Indonesia joins the Golden Visa bandwagon to lure foreign investors
The decision to grant a golden visa to American entrepreneur Sam Altman, CEO of OpenAI, marks a significant development in Indonesia’s efforts to attract foreign investments. President Joko Widodo’s government introduced a new program in late August aimed at encouraging wealthy foreigners to invest in and stay in the country for an extended period.
Under this new scheme, individuals looking to reside in Indonesia for five years are required to make a minimum investment of $2.5 million in a local venture. Alternatively, they can choose to be passive investors by committing $350,000 to purchase shares in local public companies, invest in Indonesian government bonds, or deposit the amount into savings accounts.
This move by Indonesia aligns with the global trend of countries offering golden visa programs to attract foreign investors. Golden visas have become popular because they stimulate foreign direct investment and can potentially boost the country’s economy by attracting high-net-worth individuals.
The rationale behind Indonesia’s push for foreign investment is multifaceted. Firstly, the country recently experienced its first current account deficit in two years, largely attributed to weaker exports due to falling commodity prices. To address this issue and stabilize the rupiah, the central bank resorted to selling short-term bonds to raise yields. This underscores Indonesia’s awareness of the importance of foreign capital inflows and their impact on its economy.
Indonesia’s proactive approach to attracting foreign investment is indicative of its recognition of the speed at which capital flows can move in today’s global financial markets. Given the country’s history as one of the “Fragile Five” emerging economies, it remains particularly cautious about maintaining financial stability. Foreign ownership of approximately 15 percent of government bonds further underscores the importance of attracting foreign money to support its economic goals.
In conclusion, Indonesia’s decision to grant a golden visa to Sam Altman and its broader initiative to attract wealthy foreign investors reflect its commitment to bolstering its economy and ensuring financial stability in a rapidly changing global economic landscape.
The decision by Americans, such as Sam Altman, to seek a golden visa from Indonesia rather than other countries like Portugal, Malta, or Montenegro, which also offer similar programs, can be influenced by several factors.
Firstly, the absence of an extradition treaty between Indonesia and the United States might indeed be an appealing factor for some individuals. It could provide a sense of security to those who have concerns about potential legal issues or other matters that could lead to extradition.
Secondly, the motivation behind obtaining a golden visa often goes beyond legal considerations. Many people seek such visas as part of a broader strategy for financial and personal security, often referred to as a “Plan B.” In this context, Indonesia offers a unique set of benefits. One of these benefits could be the country’s attitude toward debt, which stands in contrast to the United States.
Concerns about the U.S. government’s significant borrowing and its fiscal deficit have been on the rise in recent years. The sovereign credit ratings downgrade and Treasury bond market fluctuations have heightened these concerns. The Congressional Budget Office’s projections of a persistent fiscal deficit over the next decade, along with the increasing share of tax revenue spent on net interest payments, suggest a potentially challenging fiscal landscape in the United States.
Given this backdrop, some investors and individuals seeking financial security may be looking for alternatives to U.S. assets and financial instruments. They might perceive countries like Indonesia, which may have a different approach to debt management and financial stability, as more attractive destinations for investments and securing their future.
Ultimately, the choice of obtaining a golden visa from Indonesia or any other country is a highly individual decision, influenced by a combination of legal, financial, and personal factors. Indonesia’s unique characteristics, including its approach to debt and legal matters, might make it an appealing choice for certain individuals seeking an alternative to U.S.-based options.
The decision to invest $350,000 in local government bonds in Indonesia, as part of the golden visa program, may indeed be viewed as a more secure option in the current global context. Indonesia’s fiscal discipline and conservative approach to debt management stand in contrast to the concerns surrounding excessive debt levels in many other parts of the world.
Indonesia’s commitment to maintaining fiscal discipline is reflected in its self-imposed limit of a 3 percent fiscal deficit, a policy that has been upheld even when it means accepting slower economic growth. The projected fiscal deficit for 2024 at 2.29 percent of GDP underscores this disciplined approach. This approach to fiscal management is a reassuring narrative, especially in a global landscape where concerns about the sustainability of debt levels are prevalent.
In contrast to other regions like China, the European Union, and the United States, where investors are increasingly worried about the extent of debt accumulation and the potential for a financial crisis, Indonesia’s prudent fiscal policies offer a sense of stability. The country’s relatively low household debt, accounting for only 9 percent of GDP, is a testament to its cautious approach to leveraging its economy.
Furthermore, Indonesia’s banking and financial landscape presents opportunities for growth, given that less than 60 percent of its sizable and youthful population of 274 million have bank accounts. This highlights the untapped potential for financial inclusion and development, which can be an attractive prospect for investors looking to participate in the country’s economic growth.
Overall, Indonesia’s conservative fiscal stance and potential for financial development make it an appealing destination for investments, particularly for those seeking stability and growth opportunities in a global environment marked by concerns about excessive debt and economic vulnerability.
The unique balance-sheet landscape in Indonesia indeed offers a promising opportunity for tech entrepreneurs and investors who are interested in actively participating in the fintech sector and promoting financial inclusion. Here are some key aspects of this opportunity:
1. Fintech and Financial Inclusion: Indonesia’s financial sector presents ample room for innovation, particularly in fintech. With a growing base of smartphone users, fintech companies can leverage mobile technology to offer a wide range of financial services, including mobile banking, digital payments, and peer-to-peer lending. This aligns well with the country’s goal of expanding financial inclusion and providing access to banking services to a broader population.
2. Ubiquity of Mobile Devices: The ubiquity of mobile devices in Indonesia, where people often prioritize owning a smartphone over other consumer goods like televisions or washing machines, creates a fertile ground for tech entrepreneurs to develop and deploy mobile-based financial solutions. This trend aligns with global shifts toward mobile-first banking and payment options.
3. Influence of Social Media: Social media platforms, such as TikTok, have a significant influence on younger generations, including Gen-Z, in Indonesia. Leveraging these platforms for financial education, awareness, and outreach can be an effective strategy for fintech companies looking to engage with a tech-savvy and socially connected audience.
4. Connected yet Insulated: Indonesia’s relatively insulated position from the global debt and financial turbulence can provide a stable environment for tech entrepreneurs and investors. It offers a degree of financial security and resilience that may be attractive to those seeking to develop and grow their ventures without the uncertainties associated with highly leveraged economies.
5. Digital Nomad Hub: Indonesia, and Bali in particular, has gained recognition as a hub for digital nomads and remote workers. The availability of trendy cafes, co-working spaces, and a sub-tropical paradise setting like Bali creates an appealing environment for professionals to work, innovate, and collaborate. This presents opportunities for tech entrepreneurs to network, share ideas, and establish businesses in a supportive ecosystem.
6. Golden Visa Program: Indonesia’s golden visa program offers an additional incentive for entrepreneurs and investors to explore the opportunities in the country. It can facilitate a smooth transition for those who wish to reside and actively participate in the Indonesian market.
In summary, Indonesia’s combination of a conducive technological landscape, a growing mobile-savvy population, and a stable financial environment creates an attractive proposition for tech entrepreneurs and investors interested in fintech, financial inclusion, and digital innovation. The golden visa program adds an extra layer of appeal for those considering making Indonesia their base for tech ventures and entrepreneurial endeavors.
