Singapore/Jakarta: The Indonesian government has cancelled a company’s licence to develop an untouched coral atoll archipelago that was to be the subject of a high-profile and controversial auction run out of New York.

The Widi Islands lie in a protected marine reserve in eastern Indonesia and the rights to make them a high-end eco-tourism attraction were slated to go on the market this month in a week-long sale organised by international auction house Sotheby’s.

The Widi Islands sit in North Maluku province in eastern Indonesia.Credit:Sotheby’s

Amid resistance from environmental groups and members of the military, who last week raised an Indonesian flag on one of the islands in opposition to the offering, the bidding was delayed until January.

Now, it has been torpedoed altogether by Jakarta.

A company called Leadership Islands Indonesia (LII) had in 2015 struck an agreement with the government in North Maluku province to manage and develop the Widi Islands and planned to turn them into “one of the world’s most sustainable luxury travel destinations”.

While the actual islands are the property of the state and forbidden from being bought and sold under Indonesian law, a stake in LII was up for grabs to pre-approved buyers in the Sotheby’s auction.

But Mahfud MD, Indonesia’s Coordinating Minister for Political, Legal, and Security Affairs, said on Wednesday night the company’s licence for the islands was being cancelled due to “procedural error”.

“The [agreement] should have been approved by the marine [affairs] and fisheries minister,” he said.

He said a permit had never been issued by the minister, adding that the inclusion of 1900 hectares of forest within the area licensed for development “should not have been [allowed]“.

The water around the more than 100 islands features some of the world’s most diverse coral and marine life such as leatherback turtles and blue whales while the protected rainforests onshore are home to bird species like kingfishers and falcons and rare plants.

The Widi Islands lie an hour’s journey by speed boat from the mainland of North Maluku province.Credit:Sotheby’s

“It feels like a mix of Avatar and Jurassic Park when you get there,” LII’s owner, Bali-based British woman Natalia Perry, told a Singapore real estate magazine this year.

LII had designs on laying an airstrip to connect the islands to centres including Singapore, Bali and Cairns. But it has maintained that conservation was at the heart of its ambitions.

Eco-lodges and private island residences would be capped in number and touch less than one per cent of the rainforest, “largely overlapping spots already deforested”, and half a per cent of the whole reserve.

LII had also budgeted an initial $US1.5 million ($2.2 million) to counter threats like shark finning, poaching of endangered species and deforestation and would build a conservation centre, it has said.

The licence could still be reissued.

The government will open investment opportunities “to use the outer islands”, said Mahfud, the Indonesian minister.

“If LII is interested, it is welcome, as long as [everybody] follows the existing regulations,” he said.

LII’s spokesman, Okki Soebagio, said on Wednesday night talks were ongoing.

“We are still discussing [the matter] internally and still holding dialogue with the government,” he said.

Environmentalists, however, want the islands to be off limits to development for good.

“If their licence is being revoked, it should be revoked permanently,” said Parid Ridwanuddin, the coastal and marine campaign manager for WALHI, an Indonesian environmental NGO.

“A small island ecology is very vulnerable as it is very limited in size, unlike bigger islands. Even a small development, will cause ecological imbalances and destroy its environment.”

Greenpeace ocean campaigner Afdillah, who like many Indonesians goes by one name, said permits to manage and develop the islands should never have been granted.

“If they claimed the forest was a protected forest, then the government should protect it, they should protect it more fiercely. Do not offer it for grabs after being reviewed in the future,” he said.

“Don’t give false hope to future investors, LII, or any investors. Just leave Widi Islands alone. Let the investors look elsewhere for other more appropriate spots for development.”

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