Indonesia’s decision to join the New Development Bank (NDB) under the BRICS framework presents an opportunity to accelerate its green industrial policy. As the country transitions toward a more sustainable economy, securing financing for clean energy, infrastructure, and environmentally friendly industries is paramount. NDB offers an additional funding source that can complement existing financial institutions, allowing Indonesia to diversify its financing options while ensuring alignment with national sustainability goals.
Financing Indonesia’s Green Industrial Policy
Indonesia has set ambitious targets for reducing carbon emissions and expanding its renewable energy sector. However, financing the transition to a greener economy remains a challenge. The NDB’s strong focus on clean energy, sustainable infrastructure, and digital transformation aligns with Indonesia’s long-term development strategy. Membership in the NDB enables Indonesia to tap into funding mechanisms that support renewable energy projects, electric vehicle infrastructure, and eco-friendly manufacturing.
Diversifying financial sources is crucial as Indonesia seeks to shift away from fossil fuels. While the World Bank and Asian Development Bank (ADB) remain key partners, NDB loans—if structured with competitive interest rates and favorable terms—can provide Indonesia with greater flexibility in financing large-scale green industrial projects. This reduces the strain on public finances while ensuring Indonesia continues its path toward a low-carbon economy.
Moreover, Indonesia’s participation in NDB can help reduce financial dependence on any single source, enabling the country to better negotiate terms for loans and development assistance. This diversified approach allows Indonesia to select financing that aligns best with its environmental goals and economic priorities, ensuring a stable and sustainable transition.
Strengthening Indonesia’s Role in Sustainable Development Finance
Beyond financial access, joining NDB positions Indonesia to play a more active role in shaping global sustainable finance policies. As an emerging economy, Indonesia has a vested interest in advocating for fair and transparent financing models that support developing nations in their green transition. By participating in NDB’s decision-making processes, Indonesia can push for policies that prioritize environmental sustainability and equitable access to green financing.
NDB operates on a consensus-based governance model, ensuring that no single country dominates its lending agenda. Indonesia must take advantage of this structure to influence the bank’s funding priorities, ensuring they align with regional and national sustainability goals. Effective engagement will help secure financing for projects that support Indonesia’s green industrial policy while maintaining financial prudence.
Indonesia can also collaborate with other BRICS and NDB members to develop best practices for sustainable financing, ensuring that climate-conscious projects receive priority funding. By fostering alliances with nations that share similar sustainability goals, Indonesia can contribute to shaping NDB’s long-term green finance strategies.
Ensuring Transparency and Environmental Standards
Indonesia must actively advocate for transparency and environmental safeguards in NDB-funded projects. While the bank has established reporting mechanisms, continued scrutiny is necessary to ensure that projects meet high sustainability standards and avoid environmental or social risks. Strengthening oversight mechanisms will reinforce the credibility of NDB-financed initiatives and protect against inefficiencies or mismanagement.
Additionally, Indonesia should work to strengthen environmental and social impact assessments for NDB-funded projects, ensuring that sustainability remains a top priority. Transparency in project selection and implementation is essential to prevent environmental degradation and ensure that financing is directed toward truly transformative green initiatives.
As part of its engagement with NDB, Indonesia should push for an increased emphasis on financing clean technology innovation, such as battery storage for renewable energy, circular economy models, and carbon capture initiatives. By doing so, Indonesia can help expand the scope of sustainable financing within the institution while ensuring its own green industrial agenda receives the necessary support.
Maximizing the Benefits of NDB Membership
Indonesia’s engagement with NDB must be strategic, ensuring that its membership directly supports its green industrial ambitions. By negotiating favorable terms, advocating for transparent governance, and securing funding for clean energy and sustainable infrastructure, Indonesia can leverage NDB as a key instrument for its environmental and economic transformation.
Ultimately, Indonesia should not be a passive member of NDB but an active participant in shaping its direction. With a clear focus on sustainability, Indonesia can utilize this partnership to accelerate its green industrial policy, enhance its role in global sustainable finance, and drive long-term economic growth without compromising environmental integrity.
Additionally, NDB membership offers Indonesia an opportunity to showcase leadership in sustainable finance among emerging economies. By promoting green investment models and advocating for increased commitments to renewable energy financing, Indonesia can position itself as a regional leader in sustainability, influencing broader trends in global development finance.
Indonesia’s decision to join NDB could be a strategic move to reinforce its green development agenda. By actively engaging in policy discussions, ensuring financial prudence, and emphasizing environmental responsibility, Indonesia can maximize the benefits of NDB membership while strengthening its long-term economic resilience and sustainability.
This article was co-authored by Yeta Purnama, a researcher at the Center of Economic and Law Studies (CELIOS), and Muhammad Zulfikar Rakhmat, Director of theChina-Indonesia Deskat CELIOS.
