Minister of Agrarian Affairs/Head of the National Land Agency Number: 410-1293 on the Control of the Status of Emerging Lands and Reclamation Lands, reclaimed lands shall be declared as state-controlled lands and the arrangements shall be implemented by the State Minister of Agrarian Affairs/Head of the National Land Agency. You can read the full explanation in the article entitled Coastal Reclamation Land Status.

However, the reclaimed land may be granted land rights under the following conditions:[6]

1. fulfill licensing provisions from the government and regional governments;
2. equipped with environmental documents from the relevant government agencies;
3. use and utilization are in accordance with the direction of its designation in the spatial plan of the province/regency/city, or zoning plan of coastal areas and small islands;
4. maintain the sustainability of life and livelihoods of fishermen and the community;
5. maintain a balance between the interests of utilization and the preservation of the functions of the coastal environment and small islands; and
6. fulfill the technical requirements for material extraction, dredging, and stockpiling.

The reclaimed land in question includes artificial sea coasts, artificial river banks, artificial lakes, and artificial islands.[7] Granting of land rights on land resulting from reclamation is conducted in accordance with the provisions of laws and regulations.[8]

Therefore, if a person intends to reclaim the island and then wishes to obtain ownership of the land on a reclaimed island, then they must first apply for land rights to the government.

The provisions relating to the acquisition of land rights may refer to the provisions of laws and regulations on the land sector.[9]

Can Foreigners Obtain Land Rights on Reclaimed Island?

Are foreigners allowed to obtain land rights on a reclaimed island? Basically, the granting of land rights on reclaimed islands is conducted in accordance with the provisions of the laws and regulations.[10] Land rights in question are the right as regulated in Article 16  Law Number 5 of 1960 on Fundamental Provisions on Agrarian Principles (“Law 5/1960”).[11]

Land rights consist of:[12]

1. right of ownership;
2. right to cultivate;
3. right to build;
4. right to use;
5. right to lease;
6. right to clear land;
7. right to collect forest products;
8. rights other than those mentioned above which will be stipulated by a Law and rights of provisional nature.

It should be noted that the land rights which might be given to foreigners as well as foreign legal entities that have representatives in Indonesia are only usufructuaries and leases.[13]

Answering your question, the only land rights on reclaimed islands that can be obtained by foreigners and foreign legal entities that have representatives in Indonesia are usufructuary rights and lease rights.

For more information, if a foreign party wishes to utilize a small island and to utilize its surrounding waters for the purpose of foreign investment, then a permit from the Minister must be obtained.[14] Such foreign investment must prioritize the national interest.[15]

The utilization of small islands and their surrounding waters shall be prioritized for the following interests:[16]

1. conservation;
2. education and training;
3. research and development;
4. mariculture;
5. tourism;
6. sustainable fishery and marine business and fishery industry;
7. organic agriculture; and/or
8. animal husbandry; and/or
9. state defense and security.

So we can conclude that, if any party intends to reclaim an island, then the said party must first make a plan and obtain a location permit and a license for the implementation of the reclamation. Then if the party wishes to obtain ownership of the land on a reclaimed island, then the party must apply for land rights to the government. However, it should be noted that lands on reclaimed islands may not be owned by foreigners or by foreign legal entities.

These are the answers we can provide, we hope you will find them useful.

Legal Basis:

1. Law Number 5 of 1960 on Fundamental Provisions on Agrarian Principles;
2. Law Number 27 of 2007 on The Managements of Coastal Areas and Small Islands as amended by Law Number 1 of 2014 on the Amendment to Law Number 27 of 2007 on The Managements of Coastal Areas and Small Islands;
3. Presidential Regulation Number 122 of 2012 on Reclamation on Coastal Areas and Small Islands;
4. Regulation of the Minister of Agrarian Affairs and Spatial Planning/ Head of National Land Agency Number 17 of 2016 on Land Management on Coastal Areas and Small Islands.

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[1] Article 1 Number 23 Law Number 1 of 2014 on the Amendment to Law Number 27 of 2007 on The Managements of Coastal Areas and Small Islands (“Law 1/2014”).

[2] Article 34 Section (1) and (2) Law Number 27 of 2007 on The Managements of Coastal Areas and Small Islands (“Law 27/2007”).

[3] Article 15 Presidential Regulation Number 122 of 2012 on Reclamation on Coastal Areas and Small Islands (“Presidential Regulation 122/2012”).

[4] Article 16 Section (1) and (2) Presidential Regulation 122/2012.

[5] Article 16 Section (3) and (4) Presidential Regulation 122/2012.

[6] Article 14 Section (1) Regulation of the Minister of Agrarian Affairs and Spatial Planning/ Head of National Land Agency Number 17 of 2016 on Land Management on Coastal Areas and Small Islands (“Ministerial Regulation 17/2016”).

[7] Article 14 Section (2) Ministerial Regulation 17/2016.

[8] Article 16 Ministerial Regulation 17/2016.

[9] Article 3 Section (1) Article 16 Section (3) and (4) Presidential Regulation 122/2012.

[10] Article 16 Ministerial Regulation 17/2016.

[11] Article 1 Number (11) Ministerial Regulation 17/2016.

[12] Article 16 Section (1) Law Number 5 of 1960 on Fundamental Provisions on Agrarian Principles (“Law 5/1960”).

[13] Law 42 Letter b and d jo. Article 45 Letter b and d Law 5/1960.

[14] Article 26A Section (1) Law 1/2014.

[15] Article 26A Section (2) Law 1/2014.

[16] Article 23 Section (2) Law 1/2014.