The Indonesian government is currently preparing for the establishment of a Financial Center Special Economic Zone (SEZ) located in Bali. This strategic move is designed to attract more foreign investment and strengthen the Indonesian financial market to make it more competitive globally. For investors and businesses, this initiative brings a breath of fresh air, especially considering the potential for tax exemptions for foreign investments entering the SEZ Financial Center in Bali.

A Hub for Innovation and an International Financial Ecosystem

The Chief Executive of the Financial Services Authority (OJK), Friderica Widyasari Dewi, explained that the establishment of the Financial Center in Indonesia serves as an accelerator for market deepening and an innovation hub for financial services. The development of this Financial Center will be carried out with a focus on:

• Strengthening the investment ecosystem, financial services, and international capital management.
• Providing space for the implementation of pilot projects and the testing of business models.
• Facilitating the implementation of various new financial products and services.

A Dubai-Inspired Concept Backed by Legal Certainty

Meanwhile, the Indonesian Minister of Finance, Purbaya Yudhi Sadewa, stated that the Financial Center area in Bali will be built across an area of approximately 100 hectares. The concept is noted to be similar to the international financial center located in Dubai.

To ensure foreign investors feel safer and more confident in their investments, the government plans to implement a special legal system based on common law within the region. In addition to this legal certainty, the government is also preparing various tax incentives, including the possibility of tax exemptions.

Broad Benefits for the National Economy

The investment funds that flow in will not be strictly confined to the SEZ; they can also be directed to finance other national strategic projects, including the Danantara project and other potential ventures across Indonesia. The government hopes that the KEK Financial Center Bali will deliver substantial benefits to the Indonesian economy, such as:

• Opening up sources of development funding that are more affordable and competitive.
• Attracting a larger influx of foreign exchange from abroad.
• Helping to maintain the stability of the Rupiah exchange rate.
• Strengthening the overall resilience of the national financial sector.

Currently, the government is still drafting the regulations, the area design, and the implementation schemes in collaboration with various institutions, including the Ministry of Finance, Bank Indonesia, OJK, the Coordinating Ministry for Economic Affairs, and BPI Danantara.

Looking at the Successful Incentives of the IKN Financial Center

For context, Indonesia actually already has a Financial Center established in the Nusantara Capital City (IKN) region. This area offers various tax incentives for investors based on PMK 28/2024. Some of the tax facilities at the IKN Financial Center include:

• A tax holiday of up to 100% for a maximum of 25 years for the banking, insurance, and Islamic finance sectors.
• An 85% tax holiday for other sectors such as capital markets, fintech, venture capital, pension funds, payment systems, and other financial services.
• Exemption from withholding tax for 10 years specifically for foreign investors.