Other BriefingsIndonesia’s Approach to BRICS: Opportunities and Membership Potential
Jakarta weighs up its options as it has decisions to make in early 2024
The idea of Indonesia joining the BRICS group was raised over a decade ago, and Indonesia has participated in some BRICS meetings. Over the past two years, the concept of Indonesia officially joining BRICS has been revived with the support of actors such as China.
Last year, several Indonesian diplomats also highlighted the possibility of joining BRICS, one of some 40 countries who had expressed their interest in joining. But eventually, Indonesian President ‘Joko Widodo’ said he was considering membership – but was not in a hurry.
With Indonesia’s potential again being raised to join BRICS in July 2023, Indonesia accepted the invitation to participate in the 2023 BRICS summit. President Widodo, the Indonesian Minister of Foreign Affairs, and other officials went to Johannesburg to attend the event; but played down ongoing negotiations and media attention on the subject.
In fact, according to the different views within the government, Jakarta has not yet reached a conclusion whether to join or leave the opportunity for a later date.
Despite Indonesia’s emphasis in eliminating all forms of trade discrimination, encouraging equal and inclusive cooperation, and Indonesia’s good relations with BRICS member countries, the obvious need to join BRICS has not yet been fulfilled. In other words, Indonesia is still studying and weighing up its options.
BRICS Opportunities with Indonesia
Over the past two decades, Indonesia has experienced a high average annual economic growth, becoming one of the top 20 economies in the world. Indonesia’s GDP is US$1.385.00 trillion, and it is the largest economy in Southeast Asia.
Indonesia’s economy moves in accordance with a constantly revised 20-year development plan (from 2005 to 2025), and is based on its Vision 2045, English summary here) (Indonesia’s independence centenary) with the aim of becoming the fifth largest economy in the world.
Indonesia is the fourth most populous country in the world with a population of 276 million people. During the same past two decades, BRICS has also increased its attractiveness and economic position with about 26% of the area, and about 42% of the world’s population, strengthening economic and financial cooperation in the process. BRICS has an increasing role in the future of the economy and geopolitics of the world. Jakarta can pay more attention to multilateralism with BRICS in the changing world geopolitics.
Indonesia’s foreign policy, ambitious development, capital transfer, development of infrastructure and connectivity projects, and interaction with major powers are also important and appear to match with BRICS development aims.
Therefore, an Indonesian membership within in BRICS can create opportunities to help and speed up national development for the main goals of foreign policy, support national development, strengthen friendly international and regional relations, and enhance cooperation in accordance with its national interests.
Other Indonesian goals, such as intensifying its international role, creating a new global economic order, and expanding economic and technical cooperation between developing countries can also be reached with BRICS.
According to the World Bank, Indonesia’s economic growth increased to 5.3% in 2022, will probably reach 4.9% during 2023, and remain stable in the medium term.
Meanwhile, because of Indonesia’s needs, such as improving various economic sectoral productivity, pursuing migration to a green economy, energy transition, digital transformation, integration of the domestic economy, connecting infrastructure, and developing new capital, Indonesia needs investment growth. New and founding members of BRICS can also help Indonesia with trillions of dollars in reserves and liquidity.
As an Islamic nation, Indonesia will also be looking at the role that the new BRICS members will start to play within the Middle East. Saudi Arabia, Egypt, and the UAE are all powerful economies who have taken up roles within the BRICS New Development Bank. All are also potential tourism markets to attract people to Indonesia. Jakarta will be paying attention to the Middle East members, who take up their BRICS membership from January 2024.
(An overview of the BRICS new MENA members can be downloaded here).
From this point of view, BRICS membership can help to open new markets, consolidate existing markets, support investment flows, create jobs, and increase exports and use of technologies by Indonesia.
Entering the BRICS New Development Bank (NDB) is also an opportunity for Jakarta to find new financial investment resources, reduce dependence on the dollar, and attract BRICS financing.
The NDB can provide financial and technical assistance; and provide soft loans in Rupiah. Indonesia’s participation in aid, effective financing for sustainable development, the multilateral promotion of Indonesia’s infrastructure projects, currency stability, reducing Indonesia’s debts, and increasing Indonesia’s export capacity will all help.
Despite the Western control over SWIFT, the BRICS approach in dealing with the reforms of the international financial system, the formation of alternative payment systems, the non-dollar financial system, an increase in trade with domestic currencies can also benefit Indonesia.
Jakarta has already introduced a de-dollarization task force to help promote the use of the Rupiah in bilateral trade, reduce its dependence on the dollar, and diversify payments. This also fits in with the overall BRICS agenda.
BRICS is also in the early stages of examining the use of local currencies and can make the Indonesian Rupiah more stable from currency fluctuations risks. It will also help to prevent the stagnation of the exchange rate of the Rupiah against the US dollar.
Elsewhere, with Indonesia’s mineral reserves, the assistance of BRICS members in mining investment and export of minerals can be useful. Indonesia can meet its need for grains and chemical fertilizers by strengthening food security and gain wider access to strategic goods and BRICS markets.
It also can expand its food products export market to BRICS and achieve a reduction in supply chain and food cooperation costs.
With the presence of new members, BRICS will control more than 40% of the world’s oil supply and more than 50% of gas reserves. Indonesia would achieve an improved energy security as part of BRICS.
