BLUE FINANCING

STRATEGIC DOCUMENT

Supported by:

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Contents
List of Figures.....................................................................................................................iii

List of Tables.......................................................................................................................iii

List of Appendices.............................................................................................................iv

List Of Abbreviations..........................................................................................................v

Executive Summary..........................................................................................................vii

1. INTRODUCTION........................................................................................................ 1

1.1 Rationale of The Document.............................................................................. 3

1.2 Concept and Definition...................................................................................... 3

1.3 Scope and Objectives......................................................................................... 6

1.4 Target Audience....................................................................................................7

2. BLUE ECONOMY SECTORS IN INDONESIA...........................................................11

2.1 Sector Selection..................................................................................................11

2.2 Grading of Selected Sectors............................................................................14

2.3 Identification of Sub-sectors, Impact Measurement Indicators and

Policy References...............................................................................................18

2.4 Identification of Project Timeline.................................................................. 20

3. FINANCIAL FRAMEWORK AND THE FINANCING GAP........................................23

3.1 Green and Blue Economy: The Gap............................................................... 23

3.2 The Investment Gap......................................................................................... 24

4. EXPLORING DIFFERENT FINANCIAL INSTRUMENTS FOR INVESTMENT IN .

BLUE ECONOMY.....................................................................................................33

4.1 Case Study: Blue Economy in Indonesia...................................................... 33

4.2 Bonds and Sukuk.............................................................................................. 35

4.3 Public Service Agency........................................................................................37

4.4 Trust Funds......................................................................................................... 38

4.5 State-Owned Enterprises (SOE).................................................................... 42

4.6 Banking Sector................................................................................................... 42

4.7 Blended Financing............................................................................................. 43

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 4.8 Impact Investment............................................................................................ 45

4.9 Social and Development Impact Bonds....................................................... 47

4.10 Insurance............................................................................................................. 47

4.11 Crowdfunding......................................................................................................51

5. SAFEGUARDING BLUE INVESTMENT..................................................................55

5.1 National Standards........................................................................................... 55

5.2 International Standards................................................................................... 57

6. CONCLUSION AND RECOMMENDATIONS........................................................... 61

REFERENCES.............................................................................................................. 67

APPENDIX..................................................................................................................... 83

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List of Figures
Figure 1. Selected sectors in the Blue Financing Strategic Document...................14

Figure 2. Blue Economy Sectoral and Project Assessment Procedure...................15

Figure 3. Green and Blue Framework Sectors ...........................................................23

Figure 4. Scenario 1 – 7% contribution and no depletion.........................................25

Figure 5. Scenario 2 – 7% contribution and 1.5% depletion....................................26

Figure 6. Scenario 3 – 7 % contribution and 3% depletion.....................................26

Figure 7. Scenario 4 – 12.45% contribution and no depletion.................................27

Figure 8. Scenario 5 – 12.45% contribution and 1.5% depletion............................27

Figure 9. Scenario 6 – 12.45% contribution and 3% depletion..............................28

Figure 10. Proposed Blue Financing Ecosystem........................................................63

List of Tables
Table 1. Example of SDGs Roadmap of Indonesia for 2020-2030............................ 5

Table 2. SDG 14 Life Below Water..................................................................................12

Table 3. Blue Economy Sectoral and Project Assessment Dimension and

Criteria..................................................................................................................16
Table 4. The relevance assessment matrix of the Blue Economic Sectors.......... 17

Table 5. Sectors, subsectors, example of eligible projects, and indicators.........18

Table 6. Average Total Investment Needed per Year (IDR Trillion)......................... 25

Table 7. Project scale and instrument types.............................................................. 34

Table 8. Blue Bonds......................................................................................................... 35

Table 9. Trust fund and Badan Pengelola Dana (BPD).............................................. 39

Table 10. International trust fund case in blue sector..............................................41

Table 11. Actors in blended finance.............................................................................. 44

Table 12. Impact investing in blue sector.................................................................... 46

Table 13. Parametric insurance case............................................................................ 49

Table 14. Crowd funding in the blue sector................................................................ 52

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Table 15. National safeguards in the blue sector...................................................... 56

Table 16. International safeguards in the blue sector.............................................. 57

List of Appendices
Appendix Table A1. Assessment matrix of the blue economy sectors.................. 83

Appendix Table A2. Assessment sheet of each of the blue economy sectors... 85

Appendix Table A3. Indicators and policy references............................................... 93

Appendix Table A4. Eligible projects and timeline.................................................... 95

Appendix Table A5. Blue Economy GDP Calculation................................................. 97

Appendix Table A6. Potential overlaps and gaps between green and blue
economic frameworks
economic framework..................................................................99

Appendix A7. Proposed outline of blue economy project-level impact

analysis and identification of sectoral investment need............... 101

Appendix A8. Proposed outline of blue bond impact reporting........................... 104

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List of Abbreviations

APBN National Budget (Anggaran Pendapatan dan Belanja Negara)

BAPPENAS Ministry of National Development Planning Indonesia (Badan Perencanaan
Pembangunan Nasional)
BLU Public Service Agency (Badan Layanan Umum)
BLU Public Service Agency Fisheries Business Capital Mangement Institute (Badan
LPMUKP Layanan Umum Lembaga Pengelola Modal Usaha Kelautan dan Perikanan)
BPDLH Environmental Fund Management Agency (Badan Pengelola Lingkungan Hidup)
CSR Corporate Social Responsibility
DIB Development Impact Bonds
E&S Environmental and Social Risks
e-CBA Extended Cost Benefit Analysis
EU European Union
FAO Food and Agriculture Organization
FGD Focus Group Discussion
GoI Government of Indonesia
IO Input Output Analysis
KKP Ministry of Marine Affairs and Fisheries Indonesia
KLHS Strategic Environmental Assessment or SEA (Kajian Lingkungan Hidup Strategis)
MPA Marine Protected Area
MSY Maximum Sustainable Yield
OECD Organization for Economic Cooperation and Development
PEMSEA Partnerships in Environmental Management for the Seas of East Asia
RAN API National Action Plan for Climate Change Adaptation (Rencana Aksi Nasional
Adaptasi Perubahan Iklim)
RAN GRK National Action Plan for Greenhouse Gas Emission Reduction (Rencana Aksi
Nasional Gas Rumah Kaca)
RPJMN Medium Term National Development Plan (Rencana Pembangunan Jangka
Menengah Nasional)
SDG Sustainable Development Goals
SIB Social Impact Bonds
SOE State Owned Enterprise
UNDP United Nations Development Programme
UNEP United Nations Environment Programme
WPP Fisheries Management Area (Wilayah Pengelolaan Perikanan)
ZERI Zero Emission Research and Initiative

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Executive Summary
The Blue Financing Strategy outlines a range of measures necessary for the sustainable
development of Indonesian’s vast marine resources, in alignment with the principles of the
blue economy. The document presents a strategy for mobilizing investments in key sectors of
the blue economy while prioritizing the principles of sustainable development. In doing so, the
blue financing strategy strikes a necessary balance between the objective of unlocking the full
potential of marine based economic sectors and the imperative to preserve and prevent the
further depletion of marine resources, effectively demonstrating that these goals are not mutually
exclusive.

As the world’s largest archipelagic country with abundant marine resources, this initiative
helps Indonesia to meet national and international commitments on sustainable development.
Development of the blue economy is in alignment with Indonesia’s commitment to achieve
the 2030 Sustainable Development Goals (SDGs) agenda and SDG 14 on ocean sustainability in
particular. The Government of Indonesia (GoI) has established an enabling national legislative and
policy framework to this end. In particular, article 14, Law No. 32/2014 on Marine Management
mandates that the development of Indonesia’s marine resources be conducted under the
principles of the blue economy. The blue financing strategy outlines the resource mobilization
plan that will enable Indonesia to meet these targets.

Despite the great size and estimated value of the blue economy in Indonesia, the average
contribution to GDP in the last five years has been low at just around 3.6%, largely owing to
activities in the fisheries sector. The blue economy nevertheless is fast growing at around 10.5%
per annum, showing great potential if investments are strategically deployed. It is therefore
imperative for the GoI to implement plans to increase blue sector economic contribution to GDP.
The Blue Financing Strategy aims to facilitate this firstly by identifying the amount of additional
investment needed to propel blue activities, considering the depletion rate of natural resources.
The value of average annual investment required to achieve a target of 12.45% GDP contribution
in 2045 ranges from IDR 1,928.9 trillion, assuming no marine resource depletion, to IDR 3,307.21
trillion, assuming an annual marine resource depletion rate of 3%. The case for mobilizing finance
for sustainable blue economy projects which consider environmental implications is therefore
made.

One of the objectives of the Blue Financing Strategy is to provide the foundations for eligibility
criteria for selecting a “Blue Project”. In order to prioritize funding for investments with the highest
positive impact, the eight sectors that the strategy identified as eligible were also classified
according to their relevance and impact in the three dimensions of sustainable development i.e.,
environment, economy, and social factors. High relevance sectors fall into the Navy-Blue category,
signaling high priority for funding to investors. These include waste management, sustainable
fisheries and Marine and coastal protection and restoration of biodiversity and ecosystems.
Sapphire Blue sectors refer to those of moderate relevance, including disaster management and
risk reduction, marine renewable energy, marine biotechnology, and ecotourism. Sky Blue sectors
are those of modest relevance, implying modest priority for funding. Marine technology falls
into this category. The document therefore provides investors with guidelines on the relevance
of the sectors across three dimensions of sustainable development — economic, social, and
environmental. Investments are also classified based on the urgency of implementation into
short-term, medium-term, or long-term implementation categories.

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The Blue Finance Strategic Document aims to unleash the economic potential of marine-based
economic activities by identifying appropriate financial instruments that are relevant for public
and private investment. Financial instruments include blue bonds (sukuk) trust fund structures,
credit lines for blue projects or SMEs in blue sectors from the banking sector, blended finance
that targets the blue sector, impact investment, a social and development impact bond,
insurance products and crowdfunding. National and international standards for safeguarding blue
investments ensure environmental and social risks can be effectively minimized.

This document is intended to provide the foundation for the financing of the blue economy. A
follow-up document identifying the specific financing needs of each blue sector from public
and private parties is recommended, as well as the subsequent specific steps of project-level
impact analysis to determine feasibility. To ensure transparency, the document also recommends
a routine reporting of the allocation and impacts of projects financed by blue bonds on the
ocean environment, as well as achievement of SDG14 indicators. The report also encourages
to follow the Blue Economy Development Index (BEDI) to track the development of Indonesia’s
blue economy. Finally, the strategy recommends the establishment of a blue finance ecosystem
which comprises the stakeholders involved, ranging from private and public investors to line
ministries and international development partners.

Overall, this document elaborates a plan to gain economic benefits from marine resource
utilization, as well as methods to preserve marine ecosystems for the next generation through
informed investment decisions guided by the principles of the blue economy.

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1
Introduction
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INTRODUCTION

Indonesia is one of the biggest archipelagic countries in the world. Strategically located between
Asia and Australia, Indonesia is surrounded by vast oceans, sandwiched between the Indian
Ocean to the South, the South China Sea to the North, and the Pacific Ocean to the Northeast.
Indonesia has the second longest coastline in the world (54,716 Km), just after Canada (234,042
Km),1 which means a considerable number of people depend on the ocean for their livelihoods.
Indonesia’s location and vast seawater area means that the country has an abundance of ocean
resources, including the largest reef area in the world, covering some 51,020 km2.

Given its abundant ocean resources, it is imperative for Indonesia to advance its blue economy.
The term ‘blue economy’ was initially used by Gunter Pauli, based on the Zero Emission Research
& Initiative (ZERI) in 2004.2 As theories and practices regarding the blue economy evolve, the
definition of blue economy is also evolving, with a consensus yet to be reached. UNEP (2013)
defined the blue economy as a system that leads to improved human well-being and social
equity while significantly reducing environmental risks and ecological scarcities. The World Bank
(2017) stated that “the blue economy is the sustainable use of ocean resources for economic
growth, the improvement of livelihoods and jobs, and ocean ecosystem health.” According to
the World Bank, the scope of the blue economy consists of renewable energy, climate change,
tourism, maritime transport, waste management, and fisheries. Alternatively, the European Union
(EU) views the blue economy as all economic activities related to the ocean and coastal regions.
Therefore, the EU’s definition of the blue economy is larger in scope than the World Bank’s, as it
contains more interlinked sectors.

The need for an alternative to enhance sustainable development becomes more important than
ever as Indonesia enters the final decade of the UN Sustainable Development Goals. Strengthening
Indonesia’s blue economy could accelerate the achievement of SDG 13 Climate Action and SDG 14
Life Below Water. In the past years, Indonesia’s economy has been steadily growing at around five
percent.3 The unemployment rate has been consistently decreasing, to just above five percent
in 2019.4 The poverty rate has also consistently decreased over the years, with Indonesia having

1 https://www.statista.com/statistics/506526/longest-coastlines-in-the-world/
2
Waldegrave, L. (2017). What is the Blue Economy? Circular Impacts. Available at: https://circular-impacts.eu/
blog/2017/07/19/what-blue-economy.
3
World Bank database on Gross Domestic Product (GDP) growth (annual %). Available at: https://data.world-
bank.org/indicator/NY.GDP.MKTP.KD.ZG?locations=ID
4
Statistics Indonesia (Badan Pusat Statistik) database on employment. Available at: https://bps.go.id/indica-
tor/6/529/1/penduduk-berumur-15-tahun-ke-atas-menurut-jenis-kegiatan.html

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reached a single-digit poverty rate in 2018 of 9.82% (March).5 Based on Gross National Income
figures from 2019, Indonesia was ranked an “Upper-Middle-Country” by the World Bank.6 These
achievements, however, must also consider environmental sustainability. For instance, according
to the World Bank database, Indonesia’s CO2 emissions per capita have been increasing steadily
from 0.82 metric tons in 1990 to 2.15 metric tons in 2016, where this equals to 5.97 percent growth
per annum.7

Under the current with COVID 19 pandemic situation, the economy is slowing down, and it might
create threat to the ocean sustainability even bigger than before. This is because its potential
could be misused by becoming the focus of economic recovery that over extracted with
business-as-usual model without any attention to its sustainability. To unlock the potential of
Indonesia’s blue economy, massive investment is still needed from both the private and public
sector, through the use of various financial instruments. In order to strengthen and support the
development of the blue economy, Indonesia needs additional investment of between IDR 3.64 to
1,392.22 trillion per year to reach a 7% contribution of the sector to GDP by 2045. Meanwhile, the
investment needed to achieve a 12.45% contribution of the sector to GDP by the 100th anniversary
of Indonesian Independence ranges from 1,928.9 to 3,307.2 trillion per year. The variation in the
additional investment needed depends on the extent to which such investments consider the
depletion rate of natural resources. Ultimately, by enhancing the blue economy, Indonesia could
advance its development while ensuring the sustainability of the ocean environment.8

This report is organized as follows: Chapter 2 provides context of the blue economy in Indonesia;
Chapter 3 provides a simulation of the approximate value of investment needed to strengthen
Indonesia’s blue economy in 2045; Chapter 4 discusses the various financial instruments that
could provide blue financing investment; Chapter 5 discusses the safeguards needed to ensure
the sustainability of the environment, particularly the ocean; and Chapter 6 provides conclusions
and policy recommendations for stakeholders, particularly the Government of Indonesia (GoI), in
support of the development of the blue economy in Indonesia.

1.1 Rationale of The Document

This document is developed to strengthen and further develop the blue economy in Indonesia.
It aims to support Indonesia in achieving the Sustainable Development Goals (SDGs), particularly
SDG 13 Climate Action and SDG 14 Life Below Water. This document provides stakeholders with
three key components necessary to the realization of these goals. Firstly, this document provides
a classification of economic sectors included in the blue economy within the Indonesian context.
Secondly, this document calculates and provides an estimation of the value of annual investment
required by the Government of Indonesia to develop and strengthen the blue economy. Thirdly,

5
Statistics Indonesia (Badan Pusat Statistik) database on poverty and inequality. https://bps.go.id/indica-
tor/23/192/2/persentase-penduduk-miskin-menurut-provinsi.html
6 Akhlas (2020). “Indonesia now upper middle-income country, World Bank says”. The Jakarta Post.: https://
www.thejakartapost.com/news/2020/07/02/indonesia-now-upper-middle-income-country-world-bank-says.
html
⁷ World Bank database on CO2 emissions per capita. Available at: https://data.worldbank.org/indicator/EN.ATM.
CO2E.PC?locations=ID
8 The development of ocean economy should be undertaken carefully, since the ocean itself has CO2 reservoirs
that can aggravate the emission of greenhouse gases and eventually worsen climate change. Further expla-
nation can be accessed at https://www.nationalgeographic.com/science/2019/12/greenhouse-gases-lurk-in-
oceans-could-make-warming-far-worse/.

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this document provides information regarding various financial instruments that could be
utilized, by both private and public sectors, as means to achieve blue economy development.
This document acts as a technical document for stakeholders to implement strategies that could
contribute positively to the development of the blue economy in Indonesia.

This Blue Financing Strategic Document also serves as one of the foundations for the development
of the Government’s SDGs Securities Framework, through several features. First, this document
serves an agreed definition of which sectors can be classified as blue sectors, thus providing a
list of sectors and projects which can be financed by blue-labelled bonds to balance between a
healthy and productive ocean economy. Second, this document provides a reference to projects
in sectors which could be prioritized for funding through blue bonds, based on their relevance
to sustainability dimensions and length of projects. Third, various sample indicators of projects
eligible to be funded by blue bonds may aid the development of clear and measurable targets for
projects. These targets shall be in line with the achievement of Sustainable Development Goals,
particularly SDG 14.

