Indonesia ready to lease out islands

Foreigners cannot own them but they are welcome to run islands on lease
Lynn Lee, Straits Times 1 Sep 09;

JAKARTA: Foreigners cannot own land in Indonesia. However, to boost tourism, the local authorities are inviting them to lease available islands across the sprawling archipelago.

On Sunday, Mr Ismeth Abdullah, governor of Riau Islands province, said he welcomes overseas investors who wish to manage islands in his province.

Bordering Singapore and Malaysia, the province is made up of 1,795 islands, of which only 394 are inhabited.

Mr Ismeth told The Jakarta Post that the presence of foreign investments has raised revenues for the province. He cited the popular Nikoi Island resort, located 21/2 hours away from Singapore by ferry and speedboat.

The province's Investment Coordinating Agency usually takes about a month to issue leasing permits to investors, in line with government regulations, he added.

Separately, the head of Gorontalo province's Investment Coordinating Board told The Jakarta Globe that a Singapore-based investor was keen on leasing three islands off North Sulawesi that boast a panoramic view.

Mr Rustamrin Akuba said the provincial government was currently reviewing the proposal.

The two men's comments came days after a ruckus erupted over an alleged advertisement on the Canadian website www.privateislandsonline.com offering to sell three islands off the coast of West Sumatra to foreigners. This was reported by local media, which said the website was hawking Macaroni, Siloinak and Kandui - part of a group of 70 islands known as the Mentawai islands - for between US$1.6 million (S$2.3 million) and US$8million.

Many Indonesians were up in arms over the reports, with legislators lambasting the government for its lax attention to the country's assets.

West Sumatran governor Gamawan Fauzi denied last Thursday that any of the Mentawai islands were for sale. A website check also found that Macaroni, Siloinak and Kandui referred to resorts located on three different islands that are popular with surfers.

Mr Gamawan told reporters that the resorts were run by a partnership of local and foreign businessmen, but the management wanted to sell their shares now because of an 'internal problem'.

Mr Aji Sularso, a director-general at the Maritime Affairs and Fisheries Ministry, confirmed that the islands were still owned by Indonesia, adding that it was not possible for foreigners to own islands.

'It is not supported by any regulation,' he told The Jakarta Post.

Indonesia's estimated 17,000 islands hold vast potential for maritime tourism, from diving to surfing to beach resorts. Only 5,000, though, have been named to date. The government has said it will set aside six billion rupiah (S$858,000) to determine the exact number of islands and register them as the country's assets with the United Nations.

While he did not elaborate, Mr Aji said he anticipated a loosening of regulations with regard to coastal areas and remote islands, so that those areas could be put to 'better use' for the community and local government.

He did point out, however, that the government was getting only 600 million rupiah in tourist receipts from the Mentawai region each year.

'This amount is too small, since Mentawai has some of the most beautiful waves in the world, and these are worth much more than that.'

Nikoi Island

ITS white sandy beaches, coral reefs and proximity to Singapore are Nikoi Island's selling point for Singapore-based tourists who flock there every weekend.

The island's only resort - which charges $330 per night for a one-bedroom beach house - is owned by a group of six foreigners, five of whom are based in Singapore.

One of them, Mr Andrew Dixon, an Australian, first came across the island with his wife in 2001.

He and his partners then negotiated a deal to lease the island from the Indonesian government for 30 years, with an option for renewal. Construction of the resort began in 2005 and it was opened in May 2007.

By the end of this month, the resort will have 15 beach houses, which can accommodate up to 60 people.

There is a strong emphasis on conservation - the houses are constructed with driftwood from nearby islands, there is no air-conditioning and solar panels are used to heat water.

The management is also involved in micro-financing schemes to help residents of the Kawal fishing village on Bintan set up small businesses.

Speaking to The Straits Times yesterday, Mr Dixon said getting the resort up-and-running was not easy, as there was a lot of red tape involved.

He and his partners are now looking to get another project on a neighbouring island off the ground.