When thinking about regional financial integration, one would think of regional currencies like the Euro as the epitome example, however a different story is unfolding in Southeast Asia. Financial integration in ASEAN has been a long sought-out dream for a region with an undeniably large market growth in the future. An integrated market would mean further development within the finance sector including banking, insurance, capital markets, as well as trade. In a region with great market potential yet low intra-regional trade, improving access to financial services will not only lead to economic and trade growth but also to market efficiency by lowering the cost of capital. However, financial integration is a complex matter and in order to fully understand it, one must understand ASEAN’s progress thus far and the small concrete steps the organization is taking in ensuring a financially integrated future.
ASEAN’s financial integration has been a drawn-out process, but its saliency has been expressed since the 1997 ASEAN Finance Ministers Meeting in Thailand. The first concrete step towards financial integration was taken in 2003 after the agreement between ASEAN’s finance ministers on The Roadmap for Monetary Integration in ASEAN.[1] This was followed by another step in 2007 when ASEAN leaders declared for the establishment of the ASEAN Economic Community (AEC) by 2016 within the formulation of the AEC Blueprint which encompasses plans for trade and services liberalizations, which includes financial services, capital account regimes, and financial system integration.[2] This would mean that the AEC plans to work on removing the restrictions for intra-regional financial service and capital account provisions, capital market harmonization and development, harmonization of payments and settlements systems, and mutual qualification for financial professionals.
By 2011, the ASEAN Financial Integration Framework was established as the main approach for initiatives to liberate and integrate financial sectors. With the goal of a semi-integrated financial region by 2020, the main objectives of the framework include the provision for intra-ASEAN financial services, capacity building and development of ASEAN capital markets, capital flow liberalization, harmonization of payments and settlement systems, and regional financing surveillance and arrangements. Two years after, the Central Bank Governors of ASEAN member states (AMS) published the “The Road to ASEAN Financial Integration—A Combined Study on Assessing the Financial Landscape and Formulating Milestones for Monetary and Financial Integration in ASEAN” Summary Report as a reference guide got the financial integration process.[3] The establishments of the AEC in 2015 only furthered the on-going progress. Currently, ASEAN has taken two very distinct steps in fulfilling the goal of the ASEAN Financial Integration Framework.
In a region where intra-ASEAN trade has not yet reached unprecedented levels, bilateral trade in Southeast Asia has long been dominated by the use of the dollar. This is mainly due to the dollar’s stability and liquidity, and also the lack of a regional currency unlike the Eurozone.[4] However, transactions using the dollar has made trade, investments, and business less efficient as it takes more time to convert local currencies into the dollar and reconvert them back. Overreliance on the dollar also causes it to strengthen which could potentially make local currencies depressed and trade more costly. Furthermore, ASEAN local currencies are known to fluctuate against the dollar which may impact their debt value, as a stable currency against the dollar would lead to less debt, but a fluctuating currency would increase debt.[5]
In 2016, Thailand and Malaysia initiated a bilateral cooperation for a local currency settlement and was followed by Indonesia in 2018. The aim was to establish a monetary framework that enables the usage of local currencies to facilitate cross-border payments and flow of trade. This framework became known as the Local Currency Settlement Framework (LCS) which enables bilateral transactions to be done using local currencies within each country. The goal was to reduce overreliance on the US dollar as the currency used for trade transaction settlements and to generate local currency stability by diversifying currency exchanges.[6] Ultimately, LCS is also a strategic move in developing transaction efficiency by implementing direct trading without having to buy and sell the dollar for conversion. Broadly, it will also enhance market efficiency and local currency market development.[7]
In its implementation, the central banks of these AMS (the Bank Negara Malaysia, Bank of Thailand, and Bank Indonesia) have appointed several banks within their respective countries as Appointed Cross Currency Dealers (ACCD). These are banks that have the ability to facilitate transactions in foreign currencies, under the consideration that they have good resilience and health, experienced in providing various financial services, and have good relations with banks in partner countries.[8] Services provided by the ACCD banks in local currencies includes issuing receipt of import and export payments for trades in goods and services, receipt and payment of labor compensation transactions and investment incomes, remittances, and direct investment between LCS customers with a 10% ownership minimum limit. Currently, there are 7 AACD banks appointed by Indonesia, 6 ACCD banks appointed by Malaysia, and 5 ACCD banks appointed by Thailand.[9]