1.2 Concept and Definition

As the world’s largest archipelagic country, Indonesia is surrounded by vast oceans with abundant
marine wildlife, and is populated by 76% of the world’s coral species and 37% of the world’s coral
reef fish species (UNDP, 2016). As such, there is potential for Indonesia to develop and implement
policies and strategies to drive the blue economy. However, in 2016, the contribution of marine
resources to Indonesia’s GDP was only around 3% excluding oil and gas, or 6% including oil and
gas (BPS, 2017), which is far below its true potential. Therefore, an initiative to develop a strategic
document for blue financial instruments has been developed, to accelerate Indonesia’s blue
economy development, and achieve its full potential by unlocking investments from a variety
of stakeholders. This report aims to prioritize the principles of sustainability in areas concerning
the utilization of marine resources to ensure present needs do not compromise those of future
generations.

There are numerous definitions of the blue economy, each of which varies in scope depending on
the sectors included within definition. The concept of blue economy was initially introduced by
Gunter Pauli at the launch of the Zero Emission Research & Initiative in 2004, where the concept
started with the following statement:9

“Nature does not know the concept of waste; the only species capable
of making something no one desires are the human species.”

The statement implies that the blue economy supports an open-source movement that has the
potential to shift society from scarcity to abundance. The blue economy movement also aims to
promote both health and the environment, as well as ensuring that waste products are utilized as
input to create a new cash flow and benefit the economy. This concept is then developed further

9
Waldegrave, L. (2017). What is the Blue Economy? Circular Impacts. Available at: https://circular-impacts.eu/
blog/2017/07/19/what-blue-economy

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by many organizations that also aim to integrate a more specifically ocean-based environmental
aspect.

As theories and practices regarding the blue economy have evolved over time, the working
definition of blue economy has become varied10. For example, the UNEP (2013) defined the
blue economy as a system that leads to “improved human well-being and social equity while
significantly reducing environmental risks and ecological scarcities”. Meanwhile, the East Asian
Seas Congress (PEMSEA, 2016) declared the blue economy to be “a sustainable ocean-based
economic model that employs innovative and environmentally-sound infrastructure, technologies
and practices—including institutional and financing arrangements—and is heavily dependent on
coastal and marine resources and ecosystems”. Offering a different definition, the World Bank
(2017) stated that “the blue economy is the sustainable use of ocean resources for economic
growth, the improvement of livelihoods and jobs, and ocean ecosystem health”. According to
the World Bank, the scope of the blue economy consists of renewable energy, climate change,
tourism, maritime transport, waste management, and fisheries. Alternatively, the European Union
(EU) views the blue economy as all economic activities related to the ocean and coastal regions.
Therefore, the EU’s definition of the blue economy is larger in scope than the World Bank’s, as it
contains more interlinked sectors.

However, the different definitions from a variety of organizations share the same core attributes,
namely, the importance of balancing the current need to utilize resources for economic and
social development while minimizing, or even eliminating, the potential environmental risk to
ocean sustainability. From a national perspective, Article 25A of the 1945 Constitution states that
The Unitary State of the Republic of Indonesia is an archipelagic state having an Archipelagic
(Nusantara) character with a territory, the borders and rights of which shall be stipulated by
laws. The vision of the Long-Term Development Plan 2005-2025 stated in Law No. 17 of 2007 is
“Independent Indonesia, Advanced, Fair”. One of the key objectives outlined is for Indonesia to
develop as a strong, advanced, and independent nation, that forms and enacts policy based on
its national interests, through initiatives such as the building of an integrated marine economy,
optimized for sustainable use of marine resources.

Marine economic development creates economic growth, and has the potential to mitigate current
and future anthropogenic damage to the marine environment, necessitating the right approach.
It is mandated under Article 14, Law No. 32/2014 on Marine Management that the development of
marine resources be conducted under the principles of the blue economy. Article 14 provides the
following definition of blue economy:

“as an approach to improving sustainable marine management and

conservation of the sea and coastal resources and their ecosystems
in order to realize economic growth with the principles of community
involvement, resource efficiency, minimizing waste, and double
added value (multiple revenues).”

This definition of the blue economy will be applied for the purposes of this document.

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Another extension of the development of the concept of blue economy is the blue circular economy as de-
velop by the European Union, more detail at https://bluecirculareconomy.eu/

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Implementation of the blue economy through sustainable management of marine resources,
is in line with the Sustainable Development Goals (SDGs) global framework, specifically, SDG
Goal 14, which focuses on Life Below Water through the conservation and sustainable use of the
oceans, seas and marine resources. The Government of Indonesia (GoI) has adopted the SDGs
through Presidential Regulation No. 59 of 2017 on the Implementation of Achieving Sustainable
Development Goals. For instance, in SDG 14 (Life Below Water), the GoI plans to improve the
governance of national marine spatial planning (including fishery management areas/WPP),
increase the areas designated for sea conservation, and manage and reduce illegal, unreported,
and unregulated (IUU) fishing activities. The Government of Indonesia, through the Ministry of
National Development Planning/Bappenas (2019) also made a roadmap for SDG implementation
for the period of 2020-2030 (Table 1).

Table 1. Example of SDGs Roadmap of Indonesia for 2020-2030

Goal 14.4.1 Proportion of fish stocks within biologically sustainable levels

Strategy in 2020-2024 Strategy in 2025-2030
Strategy in
• 2020-2024
Improvement in fisheries management • Strategy in 2025-2030
Strengthening fisheries management and
and governance governance

• Revitalization of sustainable fishing prac- • Implementation of responsible and sus-

tices tainable fishing practices
Goal 14.5.1 Coverage of protected areas in relation to marine areas
Strategy in 2020-2024 Strategy in 2025-2030
• Strengthening of governance and synergy • Strengthening of governance and synergy
between government ministries and bodies between government ministries and bodies

Goal 14.5.1• Coverage of protected

Maintenance of ecosystemareas
healthinand
relation
sup- • to Maintenance
marine areas of ecosystem health and sup-
port for the use of marine protected areas port for the use of marine protected areas
Strategy in 2020-2024 Strategy in 2025-2030
• Development of long-term sustainable ma- • Provide long-term sustainable marine pro-
rine protected areas with inclusion of long- tected areas with financing
term financing

Source: Ministry of National Development Planning/Bappenas (2019).

Similarly, the National Medium Term Development Plan (Rencana Pembangunan Jangka Menengah
Nasional/RPJMN) 2020-2024 that guides national development strategies over the next five
years incorporates marine development as a core objective. The strategies include efforts to (1)
create fisheries management areas (WPP) as spatial bases in developing sustainable fisheries;
(2) manage and utilize the marine ecosystem and services sustainably; (3) increase production,
productivity, standardization, and quality control and assurance of marine products; (4) increase

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business facilitation, financing, technology, and market for fishermen, including small-scale
fisheries business production; and (5) increase the quality of human resources, the technological
innovation and development in maritime and marine sectors, and the comprehensiveness of
marine and fisheries databases. The inclusion of these strategies in RPJMN 2020-2024 shows that
improving marine management is recognized as being critical to strengthening national economic
growth, and can effectively be tracked using specific targets with corresponding indicators. The
Government also acknowledges the necessity of continuing efforts to strengthen governance and
commit to achieving targets as stated in SDG 14 Life Below Water.

1.3 Scope and Objectives

The main objective of this Blue Finance Strategic Document is to unravel the economic potential
of marine-based economic activities and explore the capital market possibilities for investment
in the blue economy. Specifically, this document aims to:

(1) Provide the foundations for eligibility criteria for selecting a “Blue Project”.

(2) Identify blue financial instruments that are relevant for public and private investment.

(3) Identify blue economy sector potential in Indonesia to be financed.

(4) Identify potential financing schemes for blue economy sector potential in Indonesia.

The document also aims to achieve long-term benefits that combine environmental, economic
and social perspectives, based on the SDG principles adopted by the Government of Indonesia
(GoI). The overall emphasis of this document focuses on how to gain economic benefits from
marine resource utilization, as well as methods to preserve marine ecosystems for the next
generation through informed investment decisions that integrate environmental risk into decision
processes.

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1.4 Target Audience
This document’s target audience comprise:

1. The Government of Indonesia

The Government can use this document as a guideline when selecting blue projects, as
well as to leverage both existing and new innovative financial instruments to reduce the
investment gap, influencing the achievement of government targets and SDG Goal 14.

2. Financial Services Sector

This document can be used by financial institutions (bank and non-bank) to assess blue
investment. Blue finance may provide financial institutions several advantages over other
financing options and may help to curate a sustainable project portfolio.

3. Philanthropists

This document provides a guideline for allocating philanthropic funds pertaining to blue
economy-based projects, and as a blue financing education tool.

4. International Development Organizations/Donors

These organizations can use the document to encourage long-term sustainability of the
ocean environment, or to establish guidelines for this process, as well as promoting economic
development through blue financing mechanisms.

Additionally, this strategic document is of value and interest to a much wider audience of potential
stakeholders, who may be involved through associated projects.

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2
Blue Economy
Sectors in
Indonesia

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2

BLUE ECONOMY SECTORS IN INDONESIA

2.1 Sector Selection

Both the Central and sub-national Governments of Indonesia are mandated to use the principles
of the blue economy as outlined in Article 14, Law No. 32/2014. Therefore, the selection of sectors
should reflect this Article. The Article divides blue economic sectors into two groups:

1. The utilization of marine resources:

Fisheries, energy and mineral resources, coastal and small islands resources, and non-
conventional resources, or natural resources that have not been used optimally.

2. The exploitation of marine resources, or enabling of the marine environment:

marine industries, marine tourism, sea transportation, and sea building.

In addition to Article 14, the sector selection process also took into consideration several important
factors. First, the three components of sustainable development: (1) environment, (2) economy,
and (3) social factors. Hence, sectors selected as part of the Blue Financing Strategy must show
a balance of attributes from the three underlying elements of sustainable development. Second,
the process of sector selection should include both stakeholders’ views and the judgement of
experts. A series of Focus Group Discussions (FGD) and interviews with relevant parties were
conducted from February to September 2019, designed to gather perceptions on the economic
sectors of greatest importance to Indonesia. Lastly, a review of global criteria relating to sustainable
development was also conducted to provide additional information for the sector selection
process. The global criteria for sustainable development chosen are based on indicators given in
the Sustainable Development Goals (SDGs), particularly SDG 14 Life Below Water. Table 2 provides
the target indicators for SDG 14.

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 Table 2. SDG 14 Life Below Water

Target Indicator Description

14.1 By 2025, all types of marine pollution, (a) Index of coastal Global indicators which will be
particularly from land-based activities, are eutrophication and developed
prevented and significantly reduced, including 14.1.1
marine litter and nutrient pollution (b) Density of floating
marine litter
14.1.1.(a) Percentage of reduced National indicators as proxies of
waste entering the ocean global indicators
14.2 By 2020, marine and coastal ecosystem 14.2.1* Ecosystem-based marine National indicators that are
would be sustainably managed and safeguarded spatial management is consistent with global indicator
to avoid adverse implications, including applied
by increasing resilience and implementing
14.2.1.(a) 11 Indonesia Fisheries Indicators at the national level to
restoration to ensure a healthy and productive
Management Areas supplement global indicators
ocean
(WPPNRI) are sustainably
managed

14.3 The effects of ocean acidification are 14.3.1 The rate of ocean Global indicator which will be
reduced and addressed, including through acidification (pH) as developed
improved scientific collaboration at all levels measured by a network of
approved and sufficient
sampling stations

14.4 By 2020, effective harvest management 14.4.1* The proportion of captured National indicators that are
and the abolition of excessive, illegal, and marine fish is within consistent with global indicators
destructive fishing are implemented, as well biologically safe limits
as the implementation of scientific-based
management, to allow for sufficient fish stock
recovery in the shortest possible time, at
least to a level where a sustainable maximum
production can be attained based on biological
characteristic

14.5 By 2020, has preserved at least 10 percent 14.5.1* Number of Marine National indicators that are
of the coastal and marine areas, in accordance Protected Areas consistent with global indicators
with national and international regulations, and
according to the best available scientific data

14.6 By 2020, certain types of fishery subsidies 14.6.1. The extent to which Global indicators which will be
that contribute to excess capacity and excess international tools are developed
fishing are prohibited, subsidies that contributes used to combat illegal,
to illegal, unreported & unregulated fishing are unreported and unregulated
removed, and withhold new types of subsidies, (IUU) fishing
by recognizing that correct and effective specific
and different treatments for developing &
underdeveloped countries shall be integral parts
of World Trade Organization (WTO) negotiations
on fisheries subsidies
14.6.1.(a) Percentage of business National indicators as proxies of
actors who comply global indicators

14.7 By 2030, increased economic benefit 14.7.1 Sustainability of fisheries Global indicators which will be
from sustainable marine resources utilization, as a percentage of Gross developed
including management of sustainable fisheries, Domestic Product (GDP)
aquaculture and tourism

12
 14.a Increased scientific knowledge, research 14.a.1 Proportion of total research Global indicators which will be
capacity, marine technology transfer by expenditures allocated to developed
taking into account the Intergovernmental marine technology research
Oceanographic Commission Criteria and
Guidelines on Marine Technology Transfer,
to improve marine health and increase
the contribution of marine biodiversity
to development in developing countries,
particularly small island developing countries,
underdeveloped countries and all countries
14.b Provision of access to marine resources and 14.b.1* The extent to which legal National indicator that are
markets for small-scale artisanal fishers frameworks /regulations/ consistent with global indicators
policies/ institutions
recognize and protect the
rights of access to small-
scale artisanal fisheries

14.b.1.(a) The number of provinces Indicators at the national level to

that have improved supplement global indicators
financial access for fishers

14.b.1.(b) Number of protected Indicators at the national level to

fishers supplement global indicators

14.c Improved conservation and sustainable use 14.c.1* Provision of policy National indicators that are
of marine and its resources through application framework and tools consistent with global indicators
of international laws reflected in the United connected to UNCLOS (the
Nations Convention on the Law of the Sea, which United Nations Convention
provides a legal framework for conservation and on the Law of the Sea)
sustainable use of marine and its resources, as implementation
stated in article 158 of “The future we want”

Source: BAPPENAS, 202011

Based on the above-mentioned considerations, eight unique sectors have been selected as the
focus for Indonesia’s Blue Financing Strategy: sustainable fisheries; marine renewable energy;
waste management; marine and coastal protection and restoration of biodiversity and ecosystems;
disaster management and risk reduction; marine biotechnology; tourism; and marine technology.
How these sectors translate from Article 14, Law No. 32/2014 is shown in the figure below.

11
http://sdgs.bappenas.go.id/wp-content/uploads/2021/02/Metadata-Pilar-Lingkungan-Edisi-II_REV3.pdf

13
 Figure 1. Selected sectors in the Blue Financing Strategic Document

Translated into the

following sector

The utilization of Marine Resources:

a. Fishery
b. Energy and mineral resources restoration of its biodiversity and ecosystem
c. Coastal and small islands resources
d. Non-conventional resources

The exploitation of Marine Resources

or enablres of marine environment: • Waste management
a. Marine industry • Marine technology (exc. biotechnology)
b. Marine tourism • Marine biotechnology
c. Sea transportation • Ecotourism
d. Sea building

2.2 Grading of Selected Sectors

In addition to the selection of the eight sectors, this document also provides guidelines on the
relevance of the sectors across three dimensions of sustainable development — economic,
social, and environmental. The purpose of this endeavor is to prioritize funding for sectors in
accordance with their relevance to the sustainability dimensions, thus creating coherence and
efficiency in the accomplishment of SDG 14. Unfortunately, existing risk and impact assessments
pertaining to the blue economy have focused on the environmental and/or ecological dimension
(Hodgson et al., 2019). Where there is emphasis on social (Satterfield et al., 2011) and economic
(Ebarvia, 2016) spheres, they are conducted in an isolated manner.

To address the need for an integrated assessment, OECD (2010) outlined guidance on the
sustainability impact assessment of policies and projects which encapsulates all three sustainable
development aspects. The steps leading up to the assessment are adapted from the Swiss
Federal Office for Spatial Development – ARE (2004) guidelines, as shown in Figure 2. The first two
steps involve the screening of projects and policies based on their relevance to the sustainability
dimensions. This is done by performing a quick scan of each project’s potential impacts on the
criteria of each dimension. Eventually, projects which are deemed relevant to the Sustainable
Development Goals will undergo more rigorous impact analysis and optimization of assessment.

During the third step, the procedure to carry out impact assessment is discussed. There are
several methodologies through which the assessment may ultimately take place, varying from
standard cost and benefit analysis, multi-criteria analysis, to general equilibrium models (OECD,
2010). One methodology recently introduced is the extended cost and benefit analysis (eCBA),
which is an enhancement of the standard cost and benefit analysis. The methodology employs a
total economic value framework, placing bigger emphasis on social and environmental impacts
therefore internalizing external costs in the decision making (GGGI, 2014)

14
 Figure 2. Blue Economy Sectoral and Project Assessment Procedure
Step 1: Present Subject

1. Relevance Analysis Step 1: Present Subject

(Sector level)

Step 2: Establish sustainability

relevance Triage: Perform impact analysis
on projects if sector is relevant
Step 4: Conduct assessment
2. Impact Analysis
(Project level)

Step 4: Conduct assessment

Step 5: Recommendation
on project feasibility

Source: adapted from the Swiss Federal Office for Spatial Development (ARE)
sustainability assessment (2004) and OECD (2010)

In conducting the relevance and impact assessment, there are three sustainability dimensions
to be considered: (1) the environmental dimension pertaining to the sustainability of habitats for
humans, animals, and plants, (2) the economic dimension pertaining to prosperity and economic
development capacity, and (3) the social dimension pertaining to the solidarity and well-being of
human life. To aid the assessment, each dimension has a set of criteria which have been adjusted
based on the feasibility to perform a desk review. The following table details the criteria of each
dimension as well as its complementing possible indicators. It should be noted that the possible
indicators are only indicative and not exhaustive, therefore other indicators may be taken into
account as the assessment takes place according to data availability.

