Indonesia Maritime Law Association Update
Cabotage Restrictions
Indonesian maritime law has recently undergone significant changes with the enactment of the third amendment to the 2008 Shipping Law, namely Law Number 66 of 2024. The amendment introduces substantial revisions to cabotage policies, impacting foreign equity investment and operational requirements in Indonesia’s maritime sector.
Effective 28 October 2025, all direct (and probably indirect) foreign equity capital investment in Indonesian sea transportation companies must adhere to stricter regulations. Foreign investors will continue (since 2008) to be limited to a maximum 49% ownership share in such companies, which must be structured as Indonesian limited liability companies, known as Perseroan Terbatas Penanaman Modal Asing (PT PMA). Additionally, these entities must register at least one vessel with a minimum tonnage of 50,000 GT, and all other vessels owned by the entity (unless registered before 28 October 2025) must also meet this 50,000 GT threshold.
This marks a significant shift from previous requirements, under which entities with direct foreign equity capital investment were only required to own and register one vessel of at least 5,000 GT, with no restrictions on the tonnage of additional vessels. The new law further mandates that the entity must not only own and register these vessels but must also operate them.
Moreover, the amendment imposes qualifications on Indonesian shareholders. The majority Indonesian shareholder must now hold a national sea transportation license, which necessitates the ownership of at least one vessel registered under the Indonesian flag with a minimum of 175 GT. Foreign investors must also be qualified as sea transportation companies in a relevant jurisdiction to participate under these regulations.
These changes reflect Indonesia’s strategic focus on encouraging foreign investment in the large-vessel segment of its maritime economy. Existing companies and those with applications filed before 28 October 2025 will continue to operate under the previous regulations, ensuring a transition period for compliance and ensuring the protection against ex post facto law. However, new vessel acquisitions must comply with the 50,000 GT requirement.
The updated restrictions also extend to specialty transportation companies in the mining and industrial sectors that wish to own and operate their own vessels. Such vessels are strictly limited to serving their own transportation needs and may not be utilized for third-party services. By imposing these new restrictions, Indonesia aims to enhance the competitiveness and self-reliance of its maritime sector while attracting foreign investment into high-capacity shipping operations.
Shipping-Related Services
In a significant liberalization of foreign investment policies, Indonesia has eased restrictions on maximum foreign shareholdings in shipping-related services. The new framework allows for 100% foreign ownership of companies engaged in stevedoring, freight forwarding, port waters cargo transport, and ship manning agency services. These entities must still be structured as limited liability companies (Perseroan Terbatas or PT), but the previous caps on foreign equity have been entirely removed.
This development is expected to attract increased foreign investment into Indonesia’s maritime services sector, fostering growth and modernization. However, to ensure compliance and maintain oversight, all service businesses, whether or not owned by foreign investors, are now subject to new reporting requirements. These reporting obligations aim to provide greater transparency and accountability while allowing the government to digitize and monitor the performance and impact in the sector.
By eliminating these restrictions, Indonesia signals its commitment to enhancing its maritime logistics and support infrastructure, aligning with global standards in support of Indonesia’s national single window interface and improving the ease of doing business for international investors.
Maritime Security: Legal, Institutional, and Geopolitical Challenges
Indonesia, as the world’s largest archipelagic state, faces unique challenges in maintaining maritime security across its vast seas. Recent legislative and institutional changes, along with persistent geopolitical tensions, have reshaped the landscape of maritime safety and security in the region.
Legal and Institutional Restructuring
The Indonesian Sea and Coast Guard has essentially been disestablished as a result of the Third Amendment to the Shipping Law of 2008, which removed provisions for its establishment. In its place, the Ministry of Transportation has been granted centralized authority over maritime safety and pollution control, vessel traffic management, navigational aids, search and rescue operations, and maritime law enforcement support.
A significant portion of the disbanded agency’s responsibilities is being merged into the Maritime Security Agency (Badan Keamanan Laut, or BAKAMLA). This consolidation aims to pave the way for the establishment of a new Indonesian Coast Guard, envisioned to operate under the Law of Sea Affairs rather than the Shipping Law. This new entity will oversee critical tasks such as the installation and maintenance of early warning systems, conducting security patrols, and formulating national maritime safety and security policies.
However, budgetary constraints pose a serious challenge. The Maritime Security Agency currently operates with only 10 patrol vessels across three operational zones:
- West Maritime Zone: Covering Java, Sumatra, and Kalimantan
- Central Maritime Zone: Encompassing the Lesser Sunda Islands
- East Maritime Zone: Covering Maluku and Papua
Geopolitical Pressures and Regional Cooperation
Indonesia remains an active participant in joint military exercises with other littoral states as well as intelligence-sharing initiatives, and coordinated patrols to enhance surveillance and response capabilities. Cooperation between the Maritime Security Agency, the Navy, and the Water Police is critical for addressing complex regional geopolitical issues driven by disputes over boundaries, oil, natural gas, and fisheries.
- Straits of Malacca: Final boundary delineations with Malaysia, Singapore, and Thailand remain unresolved.
- Celebes Sea: Disputes over the Ligitan and Sipadan Islands, the Ambalat block, and boundaries in the Tanjung Datu area continue as irritants, although bilateral agreements on traditional fisheries rights have eased tensions.
- North Natuna Sea: Encroachments by Chinese Coast Guard vessels into Indonesia’s Exclusive Economic Zone (EEZ) highlight ongoing conflicts regarding China’s controversial 9-Dash Line. On 21, 23, and 25 October 2024, Chinese Coast Guard patrols entered Indonesia’s EEZ in the North Natuna Sea, disrupting a 3D seismic survey by PT Pertamina East Natuna. The Indonesian Maritime Security Agency responded by shadowing the Chinese vessels with one patrol boat along with an Indonesian Navy Corvette. China departed but defended its actions as patrolling its jurisdictional waters, reiterating its claims in the resource-rich region.
A diplomatic pivot emerged on 9 November 2024, when Indonesia’s newly elected President Prabowo announced a common understanding with China regarding “joint development in overlapping claims areas”. This agreement included the formation of a joint intergovernmental steering committee, sparking controversy within the Indonesian diplomatic community. Critics argue that this position undermines Indonesia’s longstanding stance under the United Nations Convention on the Law of the Sea (UNCLOS) that no overlapping claims exist in its EEZ. Concerns are growing that Indonesia’s engagement with China may inadvertently legitimize China’s historical rights claims within the 9-Dash Line.
The North Natuna Sea harbors perhaps the World’s largest oil and natural gas reserves, but these resources are deep and contain high carbon dioxide content, necessitating substantial investments for environmentally acceptable extraction to ensure sustainable development.
While the prospect of joint resource development offers potential economic benefits, Indonesia must carefully navigate legal and geopolitical implications to avoid setting precedents that could weaken its maritime sovereignty.
Indonesia stands at a crossroads in redefining its maritime security framework amid growing domestic and international challenges. The success of these reforms will depend on balancing effective law enforcement, institutional capacity-building, and strategic diplomacy. As geopolitical tensions remain high, regional cooperation and adherence to international law will be pivotal in securing the nation’s maritime future.
by Andrew I. Sriro, President – asriro@akhh.com
President of the Indonesian Maritime Law Association
asriro@akhh.com
Adnan Kelana Haryanto & Hermanto