Bali wants to turn into a new Dubai - with tax breaks for foreign capital

Indonesian Finance Minister Purbaya Yudhi Sadeva announced a project of an international financial center on the tourist island of Bali with a zero tax rate for foreign capital. The project will have to compete with Singapore, as well as with hubs in Malaysia and Vietnam.

"Money can come from abroad, I will not tax it," the Financial Times quoted the head of the Indonesian Finance Ministry as saying. According to the minister, the regulatory framework of the hub in Bali will be similar to that of the Dubai International Financial Center (DIFC): "We will create a structure modeled on the Dubai structure." He did not give a timeline for the launch of the project. In addition to tax benefits, the authorities promise to simplify regulation and reduce the bureaucratic burden, Bloomberg writes.

Indonesian authorities are betting that the famous resort, which receives hundreds of flights daily, will be a better magnet for investors than the overcrowded capital Jakarta. According to Bloomberg sources, the financial center project in Bali is supported by Ray Dalio, founder of Bridgewater Associates, who advised the country's head of state.

A new financial center could help authorities stem capital outflows caused by "distrust," believes Ma Rizal Taufikurrahman of the Jakarta-based Institute for Development of Economics and Finance (INDEF).

Without a guaranteed rule of law and macroeconomic stability, the project risks degenerating into a trivial tax haven, warned Paramadina University economist Vijayanto Samirin. Nevertheless, he considers the timing of the Bali hub a good one: "The timing is right.... especially given the current turmoil in the Middle East"(quoted by the FT).

Bali will have to compete with other Southeast Asian sites that are also trying to attract international capital, Bloomberg points out. In matters of legal certainty, Indonesia is clearly inferior to Singapore, with which it is trying to compete, Ario Irhamna from INDEF told The South China Morning Post in Hong Kong. And this is "the first thing people in the financial sector look at," the expert explained.

In addition, experts are worried about the impending infrastructure crisis on the island. Bali is already suffering from an overabundance of tourists: resort complexes take 65% of fresh water, forcing locals to use wells, and new construction projects threaten to destroy Hindu temples.

This article was AI-translated and verified by a human editor