15
 Table 3. Blue Economy Sectoral and Project Assessment Dimension and Criteria

Sustainability Dimension Sustainability Criteria and Description Possible Indicators (examples)

Environment • Areas of natural importance, biodiversity: • Land use/land use change,

sectors/projects with potential influence fish stock assessment
on the preservation of areas of natural
importance and biodiversity. • Reduction in use of
fossil fuel, production of
• Renewable and non-renewable resources: renewable energy
sectors/projects which could affect the
quality and availability of renewable • Water pollution level, GHG
resources usage and reduce the use of emission level
non-renewable resources.
• Risk reduction
• Water, soil, air, climate: sectors/projects
with possible influence on water, soil, air,
and climate.

• Environmental disasters and risks:

sectors/projects with possible influence
on the reduction of environmental
disaster impacts and management of its
risk.

Economy • Income: sectors/projects with indication • Contribution in GDP added

of maintaining/increasing levels of
incomes.

• Employment: sectors/projects with • Possible Contribution in job

indication of maintaining/increasing creation/loss
levels of employment.
• Research budget in marine
• Competition and innovation: sectors/ technology
projects with possible consequence
on economic competitiveness and • Empowerment of local
innovation capacity. government

• Public-sector enterprises: sectors/

projects which could impact the
efficiency and quality of public sector
management.

Social • Health and safety: sectors/projects with • Emission particles, health

possible effect on the protection and risks, job safety
promotion of human health and safety.
• Cultural diversity/cultural
• Culture and values: sectors/projects resources
which could influence the promotion
and preservation of social values and
resources.
• Proportion of women
• Gender equality: sectors/projects which benefitting from the sector
could influence the existing condition
of gender equality in treatment and • Opportunity creation for
opportunities. existing local indigenous
communities
• Social Inclusion: sectors/projects
with possible influence on inclusion
and protection of local indigenous
communities, women, persons with
disability, ageing population, and other
minority groups.

Source: Adapted from the Swiss Federal Office for Spatial Development (ARE) sustainability assessment (2004),
European Commission (2009), and OECD (2010)

16
This document focuses on assessing the relevance of selected blue economy sectors through
adoption and adjustment of the Swiss Federal Office for Spatial Development (2004) Relevance
Analysis Methods and its criteria. Eventually, eligible projects belonging to sectors which are
deemed relevant may undergo the more detailed impact assessment analysis and the optimization
of it. However, this endeavor is beyond the scope of this document.

In this document, the relevance assessment will be performed qualitatively based on a desk
review of readily available information. The original grading methodology involves assigning a
score that ranges from 0 (no relevance) to 3 (high relevance) to each criterion based on qualitative
and desk review. However, to foster consistency and avoid biases in qualitative assessment, we
adjust the scoring 0 (low to no relevance) and 1 (at least modest relevance). Then, the total score
of each dimension is calculated by weighting each criterion across all dimensions equally, arriving
at a possible range of scores from 0 to 12.

Departing from the final score of the relevance assessment, sectors are then classified into
several categories. Sectors scoring 0-3 are categorized to have no relevance, while details of the
categorization for sectors which scored above 3 are as follows:

a. Navy Blue (High Relevance):

Sectors with high relevance across assessment criteria and dimensions, implying high
priority for funding. Sectors with scores ranging from 10-12 will be classified in this category.

b. Sapphire Blue (Moderate Relevance):

Sectors with moderate relevance to the assessment criteria, implying moderate priority
for funding. Sectors with scores ranging from 7-9 will be classified in this category.

c. Sky Blue (Modest Relevance):

Sectors with modest relevance to the assessment criteria, implying modest priority for
funding. Sectors with scores ranging from 4-6 will be classified in this category.

A summary of the relevance assessment results can be seen in Appendix Table A1, while the
detailed assessment matrix for each sector can be accessed in Appendix Table A2.

Table 4. The relevance assessment matrix of the Blue Economic Sectors

Relevance Assessment Score Grading

10 - 12 Navy Blue (High Relevance)

7-9 Sapphire Blue (Moderate Relevance)

4-6 Sky Blue (Modest Relevance)

17
2.3 Identification of Sub-Sectors, Impact Measurement
Indicators and Policy References
A series of policy dialogue sessions and FGDs with the different stakeholders and relevant experts
were the source of input for the selected sectors, relevant sub-sectors, and examples of eligible
projects. Detailed breakdowns are accompanied by indicators to measure the success of each
project. Different indicators are utilized to measure the effectiveness of each unique project based
on available metrics selected on a case-by-case basis. The prerequisite for indicator selection
referred to legal policy, ensuring a binding decision with strong enforcement capabilities.

For example, the waste management sector consists of three subsectors with clear examples
of eligible projects. This document also two indicators to measure project impacts as explained
in the table below. More detailed definition of the sectors, indicators, and policy framework
references can be seen in Appendix Table A3.

Table 5. Sectors, subsectors, examples of eligible projects, and indicators

Grading Sector Sub-sector Examples of eligible projects Indicator

Waste • Marine debris/litter • Waste collection • Water pollution level

management (Ministry of Environment
• Waste-to-Energy • Plastic waste conversion into and Forestry)
infrastructure material
• Wastewater • SDG 14.1.1: Index of coastal
treatment eutrophication and plastic
debris density
Marine and coastal • Mangrove • Marine Protected Areas (MPAs) • Greenhouse Gas (GHG)
protection and expansion and management emission reduction (blue
restoration of • Seagrass and coral carbon)
biodiversity and reefs • Mangrove and Seagrass
ecosystems replantation • Health index of coral reefs,
• Ecosystem seagrass, and mangroves
conservations • Coral reef rehabilitation
• SDG 14.5.1: Coverage of
• High seas activities • Abrasion mitigation (Building protected areas in relation
with Nature) to marine areas
• Conservation
and research on • SDG 14.3.1: Average marine
migratory species in acidity (pH) measured
high sea at agreed suite of
Navy Blue representative sampling
(High station
Relevance)
Sustainable • Sustainable fishing • Fish stock rebuilding actions • Fish stock assessment
fisheries (Ministry of Maritime
• Sustainable • Promotion of sustainable Affairs and Fisheries)
aquaculture practices and policies for
activities along the fishery • SDG 14.4.1: Proportion
• Food security value chain (e.g., fish processing of fish stocks within
equipment, fish feeds biologically sustainable
• Food processing supply, packaging, marketing, levels
distribution)
• SDG 14.7.1: Sustainable
• Investment in goods and fisheries as a proportion
services to guarantee effective of GDP
fisheries management, including
research on sustainable
fisheries and programs on
Illegal, Unreported, and
Unregulated (IUU) fishing.

• Monitoring in protected areas

and enforcement of regulations
against IUU fishing.

18
 Disaster • Research on • Disaster risk reduction • SDG target 11.b: in
management and infrastructure line with the Sendai
risk reduction for disaster risk • Disaster mitigation programs Framework for Disaster
reduction Risk Reduction 2015-
• Disaster preparedness 2030, holistic disaster risk
programs management at all levels.
• Research on
ocean disaster • Development of disaster risk • SDG 11.b.1: Disaster risk
management reduction infrastructures reduction strategies
(mitigation,
preparedness, • SDG 11.b.2: Risk reduction
response, recovery)

Marine renewable • Clean energy for • Wind, hydro, stream, and tidal- • GHG reduction
energy small islands and based power plant developed in
coastal areas coastal/marine areas • Energy produced (KwH or
Megawatt Hour)
• Transmission • Ocean thermal energy
of energy from conversion plants
Sapphire renewable resources
• Provision of solar lights into the
Blue
coastal areas for consumptions
(Moderate
and ships
Relevance)
Marine bio- Research and • R&D for health care, cosmetic, • SDG 14.3.1: Average marine
technology  development (R&D) enzyme, nutraceutical, and acidity (pH) measured
for chemicals, other biotechnology industries. at agreed suite of
  pharmaceuticals, or representative sampling
nutraceuticals derived • R&D for technology which station
from marine creatures sustains marine ecosystems
(e.g. biofuels from marine algae) • SDG 14.a.1: Proportion of
total research budget
allocated to research
in the field of marine
technology
Ecotourism Ecotourism in coastal/ • Special designated coastal/ • Sustainable tourism index
marine area marine area for ecotourism (Ministry of Tourism and
development Creative Economy)

• Eco-friendly hotel/homestays • SDG 14.1.1: Index of coastal

and services in coastal/marine eutrophication and
area floating plastic debris
density
Marine technology • Research and • Relevant tools and equipment • SDG 14.a.1: Proportion of
Development (R&D) in business activities of total research budget
for technology that the maritime sector (e.g. allocated to research
sustains business transportation, shipping, in the field of marine
Sky Blue activity of the container, logistic, tanker, technology (including the
(Modest maritime sector  port), including supporting supporting infrastructure)
Relevance) infrastructure

• Research and capacity building

campaign for sustainable blue
ocean economy

19
2.4 Identification of Project Timelines
In addition to relevance assessment, the listed projects from selected sectors are also categorized
based on their timeline, or when they should be implemented. The classification of the project
timeline is based on the urgency of implementation. The timeline itself can be classified into
short-term, medium-term, or long-term implementation categories. The timeline classification
of selected projects is explained in Appendix Table A4.

a. Short term:

Projects that are needed immediately because of the urgency of the problem at hand,
as the suspected impacts to be overcome are significant, and the selected project is
projected to help mitigate the issue over the near-term. In the concept of time, short-term
projects are between 1-5 years. Examples of projects with this implementation timeline
include waste collection and disaster mitigation programs.

b. Medium term:

Projects with a level of urgency that is moderate due to problems encountered, as well as
selected projects with attributes that can overcome or help reduce negative impacts over
the medium-term. Projects with a 5-10 year timeline can be categorized as medium-term,
with examples including coral reef rehabilitation and abrasion mitigation.

c. Long term:

Projects with a level of urgency that extends over the long term because of the nature
of problems encountered, as well as projects selected with attributes projected to
overcome or mitigate the targeted issue over the long-term. Projects extending more than
10 years, such as marine R&D for healthcare and marine eco-tourism development, can
be categorized as long-term.

20
3
Financial
Framework and
The Financing Gap

21
22
3
FINANCIAL FRAMEWORK AND THE FINANCING GAP

3.1 Green and Blue Economy: The gap

In 2018, the GoI developed a framework, called the Republic of Indonesia Green Bond and Green
Sukuk Framework, which aims to provide guidance for the government to issue sovereign green
bonds and sukuk, including the eligible green sectors and projects to be funded by the proceeds
of the instrument. The framework identifies projects that support the National Action Plan for
Reducing Greenhouse Gas Emissions (RAN GRK), The National Action Plan for Climate Change
Adaptation (RAN API), Indonesia Biodiversity Strategy and Action Plan (IBSAP), and the Sustainable
Development Goals (SDGs). The framework utilizes the climate change budget tagging system,
initiated by the Ministry of Finance, as the basis for initial project selection.

The green sectors in the framework overlap with some of the selected blue sectors identified in
this document. However, some of the blue sectors are not covered in the green framework, such
as sustainable fisheries, restoration of biodiversity and ecosystems, and marine biotechnology
and marine technology. These blue sectors are outlined in Figure 3 below. The purpose of this
document is to serve as an analytical tool to be utilized in a range of capacities by a variety of
stakeholders. Furthermore, measurement of project impacts across blue sectors found in this
document incorporate multiple indicators that examine factors beyond emissions reduction. In
2021, the GOI upgraded the green bond/sukuk framework to SDGs framework12 which outlines
social, green, and blue eligible sectors and enables different thematic bonds to be issued in the
future, including blue bonds/sukuk.

Figure 3. Green and Blue Framework Sectors

Renewable Energy

Resilience to Climate Change Marine Renewable

for High Vulnurable Areas
and Sectors/Disaster
Risk Reduction
Waste to Energy and
Waste Management
Sustainable Management
of Natural Resources
Green Tourism
Energy
Disaster Management
and Risk Reduction
Waste Management
Marine Bio-technology
Marine Protection
and Restoration of Marine Technology
Biodiversity and
Ecosystem

Sustainable Fisheries

Sustainable Transport Eco-tourism

Green Buildings

12
Republic of Indonesia SDGs Government Securities Framework, Ministry of Finance 2021

23
3.2 The Investment Gap
The average contribution of the blue economy to Indonesia’s GDP in the last five years was
around 3.6%, dominated by fisheries, which accounted for more than 70% of blue economy
contribution to GDP13. While the current value of the blue economy is a relatively small proportion
of the national GDP, the sector itself recorded a rather massive growth rate. During 2012-2020, the
blue economy grew 10.5% per annum, significantly higher than the national growth rate of around
5%. This indicates a sizable opportunity to be tapped in the long run. This long-term trajectory of
blue economy is aligned with the vision of Bappenas (2019), in which the contribution of the blue
economy is expected to reach 12.45% of national GDP by 2045. However, additional investment is
needed to enhance the potential growth of the blue economy. Besides the growth acceleration
motive, investment is also needed due to depletion of blue economy resources, as increasing
economic activity would damage the ocean ecosystems as a result of overfishing, pollution, and
waste.

Simulations of the blue economy were conducted to calculate how much investment is required
to achieve targets of 7% and 12.45% of national GDP by 2045. Six scenarios were created through
the simulations. The first and second scenarios show achievement of the targets, with the
assumption of no change in economic and environmental conditions. The third to sixth scenarios
assume no change in economic conditions while reaching targets, but a 0%, 1.5%, and 3%
percent gradual depletion of ocean resources14 occurs annually, respectively. For the third to sixth
scenarios, additional investment is required to not only contribute to achieve the targets, but also
to pay for environmental remediation costs.

The investment gap calculations were conducted through various steps and with a number of
assumptions. The first step was to forecast the blue economy sector and its components. After
defining the components of blue economy, the second stage was to estimate the natural growth
rate of the blue economy based on the historical growth of its components until 2045. It was
also necessary to estimate the long-term growth of national GDP in 2045 in order to measure
the “business-as-usual” contribution of the blue economy to national GDP in 2045 without any
investment intervention. Based on the prior targeted contribution of blue economy, the investment
needed each year from 2022 to 2045 could be estimated using an input-output (IO) matrix using
six simulation scenarios. The third step adjusted the results of the second stage with an inflation
rate and by deducting the number with the forecast value derived from the first stage. Lastly, the
average per year result from the third step was taken to attain the required yearly investment.

It is also important to interpret the results with added considerations for two reasons. First,
the calculation process was developed under the assumption that no economic shocks (other
than investment in blue economy components) occurs during the evaluation period. Second, the
latest IO matrix produced by the Indonesian Statistical Bureau was undertaken in 2016. Therefore,
even though the result adjusts for inflation, the overall number might underestimate the true
investment needed.

Further details regarding the calculation of the Blue Economy GDP are provided in Appendix Table A5
13

14
The annual depletion rate of ocean resources refers to Indonesia’s annual rate of natural resources depletion
sourced from World Bank (2021) which has an average of roughly 3.27% of GNI between 2010-2018.

24
The simulation results are summarized as follows:

Table 6. Average Total Investment Needed per Year (IDR Trillion)

Blue Economy Targeted

7% 12.45%
Contribution to GDP

No Depletion 3.64 1,928.9

1.5% Depletion 788.36 2,708.51

3% Depletion 1,392.22 3,307.21

The average annual investment needed is therefore estimated to range between IDR 3.64 trillion
to IDR 3,307.21 trillion per year, depending on the targeted contribution of the Blue Economy
on National GDP, and the depletion rate of ocean resources that occur annually and gradually
increases. The total investment needed is estimated to range from IDR 87.22 trillion to IDR 79,373
trillion per year. The detailed scenario and value of investment needed are shown as follow:

Scenario 1: 7% contribution and no depletion

Under the scenario of targeted 7% contribution of the Blue Economy to National GDP without
resources depletion, the average annual investment is estimated around IDR 3.64 trillion per year.
The total investment needed is around IDR 87.22 trillion.

Figure 4. Scenario 1 – 7% contribution and no depletion

Source: Author’s calculation

25
Scenario 2: 7% contribution and 1.5% depletion

Taking into consideration depletion of ocean resources of 1.5%, under the scenario of targeted
7% contribution of the Blue Economy to National GDP, the average annual investment needed
is estimated as around IDR 788.36 trillion per year. The total investment needed is around IDR
18,920 trillion.

Figure 5. Scenario 2 – 7% contribution and 1.5% depletion

Source: Author’s calculation

Scenario 3: 7% contribution and 3% depletion

When the rate of depletion of ocean resources increases by 1.5 percentage points to 3%, under
the scenario of targeted 7% contribution of the Blue Economy to National GDP, the average annual
investment is estimated at around IDR 1,392.22 trillion per year. The total investment needed is
around IDR 33,413 trillion.

Figure 6. Scenario 3 – 7 % contribution and 3% depletion

Source: Author’s calculation

26
Scenario 4: 12.45% contribution and no depletion

Under the scenario of targeted 12.45% Blue Economy contribution to National GDP with no
depletion of ocean resources, the average annual investment is estimated at around IDR 1,928.9
trillion per year. The total investment needed is around IDR 46,293 trillion.

