Dio Suhenda, Jakarta – The government has halted a deal to lease out development rights for more than 100 islands in eastern Indonesia following a backlash over their listing in the catalog of auction house Sotheby's.
The Widi Reserve in North Maluku, which consists of more than 100 environmentally protected islands and is part of the most biodiverse marine area on Earth, has recently become the subject of "overwhelming interest" overseas.
Exclusive rights to develop the reserve were supposed to go up for sale earlier this month, before Sotheby's pushed the auction back to early January, but the islands may now be off the market for significantly longer after the government backed out of an agreement with the company managing them.
PT Leadership Islands Indonesia (LII), officials claimed, had not obtained the proper licenses to proceed with the auction, including a utilization permit that would address environmental concerns.
"The government will cancel the [memorandum of understanding (MoU) with PT LII] since the procedures carried out were not in line with the applicable regulations," Coordinating Political, Legal and Security Affairs Minister Mahfud MD said at a press conference live-streamed from Jakarta on Wednesday.
"They also haven't fulfilled parts of the MoU themselves, so we're terminating it."
The announcement was made after Mahfud convened a crisis meeting with several Cabinet members, including Home Minister Tito Karnavian, Maritime Affairs and Fisheries Minister Sakti Wahyu Trenggono and Environment and Forestry Minister Siti Nurbaya Bakar.
Also present at the meeting were the governor of North Maluku and regent of South Halmahera.
Mahfud said the procedural error lay in the fact that the company had not obtained the proper license from the fisheries ministry.
"The ministry has never issued a permit. Additionally, there are 1,900 hectares of forest cover in the middle of the [reserve], which is not allowed under the MoU," he said.
Previously, fisheries ministry spokesman Wahyu Muryadi told The Jakarta Post that PT LII had not acquired a business development permit. He also said the islands could not be owned by foreigners or traded.
"Based on our data, they didn't fulfill the requirements," Wahyu said on Tuesday.
The Bali-based development firm, which holds 70-year management rights to the islands and is the seller in the auction, has said it plans to build on less than 0.005 percent of the reserve, AFP reported.
LII is advertising the archipelago as a chance to build luxurious resorts and homes across 17 islands, with the potential for a 1,000-meter private airstrip.
In an email to The Washington Post, PT LII said it had been working with the government since 2014 on the project and had numerous "licenses, permits, approvals and government recommendations in hand".
No estimated sale price for the rights has been given by the auction house or the company. The Post was not able to reach PT LII or Sotheby's for further comment.
Despite revoking the permit, Mahfud said the government would remain open to anyone interested in investing in the islands – including PT LII – provided that they followed the country's laws and regulations.
The senior minister added that the government would be forming a task force to review the utilization of the country's remote islands.
"There may be more development or investment projects [in outlying regions] that do not follow procedures or are lacking permits," he said.
While foreign nationals are generally not legally permitted to own land in Indonesia, PT LII's auction aims to grant foreign investors shares in the company rather than ownership of the islands themselves.
In its official listing on the Sotheby's webpage, the Widi Reserve is described as "one of the most breathtaking properties anywhere on Earth".
The islands, and Indonesia more broadly, lie within the Coral Triangle, a highly biodiverse marine area that includes the Philippines, Papua New Guinea and the Solomon Islands as well.
PT LII said in a press statement on Dec. 8 that there had been "a very serious level of interest" in the reserve from "several highly qualified registered bidders".
Zackary Wright, Sotheby's Asia-Pacific vice president, told AFP the sale had been delayed to give buyers "more time [...] to work through due diligence".
But the auction was met with criticism from environmental activists who said selling the development rights would harm the untouched island chain.