Foreign tourists are pictured walking on Bali's famous Kuta Beach. - Antara
JAKARTA: The government has set its sights on turning Bali into a global financial hub as it seeks to move forward with the family office plan thought up by the previous presidential administration, but there are doubts as to whether the resort island is cut out for such a role.
National Economic Council (DEN) spokesperson Jodi Mahardi told The Jakarta Post on Oct 17 that risk assessments for the initiative were underway with regard to regulatory and governance aspects as well as economic implications.
“Discussions are ongoing between the DEN and relevant institutions to ensure the initiative is carefully and responsibly designed,” he stated.
The plan to make Bali a financial hub that could rival Singapore and Hong Kong originated from a proposal made last year by Luhut Pandjaitan, who served as coordinating maritime affairs and investment minister at the time and now helms the DEN.
The initiative, which initially focused on the idea of attracting business leaders to set up family offices, recently sparked debate among officials, with Finance Minister Purbaya Yudhi Sadewa ruling out state budget funding. Luhut responded by saying the family office plan would not rely on the state budget, as it is designed to attract both domestic and foreign investors to place their funds in the country under a zero-tax scheme in the initial phase.
“However, we must create certainty. They [investors] ask for a common law, so we’re conducting the study [...], we’ve rarely done proper studies for a project. We tend to go straight into execution,” Luhut said on Thursday.
He added that the family office plan gained support from Bridgewater Associates founder Ray Dalio, who underscored the importance of credibility and building trust in running the project.
According to Bloomberg, President Prabowo Subianto has endorsed the plan, with officials currently drafting a proposal and eyeing House of Representatives approval by year-end, though the idea remains in the conceptual phase for now and is subject to change.
The project envisions Bali as a financial hub similar to India’s Gujarat International Finance Tec-City (GIFT City) or the International Financial Centre (DIFC) in Dubai, the United Arab Emirates (UAE), Bloomberg reported.
The business zone would offer tax breaks and regulatory exemptions to streamline bureaucracy, a persistent challenge for foreign businesses looking to invest in Indonesia.
The goal is to attract international banks, asset managers and private equity firms to accelerate the nation’s economic growth.
The government also plans to implement a distinct legal framework in the zone benchmarked on Singapore’s business-friendly environment.
Experts have raised doubts over the project’s feasibility and concerns about its impact on tourism.
Achmad Nur Hidayat, economist and public policy expert from the National Development University Veteran Jakarta (UPNVJ) stressed that creating a financial hub required an established "ecosystem of trust” with legal certainty, transparent governance and institutional integrity.
He told the Post on Friday that, without a firm legal foundation, strong regulatory reform and qualified talents, the plan may end up as mere “rhetoric without substance”.
Achmad added that Indonesia should learn from Singapore and Dubai with their independent legal systems, efficient arbitration and global finance talents, such as by establishing a special jurisdiction in Bali, readying skilled talent and modern digital infrastructure
He proposed a shift in the plan toward a model aimed not only at profit, but also at sustainability, culture and local harmony "upholding the archipelago’s values”.
Ida Bagus Raka Suardana, an economist at Denpasar’s National Education University (Undiknas), said the island did not meet the infrastructure requirements, as it was no banking hub and lacked a stock exchange.
Known for its tourism appeal, Bali would need to rebrand itself as a financial hub and then go up against established centres in the region that already have developed infrastructure and human capital.
He also warned that the establishment of global financial institutions could sideline the regional development bank, Bank Pembangunan Daerah (BPD) Bali.
“If there are no protective regulations, the Balinese will be only spectators of this loud economic transformation,” he told the Post on Friday. Suardana said risks loomed in the project's potential to marginaliSe locals unable to compete with skilled foreign professionals.
Living costs on the island could also increase, he noted, putting more pressure on the majority of Balinese who still rely on traditional sectors for income.
On the other hand, he said the plan could reduce the island’s heavy economic reliance on tourism, leveraging Bali’s growing finance and start-up ecosystem and digital nomad community.
“Bali has a huge potential to become a financial hub, but the success is highly dependent on the extent to which the government can balance global and local interests,” he said.
If effectively executed, Balinese who have long relied on the tourist sector could see new opportunities across various sectors, including finance, tech, law and management, he said, with skill enhancement programs to help young locals step into the world of global finance. - The Jakarta Post/ANN