Figure 7. Scenario 4 – 12.45% contribution and no depletion

Source: Author’s calculation

Scenario 5: 12.45% contribution & 1.5% depletion

When the depletion of ocean resources increases to 1.5%, with the scenario of targeted 12.45%
contribution of the Blue Economy to National GDP, the average annual investment is estimated to
be around IDR 2,708.51 trillion per year. The total investment needed is around IDR 65,004 trillion.

Figure 8. Scenario 5 – 12.45% contribution and 1.5% depletion

Source: Author’s calculation

27
Scenario 6: 12.45% contribution and 3% depletion

With a 3% rate of depletion of ocean resources, under the scenario of targeted 12.45% contribution
of the Blue Economy to National GDP, the average annual investment is estimated at around IDR
3,307.21 trillion per year. The total investment needed is around IDR 79,373 trillion.

Figure 9. Scenario 6 – 12.45% contribution and 3% depletion

Source: Author’s calculation

28
Box 1. Achieving SDG14: Life Below Water

In the national SDG Roadmap document, the Ministry of National Development Planning
(2019) set out scenarios related to the achievement of SDG14, in particular target 14.4.1
which is to maintain the proportion of fish stocks within biologically sustainable levels.
Until 2030, the maximum quantity of fish that can be caught without unsustainably
disturbing their stock (Maximum Sustainable Yield – MSY) is 12.54 million tons with
a total allowed catch of 80%. There are two scenarios which have been set out to
simulate how the achievement of such a target will play out in 2030. The first scenario
is the business-as-usual scenario, in which there is no intervention to accelerate the
achievement of SDG14. In this scenario, the proportion of fish production from wild
catch will be 89.04% of MSY, equivalently 11.16 million tons of fish, which exceeds
the Total Allowed Catch of 80%. The second scenario, in which an intervention from
government exists, results in the proportion of fish production from wild catch of
78.31%, equivalently 9.82 million tons.

Previously, the UN has estimated that for SDG14 to be achieved by 2030 there will be
a need for USD 175 billion investment per year. In Indonesia, additional investment of
IDR 10,397 trillion is needed to finance government interventions which will accelerate
the achievement of the relevant SDG targets by 2030. Focusing on target 14.4.1 of
SDG14, Indonesia will need to reduce its annual fish production by 1.34 million tons
in 2030 alone to achieve the second scenario outcome of keeping the Total Allowed
Catch below 80%. Achieving target 14.4.1 of SDG14 in 2030 alone by simply limiting
fish production to 9.82 million tons will cost a forgone production value of USD 1
billion15. Another alternative is to simply shift the fish production from wild catch to
aquaculture. Producing an additional 1.34 million tons of fish through aquaculture in
2030 alone will require an additional investment of IDR 53.74 trillion16, or equivalently
USD 3.7 B (USD 1 = IDR 14,512.2). Such investment needs may be realized through
various financial instruments discussed in the next section.

15
Based on Sari et al. (2019), the average price of demersal fish is 748.57 USD for each ton.
16
Based on Tran et al. (2017), the producer price of aquaculture is IDR 40,100 per kg

29
30
4
Exploring
Different Financial
Instruments for
Investment in The
Blue Economy

31
32
4
EXPLORING DIFFERENT FINANCIAL INSTRUMENTS
FOR INVESTMENT IN THE BLUE ECONOMY

4.1 Case Study: Blue Economy in Indonesia

Indonesia is the largest archipelagic country in the world, with a coastline of 54,716 Km, second
only to Canada. The country has more than 17,000 islands spread across its vast seawater and
sits strategically between the Pacific Ocean and Indian Ocean. Furthermore, based on OECD’s
Sustainable Ocean Economy data, 95% of Indonesia’s population reside within 100 Km of the
coastline, suggesting massive opportunity for a lot of its people to seek livelihood from the blue
economy.

With the country’s geographical endowment, it is intuitive for the Government of Indonesia to
take the initiatives in unlocking blue economy potential and achieve their ambition of becoming
a global maritime nexus. In its medium-term plan, the Government targets improvement in the
management of maritime and marine resources. One of the concrete steps to achieve this target
was through the ratification of Law of Republic of Indonesia No. 32 of 2014 concerning Marine
Affairs. This legal document provides a trenchant definition on the blue economy and outlines
the country’s responsibilities in sustainable marine resource management and development.
Furthermore, to avoid further ocean environmental degradation, a National Plan of Action on
Marine Plastic Debris was approved in 2018, based on Presidential Decree No. 83 of 2018.

Aided by supporting regulations, over recent years Indonesia has strived to recognize its potential
in utilizing ocean-based industries as one of its engines of economic growth. OECD (2020)
reported that between 2005 to 2015, Indonesia’s annual marine fishing production shot up and
ranked second largest in the world, overtaking the USA and Japan. An estimation by OECD (2021)
also suggests that roughly 6.5 million people were employed in fishing, fishery processing, and
aquaculture sectors in 2018. This represents 4.7% of Indonesia’s total workforce at the time,
and underestimates the true contribution of the blue economy to national employment, as it
excluded other blue sectors, such as marine-tourism, waste management, and energy.

The demand for outputs from Indonesia’s blue economy sectors has continued to rise. The
World Bank (2019) estimated Indonesia’s ocean economy to have an annual worth of more than
USD 280 billion, with marine construction and marine manufacturing industries being the two
largest sectors. Additionally, famous for its rich coral diversity, the country’s reef tourism alone is
currently valued at roughly USD 3 billion (World Bank, 2019). Up to 2018, marine fishing production
continued to record a positive trade balance of USD 4.12 billion, hinting at substantial demand

33
from the international market (BPS, 2020). However, the contribution of marine resources to
Indonesia’s GDP was calculated at around 6% in 2016, including oil and gas, suggesting there
remains an urgent need to unlock its true potential.

While abundant with untapped potential in the blue economy, climate change and environmental
degradation threatens Indonesia’s progress in unlocking it. Rising ocean water temperatures
exacerbate the condition even further, putting 82% of Indonesia’s reefs at risk17. At the same time,
Indonesia is still on its journey to attain the SDG 14 of Life Below Water, which implies the integral
need to balance economic utilization with the safeguarding of the environment and future needs.

While additional financial resources will aid projects in blue economy sectors, the financial sector
in Indonesia is primarily focused on business-as-usual practices, with little attention given to the
environmental impacts of business activities. It is only recently that interest in the green economy
has grown, while attention is rarely paid to the blue (marine) sector. As green financial mechanisms
are slightly more established than blue, this chapter was developed using a combination of the
two sectors’ models. Moreover, by using a combined model, the document can provide a broader
range of potentially viable financial mechanisms for use in blue economy-based sectors.

The types of financial instruments in this document also capture different project scales, which
makes customization according to the amount of financing required possible. All of these
instrument groups are explained in Table 7. Meanwhile, details of blue economy projects and
proposed suitable financing options can be accessed in Appendix Table A6.

Table 7. Project scale and instrument types

Scale of Investment Type of Instruments/Institutions

BLU LPMUKP
CSR
Small and medium projects
Crowdfunding
Religious Funds
Insurance
Blue Bond/Sukuk
BPDLH Banking

State-Owned Enterprise
Medium and large projects Trust Fund
Impact Investing
SIB & DIB
Blended Financing

17
More information on this can be accessed from: https://wri-indonesia.org/en/our-work/topics/ocean

34
4.2 Bonds and Sukuk18
At the current time, only a small number of blue bonds have been issued in the world: the
Seychelles Blue Bond, Nordic-Baltic Blue Bond, and Bank of China Blue Bond. These blue bonds
are summarized in the table below:

Table 8. Blue Bonds

Name Objective Size/ Duration Investors Key Terms

Seychelles Transition support USD 15 million World Bank; Private Loan provided
Blue Bond to sustainable / 10 years Placement: Calvert by GEF reduced
fisheries Impact Capital; interest rate
Nuveen, and for government
Prudential from 6.5% to
2.8%

Nordic-Baltic Bond issuances USD 213 Capital Market 0.375% coupon

Blue Bond focused on million / 5
investments within years
water resource
management and
protection

Bank of Boost the expansion USD 942.5 Capital Market. 1.054% (USD; 3
China Blue of sustainable blue million / split years)
Bond19 economy through between a By type of investors,
marine –related three-year USD banks and other 3.15% (CNH; 2
green projects, 500 million financial institutions years)
including offshore tranche and accounted for 46%
renewable energy a two-year of the bond, asset
and waste-water CNH (offshore managers 27%, private
treatment Chinese yuan) banks 19%, and
3 billion insurance companies
tranche and other investors
8%

Source: Adapted from Tirumala and Tiwari (2020)

Sovereign bond issues can be a compelling approach to financing conservation if the implementing
government is committed to a robust conservation policy approach and the effort being funded
through the debt-issue is well refined. In most cases, it will be necessary for the government to
secure credit enhancements, such as loan guarantees. An additional challenge is that the project
being financed by the bond must have a clear economic benefit and be able to generate sufficient

18
In issuing blue bonds in Indonesia, the private sector must be bound to the regulations established by the
Financial Services Authority (OJK) . Currently, there are no regulations covering the issuance of blue bonds;
therefore, companies need to comply with established rules regarding the issuance of green bonds ( POJK
number 60/POJK.04/2017).This regulation indicates that there are limits on the use of funds resulting from the
issuance of blue bonds for commercial purposes that are not part of the blue category. For reference, on green
bond arrangements, 70% of funds from the issuance must be used to finance environmentally friendly busi-
ness activities (KUBL).
19
More information on Bank of China’s Blue Bond can be accessed here:
https://www.ca-cib.com/pressroom/news/bank-china-issues-asias-very-first-blue-bonds
https://www.bank-of-china.com/en/investor/ir10/202009/t20200914_18398318.html
https://theasset.com/article-esg/41673/bank-of-china-prices-asia-s-first-offshore-blue-bond

35
cash to pay back both the interest and principal of the loan within the relevant time frame. Thus,
it can be concluded that the use of bonds will be beneficial for financing the development of a
new project or program aimed at increasing revenue or lowering costs but may not be a viable
approach to finance business-as-usual management costs for a protected area.

4.2.1. Thematic Bond

As the basis for issuance of Indonesia’s sovereign thematic bond/ sukuk, the Government of
Indonesia has developed an SDG Government Securities Framework20 – demonstrating its
commitment to fund projects that will deliver environmental and social benefits to support the
achievement of the 2030 agenda. The document is an expansion of the previously established
Republic of Indonesia Green Bond & Green Sukuk Framework – which now covers not only sectors/
projects that contribute to climate change mitigation and adaptation efforts (green focus), but
also to the advancement of the blue economy (blue focus) and positive social outcomes (social
focus), referred to as ‘eligible SDGs expenditure’ that can be financed (or re-financed) through
this instrument.

The integration of blue aspects within the Republic of Indonesia SDG Government Securities
Framework is especially critical as the government recognizes the urgent need to leverage
innovative financing for a sustainable blue ecosystem. In this regard, the Blue Financing Strategic
Document served as the main reference in determining the eligible blue sectors in the framework
– of which marine renewable energy, waste management, and sustainable management of ocean
natural resources are outlined among others.

The eligible types of expenditure set out in the framework are mapped in accordance with their
contribution towards Indonesia’s 2030 SDGs targets, as well as being aligned to the respective
applicable market standards, such as those established by the International Capital Market
Association (ICMA) and ASEAN Capital Markets Forum (ACMF). Furthermore, the framework
outlines the social co-benefits of eligible SDGs expenditures with green and blue focus, which is
particularly relevant for Indonesia, given its unique climate and socio-economic context.

As stipulated under the Republic of Indonesia SDGs Government Securities Framework, eligible
SDGs expenditure is evaluated and selected through utilization of budget tagging. Budget
tagging is imperative for the identification of expenditure on projects that deliver benefits in
accordance with Indonesia’s climate change mitigation and adaptation objectives, as well as
the SDG Roadmap towards 2030, embedded under the KRISNA system21. At this stage, strong
stakeholder commitment and coordination, i.e., among the Ministry of Finance, Ministry of National
Development Planning, and Line Ministries as project owners, is crucial in ensuring that projects
which qualify under the Framework are tagged and thus could serve as underlying projects for
the designated thematic bond/sukuk issuance.

Through this Framework, the Government of Indonesia may label its bond/sukuk issuance under
either separate thematic formats – e.g., ‘Green’, ‘Blue’, and ‘Social’ – to highlight a particular
project and policy focus, or under one broader theme of SDGs. However, it is important to note
that Indonesia’s sovereign thematic bond is issued using a general financing scheme, with the

20
https://www.djppr.kemenkeu.go.id/page/load/3229
21
KRISNA (Kolaborasi Perencanaan dan Informasi Kinerja Anggaran) is the national government’s integrated
planning, budgeting, and monitoring system

36
proceeds of the instrument going and being managed within the government’s general account,
under a sound and prudent treasury management policy. In this regard, the issuance aims at
financing the state budget deficit and thus the proceeds are not directly and exclusively allocated
to particular eligible SDGs expenditure (non-earmarked).

4.3 Public Service Agency

The Indonesian Public Service Agency, also known as BLU (which stands for Badan Layanan
Umum), is a working unit that provides goods and/or services to Indonesian citizens in a non-profit
manner without compromising productivity or efficiency. Thus, to provide a more comprehensive
service to society, BLU agencies are given the flexibility to manage their finances with several
discretions, such as the ability to use their income directly without first depositing it to the
Treasury-Fund, as well as the ability to use income surplus from the previous fiscal year. Similarly,
BLU agencies can manage human resources in a broader sense while still adhering to sound
business principles and practices. Currently, there is only one BLU that provides finance for blue
sectors, and that is the BLU LPMUKP.

Case 1: LPMUKP

BLU LPMUKP (Badan Layanan Umum Lembaga Pengelola Modal Usaha Kelautan dan Perikanan),
also known as the Public Service Agency for Marine and Fisheries Capital Management, was
established in 2017 by the Ministry of Marine Affairs and Fisheries. BLU LPMUKP is a Ministry of
Marine Affairs and Fisheries Work Unit that implements the Public Service Agency’s Financial
Management and primarily affected by a revolving fund designed to improve market access and
capital for small and medium enterprises in the marine and fisheries sectors. This improves
the well-being of those who work in the marine and fisheries sectors, particularly fishers, fish
cultivators, and micro, small and medium-scale fishery business actors.

LPMUKP provides assisted loan/financing facilities in which, in addition to loans/financing, it also

helps LPMUKP mentors in 236 Mentoring Service Locations in 357 Regencies/Cities throughout
Indonesia, with a total of more than 250 mentors. The facilitator’s primary role is divided into
two parts, namely pre-disbursement and post-disbursement. Pre-disbursement is to facilitate
and select loan applications from business actors in the marine and fisheries sectors, and post-
disbursement is to ensure the use of loans according to their designation and to assist business
actors in developing businesses so that they can thrive, one of which is ensuring and promoting
the implementation of the blue economy concept for capture fisheries, aquaculture, as well as
fish processing and marketing businesses.

LPMUKP collaborates and synergizes with the technical Directorate at the Ministry of Marine
Affairs and Fisheries (KKP) to encourage and provide incentives in the form of low-interest loans/
financing to marine and fisheries business actors carrying the blue economy concept, whether
fishing, aquaculture, or processing and marketing. The adoption of the blue economy concept is
one of the main requirements for business actors in the marine and fisheries sectors to be able
to get loans/financing from LPMUKP. This is done to support the Ministry of Marine Affairs and
Fisheries’ program, namely a blue economy, healthy seas, and prosperous Indonesia, which is
expected to encourage business actors in the marine and fisheries sectors to improve economic
welfare while also paying attention to marine resource sustainability.

37
Between 2017 and 2021 (middle 2021), the agency disbursed loans totaling IDR 742.70 billion to
businesses engaged in capture fisheries, aquaculture, fishery product processing and marketing,
salt enterprises, and other coastal businesses. The funding was distributed to 19,0 people, each
of whom received an average of IDR 39.01 million.

This BLU is intended to strengthen venture capital and is expected to have an impact on job
creation and economic growth in Indonesia’s marine and fisheries sectors22. However, although the
facility was designed to provide service throughout Indonesia, the limited number of assistants,
credit analysts, and other supporting staff in distributing these loans in comparison to the area of
Indonesia causes the loan/financing process to be less than optimal and requires improvement.
LPMUKP is constantly improving this, including collaborating with KKP technical Directorate and
the banking sector, which has an extensive infrastructure network throughout Indonesia.

Developing a strategic partnership with local banks is one option for improving BLU’s ability to
meet the financial needs of Indonesia’s marine and fisheries sectors despite its limited resources.
Tapping into existing resources from local banks will allow BLU LPMUKP to maximize its potential
in financing the marine and fisheries sectors. However, it should be noted that the strategic
partnership with local banks should help to avoid any financing overlaps. This can be achieved
through financing target segmentation, in which BLU LPMUKP focuses its fund disbursement
on activities, projects, or enterprises that are currently unbankable or are not covered by
conventional financing options available from the banking sector. Furthermore, BLU LPMUKP may
offer a scheme that allows the institution to serve as a guarantor for non-bankable blue economy
sectors. This will allow for the expansion of financing outreach to previously untapped marine and
fisheries projects or enterprises.

The BLU LPMUKP is currently partnered with PT Bank Rakyat Indonesia (Persero) TBK or BRI and
PT Bank Negara Indonesia (Persero) TBK or BNI. With this arrangement, the BLU would be able
to use the shared facilities and infrastructure of those two state-owned banks to speed up
the process of distributing loans/financing to marine and fishery business actors throughout
Indonesia. In addition, LPMUKP is currently exploring collaboration with PT Bank Syariah Indonesia
TBK (BSI), Indonesia’s largest Islamic bank, to facilitate the provision of sharia-compliant loans/
financing, which is expected to be completed in 2021 so that LPMUKP can later provide services
with both conventional and sharia-compliant patterns to marine and fishery business actors
throughout Indonesia.