As of now, the LCS cooperation has expanded to include Japan and China through the MoU signed between Bank Indonesia and the Ministry of Finance of Japan in 2020, followed by an MoU signed by Bank Indonesia with the People’s Bank of China (PBC) in 2021. The central bank of the Philippines, the Bangko Sentral ng Pilipinas, has also signed commitments with the central banks of Indonesia, Thailand, and Malaysia during the ASEAN Finance Ministers and Central Bank Governors Meeting in 2019, though they have yet to appoint any ACCD banks domestically.[10] Though trade between these countries is still heavily dominated by the dollar, the implementation of the LCS has showed a positive trend. In 2018, Bank Indonesia reported that Indonesia’s trade with Malaysia using the LCS framework reached 1.4% which rose to 3.6% in 2019 and 4.1% in 2020. Thailand also experienced a rise in LCS implementation numbers from 0.6% in 2018 to 1.1% in 2019 and 1.3% in 2020.[11] Additionally, it is predicted that trade and investments using the LCS framework will increase up to a targeted 10% in 2022, noting the US$2,53 billion transactions done within the framework in 2021. Such number constitutes 35% from trade transactions, 14% from remittances, 1% from investments, and 50% from interbank cover positions.
The LCS framework brings several notable benefits as its payments system is more efficient for faster transactions, provides alternative hedging instruments to export financing and direct investment, and exposes transaction settlement to diverse currencies whereby diversification is hoped to be able to support macroeconomic stability and foster economic recovery. The usage of the LCS has the potential to bring structural changes in payments invoicing within ASEAN. Though the share of local currency usage for trade and investments are still small—with only around less than 10% of transactions conducted in local currencies compared to the dollar—there is great hope for a more wide-spread use of the LCS framework, noting the positive growth of its usage since 2016. As of 2019, total trade done within the LCS has accumulated up to US$83 billion.[12] It is a slow and small step towards the long road for currency resilience in ASEAN.
Likewise, Indonesia recently created an initiative to expand the Quick Response Code Indonesia Standard (QRIS) features and services. The initiative was reiterated in 2021, and was followed with the commitment to establishing QR interconnectivity domestically and regionally. This is in line with the Bandar Seri Begawan Roadmap (BSBR): An ASEAN Digital Transformation Agenda to Accelerate ASEAN’s Economic Recovery and Digital Economy Integration document endorsed by the AEC that reaffirms ASEAN’s collective agreement to a five-year agenda towards the development of the ASEAN Digital Economy Agreement and negotiations on the Digital Economy Framework Agreement (DIFA) by 2025. Within the document, there is a special focus on the creation of financing, payment, and service connectivity in relations to the ASEAN Payments Policy Framework as also noted in the joint statement issued during the 8th ASEAN Finance Ministers and Central Bank Governors Meeting (AFMGM) this year.[13]
The ASEAN Payments Policy Framework for Cross-Border Real-Time Retail Payments fall under the Acceleration phase, whereby it aims to implement an inter-operable cross border digital payment via QR within the ASEAN region. This is done to increase the promotion for financial inclusion through digital finance services and regional payment connectivity in order to accelerate the Inclusive Digital Transformation Strategy, which includes the development of an ASEAN inter-operable QR Code Framework by 2022.[14] This is in line with the ASEAN Payments Connectivity Initiative which plays a key role towards furthering financial integration and connectivity of financial transactions in ASEAN, noting that QR payments are a reliable, affordable, and efficient method of payment that holds the potential to boost SMEs participation within international trade of goods and services, particularly within the tourism sector due to its practicality and convenience.[15] A cross-border QR holds a potential in increasing transaction efficiency and hastens the digitalization of trade and investment. Furthermore, the initiative holds the potential to go hand-in-hand with the LCS framework to help maintain macroeconomic stability. According to Bank Indonesia Governor, Doni P. Joewono, Bank Indonesia, Bank Negara Malaysia, and the Bank of Thailand has initiated a pilot cross-border QR that allows merchants and consumers to make retail and real-time cross-border payments via QR known as the Real-Time Retail Payments Systems (RT-RPS).[16]
A conclusion on the future of ASEAN’s financial integration
It should be noted that the current existing cooperation for the LCS framework and the cross-border QR initiative is being spearheaded by Indonesia, Thailand, and Malaysia, which so happens to also be part of the Indonesia-Malaysia-Thailand Growth Triangle (IMT-GT). These three countries also share similar sentiments in decreasing reliance on the dollar, and their strategic geographical proximity may have contributed to higher levels of trade amongst them, considering Malaysia and Thailand are part of Indonesia’s top 10 trading partners in 2018.[17] Through small concrete steps, these three ASEAN member states are paving the way for a wider ASEAN financial integration.
