Assessing Indonesia's Potential Trade Gains from Joining BRICS

Abstract

Aims: This study elaborates on the structure and intensity of BRICS international trade as a reference for Indonesia in developing its export promotion policy. In detail, the objectives of the study are to analyze (i) the intensity of trade between BRICS regions, (ii) the development of the Indonesia-BRICS trade structure both in aggregate and by product groups, and (iii) the dynamics of the competitiveness of Indonesian products in the BRICS market and the market position by product groups. Methodology: The intensity of BRICS trade as an economic bloc is measured using the Regional Trade Introversion Index (RTII). The RCA Balassa and Market Position’s Edwards & Schoer are applied to determine the competitiveness and market position of Indonesia’s export product groups. Results: The study results indicate, among others, that (i) BRICS is not a trade bloc since BRICS countries are externally biased in their trade, with RTII values that are always negative, (ii) BRICS is an important trade partner of Indonesia with very rapid growth, and (iii) three groups of Indonesian export products enjoy a rising star position in the BRICS market, two product groups with a lagging retreat position and three product groups with a lagging opportunity position. The other seven product groups are better off being diverted from the BRICS market to other markets where demand for such products is increasing. Conclusion: Indonesia’s accession to BRICS membership has great potential to increase Indonesian exports, especially as BRICS develops into 10 countries with a greater diversity of economic structures.