4.4 Trust Funds

Indonesia has several trust funds for green and blue economy related sectors already set up by
government or CSOs (Table 9). In addition to trust funds that support the development of the
blue economy, Indonesia could also establish specific Indonesian Fund Management Agencies,
known as Badan Pengelola Dana (BPD). Unlike the BLU, BPD provide services and act as fund
management bodies that channel funds to selected projects in specific industries. Similar to
Trust Funds, the management process is akin to investment management, as it collects and
raises funds to provide services. One example of this is the Badan Pengelola Dana Perkebunan
Kelapa Sawit (BPDPKS) that was established in 2015 to provide rejuvenation funding for palm oil
plantations, which could be accessed by farmers capable of implementing the technicalities

22
Nota Keuangan II 2019

38
of the projects. Instead of the Government collecting tax before exporting goods, the BPDPKS
collects the tax from palm oil industries, and the proceeds are then distributed and managed by
the agency for industry-wide improvements to enhance the sustainability of the palm oil industry.

Table 9. Trust funds and Badan Pengelola Dana (BPD)

Inves- Cate-
Name Objective Activities Size/Duration
tors gory
Indonesia Achieving Land-based Mitigation: In 2019, ICCTF have UNDP, Green
Climate Indonesia’s goals financial support for the received Rupiah GIZ, and Blue
Change Trust of a low carbon programs of reforestation / Supporting Funds from USAID,
Fund (ICCTF) economy and rehabilitation of degraded the National Budget GCF,
greater resilience lands. (dana dukungan Rupiah GEF,
towards climate Murni APBN) amounting GGGI,
change.t Adaptation and Resilience: to IDR 34.47 billion World
the dissemination of climate Bank,
information, development, ICCTF have also AFC
and innovation of adaptation received international
strategies, use of technology funding from the Danish
and knowledge, and promote Embassy of IDR 2.48
the establishment of policies billion, from USAID of
for adaptation IDR 7.53 billion and from
UKCCU of IDR 24.96
Energy: financing the billion.
low carbon energy
generation technologies
and the implementation of
conservation and energy In total, ICCTF has
efficiency received IDR 64.45 billion
of funding in 2019 alone.
Marine: promoting
sustainable use of marine
resources and to conserve
biodiversity in coastal and
marine areas
Blue Abadi A dedicated Empowering local USD 2,635,211 - Blue
Fund by conservation trust communities and agencies
Conservation fund for the Bird’s to sustainably manage
International Head Seascape in their marine resources by
(CI) Eastern Indonesia procuring local revenue
sources and providing
complimentary grants.

Financing provided to the

Blue Abadi Fund for critical
coastal ecosystem protection
and EAFM in West Papua
Province (FMA 715 and
717), results in Indonesia’s
first sustainably financed
MPA network, serving as
a national and regional
model for sustained marine
resource management as
well as in positive impacts
to ecosystem health,
fisheries production, and the
livelihoods and food security
of local fishers and their
communities.

39
 Inves- Cate-
Name Objective Activities Size/Duration
tors gory
The National Indonesia’s Fund collection, investment, Combined with the - Green
Environmental commitment to channeling State Budget and and Blue
Fund the protection of Forest Development
Management environmental Government non-tax revenue Financing (P3H), the total
Agency or sustainability operational funds for
better known Revenue generation BPD LH are estimated to
as BPD LH from service provided & reach IDR 429 trillion.
(Badan investment
Pengelola
Dana Developing partners
Lingkungan (multilateral, bilateral, non-
Hidup) government)

Provide grant, loan and

subsidy

Carbon trade

Others

Source: ICCTF (2020); WWF (2017); Government Regulation No. 46 of 2017; Olivia (2019)

40
 Table 10. International trust funds in the blue sector

Size/Du- Cate-
Name Objective Activities Investors
ration gory
Meso- To drive regional The MAR Fund operates as Since 2004 American Commission Blue
american funding and an ecoregional planning and on Environment and
Reef Fund partnerships for coordinating body which Development (CCAD),
(MAR conservation, prioritizes projects and allocates Protected Areas
Fund) restoration, and funding. Conservation Trust
sustainable use of (Belize),
the Mesoamerican
Reef Fundación para la
Conservación de los
Recursos Naturales
y Ambiente en
Guatemala (FCG),
Fundación Biósfera
(Honduras), and Fondo
Mexicano para la
Conservación de la
Naturaleza (Mexico).

PACÍFICO A coordination The initiative focuses on Since 2017 Gordon and Betty Blue
platform made channeling financing to: Moore Foundation,
up of four The David Lucile &
environmental funds Focus conservation actions on a Packard Foundation,
in Latin American shared set of priorities The Leona M and Harry
countries. R Helmsley Charitable
Mitigate Key Threats Trust, The Walton
Family Foundation,
Fill gaps in the scientific data Shark Conservation
Aims to be an Fund, WAITT
innovative regional Facilitate the distribution of foundation, Oceans5.
financing platform information for decision making
that seeks to ensure
the sustainable
management of the
Eastern Tropical
Pacific.
The PIPA is the world’s PIPA provides protection for Since 2004 New England Blue
Phoenix largest, truly terrestrial habitats on each of its Aquarium (funding
Island deep water MPA, islands safeguarding important support, biological
Protected encompassing nesting ground for seabirds and monitoring and
Area in 408,250 square rare traditional plants that have legal and technical
Kiribati kilometers (157,626 cultural and medicinal values in advice). CI’s Global
square miles) Kiribati. Conservation Fund
(main donor), CI’s
PIPA trust is a The revenues from the Pacific Islands
PIPA Trust non-for-profit endowment will go to cover: Programme
non-governmental
organization The annual fixed and variable (technical support and
established under costs associated with managing policy advice).
the laws of the PIPA in accordance with the
republic of Kiribati Management Plan
whose primary
objective is to Payments to the Government
provide long- of Kiribati for ensuring that
term sustainable exploitation of all of part of PIPA
financing for the remains limited or prohibited.
conservation of
terrestrial and Where the funds of the trust
marine biodiversity (PTEF) will be professionally
in the phoenix managed by a private third party
islands group.
Source: MAR Fund (2020); Pacifico Foundation (2020); Republic of Kiribati (2009)
41
4.5 State-Owned Enterprises (SOE)
One of the State-owned enterprises (SOEs) that could potentially fund the blue economy
sectors is PT Sarana Multi Infrastructure (SMI). PT SMI is a state-owned enterprise that finances
infrastructure projects initiated by the GoI through the Ministry of Finance. PT SMI also participates
in non-public funding for optimizing the economic and social benefits provided to communities,
supports the achievement of the SDGs, and mitigates actions responsible for climate change23.

PT SMI is also the implementing platform for SDG Indonesia One, an integrated platform which
combines public and private funds through blended financing schemes for channeling into
infrastructure projects related to the achievement of SDGs. As the implementer, PT SMI will
manage the pooled funds, accelerate deliverables through various innovative products, and
perform on the ground monitoring for the implementation of selected projects. SDG Indonesia
One is a platform which includes four pillars:

1) Development facilities,

2) De-risking facilities,

3) Financing facilities, and

4) Equity funds.

Through this platform, it is hoped that needs can be transformed into opportunities for numerous
parties so that they are able to participate in various infrastructure projects related to the
achievement of the SDGs.

4.6 Banking Sector

The current banking sector in Indonesia has already provided product offerings – such as cash,
trade, financing, treasury and advisory – to corporate and SMEs. For example, banks can provide
industry-tailored offerings of “financing” (e.g. term loans and supply chain financing), or “advisory”
(e.g. impact funds, equity fund raising).

In 2015, The Indonesia Financial Services Authority (OJK) initiated the JARING (Jangkau Sinergi dan
Guideline/Reach, Synergize, and Guideline) Program which 16 lenders and non-bank finance firms
participated in, providing credit to ocean and fisheries sub-sectors. Within a year, this program
mobilized IDR 9.2 trillion for the blue sector - an increase of 24.2% from the previous year.24
Furthermore, with the implementation of the new law on sustainable finance, there is growing
interest from bank lenders in investments across blue sectors. The regulations that modulate
banking activities that may be integrated into blue sectors are regulated in POJK No. 51 of 2017
(Financial Service Authority Regulation), which discusses the sustainable financial application of
financial services, issuers, and public companies.

23
ptsmi.co.id/pt-smi-at-glance/
24
More information on this can be accessed from https://www.ojk.go.id/sijaring/id/default.aspx#:~:text=Se-
bagai%20sebuah%20bentuk%20kerjasama%20antara,Indonesia%2C%20khususnya%20kelautan%20dan%20per-
ikanan.

42
In addition to sustainable finance law, the Ministry of Maritime Affairs and Fisheries hopes to
develop bank capital focused on micro fishers to increase bank lending activity for fisheries and the
marine ecosystem. This could form a solution to the lending capacity limitations of fisheries, as it
allows fish harvesters to compensate for the removal of price supports and assists them to cope
with market prices independently without government subsidies. Hence, this might constitute
implementation of eco-friendly fish farming practices, supporting SDG number 14 through the
promotion of small-scale fishers’ access to productive resources, services, and markets.

The banking sector could also establish a private blue bond or sukuk. One example of bonds
in the private sector in accordance with sustainable finance is associated with PT Bank Rakyat
Indonesia (Persero) TBK or BRI. BRI has implemented a sustainable finance concept through
its commitment to adhere to the underlying principles of sustainability. As the first mover in
sustainable banking, BRI issued the first Global Sustainability Bond in Indonesia for USD 500
million. The USD-denominated bond has a 5-year tenor with a coupon rate of 3.95% paid semi-
annually. The issuance of bonds with an environmentally friendly (green) scheme is an initiative
that meets the ASEAN Sustainability Bond standards. The issuance of Sustainability Bonds is an
alternative source of BRI funding for the MSME segment, so this will strengthen BRI’s business
in the MSME segment, which up to December 2018 had experienced lending reaching 76.5% of
BRI’s total loans. Another example of banking sector that issued sustainability bond in Indonesia
is Bank Mandiri. It has raised 300 million USD in 2021 to finance environmentally and socially
focused projects.

Leveraging from development around the region, banks can extend their support across the fish
supply chain, from fishing companies and exporters to importers and retailers before reaching end
consumers. This is especially so with the adoption of finance technology in the fish supply chain.
For example, banks can provide advisory support in adopting blockchain for seafood traceability,
information reporting and cashless payment.

4.7 Blended Financing

Blended finance is another means by which governments and other public sector and philanthropic
organizations can join forces to restructure investment risk return. Blended finance is defined as
the leveraging of public funds to catalyze private-commercial capital (Enclude, 2018). In addition
to general charitable philanthropic donors in Indonesia, it is also possible to leverage religious
funds, as faith-based initiatives have formulated numerous financial mechanisms that can
support the pursuance of the SDGs. Religious funding may become part of the innovative financing
mechanisms required to support blue sustainability. For example, as the most populous Muslim
nation in the world, Indonesia has the largest body of sharia or Islam based religious funds, known
as sharia investment funds. Moreover, Indonesia is also one of the largest markets for Islamic
finance with Islamic finance contributions to Indonesia’s economy. In addition to Islamic funds,
the diversity of religions in Indonesia makes religious funding even more promising, with potential
funding available from Dharma Dana, Tzuchi, World Vision, and the Salvation Army Indonesia.
The implementation of blended finance in Indonesia is progressing, initiated by the Ministry of
National Development Agency (BAPPENAS) in collaboration with Rare in 2019, to explore the
implementation of a blended finance project of marine conservation and sustainable fisheries.25

25
More information on this can be accessed from https://www.bappenas.go.id/id/berita-dan-siaran-pers/lapo-
ran-dari-skema-pendanaan-perikanan-dan-konservasi-laut-berkelanjutan-dengan-blended-finance/.

43
 Table 11. Actors in blended finance
Type of actors
Public and Philanthropic Donors
Private-philanthropic investors
(Foundations, non-profits, impact
investors with sub-commercial
return expectations, etc.)
Multilateral Development Banks
(MDBs) and Development
Financial Institutions (DFIs)
Private-commercial investors
(Funds/PEs/VCs, impact
investors with commercial return
expectations)
Institutional Investors
Banks (especially those based in
emerging markets)
Source: Adapted from Enclude (2018)
Role
• Providing grants for technical assistance
• De-risk projects using several de-risking instruments
• Convene different stakeholders
• Advocates the sustainable development agenda
• Increase sustainable development impact of investments
As these types of actors tend to have a higher risk-tolerance
compared to other actors, they are better positioned to
experiment in projects, sectors, and/or geographies with high
potential developmental impact as well as influence capital flow
through demonstrations and by taking subordinate positions
• Signal the market about commerciality of certain investment
opportunities through demonstrations
• Provide large ticket sizes (compared to other public investors
and private-philanthropic sources)
• Mitigate risks by taking risk layers, providing guarantees, etc.
• Is a critical intermediary to get institutional investors on board
as they can meet the ticket size and risk-return expectations
of institutional investors and get them on board
• Hold the necessary resources to bridge the funding gap to
achieve the SDGs
• Can manage a large spectrum of investments, from small
ventures to large size investments
• Play an important role in aggregation
• Hold on to the necessary resources to fill in the funding gap
to achieve the SDGs
• Due to large amount of capital held, they must deploy capital
in large amounts, which limits their ability to invest in smaller
propositions
• Focus more on less risky sectors and countries due to low
risk appetite
• Aggregating role at the national level
• Often small-scale investments (or larger projects through
scale syndicated loans)
• Focus on less risky sectors due to low risk appetite.
Guarantee mechanisms in combination with TA often effective
to demonstrate new business models
44
Case 2 Blended financing: Swap for climate adaption and impact investments

The NatureVest’s Blue Bond is a form of blended financing that targets the blue sector. The
initiative uses an innovative impact investment/sovereign debt swap deal designed to finance
marine conservation in the Seychelles26. Essentially, the debt-restructuring is converted so that
the Seychelles debt is structured to be more manageable, thus increasing the country’s ability
to service loans as well as making it more commercially enticing for private sector investors
to become involved. The restructuring used a combination of commercial capital and grants,
which took USD 29.6 million in impact capital loans and USD 5 million in grants to buy-back
Seychelles debt from its Paris Club creditors and the Government of South Africa. The debt
service payments were then redirected to an independent, public private trust fund called the
Seychelles Conservation and Climate Adaptation Trust (SeyCCAT). Debt service payments fund
three streams:

i) Repayment of impact investors,

ii) Climate risk reduction activities through improved management of coasts, coral reefs,
and mangroves, and

iii) The capitalization of SeyCCAT’s endowment.

The value of this debt swap to climate risk reduction and endowment capitalization is estimated
to be USD 13 million.

4.8 Impact Investment

Impact investments are investments made with the intention of generating positive, measurable,
social, and environmental impacts together with a financial return (GIIN, 2019). This type of
investment intentionally and explicitly seeks the dual objective of producing both financial and
social/environmental returns. These investments not only enhance the profile of an organization
by demonstrating social value that enables it to contribute towards sustainable development,
but can also generate a return on capital. It is this financial gain that separates impact investing
from more traditional Corporate Social Responsibility programs which also seek better societal
outcomes.

The potential in blue finance to an impact investor is considerable. The services provided by
marine bio-resources are valued conservatively at USD 2.5 trillion annually. Furthermore, the
United Nations Environment Programme estimates that over 60 percent of the world’s total
Gross National Product comes from areas within 100 kilometers of our coastline.

One of the impact investments in Indonesia within the blue sector is the Mirova Fund (2018). This
fund received USD5 million investment from FMO, the Dutch development bank. This brings the
fund total to over USD 22 million. This fund will incentivize the development and adoption of
sustainable fisheries by making debt and equity investments in fishing-related enterprises that

More information on this can be accessed from: https://www.convergence.finance/resource/3p1S3pSTVKQYY-

26

C2ecwaeiK/view

45
support the recovery of coastal fisheries in Indonesia and the Philippines. The general partner of
the Fund is a wholly owned subsidiary of RARE. RARE is an NGO that works on catalyzing behavior
change to achieve enduring conservation results.

Table 12. Impact investing in blue sector

Size/
Name Objective Activities Investors Category
Duration
Encourage Investing for Clean Energy Finance Green and
Capital sustaining global Blue
fisheries Financial Inclusion

Environmental Mar-
kets

Sustainable Infra-
structure

Sustainable Seafood

Water
Mirova’s Providing growth USD 132 OEDF Environ- Blue
(formerly capital to com- billion mental Defense
Athelia) panies that har- Fund
Sustainable ness the ocean’s
Ocean Fund natural capital
(SOF)
Conservation
International
Circulate Protecting South Circulate capital is an In 2019, US- PepsiCo, Co- Blue
Capital & Southeast investment manage- AID provid- ca-Cola, Danone,
Asia from plastic ment firm dedicated ed USD 35 Dow, Procter &
waste to financing innova- million, 50% Gamble, Unilever
tion, companies and loan-portfo-
infrastructure that lio guaran-
prevent the flow of tee.
plastic waste into the
world’s ocean while
advancing the circular
economy

Identify, incubate, and

invest opportunities
by collecting, sorting,
processing, and recy-
cling waste in south
and southeast Asian
countries

Source: Encourage Capital (2016); Blended Finance Funds (2020); USAID (2019); Tirumala and Tiwari
(2020)

46
4.9 Social and Development Impact Bonds
A social and development impact bond is used to finance development programs with money
from private investors who earn a return if the program is successful, which is paid by a third-
party. The outcomes measured are agreed upon at the outset and independently verified. With
greater focus on outcomes instead of inputs, impact bonds create space for more innovation,
local problem-solving, and adaptation. The key component of this mechanism is pre-financing in
blue sector programs by the private sector. The difference between a social and a development
impact bond is the involvement of donor agencies as full or joint funders of the outcome in
development impact bonds, but not in social impact bonds.