Since a reduction on dollar reliance and currency diversification could mean value stability for local currencies, governments need to make sure that data disclosures on the usage of the LCS framework is accessible to SMEs who may interested in conducting business with lowered exchange rate risks due to the wide choice of transaction currencies. Furthermore, information on preferential settlement currencies between firms and regular surveys for local currency usage in investments and trade are the key to promote greater use of the LCS within the region, as it would increase the numbers of direct transaction markets and create an ASEAN foreign exchange market to reduce local currencies transaction costs further.[18]Similarly, there is a lot of hope that cross-border QR payments would contribute towards economic recovery and the future of digital payments and finance, as an integrated cross-border QR initiative could spearhead the development of standardized financial technologies and infrastructure, which could hopefully expand for cross-border remittance payment and stock market sales. This initiative may hold great prospects to increase efficiency within international wholesale and retail trade and promotes investments digitalization.[19] Additionally, it has the potential to increase SMEs added values in conducting online direct transactions and boosting tourism recovery.[20]
However, for any of these initiatives to work regionally, ASEAN member states’ central banks need to expand efforts in digitalizing financial sectors in order to create an inclusive environment for an integrated financial market. Greater access and awareness on digital finance would not only drive the regional economy, but also reduce cash dependence, financial exclusion, and further realizing the AEC’s investment and trade liberalization. In this sense, the Qualified ASEAN Banks Framework should be utilized to help banks carry out the appropriate financial services and work together with stakeholders in ensuring the provision of digital financial technologies and e-platform services are accessible to many ASEAN member states, particularly for the CLMV (Cambodia, Laos, Myanmar, and Vietnam) where there is a cash-based market dominance and limited finance technological readiness.[21] The LCS and cross-border QR initiative have already operated under the principles of non-intervention and interacts with the ASEAN Way in regards to monetary power and autonomy through currency deterritorialization.[22] Hence, cooperation in fostering the political will and domestic readiness between ASEAN member states needs to happen to secure the future of ASEAN financial integration.
[1] ASEAN, “Finance Integration,” asean.org, n.d., https://asean.org/our-communities/economic-community/finance-integration/.
[2] ASEAN Briefing, “Understanding Financial Integration in ASEAN,” ASEAN Business News, April 27, 2016, https://www.aseanbriefing.com/news/financial-integration-in-asean/.
[3] ASEAN Briefing, “Understanding Financial Integration in ASEAN,” ASEAN Business News, April 27, 2016, https://www.aseanbriefing.com/news/financial-integration-in-asean/.
[4] J Shimizu, “Exploring Local Currency Usage to Reduce Exchange Rate Risks in Asia,” AMRO ASIA, January 30, 2019, https://www.amro-asia.org/exploring-local-currency-usage-to-reduce-exchange-rate-risks-in-asia/.
[5] A. Y. Widyastuti, “Gubernur BI Yakin Transaksi Local Currency Settlement Tahun Ini Naik 10 Persen,” Tempo (TEMPO.CO, February 16, 2022), https://bisnis.tempo.co/read/1561500/gubernur-bi-yakin-transaksi-local-currency-settlement-tahun-ini-naik-10-persen?page_num=3.
