In the world of wealth management , the choice of location for establishing family offices is pivotal. Wiljadi Tan, Managing Partner of Protemus Capital (Indonesia), articulates this sentiment succinctly, “Currently, Singapore, Hong Kong, and Dubai stand out as premier destinations for family offices. Their sophisticated investment infrastructure, favorable tax regimes, and robust regulatory frameworks make them attractive to UHNWIs.” Wiljadi Tan, a veteran with extensive experience in investment banking and M&A advisory, making the highlight notes.
Family offices are private wealth management advisory firms dedicated to serving ultra-high-net-worth individuals (UHNWIs). They provide a comprehensive range of services, including investment management, estate planning, philanthropy, and family governance. From the past deal experiences of Protemus Capital , the management and location of these offices significantly influence their effectiveness and efficiency.
The Leading Hubs: Singapore, Hong Kong, and Dubai
Singapore: Stability and Sophistication
Singapore has established itself as a global financial hub, renowned for its political stability, robust regulatory framework, and strategic location in Asia. The city-state boasts a highly developed financial services sector, featuring world-class banking facilities, investment services, and a diverse array of financial products. The Monetary Authority of Singapore (MAS) plays a crucial role in ensuring the integrity and stability of the financial system.
On Protemus Capital perspective, one of Singapore’s key attractions is its favorable tax regime, which includes low personal and corporate tax rates, no capital gains tax, and numerous tax treaties that prevent double taxation. This fiscal environment, coupled with a well-regulated financial sector, makes Singapore a magnet for family offices seeking stability and efficiency.
Hong Kong: The Gateway to China
Hong Kong’s status as a major financial center is underpinned by its open economy, strategic location, and legal system rooted in English common law. The city hosts a dense concentration of financial institutions, investment banks, and asset management firms. Its stock exchange is one of the largest globally, offering ample investment opportunities.
Hong Kong’s tax system is straightforward and competitive, featuring low personal and corporate tax rates, no VAT, no capital gains tax, and no withholding tax on dividends and interest. As a gateway to China, Hong Kong provides unique opportunities for investors looking to tap into the Chinese market. The Closer Economic Partnership Arrangement (CEPA) with China further enhances these benefits. Additionally, the rule of law in Hong Kong provides assurance to investors regarding the security of their investments and the resolution of disputes.
Dubai: The Crossroads of Trade
Dubai has emerged as a prominent financial center in the Middle East, thanks to its strategic location, business-friendly environment, and visionary leadership. Situated at the crossroads of Europe, Asia, and Africa, Dubai serves as a strategic hub for global trade and finance. The city’s world-class infrastructure, including one of the busiest airports and ports, facilitates international business.
Dubai offers a zero personal and corporate tax regime, making it highly attractive for wealthy individuals and businesses. The UAE has numerous double taxation avoidance agreements, and Dubai’s numerous free zones provide various incentives, including 100% foreign ownership, repatriation of profits, and exemption from import/export duties. Additionally, Dubai offers a luxurious lifestyle with high-end residential options, top-notch healthcare, international schools, and a diverse cultural environment.
Indonesia: Potential Amid Challenges
Indonesia, Southeast Asia’s largest economy, holds significant potential for attracting family offices. However, it faces several challenges that must be addressed to become a competitive destination. Indonesia’s financial sector is less mature compared to Singapore, Hong Kong, and Dubai, lacking the depth and breadth of financial services and investment products available in these hubs.
“While Indonesia has a growing banking sector, it is not yet on par with the comprehensive services offered in more established financial centers. The development of more sophisticated banking products and services is crucial,” Wiljadi Tan said. Indonesia’s capital markets are relatively underdeveloped, with limited liquidity and fewer investment opportunities. Strengthening the stock exchange and developing bond and derivatives markets would attract more investors.
Indonesia’s capital markets are also relatively underdeveloped, with limited liquidity and fewer investment opportunities. Strengthening the stock exchange and developing bond and derivatives markets would attract more investors. This can be achieved by encouraging more companies to go public, enhancing market transparency, and providing better investor protection.
In legal view, the regulatory and legal frameworks in Indonesia need significant improvements to match the standards of leading financial hubs. Investors seek regulatory stability and transparency. Frequent changes in regulations and policies can create uncertainty, deterring long-term investments. Streamlining and clarifying regulations would enhance investor confidence. Establishing independent regulatory bodies and adopting international best practices can further strengthen the legal framework.
