Indonesia\u2019s toll remarks for Malacca Strait draws attention to choke point risks<\/p>\n
Indonesia\u2019s Finance Minister has floated the idea of imposing a levy on ships transiting the Strait of Malacca, following Singapore Deputy Prime Minister\u2019s statement on ships\u2019 unconditional transit rights through international straits April 21.<\/p>\n
Finance Minister Purbaya Sadewa said April 22 at a symposium in Jakarta: \u201cAs the President said, Indonesia is not a peripheral country. We are on a strategic global trade and energy route. Yet ships passing through our straits are not charged. I\u2019m not sure whether that\u2019s right or wrong. Now Iran is reportedly charging ships passing through the Strait of Hormuz.\u201d<\/p>\n
\u201cIf it were split among three: Indonesia, Malaysia, and Singapore, it would be quite substantial, right? Our route is the longest and most extensive. Singapore is small, and Malaysia could be split with us. If only it could be like that, but it isn\u2019t.\u201d<\/p>\n
Indonesia needs to be \u201cmore offensive\u201d with all its resources and \u201cnot think defensively,\u201d he said, highlighting that it would allow the country to create faster growth while maintaining fiscal discipline.<\/p>\n
\u201cInflation remains under control. Keeping the state budget deficit at 3% of GDP means our economic fundamentals are still strong. We\u2019re being frugal, yet with a 3% deficit, growth can still reach 5%. At that level, we can grow above 5%, moving toward 5.5%-6%,\u201d said Sadewa at the event.<\/p>\n
His remarks followed Bank Indonesia\u2019s decision to hold its policy rate unchanged at 4.75% for the seventh consecutive month during its April meeting, as the central bank emphasized the need to preserve rupiah stability amid heightened global uncertainty.<\/p>\n
\u201cMore fundamentally, BI widened its current account deficit forecast for 2026 to 0.5%-1.3% of GDP, from 0.1%-0.9% at the March 17 meeting,\u201d said OCBC Group Research in a note April 22, adding that the adjustment underscores \u201congoing external vulnerabilities, particularly in the context of elevated global energy prices.\u201d<\/p>\n
Coupled with a 3% GDP state budget deficit, the \u201ctwin deficit\u201d pressures on the current account and the fiscal side \u201ccontinue to exacerbate external vulnerabilities\u201d in Indonesia as the fiscal deficit until March reached about 35% of the annual deficit, the OCBC note said.<\/p>\n
Iran has proposed charging ships for transit through the Strait of Hormuz as part of broader postwar arrangements. Based on S&P Global Commodities at Sea data, total ship transit count through Hormuz stood at 218 in March compared with 3,783 in February.<\/p>\n
Singapore has reinforced its stance of upholding ships\u2019 transit rights through international straits.<\/p>\n
Deputy Prime Minister Gan Kim Yong said at the Singapore Maritime Week April 21 that UNCLOS \u201cclearly stipulates the right of transit passage for all ships and aircraft through straits used for international navigation,\u201d and that Singapore could not negotiate away passage rights even when facing real commercial and safety pressures around Hormuz.<\/p>\n
Regarding the Strait of Malacca, which handles one-third of global seaborne oil trade, he said Singapore, Malaysia and Indonesia have a cooperative framework to keep the waterway operating smoothly and to ensure safe passage, framing the straits as a \u201cshared responsibility\u201d rather than a revenue opportunity.<\/p>\n
Foreign Minister Vivian Balakrishnan made similar comments in an April 7 parliamentary reply, saying transits through the Strait of Hormuz, just like the Straits of Malacca, fall under a clear legal regime in which \u201cthere is a right of transit passage.\u201d<\/p>\n
He added that this right \u201cis not a privilege to be granted by the bordering state,\u201d \u201cis not a toll to be paid,\u201d and cannot be suspended even for security, environmental or wartime reasons under Article 44 of UNCLOS.<\/p>\n
Balakrishnan emphasized that Singapore\u2019s legal position on Hormuz was shaped in part by the stakes much closer to home, noting that the narrowest point in the Southeast Asian waterway is less than two nautical miles wide, compared with 21 nautical miles at Hormuz. He said this geography is the reason why Singapore must take a \u201ccategorical position\u201d that transit passage is a right, not a privilege.<\/p>\n
Analysts have flagged that the congested route through the Strait of Malacca linking the Indian and Pacific Oceans is especially subject to disruptions.<\/p>\n
\u201cAlternatives are sparse: the narrow, shallow Sunda Strait is unsuitable for large tankers, while the Lombok-Makassar route adds roughly eight days per round trip \u2014 effectively removing around one-sixth of global tanker capacity. This would tighten global oil and LNG markets and drive significant price spikes,\u201d wrote think tank E3G in a March report.<\/p>\n
\u201cThe countries most exposed would be those most dependent on uninterrupted flows through Malacca and adjacent sea lanes.\u201d Japan and South Korea would take the hardest hit if the Malacca pathway were to be disrupted, while \u201cmany developing countries would be priced out entirely,\u201d according to the report.<\/p>\n
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