Resty Woro Yuniar – Indonesia's newly launched golden visa scheme is designed to lure wealthy investors, but analysts warned that it could also attract cross-border money laundering and inflate housing prices, posing a potential "threat to Indonesian citizens".
Jakarta last week officially launched its golden visa scheme, which offers residency to individuals willing to invest at least US$350,000 for a five-year stay or US$700,000 for the 10-year visa.
The programme is aimed at enticing "world?? figures, ?? international?? investors, ?? global?? talents, ?? and?? the?? Indonesian?? diaspora" ?so that they can contribute their wealth, skills, or expertise to the country, according to a statement put out by the Ministry of Law and Human Rights.
"Currently, not many countries have good economic growth, maintained political stability, demographic bonus, and abundant natural resources. This means Indonesia should be a promising investment destination and a global talent destination for work. This will significantly? affect the country, including capital gains, job opportunities, technology transfer, improvement in human resource quality, and more," President Joko Widodo said on Thursday during the policy's launch in Jakarta.
Widodo also advised the country's immigration agency to be "selective" and only allow "individuals with high potential contributions" access to the visa.
Director general of Immigration Silmy Karim said that 300 golden visas have already been issued during its trial period, from which the state pocketed two trillion rupiah (US$122.9 million) in investments.
Silmy said his agency aims to issue 1,000 golden visas this year, mainly to applicants from Singapore, Japan, China, South Korea, the Netherlands, Britain, France, Germany, and the United Arab Emirates.
On Thursday, Widodo handed a golden visa to South Korean national Shin Tae Yong, the coach of the Indonesian national football team, who pundits say has played a key role in increasing the team's performance at major tournaments.
Silmy said golden visas have also been issued to Sam Altman, the CEO of ChatGPT creator OpenAI, Boeing boss Dave Calhoun, and an unnamed Nobel laureate in economic sciences. The government is now trying to persuade Elon Musk, the world's richest man, to apply for the scheme, he added.
"The important thing is to socialise [the policy] as much as possible first. We are communicating with several Chamber of Commerce organisations, including [those from] USA, China, Japan, Korea, and Indonesia. We also socialise it to the Indonesian Young Entrepreneurs Association, whose partners may also need a Golden Visa," Silmy told reporters.
Under the scheme, individual foreign investors wanting to establish a company in Indonesia are eligible for a five-year golden visa if they invest at least US$2.5 million, and double that amount for a 10-year visa. Individual investors who do not wish to establish a company must place funds of at least US$350,000 in either Indonesian government bonds, public company stocks, or savings, to get the five-year visa.
The directors, commissioners or representatives of corporations aiming to establish companies in Indonesia must bring in at least US$25 million in investment value to apply for a five-year stay.
In total, the golden visa programme offers 10 types of visas, including one aimed at former citizens and one called a Second Home visa, which requires applicants to save funds in an account under their own name at a state-owned bank worth at least US$130,000 or buy a property worth at least US$1 million in Indonesia.
All about Nusantara?
Bhima Yudhistira, executive director at the Jakarta-based Center of Economics and Law Studies (Celios), said that the government likely launched the policy to appeal to wealthy family offices, who often demand special treatment from the immigration agencies in the countries where they base their offices.
Chief investment minister Luhut Pandjaitan said last week that the government is preparing a legal system to enable the establishment of family offices onshore, before Widodo leaves the presidential office in October.
"I reported to the president that we should adopt the legal systems used by Singapore, Abu Dhabi, or Hong Kong. By doing so, we provide legal certainty to those who invest here," he told reporters on July 22.
Earlier this month, Luhut said that there are 1,500 family offices in Singapore, whose combined assets are worth US$1.6 trillion in total. If Indonesia had the same system, family offices would inject at least US$100-200 million into the GDP, he said.
Bhima believes the golden visa scheme is another tool being used to expedite the development of Nusantara, the new capital city currently being carved out of a jungle in Borneo. The US$33 billion project has reportedly suffered from lack of interest from overseas investors, as well as from the incoming president, Prabowo Subianto.
"It is hoped that investors who get a golden visa would put their money in the new capital, even though investors typically look at legal certainty [of a project before they invest]. What if the golden visa [policy] is revoked in the Prabowo era? It's very likely to happen," Bhima said.
Thus, a golden visa alone will not necessarily be effective to attract investments in the near future, since foreign investors are "taking a wait-and-see" attitude during the government's transition period, Bhima said.
"Ultimately, investors will consider infrastructure readiness, depth of financial markets, industrial competitiveness and level of bureaucratic complexity. Here lies tight competition with countries such as Singapore, Thailand and Malaysia," Bhima said.
He also raised concerns about Indonesia's ability to combat cross-border money laundering and other criminal acts, which would be made easier with the golden visas.
"The countries that have revoked the golden Visa policy have anti-money-laundering measures that are stricter than Indonesia, and even they think that the golden Visa will enable cross-border money laundering and illegal investments. Indonesia, on the other hand, still can't [monitor] the 600 trillion rupiah [money circulation] made in online gambling," Bhima said.
Indonesia is bucking the trend seen in Europe in which EU states are gradually scrapping their golden visa or passports policies due to Russia's war in Ukraine, as well as skyrocketing house prices. In 2022, Brussels called for EU member countries to verify whether their golden visa or passports schemes were enjoyed by sanctioned Russians.
Among countries already abandoned their golden visa scheme is the UK, Ireland, and Portugal.
The latter used to allow foreigners to gain residency by buying property, which resulted in an increase in property and rent prices.
"If golden visa holders can own land in Indonesia, that could be a threat to Indonesian citizens. Land ownership could eventually shift from Indonesians to foreigners, and it could lead to protests from residents," said Nailul Huda, an economist with Celios.