Government Finalises International Financial Centre Bill, Targets Rp 500 Trillion Investment
The government projects that the establishment of the Indonesian International Financial Centre (PFII) will be able to attract jumbo foreign investment of between Rp 300 trillion and Rp 500 trillion.
Stabilitas.id – The government projects that the establishment of the Indonesian International Financial Centre (PFII) will become a new magnet for foreign capital. This special economic zone for the financial sector is estimated to be able to absorb global investment with a fantastical value, ranging from Rp 300 trillion to Rp 500 trillion.
Nevertheless, the Director General of Financial Sector Stability and Development (SPSK) at the Ministry of Finance, Herman Saheruddin, noted that this figure is the result of a moderate preliminary calculation. Its eventual realisation will depend heavily on how competitive the PFII is when standing alongside other established global financial centres.
“Based on our moderate calculations, the investment could perhaps be around Rp 300 trillion to Rp 500 trillion. But once again, this all depends on our assumptions, because we are competing with Singapore, with Dubai and others,” said Herman when met at the Parliamentary Complex in Jakarta on Wednesday (8/7).
The jumbo investment flows would come from global investors who put up capital and make the PFII zone the operational base for their businesses in Indonesia. Herman gave as an example that this foreign capital could flow in the form of the establishment of foreign bank branch networks as well as internationally incorporated corporations within the zone.
Beyond serving as a bridge for attracting direct foreign investment, the presence of the PFII also carries another strategic mission. The zone is projected to be able to open the tap on long-term funding access that is much needed to finance a number of National Strategic Projects (PSN).
Rejecting a Race to the Bottom
Amid the shower of attractive facilities to be offered to prospective businesses, the Ministry of Finance has assured that Indonesia will not sacrifice compliance with international regulations. Herman affirmed that the government will remain subject to global tax rules, including the Global Minimum Tax (GMT) provisions.
Therefore, the government is committed not to be overly generous in granting excessive incentives that risk triggering a race to the bottom – a situation in which countries undercut one another’s regulatory standards in a scramble for investment.
GMT Compliance: The global minimum tax rate rules remain the primary reference for the fiscal system in the zone.
Strict Oversight: The PFII will apply rigorous international oversight standards to anticipate the risks of money laundering and the abuse of investment facilities.
Screening System: All prospective businesses intending to enter must undergo a strict screening process in accordance with international regulatory standards.
Special Court
At present, the government together with the DPR is accelerating deliberations on the PFII Draft Bill as the principal legal umbrella. This regulation is regarded as a strategic stepping stone to deepen the national financial sector while bolstering Indonesia’s bargaining position on the global stage.
Finance Minister Purbaya Yudhi Sadewa revealed that a variety of red carpets have been prepared by the government to win over global investors, ranging from facilities in immigration, employment, residency rights, licensing, through to tax relaxation.
Interestingly, to guarantee a sense of security for major businesses, the government has proposed the establishment of a PFII Special Court as a guarantee of legal certainty to international standards.
According to Purbaya, this special judicial body will later hold full authority to examine, try and rule on all forms of disputes arising from business activities within the PFII area, as well as international commercial disputes with strong connections to the zone. ***