Study: BRICS Can Reduce Dependence On Western Countries

State leaders who are members of BRICS/PHOTO DOC via Instagram @brics_br

JAKARTA - Indonesia's move to become a permanent member of BRICS is believed to reduce dependence on Western countries and affiliated international institutions, such as the International Monetary Fund (IMF) and the World Bank.

According to a report by the economic and social research institute of the FEB UI Institute for Economic and Community Research (LPEM) joining Indonesia into the BRICS, the state group now consisting of Brazil, Russia, India, China, South Africa, Iran, Egypt, Ethiopians, and the United Arab Emirates, strategically very significant.

BRICS accounts for 37 percent of the world's gross domestic product (GDP) (2024), has 46 percent of the world's population, and covers 25 percent of the world's mainland region.

The economy of its member countries also continues to show growth, up more than four times from 1990 to 2023, and contributing 24.2 percent of world exports and 19.4 percent of world imports in 2023.

The report states that one of the concrete advantages that Indonesia can achieve is access to the New Development Bank (NDB), or previously known as the BRICS Development Bank.

The multilateral development bank was founded by early members of BRICS (Brazil, Russia, India, China, South Africa) with a focus on financing public or private projects through loans, guarantees, capital participation, and other financial instruments.

NDB will also cooperate with other international institutions and provide technical assistance to projects it supports.

Although NDB's main source of funding is China with a percentage of 48 percent, which relies heavily on China's economic development and agenda, NDB is considered to still have great funding potential for Indonesia's development.

However, LPEM FEB UI warns funding from NDB tends to be oriented to support logistics systems for the Chinese industry and at the same time create demand for Chinese products.

In addition, there is a risk of debt-trapping diplomacy or debt-trade diplomacy such as the case of the Belt and Road Initiative (BRI) in Sri Lanka that needs to be watched out for.

The study assessed that Indonesia also has the opportunity to gain access to large amounts of cheap oil supply from Russia and Iran.

However, the report also highlights that Indonesia's challenge with joining BRICS is not easy because BRICS has not been as effective as the G7 or OECD in producing real economic policies.

"At BRICS there are no preferential rates, eliminating non-tariff barriers and other significant economic integration cooperation," the report said.

Data from Bank Indonesia shows that the largest creditors or debt givers for Indonesia in 2023 are: Singapore 56.55 billion US dollars, the United States 29.09 billion US dollars, Japan 23.22 billion US dollars, and China 20.97 billion US dollars.

From international organizations, the largest creditors are Bank International for World Bank Reconstruction and Development (IBRD) 21.63 billion US dollars, Asian Development Bank 10.19 billion US dollars, and IMF 8.65 billion US dollars.