A New Vision for Indonesia’s Maritime Role
Indonesia is exploring a controversial proposal to impose levies on vessels transiting the strategically vital Strait of Malacca, a move that would challenge centuries of free navigation through one of the world’s busiest shipping corridors. Finance Minister Purbaya Yudhi Sadewa unveiled the concept at a symposium in Jakarta on Wednesday, casting it as part of President Prabowo Subianto’s strategic vision to position Indonesia as a central hub in global commerce rather than a peripheral economy.
“Indonesia is not a marginal country. We sit along a key global trade and energy route, yet ships passing through the Malacca Strait are not charged,” Purbaya stated during the event hosted by state-owned infrastructure financier Sarana Multi Infrastruktur. He stressed that any fee system would require coordination with neighboring Malaysia and Singapore, which share sovereignty over the waterway, but noted that Indonesia controls the largest portion of the strait’s coastline. The Finance Minister acknowledged that the proposal remains at an early stage and is unlikely to be implemented soon, given the complexity of securing agreement among the littoral states and the potential pushback from global shipping interests.
The proposal arrives as the Malacca Strait faces renewed international attention amid global supply chain disruptions and geopolitical tensions elsewhere. The waterway serves as a critical artery connecting the Indian and Pacific Oceans, handling approximately 94,000 vessel transits annually and carrying roughly 30% of all traded goods worldwide. For Indonesia, which possesses significant resources yet struggles with infrastructure funding, the untapped revenue potential represents an attractive target for a government seeking to assert greater economic sovereignty over its territorial waters while reducing dependence on traditional revenue sources. The strait links major Asian economies including Japan, Taiwan, South Korea, and India with Middle Eastern and European markets, making it indispensable to the global economy.
The Iran Model and Its Legal Quagmire
In articulating the rationale for the levy, Purbaya explicitly referenced Iran’s current practices in the Strait of Hormuz, where the Islamic Revolutionary Guard Corps has reportedly begun charging select vessels up to $2 million for safe passage through the contested waterway. Following weeks of armed conflict with the United States and Israel, Iran has effectively established a maritime toll system that shipping analysts say generates substantial revenue while restricting traffic through the energy chokepoint that handles 20% of global oil consumption.
However, legal experts warn that Iran’s actions represent a clear breach of international maritime law. The United Nations Convention on the Law of the Sea (UNCLOS), ratified by 172 countries, guarantees freedom of navigation through international straits under Article 17’s “right of innocent passage.” Article 26 explicitly prohibits coastal states from imposing charges on foreign ships solely for the right of passage, permitting fees only for specific services such as pilotage or port facilities.
“Iran seeking to impose tolls is not consistent with our understanding of the International Law of the Sea that applies to international straits, of which the Strait of Malacca and the Strait of Singapore are prominent examples,” stated Donald Rothwell, an international law professor at the Australian National University. Philippe Delebecque, a maritime law expert at Paris’ Sorbonne University, warned that allowing such violations could lead to a domino effect. “If the Strait of Hormuz could be closed, then why not the Strait of Gibraltar between the Mediterranean and the Atlantic, or the Strait of Malacca off Indonesia?” he asked, describing such a scenario as “the end of an international society” founded on the principle that the sea belongs to no single nation.
Singapore’s Unwavering Opposition
Singapore has emerged as the most forceful opponent to Indonesia’s proposal, with Foreign Minister Vivian Balakrishnan delivering a categorical rejection during Singapore Maritime Week 2026. The city-state, which operates one of the world’s busiest transshipment hubs, maintains that any toll system would violate the fundamental principles of international law that have governed maritime trade for centuries.
The right of transit passage is guaranteed for everyone. We will not participate in any attempts to close or interdict or to impose tolls in our neighbourhood.
Balakrishnan expanded on this position during parliamentary questioning, explaining that passage through international straits constitutes an inherent right rather than a privilege granted by coastal states. “It is not a privilege to be granted by the bordering state, it is not a license to be supplicated for, it is not a toll be paid,” he told lawmakers. “It is a right of ships to traverse.”
Singapore’s stance reflects existential economic realities. As a small island nation lacking natural resources, Singapore’s prosperity depends entirely on its status as a maritime trading hub where over 500 vessels pass daily. Any restriction on free passage through the Malacca Strait would threaten the city-state’s economic lifeline while potentially triggering similar restrictions at chokepoints worldwide, from the Suez Canal to the Panama Canal. The city-state is currently constructing the Tuas Port, which will become the world’s largest automated terminal upon completion in 2040, further cementing its dependence on unrestricted maritime access.
Historical Precedents and Regional Memories
Indonesia’s proposal echoes similar efforts from three decades ago. In October 1992, then-Malaysian Prime Minister Mahathir Mohamad announced plans to convene an international conference to discuss imposing tolls on Malacca Strait traffic. Mahathir cited growing shipping accidents and argued that users should finance safety measures, stating that “some form of payment must be made to some authority which would be responsible for keeping the straits open and reducing any danger to shipping.” Ships had previously paid no tolls for using the 1,000 kilometer waterway that runs between Indonesia to the south and Malaysia and Singapore to the north.
