Written by Fathan Bariqi Dewangga
Introduction
The modern international system is increasingly marked by geopolitical fragmentation, economic rivalry, and competition among institutional blocs. The post-Cold War premise that globalization will lead to increased economic integration under a mostly liberal international order has deteriorated as major countries, the United States and China, compete more strategically. In this climate, governments are increasingly forced to manage many economic, political, and institutional domains rather of depending only on a single geopolitical alliance. For middle powers like Indonesia, the changing international scene presents both challenges and possibilities.
Indonesia’s recent international economic strategy reflects this shift. Indonesia formally joined BRICS in 2025, becoming the group’s first Southeast Asian member state. At the same time, Indonesia progressed its entrance procedure to the Organisation for Economic Cooperation and Development (OECD), becoming the first Southeast Asian applicant to formally seek OECD membership. On the surface, On the surface. BRICS is frequently connected with Global South cooperation, multipolarity, and efforts to overhaul the Western-dominated international order, whereas the OECD is primarily identified with advanced industrial economies, liberal governance norms, and institutional transparency. However, Indonesia’s simultaneous involvement with both organizations reflects strategic calculation Instead of contradiction.
Indonesia is not choosing between BRICS and OECD. Instead, Jakarta is pursuing a geoeconomic hedging strategy aimed at maximizing economic possibilities, preserving strategic autonomy, and strengthening Indonesia’s negotiating position in the face of increasing global fragmentation. Joining BRICS opens doors to alternative cash flows like the New Development Bank and taps directly into South-South trade networks. It’s about political leverage. On the flip side, the OECD is Jakarta’s toolkit for internal house-cleaning forcing institutional reforms, tackling corruption, and signaling to global investors that Indonesia plays by transparent rules. These contacts are part of Indonesia’s larger strategy to prevent overdependence on a single major power while also advancing local economic development.
This article contends that Indonesia’s dual participation with BRICS and the OECD shows a purposeful geoeconomic hedging strategy aimed at balancing developmental pragmatism with institutional modernization. BRICS offers Indonesia strategic flexibility, alternative finance channels, and Global South leadership potential, whereas OECD membership promotes governance change, investor credibility, and long-term economic competitiveness. Rather than competing alignments, both institutions play complementary strategic roles in Indonesia’s overall foreign policy and development goal.
Geo-economics and Hedging: A Theoretical Framework
Geo-economics provides a useful framework for understanding Indonesia’s current foreign policy actions. Geo-economics refers to the use of economic instruments for geopolitical ends, in which commerce, investment, finance, and infrastructure are transformed into strategic influence tactics instead of just economic exchange channels. Edward Luttwak contended that geo-economics is the continuance of geopolitical conflict through economic methods Instead of armed combat. In the modern period, nations are progressively pursuing strategic goals through economic statecraft, institutional involvement, supply chain control, and development funding.
Indonesia’s dual engagement with the BRICS and the OECD exemplifies this geoeconomic logic. Alternatively philosophically uniting with either the Western or non-Western blocs, Indonesia strategically employs economic and institutional alliances to diversify foreign relations while maintaining policy autonomy. This strategy is compatible with Indonesia’s long-standing foreign policy concept, bebas aktif (independent and active diplomacy), which emphasizes strategic independence and adaptability in dealing with numerous powers. This is a textbook case of strategic hedging. According to Evelyn Goh, hedging is a tactic used by medium powers to avoid making final decisions between rival great powers while establishing ties with different players. Hedging differs from balancing in that it does not directly oppose a major power. Instead, states seek to diversify risks, maximize benefits, and preserve strategic flexibility amid uncertainty.
Indonesia’s present international economic diplomacy reflects institutional hedging more than military balance. Jakarta does not want to challenge either Western forces or China. Instead, Indonesia aims to engage both mature industrial economies and growing Global South institutions concurrently. Through BRICS, Indonesia develops connections with growing nations like China and India while also contributing to efforts to restructure the international order. Indonesia strengthens its integration with sophisticated economies by joining the OECD, signaling its commitment to governance reform and investor transparency.
Geoeconomic hedging is especially important in the setting of modern global fragmentation. According to Lab45, the international economy is increasingly being formed by strategic fragmentation as opposed to universal globalization, as governments organize around geopolitical and economic objectives. Under these circumstances, Indonesia’s policy might be interpreted as a pragmatic reaction to a world in which economic ties are becoming more political. (Lab45,2026)
As a middle power, Indonesia aspires to both economic growth and strategic autonomy. Simultaneous involvement with BRICS and the OECD allows Jakarta to avoid overreliance on either China or Western economies while improving negotiating power with both. This strategy enables Indonesia to benefit from numerous institutional frameworks without being locked in exclusive geopolitical camps.
Indonesia and BRICS: Global South Cooperation and Strategic Flexibility
Indonesia’s BRICS membership reflects both economic and geopolitical factors. BRICS has grown from an informal alliance to one of the most powerful platforms for promoting emerging nations and Global South concerns. According to the United Nations Conference on Trade and Development (UNCTAD), the expanded BRICS grouping will account for around 27% of global GDP, 24% of world goods exports, and 22% of global FDI inflows by 2024. These data indicate the BRICS’ rising economic prominence in the global system.
