Indonesia weighs transforming Bali into a regional financial hub

JAKARTA – Indonesia is planning to create a financial hub in tourist hot spot Bali as it seeks to boost its lagging economy by attracting international banks, asset managers and private equity firms, according to people familiar with the matter.

President Prabowo Subianto has endorsed his government’s proposal to model the tourist island after the likes of India’s Gujarat International Finance ­Tec-­City, also known as Gift City, and the Dubai International Financial Centre, said the people, who asked not to be named as the plan is not public. 

The Bali financial zone would offer tax and regulatory exemptions, cut red tape and complex bureaucracy – a perennial problem for companies wanting to do business in South-east Asia’s largest economy.

To do so, Indonesia is planning to implement a different legal framework in the hub, and is considering Singapore’s system as a possible model due to its business-friendly reputation, the people said. 

Officials are working on a draft proposal for a possible Parliament vote at the end of 2025.

Still, the proposed Indonesia Financial City is at a conceptual stage and subject to change, the people said.

The initiative, which involves the Finance Ministry and the National Economic Council, has support from Bridgewater Associates founder Ray Dalio, who informally advises the President, they added. 

“The government wants to create a modern, transparent financial centre that supports national economic development,” said Mr Jodi Mahardi, spokesman for the economic council, in response to Bloomberg News’ request for comment on the plan.

“It is expected to become a platform that connects global investment with real opportunities in Indonesia’s real sector,” he said, without elaborating.

Representatives for Mr Prabowo and Mr Dalio did not respond to requests for comments. The Finance Ministry declined to comment. 

The Bali initiative comes as Indonesian officials try to reignite growth amid weakening investment and declining consumer confidence.

The country’s richest businessmen are also growing wary of Mr Prabowo’s attempts to crack down on inequality, Bloomberg News reported in September. 

Bloomberg Intelligence forecasts 2025 economic growth of 4.9 per cent, down from a 5 per cent expansion in 2024.

The government is aiming for economic growth of 8 per cent in 2029, a goal that requires it to secure about 13,000 trillion rupiah (S$1.01 trillion) in direct investment in about four years.

Bali’s financial hub plan grew out of a 2024 proposal from former senior minister Luhut Pandjaitan to make Bali a family office hub, the people said.

But it is unclear how the plan to diversify Bali’s economy can be reconciled with the tourist hot spot’s severe overcrowding.

New hotel and road construction is threatening Hindu temples, while more than 65 per cent of Bali’s fresh water is channelled to resorts and plunge pools, forcing villages to rely on groundwater. 

The initiative’s backers see Bali’s international charm as a lure to financial firms and believe the overcrowding is manageable, one person familiar with the matter said. 

India’s Gift City also reveals the difficulties of creating a financial hub from scratch.

It remains a work in progress, with much of the municipality under construction, while its core lacks restaurant and entertainment venues, discouraging people from living in the central area. 

The Bali initiative will also face competition from Indonesia’s South-east Asian neighbours, which are similarly trying to lure international financial firms.

Malaysia has become an Islamic finance hub, while the Philippines has enacted legislation to attract investors.

Vietnam, whose market reforms helped it to garner an upgrade from FTSE Russell to emerging market status last week, is looking to invest 172 trillion dong (S$8.5 billion) to create an international financial centre in Ho Chi Minh City.

The government also wants to develop the coastal city of Danang into a financial hub. BLOOMBERG