[6] Jalin, “Understanding Local Currency Settlement in Bilateral Transactions,” jalin.co.id, October 22, 2021, https://www.jalin.co.id/en/understanding-local-currency-settlement-in-bilateral-transactions/.
[7] Bank Indonesia, “Bank Indonesia Committed to Local Currency Settlement in ASEAN Region,” www.bi.go.id, 2019, https://www.bi.go.id/en/publikasi/ruang-media/news-release/Pages/Bank-Indonesia-Terus-Berkomitmen-Dukung-Implementasi-Penggunaan-Local-Currency-Settlement-di-Kawasan-ASEAN.aspx
[8] Jalin, “Understanding Local Currency Settlement in Bilateral Transactions,” jalin.co.id, October 22, 2021, https://www.jalin.co.id/en/understanding-local-currency-settlement-in-bilateral-transactions/.
[9] Bank Indonesia, “Bank Indonesia Committed to Local Currency Settlement in ASEAN Region,” www.bi.go.id, 2019, https://www.bi.go.id/en/publikasi/ruang-media/news-release/Pages/Bank-Indonesia-Terus-Berkomitmen-Dukung-Implementasi-Penggunaan-Local-Currency-Settlement-di-Kawasan-ASEAN.aspx
[10]The Jakarta Post, “ASEAN Local Currency Deals,” The Jakarta Post, 2019, https://www.thejakartapost.com/academia/2019/04/10/asean-local-currency-deals.html.
[11] Jalin, “Understanding Local Currency Settlement in Bilateral Transactions,” jalin.co.id, October 22, 2021, https://www.jalin.co.id/en/understanding-local-currency-settlement-in-bilateral-transactions/.
[12] A. Y. Widyastuti, “Gubernur BI Yakin Transaksi Local Currency Settlement Tahun Ini Naik 10 Persen,” Tempo (TEMPO.CO, February 16, 2022), https://bisnis.tempo.co/read/1561500/gubernur-bi-yakin-transaksi-local-currency-settlement-tahun-ini-naik-10-persen?page_num=3.
[13] ASEAN, “ASEAN Economic Community Council Endorses Roadmap to Accelerate Economic Recovery, Digital Economy Integration,” asean.org, 2021, https://asean.org/asean-economic-community-council-endorses-roadmap-to-accelerate-economic-recovery-digital-economy-integration/.
[14] Monetary Authority of Singapore, “Joint Statement of the 8th ASEAN Finance Ministers’ and Central Bank Governors’ Meeting (AFMGM),” www.mas.gov.sg, 2022, https://www.mas.gov.sg/news/media-releases/2022/joint-statement-of-the-8th-asean-finance-ministers-and-central-bank-governors-meeting
[15] E Haryono, “Cross-Border QR Transactions Support ASEAN Financial Integration,” www.bi.go.id, 2022, https://www.bi.go.id/en/publikasi/ruang-media/news-release/Pages/sp_245022.aspx.
[16] IDN Financials, “BI: Cross Border QR Transactions Support ASEAN Financial Integration | IDNFinancials,” www.idnfinancials.com, 2022, https://www.idnfinancials.com/news/42210/bi-cross-border-qr-transactions-support-asean-financial-integration
[17] H Supadi, “The Use of Local Currency Settlement in Trade among Indonesia, Malaysia, and Thailand,” JOM FISIP 8, no. 2 (2021), https://jom.unri.ac.id/index.php/JOMFSIP/article/download/30945/29808
[18] N. Laoli and B. Pink, “BI Berencana Perluas Kerja Sama Local Currency Settlement Di Sejumlah Negara Ini,” PT. Kontan Grahanusa Mediatama, September 9, 2021, https://newssetup.kontan.co.id/news/bi-berencana-perluas-kerja-sama-local-currency-settlement-di-sejumlah-negara-ini.
[19] N. Ihsan and A. Olivia, “Cross-Border QR Code Bolsters Financial Integration in ASEAN Region,” Antara News, 2022, https://en.antaranews.com/news/215325/cross-border-qr-code-bolsters-financial-integration-in-asean-region.