Impact bonds have a lot of potential in blue sectors. One benefit of impact investing through
bonds is that investments are made in commercially viable businesses that have a positive
impact on the livelihoods of large communities of people. For the investors, impact bonds can
be a great alternative to stabilize their portfolio, because they can be useful to complement
other investments which might avoid similar risks in the markets. The impacts focused on are
environmental, such as: ecotourism, recycling, sustainable fisheries, etc. The downside of impact
investing in Indonesia is that the sources of funding remain fairly narrow. Moreover, to track or
measure social and development impact, especially at commencement, is currently difficult as
there are no uniform protocols.

In the environmental realm, a pay-for-success environmental impact bond was launched by DC

Water, Quantified Ventures, Goldman Sachs, and the Calvert Foundation in 201627. The bond was
created with the intention of improving the infrastructure of the sewer system to reduce the
environmental impact of increasingly frequent storm water overflows linked to climate change. In
the pay-for-success scheme, focus is placed on measuring the reduction in storm water runoff
to allow for the possibility of additional payments. In these cases, a pay-for-success component
to a bond issuance may improve availability of public finance vehicles, create local partners,
and make local governments more receptive to considering environmental impacts and other
potential issues.

4.10 Insurance
The Government, through the Ministry of Maritime Affairs and Fisheries, is working to implement
Republic of Indonesia Law No. 7 of 2016 concerning the Protection and Empowerment of
Fishermen, Fish Cultivators, and Salt Farmers. As one of the KKP’s priority programs, in line with
Nawacita number five, this initiative was realized through the Fisherman Insurance Premium
Assistance (BPAN) program, which works to improve the quality of life of the Indonesian people.
The program seeks to provide financial support to families of fishers of up to IDR 200 million if the
fisher who holds the BPAN card dies while sailing. The Ministry of Maritime Affairs and Fisheries
has also made a follow-up technical guideline detailing the governance of fishers’ insurance
premium assistance.

27
More information on this can be accessed here: https://govlab.hks.harvard.edu/files/govlabs/files/dc_water_
environmental_impact_bond.pdf

47
Other insurance for blue finance has been supported by OJK (the Financial Services Authority),
who signed a Joint Agreement between the Fisheries Insurance Coinsurance and the Indonesian
Joint Funding Fintech Association (AFPI), both of which will provide access to loans, capital, and
the formation of a shared ecosystem designed to improve the quality of marketing and financial
management of fish farmers28. In 2020, it is hoped that Coinsurance will also start to expand
the marketing reach of insurance products not solely subsidized by the State Budget (APBN).
Such an initiative can provide literacy and increase the inclusion of the fishermen community by
launching fisheries insurance products without state budget subsidies. Therefore, this insurance
may help farmers and investors avoid risks associated with the uncertainty of the market without
causing undue harm to Indonesia’s natural resources.

Parametric Insurance

Parametric insurance is a promising alternative to traditional insurance to address catastrophic

weather events and their impact on developing nations such as Indonesia, especially with the
increasing adverse effects caused by climate change. Parametric insurance is a type of insurance
that is founded on an agreement to make a payment upon the occurrence of a discrete event.
This type of insurance is currently reliant on more subjective factors that are restructured into
products with defined parameters that might enable digitalization and administration. Parametric
insurance pay-outs are determined based on objective measures, such as the magnitude of a
weather event as a highly correlated index of measurements, and not through a claim adjuster
surveying the damage. It is this type of structure that makes it preferable to apply within Indonesia,
as it is a country that often suffers weather-based disasters such as flooding, earthquakes,
and other unexpected disasters that require a quick pay-out to rebuild and to hire emergency
workers29.

One of the advantages of using parametric insurance is that pay-outs can be received quickly,
because the parameter of catastrophe can be determined immediately. Thus, this type of
insurance might be able to accommodate the uncertainty found in businesses engaged in blue
finance to ensure the stability of practices. However, the downside of using parametric insurance
is that it can be difficult to understand. This downside can be overcome by hiring experienced
insurance companies that can utilize their knowledge and experience in developing climate-
based risks and managing those risks in capital markets.

28
More information on this can be accessed here: https://www.ojk.go.id/id/berita-dan-kegiatan/siaran-pers/
Pages/Siaran-Pers-OJK-dan-Kementerian-Kelautan-Luncurkan-Asuransi-Perikanan-Lele-dan-Budidaya-Udang.
aspx
29
More information on this can be accessed from World Bank (2018)

48
 Table 13. Parametric insurance

Cate-
Name Objective Activities Size/Duration Investors
gory
Crop and Live- The document was Offers macro-level crop Launched in - Green
stock Disaster launched with the and livestock catastro- 2003
Insurance in aim to provide basic phe insurance programs
Mexico (CADE) catastrophe protection CADENA Crop In-
for the most vulnera- Small-scale, vulnerable surance policies
ble farmers in Mexico farmers are the intend- are issued by the
ed beneficiaries public para-
1)The Catastrophe Pays to all framers in statal reinsurer
Agricultural Insurance the group if the policy is Agroasemex and
(SAC) programs for triggered three private
farmers, livestock insurance com-
producers, aqua- panies.
culture farmers and
fisherman The state gov-
ernment is nor-
2)In States where SAC mally the Insured
is not provided, the under CADENA
continues direct sup- coverage and is
port (Apoyo Directo) responsible for
compensation pay- distributing pay-
ments to farmers for ments to ben-
climatic disasters eficiaries in the
case of a trig-
gered payout.

In 2011: insured
8 million hect-
ares of crops, 4.2
million head of
livestock owned
by subsistence
small holders
farming 16.5 mil-
lion hectares

Drought Insur- ARC Replica brings Provides index insur- Since 2014, ARC Burkina Green
ance in Africa humanitarian actors ance against droughts to has paid out Faso, Sen-
(African Risk into ARC’s government African union member more than 34 egal, Niger,
Capacity) led risk management states. million USD to the Gambia,
approach. four drought-af- Mali, and
ARC provides liquidity fected countries: Mauretania
and effectively mitigates Mauritania, Niger, took out
the detrimental impacts Senegal, and insurance
of disasters on the poor Malawi. from ARC>
and vulnerable.

Currently, ARC is devel-

oping two new insur-
ance products against
floods and tropical
cyclones.

49
 Cate-
Name Objective Activities Size/Duration Investors
gory
ENSO Ca- Is an agricultural Currently the Green &
tastrophe protection scheme to SAC is focused in Blue
Insurance in deal with the damages 8 regions of the
Peru caused by catastrophic country’s high-
events, mainly in the lands (Apurimac,
strata of poor produc- Ayacucho, Caja-
ers. marca, Cusco,
Huancavelica,
This is not a traditional Huánuco, Pasco,
insurance and does and Puno) and
not cover production on the follow-
costs ing crops: Papa,
Alfalfa, Amiláceo
Corn, Quinoa,
Wheat, Grain
Barley, Bean,
Pea, Forage Oats,
Corn.

With a total of
550,296 hectares
of insured area
throughout the
country (2017)
Dana Pandan The WII protects Weather Index Insurance
in Indonesia smallholders against (WII) projects
insufficient rainfall
The model combines
weather index in-
surance, agricultural
extension, and support
from a microfinance
institution (MFI) in the
form of a cash loan
and good-quality farm
inputs.
Reef Insurance Reef insurance is a The coral insurance The policy tar- Tourism in- Blue
relatively new product scheme in Mexico is gets a 40-mile dustry, The
and one case is now attempting to finance stretch of the Rockefeller
under development ongoing maintenance of Mesoamerican Foundation,
in Mexico that was reefs as well as pro- Reef, the largest The Nature
developed to provide vide assured financing reef in the West- Conservan-
a buffer against storm to restore reefs in the ern Hemisphere, cy, Swiss
damage from waves. event of extreme storm which runs south Re.
damage. for 700 miles.

The payments will be The premiums

used to fund ongoing paid by hotel
coral and beach mainte- owners is around
nance schemes as well USD 1 million
as purchase insurance and USD 7.5 mil-
policies from Swiss Re. lion with around
USD 25 million to
USD 70 million in
payouts a year.
Source: World Bank (2018); Syngenta (2019); Swiss Re. (2019)

50
4.11 Crowdfunding
Crowdfunding is a financing platform which draws together small financial contributions from
retail investors to fund a specific project/initiative. It is a subcategory to FinTech’s alternative
financing, which is part of the broader category of financial innovations enabled by technological
advancements via market-based funding outside the traditional financial system. Crowdfunding
platforms have a medium to high relevance to the blue economy.

Crowdfunding has the potential to revolutionize the financing of SDGs. Crowdfunding is performed
via platforms that allow interaction between fundraisers and funders in a singular ecosystem.
There is scope for a donation-based crowdfunding platform that can be streamed to blue
projects, and if utilized can be an alternative means to harness the potential of innovative funding
for sectors engaged in the blue economy. An important note to add is that crowdfunding data will
be able to provide an unprecedented window into early-stage equity investment activity, which is
something that conventional funding is not able to do early on.

51
 Table 14. Crowd funding in the blue sector
Name Objective
Crowd The crowdfunding
funding campaign was used to
for Marine finance the installation
Protected of a modern, stand-
Area alone 5 kw photovoltaic
management system on Cousin
in Seychelles Island Special Reserve.
My Fiji Shark30 Is a conservation
initiative with the
mission to protect
and conserve all of
Fiji’s shark species and
their natural habitats
through ecotourism,
research, advocacy, and
education.
Carbon The Indonesian not-
Ethics. org31 for-profit organization
aims to decelerate
climate crisis through
education and blue
carbon ecosystem
conservation. It also
aims to concurrently
improve the livelihood
of coastal communities.
Source: Shah (2018)
30
More information on this can be accessed from https://www.myfijishark.com/
31
More information can be accessed from https://www.carbonethics.org/
Size/ Cate-
Activities Investors
Duration gory
Installed a solar system to EUR - Green
make energy supply of the 25,000 was
island independent from raised to
fossil fuels. cover the
costs
Reduced 15 tonnes of CO2
per year in the process.
The revenues generated 200 UNDP Blue
will be used to individually Pacific
support existing shark named Office in
conservation measures, sharks Fiji, Beqa
find research, purchase Adventure
research material, create Divers (BAD)
new shark conservation
and inshore fisheries
management programs,
and build an independent
shark lab to conduct
in-country shark
conservation research.
CarbonEthics.org provides Since 2019, The general Blue
various activities which the total public can
decelerates climate crisis carbon buy the
through carbon offsetting. Blue Carbon
It allows funders to Package.
offset their carbon Other
footprint calculated by partners
the carbon calculator by range from
funding the restoration business,
and conservation of retailers, to
blue carbon ecosystem NGOs.
through the planting of
mangrove trees, seagrass,
seaweed and corals.
The planting activities
are conducted through
a partnership with local
farmers. Other activities
include providing eco-
tourism packages.
52
5
Safeguarding Blue
Investment

53
54
5
SAFEGUARDING BLUE INVESTMENT

Billions of people depend on the oceans, both for their livelihood and as a source of food. The
transboundary nature of oceans means increased efforts and interventions are needed to
conserve and sustainably use ocean resources at all scales. The safeguards found in this guideline
are therefore essential, to ensure environmental and social risks can be effectively minimized.
According to the BNC+ Framework (2019), the following steps need to be conducted to effectively
minimize risk:

• Screening for the exclusion of harmful activities and sectors,

• Evaluation to enable in-depth analysis of key Environmental & Social Risk (E&S) issues,

• Development of an E&S action plan if E&S issues are significant, and

• Monitoring of E&S performance over the course of the project or activity.

In addition to the screening process, it is also important to ensure good governance and business
integrity practices, such as anti-money laundering, anti-corruption, whistleblowing, etc., are
established and adhered to for selected projects. In terms of safeguarding, the following section
provides an overview of national standards and international benchmarks recommended by the
BNC+ Framework (2019).

5.1 National Standards

In Europe since the issuance of EU Directive 2001/42/EC (commonly referred as the strategic
environment assessment (SEA) or the SEA Directive) in 2001, every member of the European
Union is required to conduct SEA plans and programs. SEA is a systematic process for evaluating
the environmental consequences of a proposed policy, plan, or program to ensure environmental
concerns are fully included and appropriately addressed at the earliest stage of decision making
on par with economic and social considerations.

In Indonesia, SEA or KLHS (Kajian Lingkungan Hidup Strategis) are needed as SEA overcomes
the weaknesses and limitations of environmental impact analysis, and SEA is more effective at
encouraging sustainable development. In addition to SEA, the GoI has several regulations that act
as safeguards for blue investments.

55
 Table 15. National safeguards in the blue sector
Blue Investment
POJK No. 1 of 2016
Regulation of the Minister of Industry No.
31/M-IND/PER/8/2017
Preservation of Marine and Sea Biota
Law  No. 11 of 2020 regarding Job Creation Act
Law No. 45 of 2009 concerning Amendment to
Law No. 31 of 2004 concerning Fisheries
Presidential Regulation No. 56 of 2019
Presidential Regulation No. 83 of 2018
Regulation of the Minister of Maritime Affairs and About the business of sea capture in regional
Fisheries No. 57 of 2014
Regulation of the Minister of Maritime Affairs and About business in the fishing of sea capture in
Fisheries No. 12 of 2012
Government Regulation No. 27 of 2012
Government Regulation No. 46 of 2016
Government Regulation (PP) No. 74 of 2020
OJK Regulation No. 51/POJK.03/2017
Source: Author compilation
56
Concerning investment in state securities for
non-bank financial service institutions
The second amendment to the Regulation
of the Minister of Industry No. 29, regarding
machinery and production materials in state
industry development or development in the
framework of investment.
About Indonesian marine and fisheries
governance, includes simplification of sector
business licensing and ease and Investment
requirements in the marine and fishery sector.
Covering various issues regarding the
development, management and conservation
of fisheries, including management and
conservation of fish resources, fishing gear
and fishing methods, aquaculture, fishing
vessels and fishing ports, provisions to favor
minor fishermen and minor fish cultivators,
control and law enforcement in the handling
of criminal acts in the fishery field, application
of sanctions, etc.
National Action Plan Integrated Management of
National Parks and National Water Conservation
Areas 2018 - 2025.
About Sea Waste Management
areas of the Republic of Indonesia
Indonesia
About environmental permits
About procedures for strategic environmental
assessment
Concerning Indonesia Investment Authority,
Indonesia Investment Authority (LPI), aims to
increase and optimize the investment value
that will be managed in the long term to
support sustainable development.)
About the Implementation of Sustainable
Finance for Financial Services Companies,
Issuers, and Public Companies
5.2 International Standards
Within large-scale infrastructure projects it is crucial to have safeguards that can help avoid
potential risks and failures throughout the project. Some safeguard standards are in line with
both blue finance and established national standards, yet additional international standards
provide important considerations to strengthen the program.

Table 16. International safeguards in the blue sector

Guidelines for the preservation of sea habitats

World Bank Operation Manual
on Natural Habitats OP/BP 4.04
Forests OP/BP 4.36 (World
Bank)
CBD Voluntary guidelines for
safeguards in Biodiversity
Financing Mechanisms
Voluntary Guidelines for
Securing Sustainable Small-
Scale Fisheries (FAO 2015)
Voluntary Guidelines for
Securing Sustainable Small-
Scale Fisheries in the Context
of Food Security and Poverty
Eradication (SSF Guidelines)
by the FAO Committee on
Fisheries (COFI) in 2014.
Natural Capital Protocol (NCC
2016)
IUCN Gender Equality Seal
Policies about the conservation of natural habitats, like other measures
that protect and enhance the environment, are essential for long-term
sustainable development. Therefore, the Bank supports the protection,
maintenance, and rehabilitation of natural habitats and their functions
in its economic and sectoral work, project financing and policy
dialogue. The Bank supports borrowers and expects them to apply a
precautionary approach to natural resource management to enable
opportunities for environmentally sustainable development.
The objective of this policy is to assist borrowers to harness the potential
of forests to reduce poverty in a sustainable manner, integrate forests
effectively into sustainable economic development and protect the
vital local and global environmental services and associated values of
forests (mangrove).
The voluntary guidelines on safeguards in biodiversity financing
mechanisms are taken into account when selecting, designing, and
implementing biodiversity financing mechanisms and when developing
instrument specific safeguards.
The first internationally agreed instrument dedicated entirely to the
small-scale fisheries sector.
To promote secure tenure rights and equitable access to land, fisheries,
and forests as a means of eradicating hunger and poverty as well as
supporting sustainable development and enhancing the environment.
The Protocol is a framework designed to help generate trusted,
credible, and actionable information for business managers to inform
decisions in terms of stocks of renewable and non-renewable natural
resources (e.g. plants, animals, air, water, soils, minerals) that combine
to yield a flow of benefits to people.
The policy recalls, reaffirms and further strengthens IUCN’s commitment
to realizing gender equality and women’s rights and empowerment
and puts into place requirements for embedding a gender-responsive
approach into its programme and project portfolio.

