JAKARTA, July 7 (Xinhua) — The Indonesian government is implementing strategic initiatives to establish family offices and private entities to manage the business affairs of wealthy families, Xinhua reported.
This measure will allow wealthy individuals from various countries to make investments without incurring taxes.
Indonesian President Joko Widodo has ordered the formation of a task force under the leadership of Coordinating Minister for Maritime Affairs and Investment Luhut Binsar Pandjaitan, involving some ministries and the World Bank, to assess the family office investment program and prepare the necessary regulations and infrastructure.
“Some foreign investors have already expressed interest as early adopters. We will provide more detailed information in the next two to three weeks,” Luhut said on Friday.
The family office is expected to be located in Bali, a tourist island that attracts tourists from around the world, as well as in Nusantara, the country’s new capital.
According to Mr Luhut, about $11 trillion of global financial assets are currently invested outside their home economies, adding that this amount is expected to increase. The United Arab Emirates (UAE), Singapore and Hong Kong are the main countries where these funds are invested.
Luhut referred to The Wealth Report, which predicts that the number of ultra-high net worth individuals in Asia will increase by 38.34% between 2023 and 2028, with a 34% increase predicted for Indonesia. He also pointed out that the UAE, with more than 400 family offices in Dubai managing trillions of dollars, has been a pioneer in establishing wealth management centres.
“Indonesia, with its strong economic growth, broad investment prospects and neutral geopolitical policies, has the potential to attract foreign investment and become an alternative destination for capital placement,” he said.
In addition to benefiting wealthy individuals, the investment funds will be used for national projects, which will boost national economic growth. Jobs are expected to become more available as domestic capital circulation increases, which will help boost local consumption and increase gross domestic product, Luhut added.
Minister of Tourism and Creative Economy Sandiaga Uno viewed the family office as an opportunity for Indonesia to strengthen its local investment ecosystem. By supporting innovation and entrepreneurship at the national level, the family office can serve as a catalyst for more inclusive and sustainable economic growth.
“If Indonesia can attract even 5 percent, it means attracting more than $500 billion in investment, which is a significant opportunity,” Uno said.
However, according to Telisa Aulia Felianty, a professor at the Faculty of Economics and Business at the University of Indonesia, there are still challenges. The government must ensure legal certainty, data security and adequate technological infrastructure to attract investors to place their funds in Indonesia. According to her, investor confidence is the key to the success of family offices in Indonesia.
Bhima Yudhistira of the Centre for Economic and Legal Studies stressed the importance of competitive tax policies and strong financial infrastructure, similar to those in Singapore and Hong Kong.
In addition, there is a need to differentiate financial products, such as sustainability-linked bonds and sustainable development goal-linked bonds, in sectors such as healthcare, infrastructure, education and telecommunications, to encourage investment in family offices, as well as specialized insurance for high-net-worth individuals, he added. All these measures are crucial steps in building a strong and attractive investment ecosystem for investors looking to place their funds in Indonesia.
— BERNAMA-XINHUA
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