A financial centre needs customers, not just a law

In July, parliament approved the law creating Pusat Finansial Internasional Indonesia, or PFII: special zones where financial firms can trade in foreign currency and pay less tax, meant to pull international banking business into the country. Writing for the Lowy Institute's The Interpreter, the economist Ramkishen S. Rajan says the legal work is finished and the difficult part has not begun. A law can create the zone, he writes, but "the commercial case must come from Indonesia's own economy."

His point is about demand. Singapore and Hong Kong did not become financial centres through clever rules. Trade and shipping already ran through them, and the banking followed the business. Dubai's DIFC, set up in 2004, grew much faster, to more than a thousand regulated firms and over 50,000 workers by 2025, but Dubai also had a real commercial role first. Tax breaks can decide where a bank opens an office. They cannot keep that office busy.

Rajan is doubtful about Bali, which has been discussed as a site although nothing is settled. Jakarta produced about one sixth of the country's economic output in 2025, and the large banks and head offices are there. Lending and treasury teams want to sit near their clients, so a Bali branch would end up depending on the capital anyway. What could give PFII real work, he argues, is business Indonesia already generates: trade finance and hedging for commodity exports (hedging means locking in a future price so a market swing does not destroy a deal), funding for infrastructure, and Islamic finance, which is still under 8% of national banking assets and has room to grow.

Why it matters

If you were expecting this law to create a wave of finance jobs in Bali, note that the plan has neither a confirmed home nor confirmed customers yet. The real test is whether Indonesian exporters and infrastructure projects start arranging their foreign-currency deals at home instead of in Singapore. If that shift never happens, PFII ends up as an expensive tax discount rather than a financial centre.