[20] E Haryono, “Cross-Border QR Transactions Support ASEAN Financial Integration,” www.bi.go.id, 2022, https://www.bi.go.id/en/publikasi/ruang-media/news-release/Pages/sp_245022.aspx.
[21] P. Chuasakulvanich and P. Srimanote, “ASEAN – the Significance of Financial Inclusion by Qualified Financial Institutions,” Trade Finance Global, September 19, 2019, https://www.tradefinanceglobal.com/posts/asean-significance-of-financial-inclusion-by-qualified-financial-institutions/.
[22] Adinda Mardania and Mohtar Mas’oed, “Local Currency Settlement (LCS) Framework and the ASEAN Way: Implementation of Regional Monetary Agenda,” etd.repository.ugm.ac.id, 2018, http://etd.repository.ugm.ac.id/penelitian/detail/159989.
Russia Appreciates Africa’s Readiness In Stepping Up Economic Cooperation
Marsha Phoebe is on her fourth semester as an international relations major in Gadjah Mada University, Jogjyakarta, Indonesia. Her academic concentration is on global politics and security with a special interest for low security issues. Regions of interest include Southeast Asia, Japan, Latin America, and Africa.
Taking the India-Singapore Cyber Partnership Forward
The Use of The ASEAN Way In Resolving Disputes
How ASEAN should step up to accelerate sustainable energy within the region
ASEAN-US Summit: Vietnam and the United States Place a High Value on Their Partnership
Where is ASEAN amidst the rise of protectionism?
Pillars of Economic: Entrepreneurs, Digitization, SME & Exports
On May 23, President Biden declared the official start of the Indo-Pacific Economic Framework in Japan, ushering in a new phase in the Asia-Pacific conflict between the United States and China. China’s policy has taken on two distinct aspects since the Biden administration took office.
One example is Trump’s gradual shift from a full-fledged trade war with China to “precise decoupling” in crucial areas such as high technology. The economic conflict between China and the United States appears to be escalating. The temperature has dropped, but the trend of decoupling continues to increase; the second is to actively court European and Asia-Pacific friends and partners, and strive to construct a global supply chain, industrial chain, and value chain system that excludes China by enacting new international norms.
In the Atlantic, the United States and Europe announced the formation of the United States-EU Trade and Technology Committee (TTC) on June 25, 2021; in the Asia-Pacific, the Biden administration can abandon efforts to contain China by returning to the TPP (later renamed the CPTPP) and instead seek an alternative that requires only an executive order to take effect.
In this regard, President Biden initially floated the concept of establishing an Indo-Pacific Economic Framework (IPEF) during the East Asia Annual Summit in October 2021, and then disclosed further specifics in February 2022 until his visit to Japan in May to make the formal announcement. Begin the initiative. The establishment of the Biden administration’s Indo-Pacific economic framework is not only a legacy of Obama’s return to the Asia-Pacific strategic heritage, but also the first step toward establishing a global geoeconomic framework to constrain China.
Regarding the potential impact of IPEF on the economy and cooperation in the Asia-Pacific region, I believe it may be sensibly regarded from two perspectives. First, while IPEF’s negative impact should not be understated, its dividing effect on the Asia-Pacific region should not be overstated. On the day of the IPEF’s launch, Biden announced that seven ASEAN countries will join as founding members at the same time, which may exceed the expectations of many scholars and politicians, some of whom believe that ASEAN is shifting the traditional strategy of great power balance in favor of the US.
As a result, IPEF will hasten the fragmentation of the Asia-Pacific area. This point of view has merit, and it implies, to some extent, that ASEAN is willing to support the US’s efforts to create new international rules and so-called safer and more resilient global supply chains against China, thereby strengthening its relationship with the US. economic linkages and cooperation, and seize the opportunities that the decoupling of the US and Chinese value chains may bring to itself.