57
Guidelines for the preservation of sea habitats
UN Guiding Principles on
Business and Human Rights
ILO Core Labor Standards
(which are factored into IFC
Performance Standard 2)
Code of Conduct for
Responsible Fisheries (FAO
2015)
Marine Stewardship Council
(MSC) and Aquaculture
Stewardship Council (ASC)
These Guiding Principles are grounded in a recognition of: (a) States’
existing obligations to respect, protect and fulfill human rights and
fundamental freedoms; (b) The role of business enterprises as
specialized organs of society performing specialized functions, required
to comply with all applicable laws and to respect human rights; (c)
The need for rights and obligations to be matched to appropriate and
effective remedies when breached.
Recognizes that the pursuit of economic growth through employment
creation and income generation should be accompanied by the
protection of the fundamental rights of workers. For any business,
the workforce is a valuable asset, and a sound worker-management
relationship is a key ingredient in the sustainability of a company. Failure
to establish and foster a sound worker-management relationship can
undermine worker commitment and retention and can jeopardize a
project.
To set international standards of behavior for responsible practices
with a view to ensuring the effective conservation, management, and
development of living aquatic resources with due respect for the
ecosystem and biodiversity.
The MSC Fisheries Standard measures the sustainability of wild-
capture fisheries. The Standard is open to all wild-capture fisheries,
including those from the developing world.
The joint ASC Standard rewards environmentally sustainable and
socially responsible aquaculture production.
58
6
Conclusion and
Recommendations

59
60
6
CONCLUSION AND RECOMMENDATIONS

Indonesia, as the largest archipelagic country in the world, has significant potential to develop its
blue economy. Yet the full potential remains untapped, with Indonesia’s blue economy (excluding
oil and gas) contributing a mere 3% to GDP. Even including oil and gas, the contribution is only
6% GDP. Thus, it is imperative for the Government of Indonesia to target and initiate plans to
increase blue sector economic contribution to achieve 12.45% of GDP by 2045. Efforts to achieve
this target require additional investment and strong financial strategies.

To ensure efficiency in financial resources utilization, this document identified eight sectors
which are paramount to the strengthening of the blue economy and assessed their relevance to
environmental, economic, and social sustainability. These eight sectors have been categorized
navy blue, sapphire blue, or sky blue, to demonstrate high, moderate, or modest relevance to the
aspects of sustainability. Navy blue sectors include (1) waste management, (2) marine and coastal
protection and restoration of biodiversity and ecosystems, and (3) sustainable fisheries. Sapphire
blue sectors consist of (1) disaster management and risk reduction, (2) marine renewable energy,
(3) marine biotechnology, and (4) ecotourism. Lastly, sky blue sectors include the (1) marine
technology sector.

At the same time, environmental damage can be incurred if there is overutilization of marine and
coastal resources. Therefore, the identification process of an investment gap in blue economy
sectors to achieve the national target of GDP contribution takes into consideration possible
resource depletion and the amount of investment required to remedy it. The value of average
annual investment required to achieve the target of 12.45% GDP contribution in 2045 ranges from
IDR 1,928.9 trillion, assuming no marine resource depletion, to IDR 3,307.21 trillion, assuming an
annual marine resource depletion rate of 3%. These simulation results highlight the urgent need
to find suitable financial resources and consider environmental implications of blue economy
sector development.

As a measure to address these two prerequisites, this document offers various options from
capital markets for investment in the blue economy in a sustainable and innovative way. Wide-
ranging stakeholders are expected to be involved, such as the Government, private sectors, and
general public, through investment in established financial instruments like blue bonds/sukuk,
trust funds, impact investment, SIB and DIB, and blended financing, or other innovative financing
options such as crowdfunding, CSR, and religious funds. Existing local financial institutions such
as BLU LPMUKP may also be utilized to cater to financing needs stemming from non-bankable

61
marine or fisheries enterprises or projects, provided that good coordination with local banks is
in place to avoid financing overlaps. To further ensure sustainable use of ocean resources, this
document also details the safeguarding standards of blue investment, both at the national and
international levels.

It should be noted that this document serves is only one of a range of measures necessary for
Indonesia to develop its blue economy. To expedite the development of Indonesia’s blue economy
sectors, there are at least four more suggested ventures. The first two measures are related to the
development of follow-up assessment and guidelines stemming from this strategic document.
The first is the need to develop a follow-up document which identifies the specific financing
needs of each blue sector from public and private parties, as well as the subsequent specific
steps of project-level impact analysis to determine feasibility. Appendix A7 details the proposed
outline of such a follow-up document. Secondly, while laying the foundations of Indonesia’s
blue bond framework, this document suggests an outline for routine reporting of the allocation
and impacts of projects financed by blue bonds. The outline, described in Appendix A8, aims to
support relevant stakeholders in providing accountability of blue bond investments and measure
their actual impact on the ocean environment, as well as achievement of SDG14 indicators.

The third and fourth recommendations relate to the practical measures of blue economy
expansion. To holistically track the development of Indonesia’s blue economy, Government
and relevant stakeholders may refer to the Blue Economy Development Index (BEDI)32 which is
currently in development. Indicators considered in the calculation of the index include the extent
to which ocean resources are available for development (ocean capital), availability of conditions
which allow sustainable use of ocean resources (enabling factors), the degree of equity present
in blue economy sectors (social capital), and the measurement of economic growth patterns in
the blue economy (sustainable growth). Thus, the index encapsulates various aspects of the blue
economy which allows monitoring of its development, not just from an economic perspective
but also social, technological, and environmental.

Finally, there needs to be an established blue finance ecosystem which comprises the stakeholders
involved, ranging from private and public investors to line ministries. This ecosystem should
center around a platform developed and managed by the Coordinating Ministry of Maritime Affairs
and Investment and be supported by UN agencies and development partners, linking financial
resources from private/public investors to blue economy projects. In this case, the financial
service authority (OJK) serves two main purposes which include the monitoring and provision
of blue/sustainable investment guidance for activities in the financial services sector. Social
enterprises experienced in ocean environmental conservation and the line ministries enhance
the ecosystem by feeding information related to unfunded projects to the platform or directly to
public investors.

32
The Blue Economy Development Index was presented during the Blue Financing Strategic Document Launch
held on 19 August 2021 by Dr. Ir. Luky Adrianto, M.Sc., Institut Pertanian Bogor (IPB)

62
 Figure 10. Proposed Blue Financing Ecosystem

Blue Financing Ecosystem

Information feeding

Supported by UN
Developed and
agencies and
managed by
development
Kemenkomarves
partners

Line ministries

Public investors Bridging platfrom

Information
linking resources
Blue economy

feeding
from
private/public project
Private investors investors to blue
economy projects
CSOs/NGOs/Social
Enterprises
provision and
monitoring
Guidance

Financial Service
Authority (OJK)

63
References &
Appendices

65
66
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APPENDICES Appendix Table A1. Assessment matrix of the blue economy sectors
Appendix Table A1. Assessment matrix of the blue economy sectors

Biodiversity and
Protection and
Restoration of
Management

Management

Eco-tourism
Ecosystems

Sustainable

Marine Bio-
Marine and

technology

technology
Renewable

Reduction
and Risk
Disaster
Coastal

Fishery

Energy
Marine

Marine
Waste
Description
Environmental

Areas of natural Sectors/projects with potential influence on the 1 1 1 1 1 1 1 0

importance, biodiversity preservation of areas of natural importance and
biodiversity.
Renewable and non- Sectors/projects which could affect the quality 1 1 1 1 1 1 0 1
renewable resources and availability of renewable resources usage
and reduce the use of non-renewable
resources.
Water, soil, air, climate Sectors/projects with possible influence on 1 1 1 1 1 1 1 1
water, soil, air, and climate.
Environmental disasters, Sectors/projects with possible influence on the 0 1 1 0 1 0 0 0
risk reduction of environmental disaster impacts
and management of its risk.
Total Score (0-4) 3 4 4 3 4 3 2 2

Economic

Income Sectors/projects with indication of 0 1 1 0 0 1 0 1

maintaining/increasing levels of income.
Employment Sectors/projects with indication of 1 1 1 1 0 1 1 0
maintaining/increasing levels of employment.
Competition, innovation Sectors/projects with possible consequence on 1 1 1 1 1 1 0 1
economic competitiveness and innovation
capacity.
Public-sector enterprises Sectors/projects which could affect the 1 1 1 0 0 0 0 0
efficiency and quality of public sector
management.

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 Biodiversity and
Protection and
Restoration of
Management

Management

Eco-tourism
Ecosystems

Sustainable

Marine Bio-
Marine and

technology

technology
Renewable

Reduction
and Risk
Disaster
Coastal

Fishery

Energy
Marine

Marine
Waste
Description

Total Score (0-4) 3 4 4 2 1 3 1 2

Social

Health, safety Sectors/projects with possible effect on the 1 1 1 1 1 1 1 1

protection and promotion of human health and
safety.
Culture, values Sectors/projects which could influence the 1 1 1 1 1 1 1 0
promotion and preservation of social values and
resources.
Gender equality Sectors/projects which could influence the 1 1 1 1 1 0 1 0
existing condition of gender equality in
treatment and opportunities.
Social inclusion Sectors/projects with possible influence on 1 1 1 1 1 0 1 1
inclusion and protection of local indigenous
communities, women, persons with disability,
ageing population, and other minority groups.
Total Score (0-4) 4 4 4 4 4 2 4 2

OVERALL TOTAL SCORE 10 12 12 9 9 8 7 6

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 Appendix
Appendix TableTable A2. Assessmentsheet
A2. Assessment sheetof
of each
each of
ofthe
theblue economy
blue sectors
economy sectors
SECTOR: SUSTAINABLE FISHERY
Criteria Description Assessment
Score 0/1
Environmental
Areas of natural Indonesia has experienced a high level of decline in fishery availability, so it requires an investment to improve sustainable 1
importance, biodiversity fisheries, which will help in the process of preserving fish biodiversity (see: FAO, 2003).
Renewable and non- Indonesia has experienced a high level of decline in fishery availability. Projects in this sector, such as fish stock 1
renewable resources assessments, are relevant in the process of conserving fish biodiversity (see: FAO, 2003).
Water, soil, air, climate Fish consumption already has the lowest carbon emission compared to other meat consumption, hence minimum relevance
to climate change. 1 kg of fish consumption translates into 5 kg carbon production, compared to red meat whose 1
consumption produces 50 to 750 kg of carbon (see: Parker et al., 2018).
Environmental disasters, Fisheries sector is relevant to post-disaster recovery, as was the case in Vanuatu where terrestrial-based food became
1
risk scarce after a natural disaster (see: Eriksson et al., 2017).
Economic
Income On average, fisheries sector contributed 2.39% to Indonesia’s GDP between 2010 and 2020 (see: BPS, 2021). 1
Employment The fisheries sector alone accounts for 7 million workers, or 5.06% of Indonesia’s workforce (see: World Bank 2021). 1

Competition, innovation Sustainable fisheries are relevant to the fostering of innovation as advancement in aquaculture system, data collection for
1
fish stock assessment such as EU’s SMARTFISH H2020 (see: European Union, 2018)
Public-sector enterprises IUU (illegal, unreported, and unregulated) fishing implies reduction in government capacity in managing fish stocks
sustainably and lost revenue from forgone tax and other fees. This implies sustainable fisheries’ relevance in remedying the 1
circumstances through better enforcement of sustainable fishing regulations (see: Agnew et al. 2009)
Social
Health, safety Fishing, aquaculture, and seafood industry has been deemed one of the key hazardous industries by FAO therefore has high
1
relevance to health and safety of workers in the sector (see: FAO34).
Culture, values The values of sustainable fisheries are in line with Indonesian local wisdom in fisheries management such as Panglima Laot
and Sasi Laut which puts heavy emphasis on sustainable fishing and conservation of the environment (see: Sari and Latifah, 1
2021).
Gender equality Based on a study in Spain, more than half of employment creation from sustainable fisheries will go to men. Indeed, the
overrepresentation of male fishers in the sector implies the relevance of this sector to the exacerbation or improvement in 1
gender equality (see: Camara and Santero-Sanchez 2019)
Social inclusion Investment in sustainable fishing efforts help protect small-scale fishers as unsustainable fishing practices by large
1
operators have left them a very small share of catch or geographical space for aquaculture (see: Cohen et al. 2019).

34
More information can be accessed here: http://www.fao.org/blogs/blue-growth-blog/despite-advances-in-health-and-safety-operations-fisheries-remains-a-dangerous-sector/ru/?rss=1

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SECTOR: WASTE MANAGEMENT
Criteria Description Assessment
Score 0/1
Environmental
Areas of natural The ocean plastic crisis has already affected 800 marine and coastal species. Indonesia has the largest reef area in the world
importance, biodiversity covering 51,020 km. Yet in 2010, around 10.10% of the plastic waste is not managed properly, the highest figure among 1
countries with similar sized reef areas, threatening Indonesia’s rich coral reef diversity. Improved waste management
strengthens efforts at preserving marine biodiversity (see: UNEP 2019).
Renewable and non- Marine plastic debris collected from the ocean can be reused for construction applications, or turned into energy and fuels,
renewable resources hence reducing the use of non-renewable resources albeit at a much smaller scale (see: Awoyera and Desina, 2020; Khoo, 1
2019).
Water, soil, air, climate The lack of solid waste management in Indonesia has resulted in ocean pollution, mostly by plastic waste. This pollution has
resulted in sediments and microplastics, even in fish, which is hazardous to human health. Investment in ocean waste 1
management has the possibility to minimize the rate of pollution (see: Lestari and Trihadiningrum, 2019).
Environmental disasters, Waste management projects indirectly affect environmental disaster risk management through reduction of the release of
risk powerful greenhouse gases, hence impeding global warming and rising temperatures, as well as the environmental disasters 0
which may come with it (see: WWF, 2019).
Economic
Income The waste management and water supply sector currently makes an abysmal contribution to Indonesia’s GDP at 0.07%. This
is unfortunate, as studies have shown waste management can be both cost and carbon effective, implying an economic case 0
for it (see: BPS, 2021; Colenbrader et al., 2015).
Employment Investment in waste management initiatives may result in job creation. It is estimated that circular economy practices will 1
create 9 to 25 million jobs worldwide, and ocean waste prevention contributes to the stipulation (see: WBCSD 2017).
Competition, innovation Projects in ocean waste management foster innovation in technology to eliminate ocean plastic pollution, such as the use of a 1
passive system by The Ocean Cleanup.
Public-sector enterprises Quality and efficiency of the public sector is influenced through better understanding of waste management. 1

Social
Health, safety Studies have identified various evidence for microplastic ingestion by fish in Indonesia. Efforts aimed at managing ocean 1
waste are relevant in reducing its prevalence (see: Suwartiningsih et al., 2020; Cordova et al., 2019; Hadibrata et al., 2021).
Culture, values Studies have shown that the adverse impacts of ocean plastic pollution on marine biodiversity also have negative effects on 1
the wellbeing of humans. Visually, it may also cause mental distress (see: Balance et al., 2000; Beaumont et al., 2019)
Gender equality Prevention of plastic pollution is indirectly related to gender equality in the sense that men and women have distinct 1
consumption patterns and face different magnitudes of adverse impacts from plastic pollution (see: SEA Circular35)
Social inclusion Coastal waste collection has the potential to socially include waste pickers, junk shops, and aggregators in the process, most
of whom work in the informal sector. Roughly 500,000 tonnes of plastic waste or 7% of Indonesia’s total plastic waste were 1
collected by informal workers (see: WEF, 2020; Marello and Helwege, 2018)

35
More information can be accessed here: https://www.unep.org/cobsea/resources/publication/issue-brief-2-gender-equality-and-preventing-plastic-pollution

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SECTOR: ECOTOURISM
Criteria Description Assessment
Score 0/1
Environmental
Areas of natural The development of ecotourism in coastal areas influences biodiversity and natural conditions. Land clearings of such projects
importance, biodiversity need to be conducted sustainably without hampering mangrove vegetation, as they might result in coastal abrasion and the 1
decomposition of coastal plants (see: Hall, 2001).
Renewable and non- Sustainable marine eco-tourism has the potential to be developed with the use of solar energy, as in Mediterranean islands. It
renewable resources implies the sector’s indirect relevance to efforts aimed at increasing the usage of renewable energy (see: Michalena and 0
Tripanagnostopoulos, 2010).
Water, soil, air, climate Currently, business-as-usual marine tourism is responsible for high levels of water pollution (due to waste disposal practices)
as well as air pollution (mainly due to gas emissions of cruise ships). At the same time, other marine tourism activities also
contribute to the degradation of coastal waters, especially those found close to cities. With environmental principles ingrained 1
in the development of marine eco-tourism, it will be relevant in restoring the environment from pollution without forgoing
income opportunities from tourism (see: Tegar and Gurning, 2018).
Environmental Marine eco-tourism indirectly influences the risk reduction of ocean environmental disaster through enhanced public 0
disasters, risk awareness, reduced plastic waste, and possible rehabilitation of coral reefs (see: Arismiyanti, 2017).

Economic
Income Between 2010 and 2020, Indonesia’s marine tourism contributed 0.01% on average to GDP, the smallest contribution of any
blue economy sector. However, development of marine ecotourism may create additional jobs for local communities, hence 0
generating income for them (see: BPS, 2016).
Employment Tourism is labor intensive and investment in the sector may create more employment opportunities in the area. One extra job 1
in Indonesia’s hotel and restaurants industry indirectly generates 1.5 additional jobs (see: ILO, 2011).
Competition, innovation Marine ecotourism may indirectly foster the use of technology in the preservation of biodiversity (see: Muhammad and Ahmad, 0
2018).
Public-sector Public sector efficiency will be indirectly influenced through public-private partnerships which may be put in place to carry out 0
enterprises projects (see: APEC, 2005).

