Why Indonesia needs legal trust, not tax cuts, to build a finance hub

AdvertisementIndonesiaThis Week in AsiaEconomicsWhy Indonesia needs legal trust, not tax cuts, to build a finance hubFrom Singapore to Dubai, global capital favours predictable courts over tax breaks. Experts say Jakarta should take note2-MIN READ2-MIN ListenKolette LimPublished: 8:00am, 27 Jul 2026Tax breaks used to be enough. Not any more.

Analysts say a new generation of investors is prioritising legal certainty and regulatory stability over incentives – and Asia’s most successful international financial centres will be those that successfully secure trust.All of which carries repercussions for Indonesia’s plans to build its first international finance centre, after lawmakers passed a law on Tuesday giving the project the green light.Enforceable contracts, predictable regulation and robust dispute resolution mechanisms were now the most important prerequisites for global investors, said Ramkishen Rajan, an economist and Yong Pung How Professor at the National University of Singapore’s Lee Kuan Yew School of Public Policy.

“While tax incentives can attract some firms, they cannot compensate for erratic policy or weak supervision,” he said.Dubai in the United Arab Emirates ranked seventh in the latest Global Financial Centres Index. Photo: ShutterstockEstablished hubs such as Singapore and Hong Kong had succeeded because of their ability to build strong, predictable institutional environments that nurture investor confidence, said Aurelio Gurrea-Martinez, a law professor and head of the Singapore Capital Markets Initiative at Singapore Management University.

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