However, it would be premature to claim that ASEAN has entirely shifted in favor of the US. In reality, ASEAN’s option is still a classic great power balance approach. Since the beginning of the Asia-Pacific regional cooperation process in 1997, following the East Asian financial crisis, ASEAN has made full use of its geoeconomic and political strategic position, historically assuming the “centrality” of regional cooperation under the international pattern of competition between China, the United States, and Japan,” and becoming the “driver” to promote the final establishment of regional economic groups such as RCEP.
ASEAN is able to pursue a policy of great power balance in international and regional affairs because of its unique status and character. The seven ASEAN nations elected to join the IPEF, which appears to benefit the US, but it is more likely that the rapid nature of the construction of the Indo-Pacific economic framework, the ambiguity of the substance, and the optionality of the negotiating agenda have given countries a lot of leeway.
If it is totally devoted to the United States, ASEAN would lose its “central position” in regional cooperation and regional issues, as well as its current international stature. ASEAN countries will most likely have a firm grasp on this.
Second, the eventual impact of the IPEF on the Asia-Pacific economy and cooperation is dependent on China’s realistic policy decisions rather than the United States’ strategic plan, which is full of political calculations. The IPEF has established four pillars of trade, supply chain, clean energy infrastructure, and taxes and anti-corruption, but its essence is merely a “lack of a market” fundamental hollow endeavor, and the US market opening pledge is precisely what ASEAN nations are most concerned about.
As a result, unless the Biden administration addresses domestic anti-globalization sentiment and economic concerns, and then merges IPEF with existing free trade accords (such as the CPTPP led by Japan), it will be difficult for the US to create long-term collaboration with ASEAN nations. excitement. However, given the present political ecosystem in the United States, this is nearly impossible.
On the contrary, after decades of economic and trade cooperation and value chain integration, China, ASEAN, and other Asia-Pacific countries have formed a regional production and division of labor network with the world’s most complete industrial structure, most complex supply chain, and deepest interdependence. In comparison to the United States and Japan, China’s relevance to the ASEAN economy has steadily increased.
China surpassed Japan to become ASEAN’s top commercial partner in 2009. In that year, the three nations contributed for 11.6 percent, 9.7 percent, and 10.5 percent of ASEAN’s total import and export trade. Since then, the distance between China, the United States, and Japan has significantly expanded.
The entire trade volume between China and ASEAN will reach US$518.1 billion in 2020, significantly above the US$204.6 billion and US$308.9 billion between the US and ASEAN. As a result of this modification, the aforesaid proportions are now 19.4 percent, 7.7 percent, and 11.6 percent, respectively. The ever-expanding trade scale inevitably reflects into China’s enormous influence over ASEAN.
According to the Institute of Southeast Asian Studies (ISEAS) in Singapore’s 2019-2022 State of Southeast Asia Survey, China has significantly greater influence in the area than the United States, both economically and politically. In the four surveys, for example, more than 70% of respondents believe China has the greatest economic influence, while less than 10% agree with the United States; more than 45 percent believe China has the greatest political and strategic influence, while only about 30% agree with the United States.
As a conclusion, in the face of IPEF competition from the United States, China may relax. China should have confidence in stabilizing cooperation with ASEAN as long as China continues to adhere to the policy of opening up to bring greater dividends to ASEAN, adhere to ASEAN’s “centrality” in regional cooperation in the Asia-Pacific region, and firmly implement the principle of peaceful coexistence and joint building of a community of shared destiny with ASEAN countries.
As the two most dynamic countries in the Asia-Pacific area, the dynamic Asia-Pacific supply chain and value chain will not break, and the process of economic cooperation in the Asia-Pacific region will not stagnate, as long as the industrial ties between China and ASEAN are not severed.
Under auspices of BRICS (Brazil, Russia, India, China and South Africa) and China holding the 14th Summit, it provides the platform to address emerging global and thorny regional problems. The BRICS member countries collectively represent about 26% of the world’s geographic area and are home to 2.88 billion people, about 40% of the world’s population.
