Indonesia’s foreign policy, especially its pro-active stance on key geopolitical issues, re-orientation of economic linkages, pro-active multilateralism and vocal articulation of issues pertaining to the Global South have drawn immense attention in recent years. The South-East Asian nation has traditionally followed a balanced foreign policy, referred to as ‘bebas-aktif’(free and active), driven primarily by its self-interest and the principle of neutrality.
A strong reiteration of the above point is Indonesia’s stance during the Russia-Ukraine war as well as its Presidency of the G20. Then President, Joko Widodo – referred to as Jokowi – while firmly batting for an end to the war, refused to take sides. He also invited Russian President Vladimir Putin to attend the G20 Summit held at Bali in November 2022, much to the chagrin of Western nations. Putin did not attend the summit.
Indonesia’s ties with Washington and Beijing under Prabowo
Prabowo Subianto, who took over as president in 2024, has sought to strike a fine balance between Washington and Beijing. He visited China and the US in November 2024 — soon after taking over as President. Prabowo also spoke with then US President-elect and current US President Donald Trump during his US visit.
While seeking to strengthen ties with China, the Southeast Asian nation has also been reasonably successful in dealing with the Trump administration. Both countries concluded a trade deal. While Trump had earlier announced 32% tariffs on Indonesian exports, both sides agreed to tariffs of 19% on goods from Indonesia. The US President dubbed this deal as a win-win for the US, especially American farmers and highlighted the point that Indonesia would purchase US energy, American farm products of over $4 billion and Boeing Jets.
While reaching out to the US, Indonesia has also sought to strengthen the Southeast Asian nation’s economic linkages with China. During the Indonesian President’s visit to China in 2024, both countries agreed to investment commitments worth $10 billion. Bilateral trade between both countries was estimated at $135 billion.
Indonesia’s entry into BRICS in January 2025, as full member, cannot be separated from the same. While commenting on the same, Indonesia’s Foreign Minister Sugiono said that Indonesia’s entry into the organisation was a reiteration of its commitment to an independent policy.
Two important developments have taken place in the context of Indonesia’s economic linkages, which cannot be de-hyphenated from its foreign policy.
The first is Indonesia’s Central Bank – Bank Indonesia’s (BI) announcement of foreign exchange operations focused around the Yuan. It will also bring in instruments in Japanese Yen as part of its foreign exchange monetary operations.
Bank Indonesia Senior Deputy Governor Destry Damayanti while commenting on this decision said: ‘Settling transactions directly in partner currencies will ease pressure on the US dollar and strengthen Indonesia’s FX ecosystem.’
Like several other countries, Indonesia has been seeking to reduce dependence upon the US Dollar. Bank Indonesia and its Chinese counterpart, the People’s Bank of China, established a local currency settlement framework in 2021, which paved the way for current account transactions and direct investments being settled in either rupiah or yuan. Last month, the Governor of Indonesia’s Central Bank, Perry Warjiyo stated that the ASEAN nation had recorded transactions worth over $6 billion as of July 2025 with China.
Indonesia’s investment in the NDB
The second important development is Indonesia’s decision to invest $1 billion for the New Development Bank (NDB). Indonesia had announced that it would be joining the NDB during a meeting between Prabowo and NDB president and former Brazilian President Dilma Rousseff earlier this year.
NDB is a multilateral bank established by BRICS nations. It was formed in 2015 by the founding members of BRICS. NDB’s key focus is funding projects related to infrastructure, energy and sanitation, amongst other areas, in developing countries with a firm focus on sustainable development.
While several members of BRICS are not members of NDB, several non-members of BRICS have joined NDB. Apart from the founding members of BRICS – Brazil, Russia, India, China and South Africa the other members of NDB include Bangladesh, the United Arab Emirates (UAE), Egypt, and Algeria.
While commenting on the decision, Indonesia’s Chief Economic Affairs Minister Airlangga Hartarto said: “The government has agreed to invest $1 billion in the NDB. So, we will become a member. And we quickly participate actively in preparing for our accession to the NDB.”
The entry of Indonesia into the NDB is important not just in the context of Indonesia’s economic policy and its focus on diversifying economic relations, as several countries have been compelled to do in recent years, but also reiterates the fact that several developing countries are not depending only upon Western lending institutions for assistance.
In conclusion, the recent developments highlight Indonesia’s focus on strengthening its economic linkages with China, while ensuring that its ties with Washington remain intact. Indonesia’s entry into NDB also indicates its growing interest in BRICS. It is well placed to make important interventions and tangible contributions towards pushing economic cooperation between BRICS members.
[Photo by kremlin.ru]
The views and opinions expressed in this article are those of the author.
Tridivesh Singh Maini is a New Delhi based analyst interested in Punjab-Punjab linkages as well as Partition Studies. Maini co-authored ‘Humanity Amidst Insanity: Hope During and After the Indo-Pak Partition’ (New Delhi: UBSPD, 2008) with Tahir Malik and Ali Farooq Malik. He can be reached at tridivesh80@hotmail.com.