BRICS can also be an important card in Jakarta’s negotiations with Western-oriented institutions. Also, membership in BRICS can be a step to benefit from the experiences of member countries, develop trade, sign new trade agreements, and be a potential source of foreign direct investment (FDI) in Indonesia.
From the point of view of many, BRICS is a valuable tool to increase exports in new markets and the markets of the Middle East, South America, and Africa. Joining this group can open more doors for Jakarta.
Current Indonesia-BRICS Trade
A large part of Indonesia’s trade is already with the BRICS countries, and despite the strong economic relations with the five BRICS members, this can be extended to the new members as well.
During 2022, Indonesia-China trade reached US$133.6 billion, Indonesia’s bilateral trade with India reached US$32.7 billion, while Indonesian trade with Brazil reached US$5.4 billion, Russia at US$3.6 billion, and South Africa with US$3.3 billion. All showed significant increases during a US$178.6 billion overall Indonesia-BRICS 2022 performance.
In 2022, Indonesia’s exports to BRICS countries were US$93.16 billion, while imports reached US$85.44 billion. China was a large share of both (70.9% of exports and 79% of imports).
Proponents argue that economic slowdowns in China, Japan, and the United States should be watched with the argument being that Indonesia’s joining BRICS would reduce the country’s dependence on these countries.
Hurdles and Doubts
Indonesia’s foreign policy is independent and active, and multilateral and international cooperation towards peace is an important part of Indonesia’s foreign policy. But in order to maintain its financial interests, and steer away from colonial attitudes, Indonesia has not joined any military alliance.
From this perspective, an Indonesian concern is the increase in geopolitical tension between the United States and China, as well as between Australia and China, and unwanted pressure from Washington to join the Quad security network.
The White House does not see BRICS as a geopolitical competitor. That is reserved for the Shanghai Cooperation Organisation (SCO), which Indonesia attends as a permanent member of ASEAN, who has ‘Guest Status.’
However, any kind of anti-Western alliance could complicate Indonesia’s relationship with the United States and the political and economic costs of a Western response. This means that joining BRICS could in time cloud relations with the West, although as BRICS is not a legal structure this would be difficult to target.
Although China is a rather more important trading partner for Indonesia than the United States, in 2022, the United States was still one of the largest trading partners of the country.
Indonesia also worries that BRICS may turn into a completely “anti-Western” group led by China and Russia, or that China will use BRICS to counter the West.
In addition, China is Indonesia’s main source of foreign investment, but it is also seen as a threat to Indonesia’s domestic politics. Indonesia has repeatedly protested China’s approach in the region. However, given the Belt and Road Initiative and anti-Chinese sentiments in society, there are criticisms of China’s massive infrastructure projects in Indonesia and the perceived risks of a debt trap. That said, Indonesia’s Jakarta-Bandung high-speed rail has recently opened, a BRI US$7.3 billion project that was delivered and will significantly add to the development of Bandung in particular. Concerns now this project has been completed and is now operational should start to abate.
However, opponents of BRICS membership point to uncertainty about the economic benefits. While Indonesia wants to join the predominantly Western Organization for Economic Co-operation and Development (OECD), BRICS is seen as an obstacle.
Other opposition issues include the fragility of the BRICS coalition, alignment with certain political blocs, a lack of economic benefits, BRICS benefiting from Indonesia’s huge population rather than vice versa and so on.
Others believe that with the lack of unity among member states, BRICS acts as a loose organization and has not become a political union like the European Union (EU) or even a formal trade association. Others believe that siding with Russia is in contrast with a “free and active” Indonesian foreign policy.
BRICS is still not a full international or regional organization and is more informal than the old organizations and there is some inconsistency between some members. Other concerns pay attention to the obligations of new members, the exclusive rights of founding members, and the possibility of BRICS policies conflicting with Indonesian policies.
From this point of view, the form of Indonesia’s financial and non-financial obligations as a BRICS member is not compatible with the principle of “free and active” foreign policy, and this needs to be reconciled.
Indonesia’s BRICS Vision
Indonesia still faces structural constraints to growth. Despite challenges such as softening investment growth, BRICS can help grow its GDP.
In essence, the type of permanent membership, a minimized involvement or even a total rejection of BRICS by Indonesia in BRICS seems to depend on the winner of the 2024 Presidential election and the development of Indonesia’s subsequent foreign policy. Those are due to be held in February – four months from now.
It seems that Indonesia will make a decision in consultation with other ASEAN members and domestic parties by examining the possibility of joining BRICS and evaluating all the advantages and disadvantages of that decision. It will also want to hear from the new Middle Eastern members about their BRICS experiences, an issue that will not become apparent until mid-2025 at the earliest.
In fact, Indonesia is trying to balance its relations with China as its trade partner and the United States as a security partner. How that is perceived may have changed by the next BRICS summit in late summer 2024.
Consequently, an Indonesian decision to join BRICS will be more of a political and geopolitical strategic decision. Joining BRICS will affect Indonesia’s power. Considering Indonesia’s membership in the Group of 20, joining BRICS can be an important opportunity for Indonesia to express influence in global geopolitical and geoeconomic dimensions and promote the country’s soft power. Jakarta will need to decide whether the G20 suffices or whether BRICS can add an additional angle.
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