Danantara to Capitalise PFII, Risks and Governance Under Scrutiny

The government’s plan to make the Danantara Investment Management Agency a source of initial capital for the establishment of the International Financial Centre (PFII) must be accompanied by strong governance and risk management. It must be ensured that the PFII has a clear institutional design and strategy to attract global investors.

Syafruddin Karimi, a professor at Andalas University’s Faculty of Economics and Business, stated that investing in the PFII does not automatically carry lower risk than direct investment in the real sector, such as downstream industrialisation. He noted that investment in the PFII carries a different risk character because it relates to market confidence in the credibility of a financial centre.

‘The PFII bill states that the initial capital of the PFII Management Agency can come from business entities, Danantara, or other legal sources. This makes the PFII not just a regulatory project, but also an institutional investment project that could affect Danantara’s balance sheet and reputation,’ he said on Monday (13/7/2026).

According to him, the PFII will face a range of risks, from regulatory, reputational, money laundering, tax revenue, institutional, and litigation risks, to the failure to attract anchor investors. These risks differ from real sector investments, which are more influenced by project, commodity, technology, land, energy, and market factors.

Therefore, he assessed that Danantara’s involvement must be supported by an independent feasibility study, clear exposure limits, public audits, a financial and economic return scheme, a prohibition on conflicts of interest, and a measurable exit mechanism. Syafruddin warned that if the market perceives the PFII as a low-tax haven, a round-tripping channel, or an area with weak supervision, Danantara’s reputation will be affected.

‘Global private capital must also bear the risk. If the entire initial burden rests on Danantara, this project could simply transfer policy risk onto the balance sheet of the state investment agency,’ he said.

Provisions regarding the initial capital source for the PFII are contained in the draft PFII Bill currently being discussed by the House of Representatives (DPR). Article 5 of the draft bill states that the initial capital of the PFII Management Agency can be in the form of cash, state property, assets of state-owned enterprises (BUMN), and/or other legal assets. The source of this initial capital can come from business entities, the Danantara Investment Management Agency, and/or other legal sources in accordance with statutory provisions.

The draft also stipulates that within a maximum of 30 calendar days after receiving the initial capital, the Head of the PFII Management Agency must submit a work plan and budget for the use of the capital to the PFII Governor for approval.

The government is currently accelerating the preparation of the legal basis for the establishment of the PFII. Coordinating Minister for Economic Affairs Airlangga Hartarto said the PFII Law is targeted for completion on 21 July 2026. After the law is passed, the government will issue a government regulation as an implementing rule before the submission of the Financial Note and the 2027 State Budget Draft on 16 August 2026.

‘This is parallel, we are also waiting for the law. We are just waiting for the PP, it will be issued soon after the law. Hopefully, everything will be ready before 16 August,’ Airlangga said.

Airlangga stated that the government is preparing Bali as the location for the PFII. According to him, Bali has an international reputation, ease of attracting investors and business actors, and is supported by economic and infrastructure development, including the Sanur Special Economic Zone (KEK). However, the decision on the location is still being discussed with the DPR and will be further regulated in the law and the PP on PFII.

Through Law Number 4 of 2026 concerning Amendments to Law Number 4 of 2023 on Financial Sector Development and Strengthening (UU P2SK), the government has previously regulated the policy for establishing the PFII. The area is designed to have legal, administrative, and financial governance specificities that adopt international principles and standards.

In addition to regulating institutions, the PFII Bill also prepares a number of facilities, including tax incentives in the form of Income Tax (PPh), Value Added Tax (PPN), and Sales Tax on Luxury Goods (PPnBM) facilities, as well as customs facilities.

The establishment of the PFII will also bring changes to the institutional architecture of the national financial sector. Through the P2SK Law, the government has expanded the scope of roles of a number of financial sector regulators, from Bank Indonesia (BI), the Financial Services Authority (OJK), to the Deposit Insurance Corporation (LPS). The law also broadens the scope of banking business activities, not only collecting funds and extending credit, but also covering various other financial services.

Meanwhile, more detailed arrangements regarding the PFII are still being discussed through the PFII Bill. Based on the draft bill, the operation of the area will be carried out by the PFII Management Agency, which is tasked with managing the operation of the financial centre. Unlike general financial services institutions, the PFII Management Agency is not directly under the supervision of the OJK. Supervision of operations and financial services activities in the area will be carried out by a specially formed PFII Financial Services Supervisory Agency.