Introduction

Investment in the tourism sector—particularly in the development of hotels and resorts in coastal areas—has grown rapidly in Indonesia. However, many such properties have been constructed within the coastal setback zone, an area legally designated as restricted for commercial activities. This situation raises critical legal questions: How can business actors operate within areas that are, by law, considered off-limits? Does this indicate a legal loophole, or are we facing systemic non-compliance?

Coastal Setback Provisions and Their Implications for Business

Pursuant to the Spatial Plan Law (Law No. 27 of 2007, as amended by Law No. 6 of 2023), the coastal setback line refers to a protected area extending 100 meters from the highest tidal point. In principle, this provision prohibits any commercial activity within that radius, except for activities supporting conservation functions or those subject to specific permits.

For business actor, this presents a legal and commercial dilemma.
First, in many regions, there is an absence of regional regulations (Peraturan Daerah) or formal determinations issued by the relevant local authority (Head of Region) defining the applicable setback boundary. This regulatory vacuum often results in the issuance of land title transfers or building permits for parcels later identified as falling within the setback zone.

Second, this condition gives rise to the risk of administrative defects in land certificates (Sertipikat Hak Atas Tanah) encompassing setback areas. Furthermore, business actors may be deemed in violation of spatial planning regulations, potentially amounting to unauthorized privatization of public coastal areas.
Third, from a reputational standpoint, such violations may harm the image of companies—especially those affiliated with international operators obliged to adhere to global legal and environmental standards. In the context of sustainable investment, tourism properties are increasingly assessed based on compliance with environmental, social, and governance (ESG) principles.

Case Studies: Bali and Labuan Bajo

In Bali, several luxury hotels located in Seminyak, Canggu, and Uluwatu are situated in close proximity to the shoreline. Similarly, in Labuan Bajo, exclusive hotels and resorts are frequently constructed within 100 meters of the coastline. In certain instances, such developments have been challenged by environmental non-governmental organizations and have become the subject of legal proceedings. However, these disputes are often resolved through political channels, failing to establish clear legal precedent. In many cases, regional governments have yet to adopt definitive regulations governing the coastal setback boundary.

Recommendations

The prevailing legal ambiguity and uncertainty regarding coastal setback zones poses significant challenges to hotel and resort developers. To resolve this issue, local governments must provide unequivocal legal determinations regarding the applicable setback radius in their jurisdictions. Doing so will enable business actors to comply with applicable regulations and avoid future administrative and legal disputes.