For Indonesia, BRICS participation has various strategic benefits. First, it strengthens Indonesia’s position within the Global South. Indonesia has long positioned itself as a leadership voice among developing countries, through organizations like the Non-Aligned Movement and the G20. BRICS participation reinforces this identity by putting Indonesia in a coalition pressing for reform of global governance institutions that are frequently regarded as unduly influenced by Western countries.
Second, BRICS creates significant economic potential. Intra-BRICS commerce increased more than thirteenfold between 2003 and 2024, reaching nearly USD 1.17 trillion. (UNTAD, 2025) Indonesia’s involvement enables it to strengthen economic ties with emerging nations, China and India, which are among its top trading partners. This is especially crucial as Indonesia strives to diversify export destinations and limit its exposure to interruptions in traditional Western markets.
Third, BRICS provides access to alternative development funding through the New Development Bank (NDB). Indonesia contributed around USD 1 billion to the NDB, providing access to infrastructure funding for critical national projects. This funding option is significant since infrastructure development is still key to Indonesia’s long-term economic transformation strategy, in transportation, digital connectivity, and energy transition projects. BRICS funding gives Indonesia with more flexibility than traditional Western-led financial institutions. Unlike institutions that are frequently connected with severe political conditions, BRICS promotes sovereignty and non-interference. This is consistent with Indonesia’s stance for preserving policy autonomy while achieving developmental objectives.
BRICS participation also benefits Indonesia’s industrial strategy, downstream industrialization and vital minerals. Indonesia has implemented an aggressive nickel downstreaming program aimed at changing the nation from a raw material exporter to a producer of higher-value industrial goods, for electric car supply chains. China has become a significant investor in Indonesia’s nickel-processing industry, and BRICS cooperation reinforces these economic ties.
However, Indonesia’s BRICS involvement should not be understood as an anti-Western stance. Rather, Jakarta leverages BRICS to diversify strategic connections and broaden economic opportunities in an increasingly multipolar global context. Indonesia aspires to profit from developing economic networks while maintaining ties with established economies.
Indonesia and the OECD: Governance Reform and Economic Credibility
While BRICS enhances Indonesia’s strategic options, OECD membership provides a distinct but complementary objective. The OECD is a rules-based institutional structure that promotes advanced industrial economies, governance norms, and economic transparency. For Indonesia, OECD membership serves as both an outward signal of confidence and a tool for internal institutional development.
The OECD accession plan for Indonesia outlines the considerable governance improvements necessary throughout the accession process. The plan focuses on transparency, anti-corruption measures, competition policy, regulatory harmonization, investment liberalization, environmental governance, and institutional accountability. (OECD, 2024) These changes go beyond economic liberalization to include broader institutional renovation.
Foreign direct investment governance is a key OECD criterion. According to the OECD roadmap, Indonesia must build “an open and transparent regime for foreign direct investment” while minimizing limitations on investment sectors. (OECD, 2024) This condition is especially significant since Indonesia wants to attract higher-quality FDI capable of boosting technical advancement, industry diversification, and long-term economic growth. Indonesia’s interest in OECD membership is inextricably connected to its long-term national development objectives. The government’s development strategy for 2025-2045 is to turn Indonesia into a high-income economy through industrial upgrading, digital transformation, and human capital development. Achieving these goals necessitates better governance structures, investor trust, and inclusion into sophisticated economic networks.
OECD membership also boosts Indonesia’s international economic reputation. OECD economies jointly contribute for the majority of global investment and technical innovation. Membership thereby communicates institutional dependability and policy predictability to overseas investors. This is especially crucial given the global uncertainties surrounding trade fragmentation and geopolitical instability. The OECD membership process puts further pressure on Indonesia to strengthen state-owned firm governance and institutional openness. This problem has been especially pertinent in debates about Danantara, Indonesia’s sovereign wealth fund. Questions about openness, accountability, and political supervision have sparked controversy over whether Indonesia’s institutional processes properly adhere to OECD governance requirements.
The OECD roadmap highlights the need for open ownership arrangements, accountability measures, and fair competition among state-owned firms. To improve regulatory credibility and investor trust, Indonesia may need to implement significant institutional reforms in accordance with these requirements.
Environmental and digital governance are also important aspects of OECD admission. The plan advocates for bold climate policies, openness in environmental regulations, digital transformation frameworks, and data governance changes. These sectors are becoming more relevant as global investment flows are linked to sustainability standards, green transition strategies, and digital infrastructure capability.
As a result, OECD admission serves as both diplomatic recognition and a means for internal institutional transformation. Indonesia’s admission process aims to enhance governance quality, increase economic competitiveness, and deepen integration into sophisticated global economic systems.
Dual Engagement as Indonesia’s Geo-economic Hedging Strategy
Indonesia’s simultaneous participation with BRICS and the OECD should be interpreted as a planned geoeconomic hedging strategy rather than inconsistent foreign policy activity. Jakarta uses each institution for a variety of strategic reasons while avoiding overreliance on any specific geopolitical or economic grouping.
