Economist Advises on PFII: Location and Incentives Under Scrutiny

An economist has provided input on the formation of the International Financial Centre (PFII) Bill, particularly regarding initial capital, risks, and various facilities to be granted. Professor Telisa Aulia Falianty from the University of Indonesia’s Faculty of Economics and Business urged a careful review of the PFII’s proposed location. She noted that if Bali is chosen, local regulations such as building height restrictions would prevent the construction of the high-rise towers typical of global financial centres like Dubai and Hong Kong, which are needed for efficiency and integrated activities. Telisa also raised concerns that establishing a global sharia financial centre in Bali might clash with the local culture. She suggested that while Bali could host a specialised PFII location leveraging its tourism competitiveness, the main hub should be elsewhere, as the PFII could operate in more than one location. Regarding tax incentives, Telisa warned against adopting a 100% income tax reduction, stating it could lead to moral hazard and is considered poor international business practice. She recommended a reduction of 70-80% instead, to avoid negative effects on domestic taxation and prevent Indonesia from becoming a full tax haven.