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

From Singapore to Dubai, global capital favours predictable courts over tax breaks. Experts say Jakarta should take note Tax 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. 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. Established 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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