05 Oct 2026 · TAMA Insight
Indonesia Updates Framework for the Utilization of Small Islands and Surrounding Waters
Indonesia has introduced a new regulatory framework governing the utilization of small islands and their surrounding waters through Minister of Marine Affairs and Fisheries Regulation No. 13 of…
Indonesia has introduced a new regulatory framework governing the utilization of small islands and their surrounding waters through Minister of Marine Affairs and Fisheries Regulation No. 13 of 2026 (“MMAF Regulation 13/2026”). The regulation replaces the previous framework under Minister of Marine Affairs and Fisheries Regulation No. 10 of 2024 and took effect on 14 September 2026.
The regulation provides a more detailed framework for the utilization of small islands, including requirements concerning spatial planning, land area, environmental considerations, foreign investment, supervision, and the treatment of existing permits.
1. Principles Governing Small Island Utilization
MMAF Regulation 13/2026 requires the utilization of small islands and surrounding waters to be considered as part of an integrated ecological and economic system with nearby larger islands. The framework also places national interests as a priority, including national defence and security, environmental protection, public welfare, and nationally designated strategic projects or vital national objects.
The regulation maintains the existing policy direction that utilization of small islands should prioritize activities such as conservation, education and training, research and development, marine cultivation, tourism, sustainable fisheries and marine industries, organic agriculture, livestock, and national defence and security.
Utilization is divided into utilization of the small islands themselves and utilization of the surrounding waters. While the former is regulated in greater detail under MMAF Regulation 13/2026, activities in surrounding waters remain subject to other applicable marine spatial planning and business licensing requirements.
2. Spatial and Environmental Requirements
Utilization of a small island must be consistent with the applicable spatial plan, the characteristics and type of activity, land-area limitations, and the island’s topography and typology. The regulation also requires consideration of ecological, socio-cultural, economic, and defence and security factors.
A key restriction is that utilization may not result in a reduction in the physical area of a small island. This requirement places a clear limitation on activities that could alter the island’s physical extent.
These requirements are particularly relevant for investors considering tourism, marine-related businesses, or other commercial activities on small islands, as project feasibility cannot be assessed solely by reference to land availability or the proposed business activity.
3. Limits on Land Utilization and Green Open Space
MMAF Regulation 13/2026 maintains a significant limitation on the proportion of a small island that may be utilized commercially.
At least 30% of the island’s area must remain under the direct control of the State, while a maximum of 70% may be utilized by business actors. Business actors utilizing land must also allocate at least 30% of the utilized land for green open space.
The regulation therefore does not provide a basis for commercial utilization of an entire small island. The permitted business area remains subject to both the overall island-area limitation and the green open space requirement.
For foreign investment projects, these restrictions need to be considered together with the applicable requirements concerning spatial planning, land and marine areas, and the specific conditions applicable to foreign investment in small islands.
4. Foreign Investment Considerations
The framework continues to recognize specific requirements for the utilization of small islands in connection with foreign investment. Such utilization is subject to the broader requirement to obtain the relevant approval and to take into account national interests as well as ecological, social, and economic considerations.
MMAF Regulation 13/2026 also places the supervision of recommendations for foreign investment-related utilization, as well as utilization of small islands with an area below 100 km², under the Minister.
Accordingly, foreign investors should assess the regulatory position of a proposed island project before proceeding with land acquisition, project development, or other commercial commitments.
5. Supervision and Administrative Enforcement
The regulation establishes a specific supervision framework for small island utilization. Supervision covers, among other matters, the validity and period of the relevant recommendation, conformity between the approved recommendation and activities carried out on the ground, compliance with utilization requirements, fulfillment of obligations contained in the recommendation, and the impact of the utilization activities.
Supervision is carried out through the Special Police for Coastal Areas and Small Islands Management. Where administrative violations are identified, administrative sanctions may be imposed in accordance with applicable legislation. Where there are indications of criminal conduct, the relevant authorities are required to coordinate with investigators.
This means that compliance does not end once a recommendation or permit has been obtained. Actual activities must remain consistent with the approved utilization and applicable obligations throughout the project.
6. Compliance Incentives
MMAF Regulation 13/2026 also introduces an incentive mechanism for eligible business actors holding recommendations for foreign investment-related utilization or utilization of small islands below 100 km².
The incentives are available to business actors that have fulfilled the obligations contained in their respective recommendations. They may take the form of infrastructure or facility support, awards, and publication or promotional support.
The mechanism therefore links regulatory incentives to demonstrated compliance with the obligations attached to the utilization recommendation.
7. Existing Permits Remain Valid
The regulation provides transitional protection for existing foreign investment-related small island utilization permits. Permits that were already held before MMAF Regulation 13/2026 came into force remain valid until their respective expiry dates.
This provision is relevant for existing projects operating under the previous regulatory framework. However, any subsequent extension or amendment should be assessed against the requirements applicable under the new framework.
8. Replacement of the Previous Framework
MMAF Regulation 13/2026 expressly repeals and replaces MMAF Regulation 10 of 2024. The new regulation became effective on 14 September 2026.
The change is therefore relevant not only to new investment projects but also to existing businesses planning to modify, expand, or renew their utilization arrangements.
Key Considerations for Business
For businesses considering investment or operations on small islands, the regulatory assessment should be undertaken before the project reaches the implementation stage. In particular, businesses should assess the applicable spatial plan, the physical characteristics of the island, the permitted utilization area, green open space requirements, the nature of the proposed activity, and any additional requirements applicable to foreign investment.
The existence of a suitable business opportunity or available land does not, by itself, establish that the proposed utilization can proceed. The project must remain consistent with the applicable spatial, environmental, land-area, and licensing requirements.
Conclusion
MMAF Regulation 13/2026 establishes the current ministerial framework for the utilization of small islands and their surrounding waters in Indonesia. The regulation maintains strict controls over the extent and manner of commercial utilization while strengthening the link between utilization recommendations, spatial planning, environmental considerations, supervision, and compliance.
For investors and existing business operators, the principal issue is therefore not only whether an activity is commercially permissible, but whether the proposed utilization can satisfy the regulatory conditions applicable to the specific island, location, and investment structure.
This alert is part of a series examining recent developments in Indonesia’s maritime, investment, and regulatory framework. Please feel free to contact us should you wish to discuss these developments further.
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