Competitive incentives in PFII key to attracting global investment: PPI
Jakarta (ANTARA) - Syahrir Ika, Chairman of the Indonesian Researchers Association (PPI), has said the government needs to provide competitive fiscal incentives in implementing the Indonesia International Financial Centre (PFII) law so that it can compete with various global financial centres in attracting investment.
“If other countries offer better facilities, investors will certainly choose those countries. So the issue is not merely how large an incentive we provide, but how our incentives keep Indonesia competitive compared with rival nations,” Syahrir said in Jakarta on Friday.
Syahrir, who is also a researcher at the Economic Research Centre of the National Research and Innovation Agency (BRIN), said the financial sector differs from the real sector because capital moves far more quickly, meaning investors will always compare the incentives and facilities Indonesia offers with those of countries such as Singapore, Dubai, Malaysia and Vietnam.
He explained that fiscal incentives are an instrument commonly used by governments to boost investment competitiveness. However, experience shows that tax incentives alone do not automatically attract investors unless supported by a strong business ecosystem.
“Fiscal incentives are necessary, but they cannot stand alone. Investors do not only calculate taxes; they also look at political stability, policy consistency, regulatory quality, infrastructure and business certainty,” said the former researcher at the Fiscal Policy Agency (BKF) of the Ministry of Finance.
Therefore, he said, the implementation of the PFII needs to be supported by a combination of mutually reinforcing policies, so that Indonesia offers not only fiscal incentives but also an investment environment that provides certainty and comfort for global business players.
At the same time, Syahrir reminded the government that it must maintain fiscal balance when designing these incentives. Efforts to increase competitiveness must not be made at the expense of national fiscal health, as this could actually raise the perception of risk towards the Indonesian economy.
“The government certainly has to calculate the optimal incentive position. We must be competitive, but the fiscal space must not be disrupted because ultimately that would increase economic risk,” he said.
Beyond incentives, he believes the momentum of establishing the PFII should be used to strengthen the foundations of the national financial sector through deepening financial markets, stronger regulation, financial technology development, improved human resources and increasingly credible governance.
According to him, the competitiveness of an international financial centre is ultimately determined by the quality of the ecosystem built, not merely by the size of the tax facilities provided.
“The momentum of establishing the PFII should be used to improve the Indonesian financial sector ecosystem. What must be built is not only the incentives, but also the foundations so that our financial sector becomes stronger, more efficient and able to compete in the long term,” said Syahrir.
Syahrir also reminded the government of the need to maintain a level playing field, so that incentives granted within the PFII zone do not create competitive distortions with businesses carrying out similar activities outside the zone.
According to him, the incentive design must be able to enhance Indonesia’s competitiveness as an international financial centre without creating unequal treatment that could disrupt the overall business climate.
He is optimistic that the government already has various studies to determine the design of PFII incentives. However, he said, evaluation and learning from other international financial centres still need to be carried out so that the policies implemented can increase Indonesia’s competitiveness without causing distortions or undermining national fiscal sustainability.
On the same occasion, Syahrir praised the concept of establishing the PFII as a strategic step for Indonesia in capitalising on momentum to attract global investment. He also said the idea reflects the government’s strategic vision in reading global dynamics.
“This means the President has a strategy. He understands the changes taking place in the global economy and financial system and is trying to seize the opportunity. That is a positive side that deserves appreciation. I rate the effort to capture this momentum very highly,” he said.