PPI Value of PFII Strategic Steps, Competitive Incentives are the Key to Attracting Global Investment

JAKARTA - The General Chair of the Indonesian Research Association (PPI) Syahrir Ika assessed that the government needs to present competitive fiscal incentives in the implementation of the Indonesian International Financial Center Law (PFII) in order to be able to compete with various global financial centers in attracting investment.

Syahrir, who is also a researcher at the BRIN Economic Research Center, said the character of the financial sector is different from the real sector because the movement of capital takes place much faster so that investors will always compare the incentives and facilities offered by Indonesia with other countries such as Singapore, Dubai, Malaysia, and Vietnam.

"If other countries provide better facilities, investors will certainly choose that country. Therefore, the issue is not just about how much incentives we provide, but how the incentives we provide are able to make Indonesia remain competitive compared to competing countries," said Syahrir in Jakarta, Wednesday.

He explained that fiscal incentives are instruments that governments commonly use to increase investment competitiveness. However, experience shows that tax incentives alone do not automatically attract investors if they are not supported by a strong business ecosystem.

"Fiscal incentives are necessary, but not stand-alone. Investors not only calculate taxes, but also look at political stability, policy consistency, regulatory quality, infrastructure, to certainty in business," said the former Researcher at the Fiscal Policy Agency (BKF) of the Ministry of Finance.

Therefore, according to Syahrir, the implementation of PFII needs to be supported by a combination of various complementary policies so that Indonesia not only offers fiscal incentives, but also an investment environment that provides certainty and comfort for global business actors.

On the other hand, Syahrir reminded the government that it still needs to maintain fiscal balance in designing various incentives. Efforts to increase competitiveness should not be carried out at the expense of national fiscal health because it can increase the perception of risk to the Indonesian economy.

"The government must certainly calculate the optimal position of incentives. We must be competitive, but do not let the fiscal space be disturbed because in the end it will actually increase economic risks," he said.

In addition to incentives, he assessed that the momentum of the formation of PFII should be used to strengthen the foundation of the national financial sector through deepening the financial market, strengthening regulations, developing financial technology, improving the quality of human resources, and increasingly credible governance.

According to him, the competitiveness of an international financial center is ultimately determined by the quality of the ecosystem that is built, not merely the size of the tax facilities provided.

"The momentum of the formation of PFII should be used to improve the ecosystem of the Indonesian financial sector. What is built is not only the incentives, but also the foundation so that our financial sector is stronger, more efficient, and able to compete in the long term," said Syahrir, who also served as Acting Director of the Government Investment Center (PIP), General Service Agency (BLU) at the Ministry of Finance.

Syahrir also reminded the government to maintain a level playing field so that the provision of incentives in the PFII area does not cause distortions in competition with business actors who carry out similar activities outside the area.

According to him, the design of incentives must be able to increase Indonesia's competitiveness as an international financial center without creating unequal treatment that has the potential to disrupt the overall business climate.

He is optimistic that the government has conducted various studies in determining the design of the PFII incentive. However, according to him, evaluation and learning from various international financial centers still need to be carried out so that the policies implemented are able to increase Indonesia's competitiveness without causing distortions or reducing national fiscal sustainability.

On the same occasion, Syahrir appreciated the concept of the establishment of PFII as a strategic step for Indonesia in utilizing the momentum to attract global investment. He also assessed that the idea reflected the government's strategic vision in reading global dynamics.

"This means that the President has a strategy. He understands the changes that are happening in the global economy and financial system so that he tries to take advantage of it. That's the positive side that needs to be appreciated. I give a very good value to the effort to capture this momentum," he said.