PFII Prioritised for Foreign Multinationals, Domestic Banks Barred from Raising Funds

The government has confirmed that the International Financial Centre Indonesia (PFII) is primarily intended to attract foreign multinational companies, while domestic financial service firms will face stricter requirements to participate. The House of Representatives (DPR) passed the PFII Bill into law on Tuesday (21/7/2026).

Minister of Finance Purbaya Yudhi Sadewa stated that the government aims to finalise the technical regulations quickly so the special economic zone can become operational soon. He noted that the current high level of global uncertainty presents an opportunity to attract investment. “We will try to get it done this year. The higher the uncertainty, the greater the demand for a financial centre,” Purbaya said on Thursday (23/7/2026).

Investment entering the PFII is primarily targeted at foreign multinational entities. Beyond attracting investment to deepen financing markets, foreign companies operating within the zone will be able to transact freely in foreign currency. Purbaya explained that this foreign exchange liquidity is expected to support the country’s foreign reserves and help stabilise the rupiah exchange rate, which has recently weakened against the US dollar. He described this as a “potential gain” for the government, even though the zone offers a 0% income tax rate for 50 years. He noted that when the government issues global bonds in US dollars, having buyers within the PFII reduces pressure on the global market.

However, the government has imposed strict limitations to prevent domestic financial institutions from simply relocating to the zone to benefit from the tax incentives, which could erode the national tax base. Domestic financial service institutions, such as banks, are allowed to participate but must establish a new incorporated entity within the PFII rather than merely opening a branch office.

Mohammad Hekal, Deputy Chairman of Commission XI of the DPR, confirmed that the 0% tax incentive applies exclusively to activities within the PFII. He stressed that foreign banks operating in the zone will be prohibited from raising funds from the domestic Indonesian jurisdiction outside the PFII, such as collecting third-party funds from the retail market. They are only permitted to provide loans or financing facilities to investment projects in Indonesia.

Hekal emphasised that the core principle of the PFII is to attract global capital, not domestic funds. However, he acknowledged that the centre is also expected to encourage the repatriation of Indonesian capital currently parked in tax havens like Singapore and Hong Kong.