Indonesia Cuts 2025 GDP Growth Forecast, Maintains Budget Gap Strategy

Indonesia’s Finance Minister Sri Mulyani Indrawati announced in parliament on Monday that the country has revised its 2025 GDP growth forecast to 5.1% to 5.5%, down from the previous estimate of 5.3% to 5.6%.

This new growth outlook, bond yields and the rupiah exchange rate predictions will guide the government’s 2025 budget planning.

Outgoing President Joko Widodo will finalise the figures and present the 2025 budget to parliament in mid-August. Lawmakers will debate the budget in September before President Widodo’s successor, Prabowo Subianto, takes office in October.

The transition team for president-elect Prabowo is collaborating with the finance ministry to ensure the 2025 budget reflects his plans. Sri Mulyani confirmed that initiatives to improve nutrition for school children, a critical program of Prabowo, will be part of the 2025 fiscal plans, though details remain unspecified.

Analysts have raised concerns about the high cost of Prabowo’s campaign pledge to provide free meals for 83 million children, which could impact Indonesia’s fiscal discipline. The estimated first-year cost is $7.7 billion, with potential growth boosts of up to 2.6 percentage points by 2029.

Despite the reduced growth forecast, the government plans a 2025 budget deficit range of 2.45% to 2.82% of GDP, close to the previous estimate of 2.48% to 2.80%. This year’s budget deficit is 2.29% of GDP, compared to last year’s 1.65%.

The public debt-to-GDP ratio will remain between 37.98% and 38.71% next year, consistent with current levels. Maintaining healthy fiscal metrics remains crucial as Indonesia approaches market-based financing instead of bilateral or multilateral loans to address the budget gap.

Sri Mulyani warned, “A widening fiscal deficit can increase bond yields, pressure the rupiah exchange rate, raise domestic interest rates, and reduce private sector activity.”

Our Commentary:

Since 2014, Singapore has been Indonesia’s top source of foreign direct investment (FDI) Despite the revised GDP forecast, Indonesia continues to welcome foreign investments.

At ForBis Group, we note a substantial influx of foreign investors into Indonesia across sectors such as technology SaaS, property development, infrastructure, and manufacturing. Indonesia’s growing middle class fuels this trend, projected to reach 80% of the population by 2045. The expanding middle class drives demand for services and products, enhancing investment opportunities. Indonesia’s diverse workforce further attracts foreign investments.

For more information on how ForBis Group can help you enter the Indonesian market, please contact us.

Singapore Implements Stricter Penalties for Corporate Service Providers Violating Anti-Money Laundering Regulations

Singapore passed a new law on Tuesday, Jul 2, significantly increasing penalties for corporate service providers that breach anti-money laundering duties. The Accounting and Corporate Regulatory Authority (ACRA) now requires all corporate service providers to register, regardless of whether they transact with the authority.

ACRA, under the Ministry of Finance, has adopted a stricter stance on corporate service providers and individuals failing to comply with regulations. Since 2021, ACRA imposed 41 sanctions, canceling or suspending the registration of 31 firms and individuals. The new Corporate Service Providers Bill raises fines for non-compliance from S$25,000 to S$100,000 (US$73,650).

All businesses providing corporate services, including those serving only overseas clients, must register with ACRA. This requirement extends to accounting firms performing services specified by the Financial Action Task Force, a global watchdog on money laundering and terrorism financing.

Second Minister for Finance Indranee Rajah highlighted the vulnerability of nominee directorship arrangements to abuse. Nominee directors, often local residents appointed by corporate service providers, sometimes fail to perform their fiduciary duties. New regulations mandate that only registered corporate service providers can arrange nominee directorships, ensuring individuals are fit and proper for the role.

The recent S$3 billion money laundering case underscored the importance of these measures. The offenders, part of an illicit gambling ring, laundered money into luxury assets. This case, though incorporated into the new law, does not solely drive the new regulations.

Parliament also debated the Companies and Limited Liability Partnerships (Miscellaneous Amendments) Bill alongside the Corporate Service Providers Bill. Corporate service providers act as “gatekeepers” against company misuse, supporting businesses in filing annual returns and arranging directors. They must conduct customer due diligence for all clients, resident or non-resident.

Concerns arose regarding the impact of the new law on business compliance costs. MPs like Mr. Lim Biow Chuan and Nominated MP Neil Parekh noted the potential financial burden and service interruptions for small companies. However, Ms. Indranee assured that the requirements, reflecting best practices, should not significantly increase compliance costs or affect Singapore’s business environment.

Mr. Louis Chua raised the issue of “Singapore-washing,” where foreign firms relocate to mitigate geopolitical risks. He emphasized maintaining Singapore’s reputation against money laundering. While some MPs felt the penalties might be excessive, Ms. Indranee stated that the government had extensively consulted stakeholders and calibrated the requirements appropriately.

The Bill rejected an initial proposal requiring nominee directors to meet training requirements, considering it overly restrictive and costly. Instead, corporate service providers must ensure nominee directors are qualified, allowing capable individuals to hold multiple directorships without unnecessary limits.

Together, the Corporate Service Providers Bill and the Companies and Limited Liability Partnerships (Miscellaneous Amendments) Bill aim to strengthen Singapore’s anti-money laundering framework, ensuring the city-state remains a safe and legitimate business hub.

Our take:

Corporate services play a critical role in the global fight against money laundering and counter-terrorism financing. At Forbis Group, we understand the immense responsibility that comes with ensuring our financial systems adhere to stringent regulations. As a corporate services provider in Singapore, a leading financial hub with a high volume of transactions, our role is more vital than ever.

