Indonesia as a maritime nation with over +17,000 islands in its territory is heavily dependent on sea transportation to connect its vast territories. Being an island nation where the sea runs right down the middle of its territory, dividing the country into multiple islands poses a significant challenge to the country’s inhabitants, but also offers new opportunities. Indonesian waters are bustling with business activities such as cargo transportation, offshore oil and gas exploration, fishing, as well as tourism. Such activities will require a substantial amount of naval vessels operating in the country’s territory.

As a developing country, Indonesia is pursuing a policy of self-sufficiency, and in the maritime sector, it is striving to limit the use of foreign vessels in its territory. Under Article 8 of Law Number 17 of 2008 on Shipping (“Shipping Law"), Indonesia has rightfully stipulated the cabotage principle, whereby domestic maritime transportation activities in Indonesia are conducted by national maritime transportation companies using Indonesian-flagged ships and manned by Indonesian ship crews. However, there are exceptions to this rule. Under Article 206a of the Government Regulation number 22 of 2011 on the amendment of Government Regulation number 20 of 2010 on Water Transportation, foreign vessels are allowed to conduct other activities excluding transport of passengers and/or goods in domestic maritime transport activities in Indonesian waters as long as Indonesian flagged vessels are not available or are not available in enough numbers. The “other activities” mentioned in said article would be the following:

1. Oil and gas survey;
2. Drilling;
3. Offshore construction;
4. Offshore support operation;
5. Dredging; and
6. Underwater salvage and work.

As of the date of this writing, the current implementing regulation for foreign vessels shall be the Minister of Transport Regulation number PM 2 of 2021 on the Terms and Conditions of Approval for the Use of Foreign Vessels for Other Activities in the Territorial Waters of Indonesia Other than Transport of Passengers and Goods (“PM 2/2021”).  Under Articles 2 and 3 of PM 2/2021, foreign vessels performing such other activities shall be operated by an Indonesian sea transportation company that conducts its activity in Indonesian territorial waters and/or to and from foreign ports (hereinafter “National Sea Transportation Company”). As for the vessels themselves, under PM 2/2021, they must be issued an Approval for the Utilization of Foreign Vessels (“PPKA”) by the Minister of Transport as delegated to the Directorate General of Sea Transportation (Ditjen Hubla).

 Under Article 4 of PM 2/2021, the requirements to obtain the PPKA are:

1. Work plan, which includes activity schedule, scope of work, which is completed with justification of vessel needs, and work area, which is marked with geographical coordinates;
2. Work contract between an employer and a National Sea Transportation Company and/or letter of appointment from an employer to a National Sea Transportation Company;
3. Charter party between a National Sea Transportation Company and the owner of the foreign vessel;
4. Copy of the National Sea Transportation Company business license or a sea transportation standard certificate that has been validated;
5. Copy of foreign vessel registration and nationality certificate;
6. Foreign vessel measurement certificate;
7. Copy of valid classification certificate;
8. Copy of valid certificate of safety and security for foreign vessel;
9. Copy of valid foreign vessel safety management certificate;
10. List of foreign vessel crew/a certificate signed by the vessel captain;
11. Proof of announcement of Indonesian vessel procurement (proving that there has been indeed an attempt to secure a domestic vessel); and
12. A statement from the owner of the foreign vessel which clarifies their willingness to accept and place maritime practice cadets from the national shipping school.

If the vessel fails to possess the valid safety and security of a foreign vessel, then the applicant shall attach a mobile offshore drilling unit safety certificate or a certificate from the classification agency. Other requirements however are mandatory and unless provided then the PPKA shall not be granted.

The PPKA is granted for a maximum period of 6 months and can be extended. Upon completion of the activities, the foreign vessel must leave Indonesian territories. However, foreign vessels that possess PPKA with an employment contract of more than 2 years shall be registered as an Indonesian vessel and shall be exempted from leaving Indonesian waters, as well as the types and specifications for drilling activities.

Penalties for not possessing the PPKA Under Article 18 of PM2/2021, an administrative sanction shall be imposed an administrative sanction in the form of a written reprimand, suspension of business license, or revocation of business licenses. This means the National Sea Transportation Company will be barred from performing any business activity should the PPKA is not applied. This, however, does not discount any other applicable criminal sanctions to be imposed if the procurement or use of the vessel is done illegally.