Asbisindo Proposes PFII Design Must Accommodate Sharia Finance

The Indonesian Sharia Bank Association (Asbisindo) has proposed that the design of the International Financial Centre (PFII) should not only accommodate conventional finance but also Islamic finance, enabling the zone to become Indonesia’s international sharia financial hub. Asbisindo Secretary General Koko Tjatur Rachmadi stated during a public hearing with the PFII Bill working committee in Jakarta on Thursday that the association supports the establishment of PFII in principle, provided its design serves as a centre for international sharia transactions alongside conventional ones. Asbisindo believes the PFII must encourage the development of the sharia banking industry, the sukuk market, the halal industry, and sustainable financing, while strengthening Indonesia’s integration with global investors, particularly from Organisation of Islamic Cooperation (OKI) member countries, the Middle East, and Southeast Asia. However, this support comes with conditions. Asbisindo stressed that the PFII must maintain financial system stability, sharia compliance, fair competition with the domestic industry, and consumer and investor protection, and must not become a space for regulatory arbitrage, tax avoidance, or financial activities lacking real economic substance. The association also warned of the risk if the PFII develops merely as an offshore financial centre without contributing to the national economy. Koko stated that tax incentives, licensing, and other facilities must be linked to indicators of real benefit, such as incoming investment, real sector financing, job creation, skills transfer, increased domestic financial market transactions, and support for MSMEs, particularly in the halal industry. Asbisindo further highlighted the potential for unequal treatment between PFII players and domestic banks. If financial institutions in the PFII receive significantly more lenient facilities than national sharia banks, competitive distortions could occur. The association urged that sharia commercial banks, sharia business units, and domestic sharia financial institutions be granted equal and aligned access to participate in the PFII. Asbisindo also requested that the special legal and administrative framework of the PFII not diminish the application of prudential principles, oversight by the Financial Services Authority (OJK), monetary policy by Bank Indonesia (BI), deposit insurance by the Indonesia Deposit Insurance Corporation (LPS), or sharia governance. The government was asked to affirm in the law that the PFII remains part of the Unitary State of the Republic of Indonesia and is subject to Indonesian sovereignty. Furthermore, Asbisindo highlighted the risk of non-uniform sharia compliance and suggested the PFII needs a mechanism for fatwa recognition, standard harmonisation, and sharia dispute resolution to address differences in contract interpretation across jurisdictions. The association also emphasised that the PFII must avoid the stigma of a tax haven by implementing beneficial ownership standards, anti-money laundering and counter-terrorism financing measures, tax transparency, and cross-jurisdictional reporting. As input for the PFII Bill, Asbisindo proposed that the development of sharia finance be explicitly included as a primary objective. The scope of activities should cover both conventional and sharia financial services, including sharia banking, sukuk, sharia investment, takaful, Islamic fintech, Islamic trade finance, and Islamic wealth management. On governance, Asbisindo suggested establishing a coordination mechanism involving OJK, BI, the National Sharia Board of the Indonesian Ulema Council (DSN-MUI), the LPS, and other relevant authorities. The association also encouraged the formation of a PFII Sharia Advisory Council to support the harmonisation of national and international sharia standards. Regarding licensing, Asbisindo views a fast and competitive process as important, but it must still prioritise fit and proper tests, prudential principles, anti-money laundering measures, and sharia compliance. Incentives should be granted selectively based on substance and national economic benefit, including encouraging unique sharia products capable of attracting global investors. For domestic industry protection, Asbisindo proposed that national sharia banks be given equal opportunities to open branches, units, desks, or electronic business vehicles within the PFII. In dispute resolution, the association supports the establishment of a special PFII court with competence to handle sharia economic disputes, along with the option of international sharia arbitration. Koko concluded that Asbisindo fully supports the establishment of the PFII as long as the bill guarantees the integration of sharia finance, strong sharia governance, equal treatment for the domestic industry, prudential supervision, and a real contribution to the national economy.