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Island for Sale: Ownership Rights and Restrictions over Islands

Updated: Aug 31

By: Michael Demetrius (michael.demetrius@launcher.id) and Clara Viriya (clara.viriya@launcher.id)

A little while back, a small island in the territorial waters of Buton Island, Southeast Sulawesi, namely Pulau Pendek (“Pendek Island”) went viral on social media as it ended up for sale on an e-commerce site, followed by a report filed by the heirs of its former islanders. This sparsely populated island of 242 hectares was offered at a price of Rp36,500 (thirty six thousand five hundred Rupiah) per square meter. Nevertheless, this transaction is deemed illegal and contrary to relevant prevailing laws and regulations.

Article 33 paragraph (3) of 1945 Constitution of the Republic of Indonesia (“UUD 1945”) provides that all lands, waters and natural resources within the territory of Republic of Indonesia are to be controlled by the State and shall be used to the greatest benefit of the people. The aforesaid provision expressly prohibits land ownership by any business entities as well as individuals. However, Indonesia as a sovereign State can grant the rights and permits to use the above resources to its citizens, both organizations and individuals. Such rights include right to own, right to cultivate, right to use, right to rent buildings, land clearing right, forestry right, and so forth. The granting does not lessen the State’s authority to control and manage the islands in the event there exists national interests or emergencies.

This notion is further substantiated by Article 9 paragraph (1) of Minister of Agrarian and Spatial Planning/National Land Agency Regulation Number 17 of 2016 on Land Arrangement in Coastal Areas and Small Islands (“Permen ATRBPN 17/2016”), which provides that small islands can be granted land rights. Small Island itself is an island with an area smaller than or equal to 2,000 km2 (two thousand kilometer square) along with its overall ecosystem. With reference to Law Number 27 of 2007 as lastly amended by Law Number 1 of 2014 on the Management of Coastal Areas and Small Islands (“Law 27/2007”), such rights are commonly granted in the form of a land book and/or a land certificate that is issued by the Ministry of Agrarian and Spatial Planning/National Land Agency.

In this present case, the Pendek Island offered through an online site, did not have the above certificate of ownership and is not owned by any individuals or entities. This absence of a certificate of ownership has made Pendek Island to be considered as a State property, in this case the Southeast Sulawesi Provincial Government or the Regency Government.

In any case, as further determined in the Article 9 paragraph (2) Permen ATRBPN 17/2016, such rights only grant control over at most 70% (seventy percent) of the total island’s area. The remaining 30% (thirty percent) shall be directly controlled by the State and be allocated as a conserved plantation and public space.

Lastly, not only are islands not allowed to be owned by individuals or business entities, as mandated by Article 26 paragraph (2) of Law Number 5 of 1960 on Basic Agrarian Law (“Law 5/1960”), rights and certificates thereto cannot neither be bought nor sold, including to foreign nationals. Otherwise, it shall be nullified and the land in question will be returned to become the State asset. As such, islands in Indonesia cannot be sold nor bought with ownership title to both foreign and Indonesian citizens. However, both can have and be granted with right to use and right to cultivate over such state assets.