Economist Warns Against Financial SEZ Creating 'Two Indonesias'

Jakarta, CNBC Indonesia - The government will build a Special Economic Zone (SEZ) in the financial sector or Indonesia financial centre in Bali, Indonesia. This financial SEZ will adopt a model similar to that implemented in Dubai.

This step is viewed as a strategic effort to attract global capital flows while strengthening Indonesia’s position in the increasingly fragmented international financial architecture.

Head of Economics at Trimegah Sekuritas Indonesia, Fakhrul Fulvian, assesses that the idea arises from a real need to address changes in the global landscape, but it also carries non-trivial consequences.

“In a world that is becoming increasingly fragmented, where dollar liquidity is no longer as loose as before, countries are indeed compelled to create new pathways to attract financing. A financial SEZ could be one instrument for that,” said Fakhrul on Wednesday (28/4/2026).

According to him, much of the financial activity related to Indonesia has so far taken place in global financial centres such as Singapore and Hong Kong. This reflects a gap between the size of the domestic economy and the depth of the national financial sector.

“We have a large economy, but financial intermediation largely occurs abroad. The financial SEZ is an effort to ‘bring back’ some of those functions domestically,” he explained.

Furthermore, the financial SEZ is also seen as a space for experimentation with various financing innovations, including strengthening local currency transaction schemes and diversifying non-dollar funding sources.

However, Fakhrul warns that imitating the Dubai model - known through areas like the Dubai International Financial Centre (DIFC) - cannot be done directly without considering fundamental differences in economic and political structures.

“What is often overlooked is that the Dubai model is not just a business zone, but a system with a legal regime, regulators, and governance that is very different from its national system. This touches on issues of legal sovereignty and institutional design,” said Fakhrul.

He added that in the context of Indonesia as a democracy with a complex institutional structure, implementing such a system will face significant political-economic challenges.

In addition, there is a risk that the financial SEZ could create dualism in the national economy if not designed carefully.

“The biggest risk is not that this SEZ fails, but that it succeeds, yet only creates an enclave integrated with global markets, while the domestic system remains left behind. This could give rise to ‘two Indonesias’ in one country,” said Fakhrul.

Moreover, he emphasises that the success of global financial centres is not determined solely by fiscal incentives or competitive regulations, but also by policy consistency and long-term credibility.

“Trust cannot be imported. It is built through consistency. Without it, the financial SEZ will only be an ambitious project that struggles to achieve structural impact,” he said.

The Indonesian government is considering Bali as the location for building an international financial centre or Indonesia’s international financial centre.

This was stated by Coordinating Minister for the Economy Airlangga Hartarto on Monday (27/4/2026), when met at his office in Jakarta.

“Yes, of course we see an opportunity for a financial centre, to prepare for it as well. With geopolitical changes, Bali becomes attractive,” said Airlangga.

For the construction process, Airlangga said the government is currently preparing the regulations first. The manager of the Global Financial Centre in Indonesia, according to Airlangga, will come from a non-governmental institution, although there is an option for it to be managed by BPI Danantara.

“To what extent the regulations can accommodate what is requested for establishing a financial centre or family office. A financial centre is entirely managed by, in quotes, non-governmental, but if Danantara manages it, that’s fine too,” said Airlangga.

Finance Minister Purbaya Yudhi Sadewa also admitted to having agreed with the National Economic Council (DEN) under the leadership of Luhut Binsar Panjaitan regarding the establishment of an International Financial Centre in Indonesia.

However, Purbaya said that this international financial centre will be established in Indonesia not in the form of a Family Office as has been circulating, but in the form of a Special Economic Zone (SEZ) for the Financial Services sector.

“Actually, it’s not a family office; it will be a special economic zone for the financial sector,” said Purbaya at the BPPK Building, Jakarta, on Friday (24/4/2026).

Purbaya said there is already a reference for building a Financial Services SEZ that is most suitable for Indonesia, namely the one already built in Dubai. Therefore, he assesses that the Financial Services SEZ project can be built quickly.

“The one that fits for me is the Dubai model, like that. We will pursue it in the near future,” said Purbaya.

According to Purbaya, President Prabowo Subianto has also agreed to build the Financial Services SEZ. The construction of the project, he said, will be led by Coordinating Minister for the Economy Airlangga Hartarto.

“The President has given instructions and guidance. So, the Coordinating Minister for the Economy will lead his team; we will assist from there,” he explained.