We welcome the recent regulatory changes aimed at strengthening compliance and enhancing transparency within the industry. These measures are crucial in maintaining the integrity of our financial ecosystem and safeguarding it against illicit activities. However, it is essential that corporate service providers are given adequate time to adapt and fortify their internal processes to meet these new standards effectively.

At Forbis Group, we are committed to supporting our clients through this transition. We believe that by fostering a culture of compliance and accountability, we can not only protect our financial system but also contribute to a more secure and sustainable business environment. Our dedication to upholding the highest standards of regulatory compliance reflects our unwavering commitment to the principles of people, planet, and profit – the foundation of our long-term business sustainability strategy.

By integrating these new regulations into our practices, we aim to not only comply with the law but to lead by example in promoting ethical business conduct. The integrity and security of our financial system depend on the collective efforts of all corporate service providers. At Forbis Group, we are proud to play our part in this crucial endeavor, ensuring that our clients, and the broader business community, can operate in a safe and transparent environment.

Family Offices: ESG-Investing Awareness & Reporting

In recent years, the topic of Environmental, Social, and Governance (ESG) issues in Singapore have shifted to something that was once niche to a trend that can be seen across modern investment portfolios.

The whooping number on the so-called impact investing can be translated into the realisation of the coming-of-age investors and next generation wealth owners about the importance of investing in businesses that have a positive impact on society and the environment.

While the goal of investing in ESG does not diminish the interest in generating financial returns, more businesses don’t seem to want to miss out on creating positive social or environmental outcomes at the same time.

The same can be said for family offices in Singapore, which in recent years have seen progressive shifts towards ESG impact investing. Family offices are private wealth management entities that cater to high-net-worth families or individuals and are responsible for managing the family’s wealth across generations.

ESG Reporting: Popularity & Frameworks

There are several notable reasons why ESG investments gained traction among family offices in Singapore recently. Family offices are becoming more aware of the potential risks associated with investing in companies that have poor ESG practices. This can lead to reputational damage and eventually financial losses. By ingraining ESG principles and considerations into their investment strategies, family offices can reduce these risks and ensure that their investments are sustainable in the long term.

In addition to that, ESG-focused investing has been shown to generate attractive returns. Studies in recent years have found that companies applying ESG practices tend to outperform those that lack focus on the subject. By investing in companies with strong ESG practices, family offices can potentially generate higher returns while also contributing to giving positive outcomes to the society.

As family offices start to realise that ESG issues can have a significant impact on their financial performance and reputation, ESG reporting is becoming an important consideration. To guide their ESG reporting strategy, family offices can use various ESG reporting frameworks, such as the Global Reporting Initiative (GRI) Standards, Sustainability Reporting Guidelines (SRG), United Nations Sustainable Development Goals (SDGs) and Task Force on Climate-related Financial Disclosures (TCFD).

1. Global Reporting Initiative (GRI) Standards
The GRI Standards are a widely recognised framework for sustainability reporting that provide guidelines on ESG disclosures. The GRI Standards cover a range of ESG issues, including governance, ethics, human rights, labour practices, environment, and social issues.

2. Sustainability Reporting Guidelines (SRG) by the Singapore Exchange (SGX)
The guidelines were introduced in 2016 as an effort to encourage publicly listed companies in Singapore to disclose their ESG performance. This resulted in the requirement for all listed companies to adopt a “report or explain” approach. The guidelines cover a wide range of ESG issues, including climate change, human rights, and supply chain management.

3. United Nations Sustainable Development Goals (SDGs)
The SDGs are a set of 17 global goals adopted by the United Nations in 2015 to address social, environmental, and economic challenges.

4. Task Force on Climate-related Financial Disclosures (TCFD)
The TCFD was established by the Financial Stability Board to provide a framework for companies to disclose climate-related risks and opportunities. The TCFD framework covers four areas: governance, strategy, risk management, and metrics and targets.

By considering ESG reporting, family offices will be able to identify and prioritise ESG issues that are critical to their business. Undoubtedly, this will also be useful to help them track their progress towards achieving sustainability goals. By using these frameworks, family offices can also create long-term value for their shareholders, employees, and other stakeholders.

New Tax Incentives for Single Family Offices

A recent effort to encourage single family offices to deepen their investment in local Singaporean companies is taken by the Monetary Authority of Singapore (MAS) through its representative Mr. Alvin Tan, the Minister of State. He shared that MAS has continuously ensured the relevancy of fund tax incentive schemes and it has come up with the raised minimum criteria for single family offices. They perform this by “(i) increasing hiring requirements and (ii) introducing a new requirement for family offices to invest at least 10% or S$10 million of their assets (whichever is lower) in local investments.”

In addition to the raised criteria, MAS, Singapore Economic Development Board and Enterprise Singapore are also actively putting the effort through creating platforms to connect local companies with investors and supporting the Wealth Management Institute’s Global-Asia Family Office Circle, which acts as a platform for members to share best practices on management of wealth and co-investing which can help local companies in the nation flourish.

With the supportive environment coming from wealth-owners, ESG-focused businesses and the Singaporean government, it is not a big surprise that family offices are leading the way in ESG-investing in the country.

What ESG-Investing Means for Forbis

For Forbis Group, investing in ESG is not merely creating a positive impact on the environment. For us, it also means investing in a workplace that treats employees well, maintaining a diverse and inclusive workforce, and performing accountable and transparent governance practices. We consistently assist our clients to build up their ESG reporting and practices through our advisory services. We are also a proud member of RaISE Singapore which supports social enterprises.