Conducive investment climate key to PFII attracting global funds, says economist

Economists assess that the success of the Indonesian International Financial Centre (PFII) in attracting global investment will be determined by the creation of a conducive investment climate and the enhancement of domestic financial market competitiveness. Executive Director of the Institute for Development of Economics and Finance (Indef) Esther Sri Astuti stated that the potential investment funds that can be raised through the PFII will be greater if the government is able to present an attractive investment environment for global investors. “When talking about the potential funds to be raised, it is certainly much larger. However, it must be accompanied by efforts to create a conducive investment climate,” Esther said in Jakarta on Monday. She assessed that investors’ decisions to place capital are influenced not only by the incentives offered but also by business certainty and long-term investment prospects in Indonesia. “Investors will come if licensing is easy, regulations are clear and do not change, infrastructure is well established, and the market is promising,” she said. According to her, the development of the PFII needs to be carried out through cross-ministerial coordination, Indonesian representatives abroad, and the private sector so that the target investors can be mapped more precisely. She added that the design of incentives for investors also needs to be tailored to the needs of each prospective investor to be more effective in attracting investment interest. “This means policymakers must listen to their wishes and negotiate whether they can be realised or not,” Esther said. According to her, Indonesia is not enough to just offer tax incentives to attract global funds, but also needs to strengthen the depth of the financial market. “The first is clearly incentives from the tax side. But it is not only that, not only tax incentives, but the existence of a deep financial market,” she said. She stated that the development of the PFII also requires the availability of professionals in finance, taxation, law, financial engineering, and wealth management so that the financial centre can operate competitively. In addition, macroeconomic stability, regulatory certainty, legal certainty, and policy certainty are important factors in building investor confidence. “Investors will not invest or place their money in an unstable region or country,” she said. She added that infrastructure support, including digital infrastructure, is also needed to support the PFII’s function as a centre for international financial activities. According to her, the PFII needs to have a mechanism that allows transactions, information flows, and fund flows to take place quickly and with liquidity so that investors can enter and exit easily. “If it cannot compete, of course it will not be able to attract global funds. Many things must be prepared so that it can run well,” she said. She assessed that the impact of the PFII on domestic financing still depends on Indonesia’s ability to meet these various prerequisites. She said the PFII could help domestic funding if it runs effectively, but she also warned that the costs incurred could potentially be greater than the expected benefits if the financial centre fails to attract investors. Indonesia’s investment realisation in the first quarter of 2026 was recorded at Rp498.8 trillion, or about 24.4 per cent of this year’s investment target of Rp2,041.3 trillion, an increase of 7.2 per cent compared to the same period last year. The government hopes that various instruments, including the establishment of the PFII, can strengthen Indonesia’s attractiveness as a global investment destination. Meanwhile, Finance Minister Purbaya Yudhi Sadewa previously said the government is preparing various facilities to attract investors to the PFII, including ease of taxation, immigration, employment, residency, licensing, and the establishment of a special court. Purbaya also conveyed that funds managed through the PFII can later be used to finance domestic projects, including Danantara projects, as well as to purchase Government Securities (SBN), while remaining based on market mechanisms. The House of Representatives Commission XI is targeting the PFII Bill to be brought to a plenary session on 21 July 2026, after previously being agreed to be included in the 2026 Priority National Legislation Programme.