The Revolving Fund was established on 11 February 1981 through a Memorandum of Understanding (MOU) signed between Indonesia, Malaysia, Singapore and the Malacca Strait Council (MSC).

The Revolving Fund was set up with a principal sum of 400 million ¥ contributed by the MSC. Any of the three littoral States of the Malacca and Singapore Straits (i.e. Indonesia, Malaysia and Singapore) is allowed to draw cash advance from the Revolving Fund for use in combating oil pollution caused by ships. The amount drawn will be repaid to the Fund when the State recovers the clean-up costs from the parties responsible. The Revolving Fund is managed by the Revolving Fund Committee (RFC). The RFC meets annually to discuss issues relating to oil spills and to update the Standard Operating Procedure for Joint Oil Spill Combat in the Straits of Malacca and Singapore (SOP). The SOP, which was drawn up following the establishment of the Revolving Fund, covers areas such as the response areas and division of responsibility among the littoral states, contact points, communication and information sharing procedures, inter-state assistance and reimbursement procedures. The objectives are to facilitate early information sharing and prompt and coordinated response to any oil spill incident. Regular joint exercises are also carried out to test the procedures and any lessons learnt are used to further improve and update these procedures.