Aldo Felix Januardi is Managing Partner of Jakarta-based AVYA Law Firm, specializing in family businesses and multi-generational family estates. He is also the co-founder of LogikaRasa, a Jakarta-based startup that promotes Indonesian literature.
The Indonesian government’s plan to establish a family office hub in Bali has sparked both enthusiasm and skepticism. The ambitious plan, put forward by President Joko Widodo and Coordinating Maritime and Investment Minister Luhut Binsar Pandjaitan, aims to transform the resort island into a financial magnet similar to Singapore.
Critics argue that despite the bright potential for economic growth, Indonesia may not yet be ready for such an endeavor.
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It seems logical to emulate Singapore’s success. The city-state’s streamlined regulations, strong legal framework and centralized management make it a haven for family offices. However, Indonesia’s vast archipelago presents a completely different background. The challenge of replicating Singapore’s centralized efficiency in Bali, a diverse and decentralized nation, is immense.
An important consideration is the need to grant special autonomy to Bali, along with Aceh, Yogyakarta and Papua. Unlike these regions, where autonomy is rooted in political sovereignty, Bali’s autonomy will be driven purely by economic ambitions. This difference raises many legal issues. Conflicts in laws across the financial, corporate, and household sectors are almost inevitable, increasing uncertainty and potentially leading to litigation.
Furthermore, the cultural and environmental implications of this plan cannot be ignored. Bali, with its unique cultural heritage and delicate ecosystem, is already facing pressure from overtourism. The influx of wealthy individuals and the establishment of family offices could exacerbate these problems, strain local resources, and change the socio-cultural fabric of the island. Critics say Bali could become a tax haven, a magnet for suspicious transactions and money laundering, further eroding its cultural integrity.
Governments must act carefully, balancing economic aspirations with the obligation to protect Bali’s environmental and cultural heritage. An influx of wealth can spur economic growth, but it can also lead to illegal activity. A strong regulatory framework and rigorous oversight are essential to mitigating these risks, but effectively implementing such measures remains a challenge.
Singapore occupies the position of a major player in this sector for several reasons. The country boasts a clear and consistent regulatory and legal framework and a reliable judicial system. Ranked first in the world for political and operational stability, it is home to an estimated 59% of Asia’s family offices.
Singapore is also the world’s fourth largest recipient of foreign direct investment and is a thriving business hub. Singapore’s ecosystem supports over 3,000 startups, a global network of 500 investors, and over 200 incubators and accelerators. A stable and strong economy, rich human capital, and strategic geographic location make it a highly attractive city for wealthy families.
The question is what lessons Indonesia can learn from Singapore’s experience. Indonesia stands on the brink of a transformational opportunity with the rise of family offices. Indonesia, the world’s fourth most populous country and Southeast Asia’s largest economy, is well positioned to benefit from this proliferation. However, achieving parity with Singapore requires a strong regulatory and legal reform framework.
Unlike Singapore, Indonesia lacks key elements such as probate and trust funds. Singapore’s legal system handles probate efficiently and ensures that the estate is distributed according to the wishes of the deceased.
Conversely, wills in Indonesia are administered by notaries, which often creates complications and delays. The absence of trust funds in Indonesia’s legal framework has forced many family offices to relocate assets to Singapore for better asset management. Additionally, Indonesian inheritance law, influenced by Dutch civil law and Islamic law, mandates fair distribution among family members, creating challenges for family offices that require customized solutions. Therefore, it is essential to establish laws and regulations that address these gaps in order to provide the necessary legal backbone for family offices to operate effectively.
Additionally, strict anti-money laundering regulations and enhanced know-your-customer (KYC) protocols are also important. These measures not only protect the financial system, but also instill confidence in potential investors and ensure that their funds are safe from illegal activities.
The Singapore International Arbitration Center (SIAC) is renowned for its efficiency and reliability. In contrast, legal proceedings in Indonesia are often lengthy and uncertain, making it less attractive for family offices to prioritize quick and discreet resolution of disputes.
Establishing a private arbitration commission in Bali, modeled on SIAC, could be a solution. Such committees provide a streamlined process for resolving disputes and ensure that disputes are handled quickly and appropriately, consistent with the familial nature of these offices.
By investing in sustainable projects, social enterprises and green technologies, Indonesian family offices can advance impact investing and align economic interests with social and environmental benefits. This will broaden the scope of investment and contribute to Indonesia’s sustainable development goals.
Singapore’s rise as a hub for family offices highlights its commitment to a high quality of life. To attract similar investments, Indonesia needs to improve its prosperity and quality of lifestyle. Family offices focus on preserving and growing the wealth and well-being of families. Singapore’s success is due to its multicultural society, diverse talent pool and world-class education system.
Our highly educated workforce in finance, accounting and legal services further enhances our attractiveness. For Indonesia to compete, it needs to invest in education, healthcare and infrastructure, develop a skilled workforce and create an environment in which family offices can thrive.
The Indonesian government’s plan to establish a family office hub in Bali is undoubtedly visionary, but it is fraught with complications. Bali’s need for special autonomy, potential legal disputes, and environmental and cultural impacts are major hurdles that must be addressed.
If we do not act with caution, dreams of economic benefits can quickly turn into bureaucratic and environmental nightmares. However, raising Indonesia’s family office ecosystem to par with Singapore’s is also achievable.
By implementing strategic legal reforms, creating a supportive regulatory environment, and promoting innovation and sustainability, we can attract family offices and foster economic prosperity. The government envisions managing up to $500 billion (more than Rp. 8,000 trillion) and mandating local employment in family offices.
With the right reforms, Indonesia can foster the prosperity of family offices and drive significant economic growth and development.