Recommendations from Protemus Capital
To gain a deeper understanding of the challenges and opportunities for attracting family offices to Indonesia, insights from investment experts like Wiljadi Tan and his Protemus Capital team are invaluable. They propose several strategies:
- Developing a Niche Market Indonesia should focus on developing niche markets to attract family offices. Leveraging its unique investment opportunities in sectors like natural resources, agriculture, and the digital economy, Indonesia can differentiate itself from other financial hubs. Creating targeted incentives and highlighting these niches can make Indonesia more appealing.
- Leveraging Technological Advancements The rise of fintech and digital banking presents a unique opportunity for Indonesia to leapfrog traditional financial infrastructure. By fostering a vibrant fintech ecosystem, Indonesia can provide innovative financial services that cater to the needs of family offices. Emphasizing technology adoption can significantly enhance the country’s appeal to global investors.
- Building a Strong Brand Investing in branding and marketing efforts is crucial for Indonesia to highlight its strengths and attract global investors. Countries like Singapore and Dubai have successfully marketed themselves as premier financial hubs. Indonesia should showcase its success stories and create a positive narrative around its economic potential.
- Developing a Skilled Workforce A well-educated and skilled workforce is vital in attracting family offices. Indonesia should invest in education and training programs to develop a pool of talent that can support the growth of the financial sector. Promoting knowledge transfer and capacity building will strengthen the country’s human capital.
- Promoting Public-Private Partnerships Public-private partnerships (PPPs) can play a crucial role in developing the necessary infrastructure for a thriving financial sector. By collaborating with private investors, the government can accelerate the development of financial hubs and create an enabling environment for family offices.
Enhancing Financial Infrastructure
Wiljadi Tan said, Indonesia must focus on enhancing its financial infrastructure to match the standards of leading financial hubs. This includes developing more sophisticated banking products and services, strengthening capital markets, and improving regulatory and legal frameworks.
While Indonesia has a growing banking sector, it is not yet on par with the comprehensive services offered in more established financial centers. The development of more sophisticated banking products and services is crucial. This includes offering a wider range of investment products, such as mutual funds, ETFs, and private equity options. Additionally, improving digital banking services and integrating fintech solutions can provide more convenient and efficient services to family offices.
Offering Competitive Tax Incentives
Indonesia’s tax regime is less competitive compared to those of Singapore, Hong Kong, and Dubai. Offering attractive tax incentives, such as reduced corporate and personal income tax rates, exemptions on capital gains, and double taxation treaties, would make Indonesia more appealing to family offices.
Reducing corporate and personal income tax rates can make Indonesia more attractive to family offices. This can be achieved by offering lower tax rates for high-net-worth individuals and businesses that relocate to Indonesia. Additionally, providing tax holidays and exemptions for new investments can encourage more family offices to establish a presence in the country.
Exempting capital gains from taxation can further enhance Indonesia’s appeal to family offices. This includes exempting gains from the sale of investments, such as stocks, bonds, and real estate. Additionally, providing exemptions for reinvested earnings can encourage long-term investments in the country.
Establishing double taxation treaties with other countries can prevent family offices from being taxed twice on the same income. This can be achieved by negotiating agreements with countries where family offices are commonly located, such as the United States, the United Kingdom, and China. Additionally, providing tax credits for taxes paid in other countries can further reduce the tax burden on family offices.
Improving the Business Environment
Wiljadi Tan make bold statement, Improving the overall business environment in Indonesia is crucial for attracting family offices. This includes enhancing the ease of doing business, reducing bureaucratic hurdles, and providing a stable and predictable regulatory environment. Enhancing the ease of doing business in Indonesia can attract more family offices. This includes simplifying the process of starting and operating a business, reducing administrative burdens, and providing one-stop services for business registration and permits. Additionally, improving infrastructure, such as transportation, telecommunications, and utilities, can create a more conducive environment for business operations.
Reducing bureaucratic hurdles can make Indonesia more attractive to family offices. This includes streamlining regulations, reducing red tape, and providing transparent and efficient administrative processes. Additionally, implementing digital solutions for government services can enhance efficiency and reduce the time and cost of doing business. Providing a stable and predictable regulatory environment is crucial for attracting family offices. This includes establishing clear and consistent regulations, avoiding frequent changes in policies, and ensuring transparency in the regulatory process. Establishing independent regulatory bodies and adopting international best practices can further strengthen investor confidence. (GT)
