Indonesia’s parliament has passed a law paving the way to establish international financial centres (IFCs) that the government hopes will attract as much as 500 trillion rupiah (US$27.8 billion) of foreign capital into Southeast Asia’s largest economy.
Mohamad Hekal, deputy chairman of parliament’s finance commission, the local equivalent of a financial services committee, said the legislation is designed to attract international banks, investment banks, wealth management firms, as well as aircraft and ship leasing companies.
Deep-pocketed family offices are a key target market.
“It is estimated there is around $3.2 trillion of wealth of the world’s richest families held in various family offices across global financial hubs. It is estimated about 65% is currently looking for a new home. That is what we’re aiming to capture,” Hekal told lawmakers on July 21, when the law was passed.
Qualifying investors in the IFCs may be able to enjoy tax holidays for as many as 50 years.
Hekal said businesses operating within the IFCs would be allowed to conduct transactions in foreign currencies, and that a dedicated supervisory authority reporting directly to the Indonesian president and parliament would oversee the centres.
He said the law also provides for a special court and arbitration body to resolve disputes within the IFCs.
Herman Saheruddin, director general of financial sector stability and development at the finance ministry, told parliament earlier this month that the IFCs could attract 300 trillion rupiah–500 trillion rupiah in investments, including foreign bank branches and other financial institutions.
The government has yet to announce the location of the first IFC. Lawmakers had previously identified Bali, an island popular with foreign tourists, as a potential site.
