Jakarta. Indonesia has taken a major step toward establishing its first international financial hub after Parliament passed a law creating the Indonesia International Financial Center (IIFC), a project the government hopes will transform the country into a regional financial gateway and attract hundreds of trillions of rupiah in investment.

The law provides the legal foundation for the new financial district, but many of its key details — including tax incentives, investor requirements and operational rules — have yet to be finalized through implementing regulations.

Here's what is known so far.

What is the new financial hub?
The International Financial Center will be a special zone dedicated to international financial services and globally oriented businesses.

The government says the hub is intended to deepen Indonesia's capital markets, attract foreign investment, diversify financing sources beyond bank lending, and strengthen the country's position in the global financial system.

Officials also envision the center becoming a regional hub for Islamic finance, green and blue finance, fintech, digital finance and sustainable investment.

Unlike traditional special economic zones focused on manufacturing, the financial center will specialize in financial services and capital markets.

Why is Indonesia creating it?
Indonesia has long relied on commercial banks and the state budget to finance economic growth.

Finance Minister Purbaya Yudhi Sadewa said the financial center is designed to broaden funding options by attracting both domestic and international investors, allowing businesses and the government to raise capital through a wider range of financial instruments.

The government expects investment flowing through the center to support infrastructure, manufacturing, trade, climate projects and other productive sectors rather than speculative financial activity.

Officials also hope the project will create jobs, encourage technology transfer and improve Indonesia's competitiveness against established financial hubs in Asia and the Middle East.

What incentives will investors receive?
The law authorizes both fiscal and non-fiscal incentives.

Fiscal incentives include potential exemptions or reductions in income tax, value-added tax, luxury goods tax and customs duties.

Non-fiscal incentives include simplified licensing, immigration and employment procedures, residency permits and Indonesia's golden visa program.

Earlier proposals included a 0% corporate income tax for up to 50 years, although tax officials have since clarified that the maximum incentive will not automatically apply to every investor.

Will every company get a 50-year tax holiday?
No.

Director General of Taxes Bimo Wijayanto said reports suggesting every business would receive a 50-year tax exemption are incorrect.

He said eligibility, duration and qualifying sectors will be determined later through Finance Ministry regulations.

Tax incentives will also need to comply with the OECD-backed Global Minimum Tax framework, meaning Indonesia cannot simply offer blanket tax exemptions without considering international tax rules.

How will the center be governed?
The law establishes a dedicated institutional framework separate from Indonesia's existing financial regulators.

It provides for:

• A governor to oversee the financial center under authority delegated by the president.
• An advisory council.
• A governing council.
• A management authority.
• A dedicated financial services supervisory body.
• An arbitration institution for commercial disputes.
• A specialized court to handle cases arising from activities within the financial center.

Administrators will report directly to the president, while Parliament will receive regular oversight reports.

Will businesses operate under different rules?
Yes.

The law allows several special arrangements designed to make the center more attractive to international investors.

Businesses operating within the financial hub may use English in commercial activities and conduct transactions in foreign currencies.

The law also establishes separate arbitration and judicial mechanisms intended to provide greater legal certainty for investors.

Where will the financial center be located?
The government has not formally designated the location in the law.

However, senior officials have indicated the center will likely be developed in Bali, with Kura Kura Bali Special Economic Zone emerging as the leading candidate.

President Prabowo Subianto has promoted Bali as a safe destination for global capital, particularly amid rising geopolitical tensions, while Chief Economic Affairs Minister Airlangga Hartarto has said the government is accelerating development of the Kura Kura Bali project.

How much investment does the government expect?
The Finance Ministry has said it hopes the financial center will eventually attract around Rp500 trillion (about $27.9 billion) in investment through tax incentives and other business-friendly policies.

Officials acknowledge, however, that meeting that target will require Indonesia to compete with established financial centers such as Singapore and Dubai.

What happens next?
Although the law has now been enacted, the financial center cannot begin operating immediately.

The government must still issue a series of implementing regulations covering governance, licensing, eligible business activities, investor qualifications, tax incentives and operational procedures.

Those regulations will determine how the International Financial Center functions in practice and whether it can achieve the government's ambition of becoming a regional financial hub capable of competing with established global centers.

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