Indonesia’s Financial Centre Ambition: Connecting Global Capital with the Real Economy

By Muhammad Verdias Yurindra

Indonesia is taking a significant step toward strengthening its position in the global financial system. In July 2026, Indonesia’s Parliament approved the establishment of the Pusat Finansial Internasional Indonesia (PFII), creating a legal framework for a specialised international financial centre designed to attract foreign capital, financial institutions and high-value financial services.

The initiative comes as competition for international financial activity is intensifying across Southeast Asia. Singapore remains the region’s most established financial centre, but Malaysia and Vietnam are also developing specialised platforms to attract international capital. Indonesia is therefore entering a broader regional competition, not simply to replicate Singapore, but to determine what role it can play in ASEAN’s evolving financial architecture.

The government sees the PFII as more than a financial-services hub: it is intended to deepen Indonesia’s capital markets, diversify funding sources, attract domestic and international investment, and channel capital into productive sectors such as manufacturing, infrastructure, climate and sustainable finance. The government is targeting up to Rp500 trillion in investment, supported by tax incentives, simplified licensing and other investor facilities.

From Jakarta to Bali

Indonesia’s approach is notable because the government has selected Jakarta and Bali for the PFII.

President Prabowo Subianto announced in August that Jakarta would serve as the initial location, with the PFII eventually moving to Bali once the necessary infrastructure is ready. The centre is intended to cover a broad range of activities, including banking, insurance, capital markets, derivatives, carbon exchanges, bullion, fintech, Islamic finance, family offices, treasury centres and investment management. It is also expected to provide international-standard arbitration and commercial dispute-resolution services.

Jakarta already possesses the financial institutions, regulatory infrastructure, professional services and talent required to support an international financial centre. Bali, meanwhile, offers a different proposition: international connectivity, global recognition and an environment that could help attract international investors and financial professionals.

This suggests that Indonesia is not attempting to create an entirely new financial ecosystem from scratch. Instead, it is seeking to leverage Jakarta’s existing financial depth while developing Bali as a longer-term international-facing hub.

A lesson from IKN

The decision to focus the PFII on Jakarta and Bali also comes after an important lesson from Indonesia’s experience with IKN.

Indonesia previously introduced substantial tax incentives for financial activities in the new capital, including a corporate income-tax reduction of up to 100% for banking, insurance and Islamic-finance activities, and an 85% reduction for a range of other financial activities. However, according to Indonesia’s Directorate General of Taxes, no taxpayer had applied for the financial-centre tax incentive in IKN through the end of 2025, despite the facility having been available since 2024.

The experience highlights a critical point for Indonesia’s new IFC strategy: tax incentives alone are not enough to attract international financial institutions.

Investors need access to established financial markets, skilled talent, international connectivity, reliable infrastructure and predictable regulation. Jakarta already provides many of these ingredients, while Bali could potentially build on its international profile to attract a different segment of financial and professional services.

The IKN experience therefore makes the Jakarta-to-Bali strategy particularly interesting. Rather than relying primarily on fiscal incentives to create demand, the PFII will need to build an ecosystem around where investors actually want to operate.

Competing through Indonesia’s economic strengths

Indonesia is Southeast Asia’s largest economy and offers substantial investment opportunities across infrastructure, manufacturing, critical minerals, electric vehicles, renewable energy, digital infrastructure and consumer markets.

This creates a potential niche for the PFII: connecting international capital with Indonesia’s real-economy investment opportunities. Danantara, as Indonesia’s sovereign asset management institution, has begun preparing the PFII by engaging with international investors, with 110 Asian investors attending a recent meeting to provide input on whether the proposed structure and format meet global standards. Danantara is also responsible for developing the PFII’s physical infrastructure, with Jakarta designated as the initial location and Bali planned as a subsequent location.

Indonesia could position the PFII around areas where the country already has strong economic fundamentals. These could include cross-border financing, sustainable finance, private capital, investment funds, commodity and trade finance, digital financial services, family offices and financing for the energy transition.

The objective would be to make Indonesia not only a destination for foreign investment, but also a platform through which international investors can access the opportunities emerging from Indonesia’s economic transformation.

Regulation will determine the results

The success of the PFII will ultimately depend on more than its legal framework and fiscal incentives.

International investors will assess regulatory predictability, licensing requirements, investor protection, foreign-exchange arrangements, financial supervision and dispute-resolution mechanisms. The government has indicated that the PFII will maintain international standards on anti-money laundering, beneficial ownership transparency, taxation and information exchange.

A specialised financial regime can make Indonesia more competitive, but excessive regulatory divergence could create fragmentation or concerns about regulatory arbitrage. The PFII will therefore need to strike a balance between flexibility and international regulatory standards.

From competition to regional connectivity

Indonesia’s international financial-centre ambition should ultimately be viewed as part of a broader ASEAN transformation.

The region is developing multiple financial hubs with different strengths: Singapore’s established global financial ecosystem, Malaysia’s specialised cross-border and Islamic-finance capabilities, Vietnam’s emerging two-city IFC model, and Indonesia’s attempt to combine its economic scale with a dedicated international financial framework.

Its opportunity is to create a financial centre that is distinctively Indonesian — one that combines Jakarta’s existing financial depth and Bali’s international appeal with the scale of Indonesia’s underlying economy.

The real measure of success will not be the number of financial institutions that establish offices in the PFII. It will be whether the centre can mobilise new international capital, facilitate cross-border transactions, attract global financial talent and channel investment into Indonesia’s next phase of growth.

What to monitor

Going forward, attention should focus on the implementation of the PFII framework, particularly the issuance of implementing regulations covering licensing, eligible activities, tax incentives, foreign ownership, foreign-exchange arrangements and financial supervision. The government’s Jakarta-to-Bali development timeline and progress in building the necessary infrastructure and supporting ecosystem will also be important indicators of the centre’s viability. Market uptake should be closely monitored, including whether international banks, insurers, asset managers, family offices and other financial institutions establish operations under the PFII framework.

At the regional level, developments in Singapore, Malaysia and Vietnam will provide an important benchmark for Indonesia’s competitiveness. Ultimately, the key measure will be whether the PFII can move beyond attracting registrations or offices to mobilising new international capital, facilitating cross-border financial activity and channelling investment into Indonesia’s broader economic transformation.

Indonesia’s Financial Centre Ambition: Connecting Global Capital with the Real Economy