What are the issues at stake: During the past two decades, new geopolitical confrontation as between democracy and authoritarianism, and unipolar and multipolar system, have partly appeared between the United States and Europe on one side and Russia and China on the other side. There other ccountries that are followers of the these distinctive groups. The group deeply dissatisfied about unipolar system and global hegemony throttled by the United States.
Despite the individual differences, BRICS members ultimately seek to consolidate its position, with a number of instruments at hand, in the development of the new global order and therefore have the following:
(i) Unified front and expansion of the group, demonstrate its effectiveness in addressing emerging tasks on regional and international stage. For instance in May, China suggested launching discussions of the issue that Argentina and Saudi Arabia had expressed interest in joining BRICS.
According to experts, other potential candidates include Bangladesh, Egypt, the United Arab Emirates and Uruguay who joined the BRICS New Development Bank last year. In addition, analysts point out that events held on the sidelines of the BRICS foreign ministers meeting involved representatives of Indonesia, Kazakhstan, Nigerian and Thailand.
A number of countries are already on the list as potential new members. The final positions is that this geopolitical configuration is in exploratory phases, undoubtedly meant to bring a new axis of Russia-China but inclusion of Mexico , Indonesia and Turkey has its own strategic baggage. The procedures have to be thoroughly examined and reviewed, the dialogue is of importance to further expand BRICS.
(ii) The question of creating an international reserve currency based on a basket of currencies of the BRICS countries is being considered. In addition, the development of reliable alternative mechanisms for international settlements is being drawn up together with BRICS partners.
Russia’s financial messaging system is open for the connection of banks of the five countries. The geography of Russia’s Mir payment system is being expanded. The fact is that there are comprehensive measures directed at reducing the negative impact of sanctions and strengthening trade and investment ties with all interested states.
(iii) On fortifying the economic front is one key area for BRICS. Russia is feverishing cooperating with China and India. Trade among them has witnessed exponential growth, and Russia is set to make new legislations that could facilitate further, especially in the Central Asian region and within the Eurasian Union.
Closely relating to that Russia is advocating for expanding entrepreneurial freedoms, reducing administrative burdens, launching new preferential lending programs, and introducing tax and customs exemptions. While these aim at supporting Russia’s economy against raft of draconian sanctions, it would simultaneous help China, India and many Asia-Pacific countries that are ready to do mutual business with Russia.
Against these backdrop as briefly discussed above, BRICS can serve as an opportunity for the group to convince the world that it can be a viable financial option against Western-led institutions like the World Bank and the International Monetary Fund. Furthermore, combined together they possess a huge resources and only need to present a “clear-cut economic model” that ultimately be attractive and be replicated around the world. BRICS countries constitute 40 percent of the world’s population, and the group needs to engage in more interactive development processes especially the global south to get more clout as a serious global player.
China is holding the BRICS presidency in 2022. While strengthening economic, technological and scientific potential, the BRICS partners are ready to continue working on principles of respect to interests of each other, unconditional supremacy of international law, and equality of countries and peoples of the globalized world.
The 14th BRICS summit held in June, the leaders of Brazil, Russia, India, China and South Africa focused on the state of affairs and prospects of multifaceted cooperation within the group in the political, economic, cultural and humanitarian areas. The summit touched upon pressing international and regional issues and are reflected in the summit’s final declaration.
Since its establishment, the BRICS success could be described as moderate. The group has a combined population of 3.23 billion and their combined GDP is more than US$23 Trillion. Historically, the first meeting of the group began in St Petersburg in 2005. It was called RIC, which stood for Russia, India and China. Then, Brazil and subsequently South Africa joined later in February 2011, which is why now it is referred to as BRICS.
