Indonesia's International Financial Center: Aiming for Global Investment

The Indonesian government is in the process of establishing the Pusat Finansial Internasional Indonesia (PFII), aiming to create a competitive environment for foreign investment. This initiative is part of a broader strategy to enhance Indonesia's position as a global financial hub.

Government Plans and Incentives

Finance Minister Purbaya Yudhi Sadewa has announced that the PFII will offer various tax incentives for foreign investors, modeled after successful international financial centers like Abu Dhabi Global Market (ADGM) and Dubai International Financial Centre (DIFC). These incentives are expected to include tax rates as low as 0% on certain revenues, which Purbaya believes will make Indonesia more attractive to global investors.

“Indonesia has all the prerequisites to develop into one of the centers of international financial activity in Asia and the world.”Purbaya Yudhi Sadewa, Finance Minister

Purbaya emphasized that the PFII will not only focus on financial services but will also support real sector projects in Indonesia. He stated, "The establishment of PFII is intended to enhance Indonesia's competitiveness as an international financial center, serving as a catalyst for deepening the national financial sector and facilitating financing for strategic national projects."

Legal Framework and Location

The legal framework for the PFII is currently under discussion in the Indonesian parliament, with a target to finalize the legislation by July 22, 2026. The PFII is expected to be established in a special economic zone (KEK), potentially in Bali, although the exact location has not yet been confirmed. Secretary of the Coordinating Ministry for Economic Affairs, Susiwijono Moegiarso, mentioned that the government is considering multiple locations for the PFII, with a focus on creating an environment comfortable for international investors.

Additionally, the PFII will operate under a common law system, differing from Indonesia's usual civil law framework. This change is aimed at simplifying business operations and attracting foreign firms to set up in the new financial center.

Strategic Goals and Expectations

According to Purbaya, the PFII is designed to not only attract foreign capital but also to enhance Indonesia's overall economic growth. The initiative is expected to create jobs, facilitate knowledge transfer, and improve the country’s competitive edge in the global market. He noted, "Indonesia has all the prerequisites to develop into one of the centers of international financial activity in Asia and the world."

The government anticipates that the PFII will significantly increase foreign direct investment, which currently stands at approximately IDR 2,200 trillion (around USD 146 billion). In comparison, Singapore's financial center attracts investments up to IDR 5,000 trillion (approximately USD 330 billion), highlighting the potential for growth in Indonesia's financial sector.

Investor Interest and Future Outlook

Purbaya has indicated that there is considerable interest from foreign investors, particularly from countries like the United States, Japan, Australia, and China. He expressed optimism that the PFII will facilitate a more robust flow of capital into Indonesia, especially as investors seek safer investment environments amid global uncertainties.

While the exact financial impact remains uncertain, the government is committed to creating a favorable investment climate through the PFII. The initiative aims to position Indonesia as a competitive player in the international financial landscape, encouraging both foreign and domestic investments in various sectors.