Why Indonesia is putting $1 billion into the BRICS development bank

Indonesia joined the New Development Bank in January and has promised US$1 billion in capital over seven years. The bank, set up by the BRICS group (Brazil, Russia, India, China, and South Africa), was built as an alternative to Western-led lenders like the World Bank. A piece in the Lowy Institute's The Interpreter calls the move a "sovereignty hedge": a way to spread Indonesia's borrowing so that no single foreign capital can dictate its choices.

The worry the plan answers is real. When Washington pulled back from Indonesia's Just Energy Transition Partnership, a Western-funded deal to help the country move off coal, it showed how promised money can vanish when foreign politics shift. The New Development Bank asks members to buy in as shareholders first, then lends to them, and it favours loans in local currency, which lowers the risk that a falling rupiah suddenly makes a debt much larger. Prabowo's new sovereign wealth vehicle, Danantara, would steer that financing into power grids, battery storage, and critical-mineral projects.

The authors are not simply cheering. They point to a "Prabowo paradox": money meant to protect Indonesia's independence could also concentrate power and weaken oversight at home, since Danantara controls so much. Much of the bank's lending still runs in Chinese renminbi, so the escape from one big currency partly becomes reliance on another. As they put it, "sovereignty alone is not governance."

Why it matters

If you care where the roads, power plants, and mineral projects around you get funded, this quietly changes the answer, and the rules that come with the cash. Cheaper, local-currency loans could help build faster, but a single state fund steering the money means less public scrutiny over which projects win. Watch whether Danantara publishes what it borrows and where it spends, because that is the difference between smart hedging and unchecked power.