BRICS largely supports Indonesia’s strategic diversification efforts. Indonesia benefits from BRICS membership in terms of alternate finance sources, improved South-South commercial integration, and more Global South political influence. BRICS also allows for greater freedom in pursuing economic policy and infrastructural development without imposing strict political conditions.
In contrast, the OECD backs Indonesia’s institutional modernization efforts. OECD membership boosts investor confidence, improves government credibility, and promotes fundamental changes required for long-term economic development. Indonesia’s participation in the OECD demonstrates its dedication to openness, regulatory harmonization, and market dependability.
This dual-track strategy enables Indonesia to seize economic opportunities in both emerging and established economies. Instead of choosing between China and the West, Indonesia intends to engage both strategically while maintaining policy autonomy.
Indonesia’s approach mirrors the larger reality of geoeconomic fragmentation. In an increasingly divided international system, middle countries are under pressure to identify with opposing blocs. However, Indonesia seeks to prevent binary alignment by diversifying alliances across several institutional frameworks.
The tactic also strengthens Indonesia’s negotiation position. Jakarta benefits from more flexibility in negotiating trade agreements, recruiting investment, and seeking development finance by keeping ties with both the BRICS and the OECD. This decreases the sensitivity to coercive economic coercion from a single external entity.
Indonesia’s policy aligns with its larger diplomatic heritage. Since independence, Indonesia has prioritized non-alignment and strategic autonomy. Modern geoeconomic hedging is an adaptation of this history to a global setting dominated by economic struggle rather than merely military confrontation.
Risks and Challenges
Despite its strategic advantages, Indonesia’s dual engagement policy poses substantial risks and obstacles.
the increasing competition between the United States and China may limit Indonesia’s strategic options. Some Western officials increasingly see BRICS as a challenge to Western power, but the OECD is still identified with liberal governance principles and advanced Western economies. If geopolitical division continues, Indonesia may experience more pressure to declare clearer alignment preferences.
conflicts may arise between OECD governance requirements and the developmental flexibility that comes with BRICS collaboration. OECD membership necessitates considerable improvements in transparency, anti-corruption measures, competition policy, and investment liberalization. These standards may occasionally collide with Indonesia’s state-led industrial plans or politically linked economic structures.
Indonesia suffers institutional capacity concerns. OECD entry necessitates considerable regulatory harmonization across a wide range of areas, including digital governance, environmental policy, fiscal management, and corporate governance. Strong bureaucratic cooperation and political commitment will be required to regularly implement these improvements. The governance issue over Danantara exemplifies these contradictions vividly. While sovereign wealth funds might improve national development finance, issues over transparency and accountability may harm Indonesia’s credibility in OECD accession talks if not addressed sufficiently.
Indonesia must avoid over-reliance on any one economic partner, China. Althogh Chinese investment has played an essential role in Indonesia’s industrial downstreaming program, excessive concentration of investment or export dependency might generate long-term strategic weaknesses.
Finally, BRICS has internal limits. The organization is made up of widely varied political and economic systems, each with its own strategic goals. As a result, BRICS may struggle to function as a cohesive economic bloc on par with more structured groups like the OECD.
Conclusion
Indonesia’s pursuit of both BRICS membership and OECD entry demonstrates a savvy hedging strategy rather than a conflict. In an increasingly fragmented international system, Jakarta tries to maximize economic possibilities, maintain strategic autonomy, and expand its global influence by collaborating with both rising and advanced economic blocs. BRICS gives Indonesia access to markets in the Global South, alternative development funding, and a platform to advocate for international governance reforms. Meanwhile, the OECD provides avenues for institutional modernization, higher-quality investment, and deeper integration into leading industrial economies. These responsibilities are complimentary, not mutually incompatible.
Indonesia’s policy reflects the reality of a multipolar world in which middle powers cannot rely on a single geopolitical or economic alliance. By balancing BRICS and OECD involvement, Indonesia strengthens its negotiating position and decreases its exposure to external shocks and geopolitical polarization. To reap the benefits of this dual-track strategy, Indonesia should officially include hedging in its overall foreign policy philosophy. A clear articulation of this strategy would decrease uncertainty and improve policy consistency between administrations. Indonesia should also pursue OECD-related reforms that boost its competitiveness in BRICS markets, in governance, industrial policy, and technical capabilities.
Finally, Indonesia should prioritize growth in sectors aligned with both BRICS and OECD interests, such as the digital economy, renewable energy, and infrastructure finance. These industries provide possibilities for investment from a variety of partners while also contributing to Indonesia’s long-term development into a resilient and internationally competitive economy.
References
Arreta, J., Wicaksono, R. A. D., & Dewangga, F. B. (2026). Reposisi Indonesia dalam konstelasi geoekonomi baru.
Luttwak, E. (1990). From geopolitics to geo-economics: Logic of conflict, grammar of commerce.
Organisation for Economic Co-operation and Development (OECD). (2024). OECD economic outlook, volume 2024
Organisation for Economic Co-operation and Development (OECD). (2025). FDI in figures: April 2025.
United Nations Conference on Trade and Development (UNCTAD). (2024). World investment report 2024: Investment facilitation and digital government.
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