That earlier initiative collapsed under the weight of international opposition and the realization that unilateral tolls would violate established maritime law. Today, the strategic environment has grown more complex. Roughly 40% of global trade now passes through the strait, including the bulk of oil flows from the Middle East to Asian economic powerhouses such as China, Japan, and South Korea. The waterway narrows to just 2.7 kilometers at its tightest point, making it more than ten times narrower than the Strait of Hormuz and particularly vulnerable to disruption.
Malaysian officials today reject comparisons between the Malacca Strait and Hormuz. Defence Minister Mohamed Khaled Nordin recently emphasized that the three littoral states do not face the geopolitical pressures that Iran confronts. “What happened in Hormuz is not something to be emulated,” he stated. “Malaysia, Indonesia, Singapore, we are not facing the same circumstances as Iran.” Despite this, Malaysia has pursued its own distinct approach to regional tensions, engaging in direct dialogue with Iran to secure passage for Malaysian vessels through the blockaded Hormuz strait, a move that drew criticism from Singaporean officials who view such negotiations as legitimizing violations of international law.
Great Power Rivalry and Sovereign Concerns
The toll debate unfolds against a backdrop of intensifying military cooperation between Indonesia and the United States. In early April, Jakarta and Washington signed a Major Defence Cooperation Partnership (MDCP), prompting reports that the Trump administration sought blanket overflight access for US military aircraft through Indonesian airspace. While Indonesian officials clarified that no unrestricted access had been granted, the revelation sparked internal military debate about sovereignty and strategic autonomy.
Colonel Arm Oke Kistiyanto of the Indonesian armed forces published a detailed assessment warning that such agreements could create serious risks, potentially drawing Indonesia into conflicts beyond its control. “Airspace is a core domain of state sovereignty,” Kistiyanto wrote. “When access to that domain is requested by a major power, what is at stake is not only the passage permit, but also the strategic significance of that permit: who gains operational benefits, how other countries interpret it, and whether the decision is consistent with Indonesia’s foreign policy orientation.”
Recent US naval movements have underscored American strategic interest in the waterway. The USS Miguel Keith, a 240-meter expeditionary sea base vessel, transited the strait in mid-April, conducting operations that the US Navy described as routine. Indonesia confirmed the transit complied with international law, but the presence of American warships highlights the delicate balance Jakarta must maintain between asserting economic sovereignty and avoiding entanglement in great power competition.
China watches these developments with particular concern. Chinese strategists have long identified the Malacca Strait as a critical vulnerability in the country’s energy security architecture, coining the term “Malacca Dilemma” during the presidency of Hu Jintao in the early 2000s to describe the risk of a naval blockade cutting off oil supplies. Any move to restrict or monetize passage through the strait would raise alarm bells in Beijing, which relies on the waterway for approximately 70% of its imported energy and views increased US military presence with deep suspicion.
Economic Realities and Practical Obstacles
Despite the political appeal of monetizing the strait, Indonesia faces significant practical challenges in implementing any toll system. The Malacca Strait spans approximately 1,000 kilometers, bordered by three sovereign nations. Without trilateral agreement, vessels could simply navigate closer to Malaysian or Singaporean coastlines to avoid Indonesian fees, rendering the levy economically meaningless while straining regional relations. Indonesia, Malaysia, and Singapore have maintained cooperation mechanisms against maritime piracy for decades, but a toll system would require a fundamentally different level of coordination.
The economic stakes extend far beyond Jakarta’s revenue projections. The strait accommodates approximately 82,000 vessel transits annually, with traffic including crude oil tankers, liquefied natural gas carriers, and container ships serving manufacturing supply chains across East Asia. Any disruption or additional cost would ripple through global markets, potentially raising prices for consumers worldwide while threatening the just-in-time delivery systems that modern industry depends upon. Energy analysts note that three-quarters of global maritime trade, representing $10 trillion in value, passes through just thirteen key choke points including Malacca.
Finance Minister Purbaya acknowledged these complexities, admitting the proposal remains in early stages and is unlikely to be implemented soon. “With all the resources we have, we should not think defensively. We need to start thinking more offensively, but in a measured way,” he said. The measured approach will need to reconcile Indonesia’s aspirations for greater economic sovereignty with the legal frameworks and diplomatic realities that have kept the Malacca Strait open to global commerce for generations.
Key Points
- Indonesia’s Finance Minister Purbaya Yudhi Sadewa has proposed charging levies on ships transiting the Malacca Strait, citing President Prabowo’s vision to position Indonesia as a central player in global trade rather than a peripheral economy.
- Singapore Foreign Minister Vivian Balakrishnan has strongly rejected the proposal, insisting that transit passage through international straits remains guaranteed under UNCLOS and must remain free of tolls.
- The proposal references Iran’s current toll collection in the Strait of Hormuz, where vessels reportedly pay up to $2 million for passage, though legal experts say such charges violate Article 26 of the United Nations Convention on the Law of the Sea.
- The Malacca Strait handles approximately 40% of global trade and 82,000 vessel transits annually, serving as an indispensable artery for energy supplies to China, Japan, South Korea, and other Asian economies.
- Malaysia proposed similar tolls in 1992 but abandoned the plan due to legal and diplomatic opposition; current Malaysian officials reject comparisons between Malacca and Hormuz while pursuing separate talks with Iran regarding the blockaded strait.
- The United States has recently deepened military cooperation with Indonesia and maintains naval patrols in the strait, complicating Jakarta’s efforts to assert economic sovereignty while balancing relations with Washington and Beijing.