Human needs in this world cannot be separated from 3 basic needs, namely shelter, clothing and food. Clothing is one of the things that humans will always use from birth to the end of their life no matter rich or poor because everyone needs clothes during their life. The industrial sector that produces this clothing is the garment industry, the garment industry is a company engaged in the manufacture of apparel for men and women, for all ages from baby to adults. Product from garment examples such as underwear, shirts, jeans, t-shirts, jackets, blouses, etc. and usually these garment products are mass-produced with the same model. Characteristics of garments produced by garments are the models of clothing that are made usually have the same shape, garment clothing generally uses standard sizes (S, M, L, XL) or numbering (Fitinline, 2019). There are lots of garment factories in each country and usually the factory has chosen the targeted market segment according to the product production. However, there are still many obstacles that can occur in this garment industry. Among other things, the rapid changes in the garment industry so that innovation must be carried out every time because fashion is always evolving, causing this industry have to adapt to the trends that are popular with the community, as well as high competition due to the many existing garment factories so that characteristics and expertise are needed to survive. However, when a garment factory can produce products with brands that have strong characteristics, Models that are trendy and comfortable to wear, the brand can quickly become a favorite of the community and with the right promotion can build branches in several countries.
If the garment industry is an industry that focuses on apparel, then above the garment industry there is an industry that is wider in scope, namely the textile industry is one of the manufacturing industry sectors that produces starting from raw materials to become materials that have a selling value such as yarn, cloth, and finished products made from textiles. The textile industry is very large because it consists of several materials. There are natural materials such as silk, wool, and cotton. And there are also synthetic materials, namely polyester, polypropylene, nylon. As for the process of making yarn into fabric, there are 3 types, namely woven, knitted and nonwoven. Woven itself is a fabric making technique that has the principle of combining threads lengthwise and transversely or making patterns that cross each other, while knitted fabrics are fabrics made with the principle of entangling threads that are intertwined with each other to form a circle or arch so that the threads can relate to each other. Then nonwoven is a fabric that is made without going through the woven and knitting process but with a special nonwoven machine. Fabrics made with different techniques have different purposes and functions depending on the use and purpose of use.
By seeing the importance of textiles in everyday life and because textiles are an industry that will always be needed, it is not surprising that the demand for textiles is always increasing from time to time. So that countries that have large textile production can make textiles one of the economic sources for state income. Here are 3 countries with the largest textile production in the world:
It’s not new anymore if China dominates the global textile market because this country is able to have an output reaching 52.2% of global textile production in 2019. Several factors that support China to become a giant ruling textile industry are due to low production costs, technological advances that as well as, considerable supply of raw materials. These things make China the largest textile producing country in the world. In addition to being the largest textile producer, China is also the country that exports the highest textiles. From Statista data, in 2020 China was the top global textile exporter with a value of around USD 154 billion. This figure of China’s exports is almost 43.5% of the total textile export market worldwide (Inda Susanti, 2022).
India occupies the second position as the largest textile producing country in the world, textile is one of the oldest industries in India and the development of this industry is always increasing from time to time. In India there is a division into 2 sectors. The first sector is an unorganized sector that still uses human labor and simple tools. Then the second sector is an organized sector, namely a sector that is more modern because it uses combined techniques and machines. India’s textile industry is estimated to be worth USD250 billion in 2019. According to the IBEF report, India’s State textile industry accounted for 7% of industrial output in 2018/2019. It contributes 2% to India’s GDP and employs more than 45 million people in 2018/2019 (Inda Susanti, 2022).
United States of America (USA)
America is in the 3rd position with the largest textile production. America managed to account for 5.3% of the output of global textile production in 2019. The biggest strength of textiles from the United States of America comes from the production of nonwoven fabrics, medical textiles and protective clothing. By combining advanced technology and innovation, the United States continues to grow with textile production increasing every year. Citing data from the US National Council of Textile Organizations (NCTO), the total value of shipments of US-made fibers and filaments, textiles and apparel amounted to approximately USD76.8 billion in 2018, up from USD73 billion in output in 2017 (Inda Susanti, 2022).
It is estimated that the demand for textiles in the future will continue to increase with the development of technology, there will be many new innovations that can be useful for human life. Especially in the garment and textile industry sector. As one of the basic human needs, it is estimated that the industry will remain stable and continue to increase, although sometimes there will be a decline but will return to a stable position. So literally the garment industry is part of the textile industry as well. However, the garment industry has a main focus on making apparel. Meanwhile, the textile industry has a wider scope because it processes from raw materials into finished materials that are ready to be reprocessed or can be sold directly without being reprocessed.
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