Social
Health, safety In 2019, Indonesia still ranked low with regards to Health and Hygiene of their tourism sector. Projects in this sector have the 1
potential to improve access to water and medical intervention for tourists (see: WEF, 2019) .
Culture, values Development of ecotourism projects tend to influence existing local culture and social values, as was the case in Ubud, Bali
and Komodo National Park. Community empowerment programs have the ability to ensure local communities preserve their 1
culture as part of tourism sustainability (see: Walpole and Goodwin, 2001; Sutawa, 2012).
Gender equality Coastal ecotourism projects may facilitate further improvement in gender equality, as most workers in this sector are women 1
(see: ILO, 2010).
Social inclusion Ecotourism projects may increase the welfare of local communities. However, projects in the sector need to be cautiously
implemented as failure to include local communities in the process may result in exacerbated inequality. It implies the 1
relevance of this sector in social inclusion (see: Leposa, 2019).

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SECTOR: MARINE RENEWABLE ENERGY
Criteria Description Assessment
Score 0/1
Environmental
Areas of natural The construction process of the plant indirectly affects marine life. As more fish are likely to be attracted to the plant, it
importance, increases the incidence of fishing in the surrounding area, hence affecting the population of fish (see: Octaviani et al., 2016)
1
biodiversity
Renewable and non- Marine renewable energy (wave, tidal, and ocean thermal) in Indonesia could contribute up to 60,000 MW. This is a great
renewable resources potential, as these are renewable resources, hence it will reduce the use of non-renewable resources (see: Iswadi et al.,
1
2018).
Water, soil, air, climate From an ecological perspective, ocean thermal energy conversion brings positive effects to the ocean surface as it enriches
the nutrient of the ocean water. Additionally, 1 MW OTEC could produce 4,500 cubic meters of fresh water per day (see:
1
Riyanto, 2017; Koto and Negara, 2016).
Environmental OTEC has no relevance to environmental disaster risk reduction as its plants are heavily affected by natural disasters and
0
disasters, risk tend to be located in sites with low earthquake risk and quiet waters (see: Kim, 2020).

Economic
Income Between 2010 and 2020, Indonesia’s marine renewable energy sector which comprises of electricity contributed 0.01% to the
GDP, on average. However, construction of OTEC, floating wind turbines, and wave energy turbine may create additional jobs 0
(see: BPS, 2016).
Employment Studies have shown that reaching Indonesia’s full capacity in producing renewable energy may require creation of 70,000 – 1
190,000 more jobs (see: Elfani, 2011).
Competition, Research projects into the potential of Ocean Thermal Energy Conversion and Ocean Current Power Plants (PLTAL) in
innovation Indonesia contribute to innovations on how to effectively utilize these resources (see: Octaviani et al., 2016; Orhan and 1
Mayerle, 2017).
Public-sector Public sector efficiency is indirectly affected through research contributions into the potential of Ocean Current Power 0
enterprises Plants (see: Iswadi et al., 2018).

Social

Health, safety There are safety concerns associated with the OTEC power system, such as electrical hazards, revolving machines,
compressed gas use, and heavy material-handling equipment. The Closed Cycle of OTEC (CC-OTEC) power plant is less 1
dangerous to run because it uses a low-temperature, low-pressure Rankine cycle (see: Octaviani et al., 2016).
Culture, values Marine renewable energy has cultural relevance through possible increase in the national electrification ratio in Indonesia, 1
which is currently 83.4% (see: Rahmawati et al., 2021; Andrawina et al., 2017).
Gender equality A survey conducted by International Renewable Energy Agency (IRENA) shows that women contribute 32% to the renewable 1
energy sector (see: IRENA, 2019).
Social inclusion Marine renewable energy enhances social inclusion through possible increases in the national electrification ratio in 1
Indonesia, which is currently 83.4% (see: Rahmawati et al., 2021; Andrawina et al., 2017).

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SECTOR: DISASTER MANAGEMENT AND RISK REDUCTION
Criteria Description Assessment
Score 0/1
Environmental
Areas of natural Investment in disaster management infrastructure projects, such as a sea wall, may influence marsh and intertidal rocky
importance, biodiversity shores, which may be the habitat for various coastal marine species. Seawall projects, especially those with hard structures, 1
are particularly detrimental to the preservation of these habitats. In this case, soft structures, such as a mangrove green belt,
is much preferred (see: Bozek and Burdik, 2005).
Renewable and non- Sea walls have the opportunity to couple as wave energy converters (WECs), utilizing ocean waves to create energy and acting 1
renewable resources as hydropower plant (see: Buccino et al., 2015).
Water, soil, air, climate Investment in ocean disaster prevention soft structures, such as mangrove green belts, has the potential to fight climate 1
change through carbon sequestration (see: Mudiyarso et al., 2015).
Environmental Establishment of reliable ocean disaster early warning systems and structural preventions may hugely minimize the adverse 1
disasters, risk impacts of calamity and avoid preventable casualties (see: UNDRR et al., 2019).
Economic
Income The recovery phase of ocean disaster management affects income creation indirectly through securing/preparing sectors and
rebuilding infrastructures which may provide employment subsequent to natural disasters. An example is the cash-for-work 0
program in Aceh, after the 2004 tsunami (see: Thorburn, 2009; Palliyaguru, 2007; Doocy et al., 2006).
Employment The recovery cycle of ocean disaster management affects employment indirectly through securing/preparing sectors and
rebuilding infrastructures subsequent to natural disasters. An example is the cash-for-work program in Aceh, after the 2004 0
tsunami (see: Thorburn, 2009; Palliyaguru, 2007; Doocy et al., 2006).
Competition, innovation Investment in disaster management and risk reduction has the potential to leverage technology and innovation. One example is 1
the central Sulawesi tsunami response (see: UNICEF, 2019).
Public-sector Involvement of community groups in research projects on disaster management and risk reduction indirectly aids government 0
enterprises capacity in delivering an improved disaster mitigation, preparedness, response and recovery (see: Ahrens and Rudolph, 2006).
Social
Health, safety Establishment of reliable ocean disaster early warning systems and structural preventions may hugely minimize adverse 1
impacts and avoid preventable causalities (see: UNDRR et al., 2019).
Culture, values Soft erosion-prevention structure development, such as a mangrove belt, is in line with existing traditional local values such as 1
Kewang in Ambon (see: Salampessy et al., 2015).
Gender equality Disasters tend to differently affect men and women due to gender-based vulnerabilities. Disaster management is relevant in 1
exerting efforts to make sure everyone is included in every part of the stages, from mitigation to recovery (see: UNIFEM, 2009).
Social inclusion Efforts in building soft erosion-prevention structure development, such as a mangrove belt, can involve existing traditional 1
communities such as those who practice Kewang in Ambon (see: Salampessy et al., 2015).

89
SECTOR: MARINE AND COASTAL PROTECTION AND RESTORATION OF BIODIVERSITY AND ECOSYSTEMS
Criteria
Environmental
Areas of natural
importance, biodiversity
Renewable and non-
renewable resources
Water, soil, air, climate
Environmental disasters,
risk
Description Assessment
Score 0/1
Proper management of marine protected areas provides benefits of coastal protection, species survival, and reproduction. It 1
has also been proven to enrich fish species diversity (see: Lester et al., 2009; WWF, 2015).
Marine protection areas are indirectly relevant to the generation of energy through restoration of microalgae biodiversity 1
which can be utilized for energy production (see: Kaisar et al., 2015).
Mangroves generate blue carbon sequestration. A study shows that MPAs can avoid mangrove loss by 14,000 ha and prevent 1
13 million metric tons of carbon emissions in Indonesia (see: Miteva et al., 2015).
Mangrove plantations have the potential to protect coastal abrasion, provide storm protection, and minimize the impacts of
tsunami waves. Coral reef rehabilitation protects coastlines from storms and erosion (see: UNEP, 2014; Cesar, 1996). 1

Economic
Income There is an economic case for marine protected areas as shown by the WWF, who projected expansion of MPAs will have a
24% economic rate of return. A green economic valuation in South Sulawesi shows that converting mangroves into 1
commercial aquaculture is not economically beneficial when it takes into account the cost it might take for environmental
rehabilitation (see: WWF, 2015; Malik et al., 2015).
Employment Globally, expansion of MPAs by 30% creates an optimistic estimation of 180,000 job creation by 2050 (see: WWF, 2015). 1

Competition, innovation Efforts in maintaining MPAs include enforcing the regulations, keeping an eye on species movement, and monitoring illegal
activities. Such efforts may indirectly foster technological advancement and innovation (see: Gunn and Block, 2001; Global 1
Fishing Watch36).
Public-sector enterprises A coherent, transparent, and accountable marine protection system may indirectly enhance public sector efficiency (see: 1
Blasiak et al., 2019).
Social
Health, safety Mangrove plantation and coral rehabilitation has the potential to protect coastal abrasion, provide storm protection, and 1
minimize the impacts of tsunami waves, therefore avoiding casualties in natural disasters (see: UNEP, 2014; Cesar, 1996).
Culture, values Development of mangrove belts is in line with existing traditional local values, such as in Ambon, Indonesia (see: 1
Salampessy et al., 2015).
Gender equality Marine protection projects may indirectly influence gender inequality through gender mainstreaming in marine protection
projects and involvement of women in ocean management and research. Such practices have been implemented in the 1
Philippines and India (see: UNEP, 2019).
Social inclusion There have been cases of community-based mangrove management in Indonesia which include local and indigenous 1
communities in the decision making process (see: Damastuti and de Groot, 2017; Damastuti de Groot, 2018).

36
More information can be accessed here: https://globalfishingwatch.org/
90
SECTOR: MARINE BIOTECHNOLOGY
Criteria Description Assessment
Score 0/1

Environmental
Areas of natural Direct conversion of natural areas for algae biofuels will influence biodiversity negatively. Improved land use planning needs 1
importance, biodiversity to be in place for the production to not interfere with biodiversity (see: UNEP, 2009).
Renewable and non- Algal biofuels include bio-diesel, bio-ethanol, and bio-gasoline. Investment in R&D for marine biotechnology, specifically on
renewable resources biofuels from marine algae fosters the production and use of renewable energy. Compared to terrestrial plants, algal 1
biofuels are more beneficial as they have higher photosynthesis rates and their exploitation can co-exist with fresh water
and food supply (see: Querellou et al., 2010; OECD, 2013).
Water, soil, air, climate Microalgae-based biodiesel production can use wastewater sources, contributing to the process of water recycling. 1
Additionally, they have a lower carbon footprint than biofuel feedstocks (see: Farooq et al., 2015; OECD, 2013).
Environmental disasters, Investment in marine biotechnology indirectly affects environmental disaster risk reduction through the use of algae-based
risk biofuels which have a lower carbon footprint, hence combatting climate change and its disastrous implications at the same 0
time (see: UNEP, 2009).
Economic

Income Between 2010 and 2020, Indonesia’s marine bio-technology energy sector contributed 0.02% to the GDP, on average.
However, research and development in the field as well as mass production may create additional jobs and income (see: 1
BPS, 2016).
Employment Marine biotechnology creates jobs in academic positions, as well as manufacturing subsectors, such as food, 1
pharmaceuticals, nutraceuticals, and cosmetics (see: OECD, 2013).
Competition, innovation Due to ongoing attempts of science and industry to minimize production costs and increase economic competitiveness,
algae have proven to be a superior feedstock for biofuel production. Compared to other biofuels algae do not compete with 1
other feedstocks for natural resources, or impact food prices as is the case, for instance, with corn-based biofuels (see:
Ziolkowska and Simon, 2014).
Public-sector enterprises Investment in marine biotechnology R&D can indirectly improve public sector contribution to bioprospecting, research, and 0
proofing of concepts (see: Marine BioTech, 2017).
Social

Health, safety The marine biotechnological process has significant capacity to improve human life. Several biotechnological tools have
been developed for cost-effective products that can be used for medical applications, such as new drug treatments, 1
vaccines, and antibiotics (see: OECD, 2013).
Culture, values From a societal perspective, biotechnological innovation through the exploitation of marine resources for microbial biofuel
production plays an important role in the development of industrial processes that require less use of agricultural land for 1
biofuel production (see: Kim, 2015).
Gender equality Investment in marine biotechnology indirectly encourages women to participate in science and technology. In the
Seychelles, for example, biotechnology projects encourage women to get into the field through coding and robotic 0
workshops (see: Allard and Bauer, 2018).
Social inclusion Marine biotechnology has indirect links to inclusion and protection of indigenous communities through the common 0
practice of patenting traditional indigenous knowledge to produce valuable products (see: Karjala, 2005).

91
SECTOR: MARINE TECHNOLOGY
Criteria Description Assessment
Score 0/1

Environmental
Areas of natural importance,
biodiversity
Renewable and non-
renewable resources
Water, soil, air, climate
Environmental disasters, risk
Economic
Increased marine transportation and other human activities below the ocean surface have increased underwater ocean ambient
noise by 15 decibels in the last 15 years. Over long distances, such increases in underwater noise may disturb marine life (see: Pine 0
et al., 2016; Walker et al., 2019).
Maritime transport is important to global trade, as it transports over 80% of global retail trade. In 2015, the global shipping fleet
consumed approximately 298 million tonnes of fuel. Switching from fossil to renewable fuels is one way to reduce shipping 1
pollution. It has been demonstrated that using biomass to generate renewable methanol for use in the shipping industry is a
technically viable choice for reducing the environmental impacts of maritime transport (see: Svanberg et al., 2018).
Maritime Transportation Systems (MTS) are regarded as the most reliable and cost-effective mode of international goods
transportation, offering a dependable means of promoting international trade. However, MTS are also a source of environmental 1
pollution. According to the International Maritime Organization (IMO), maritime shipping was responsible for 2.3% CO2 emissions in
2012, and these emissions are expected to rise by 50% by 2050 (see: Lespier et al., 2018).
Existing transportation by ships may cause environmental disasters. There have been cases where extensive oil spills spread out
hundreds of nautical miles from the source of the incident and caused severe harm to the marine environment. Research and 0
development of tools related to the maritime sector such as tankers and containers may indirectly avoid this (see: Akyuz, 2016).

Income Maritime technology regarding industry and transportation accounted for 0.61% of GDP on average from 2010 to 2020. This is the 1
second largest contributor of Maritime GDP in Indonesia (see: BPS, 2016).
Employment In 2019, there were only 143,702 Indonesian seafarers (see: UNCTAD, 2019). 0

Competition, innovation
Public-sector enterprises
Indonesia is strategically located between two oceans and is establishing a maritime state identity, which will expand opportunities
for the growth of a new maritime industry. Indonesia, like Norway, has huge marine areas. The shipbuilding industry has recently
emerged as a promising maritime industry in Indonesia. Additionally, competition and cooperation may occur, especially between 1
domestic and foreign industries. Innovation, especially in the field of shipbuilding technology, should be pursued (see: Marlyana et
al., 2017).
Investment in the research of maritime transport and shipping may indirectly increase port efficiency and capacity of national
shipping companies. In Indonesia, most ports are publicly run by public sector enterprises. Therefore, there are indirect effects of 0
investment on public sector efficiency (see: Hartanto, 2019).

Social

Health, safety Advanced modern ship construction achieves high standards of protection, crew training has improved, and shipping companies
are comparatively advanced as compared to similar types of businesses. Furthermore, as a result of a series of internationally 1
ratified safety conventions, seaborne transportation is now strictly controlled (see: Kristiansen, 2013)
Culture, values Research in maritime transport and shipping indirectly affects local culture through possible intensification of culture exchanges in 0
locations where international ports are accessible (see: Lovina et al., 2017).
Gender equality Women make up only about 2% of the world's maritime workforce, according to data from the International Transport Workers
Federation, and women members of maritime unions make up only about 23.000 worldwide (Women seafarers, 2019). The low 0
number of women in the shipping industry is also said to make them more vulnerable to discrimination (see: Kormych, 2020).
Social inclusion Some industries are critical to the survival of coastal communities. For example, the shipping industry offers a vital lifeline for 1
island communities by providing ferry services and cargo transportation (see: Marine Management Organization, 2014).

92
 Appendix TableTable
Appendix A3. Indicators and
A3. Indicators policy
and policyreferences
references

Sector Definition Indicators Reference

Appendix Table A2. Assessment sheet of each of the blue economy sectors
Navy Blue (High Relevance)
Waste Waste management Water pollution level RAN AKSI SDG
management activities which reduce (Ministry of Environment and Document SDG
ocean waste and marine Forestry) UNEP
debris, whether sourced SDG 14.1.1: Index of coastal Government Regulation No.
from land (domestic) or eutrophication and plastic 19 of 1999
sea (mining, shipping, debris density Presidential Decree No. 83
fisheries) of 2018
Decree of the Minister of
Environment and Forestry
No. 51 of 2004
Decree of the Minister of
Environment and Forestry
No. 147 of 2004

Marine and Activities related to the Greenhouse Gas (GHG) Presidential Decree No. 61
coastal protective management emission reduction (blue of 2011
protection and and restoration of coastal carbon) Presidential Decree No. 59
restoration of and marine natural Health index of coral reefs, of 2017
biodiversity and assets. These activities seagrass, and mangroves DID KKPD concept
ecosystems may also be connected to SDG 14.5.1: Coverage of NAP Adaptation to Climate
carbon sequestration protected areas in relation to Change
from mangrove forests, marine areas
seagrass meadows, or SDG 14.3.1: Average marine
intertidal saltmarshes acidity (pH) measured at
(blue carbon). agreed suite of representative
sampling station
Sustainable Effective fisheries Fish stock assessment RPP
fisheries management or certified (Ministry of Maritime Affairs RAN harvest strategy
fisheries must adopt or and Fisheries) SDG
abide to state-of-the-art SDG 14.4.1: Proportion of fish EAA Document
certification and business stocks within biologically HCCP
practices. Operations sustainable levels SHTI
must lead to sustainable SDG 14.7.1: Sustainable CPIB
fish stocks or fishing fisheries as a proportion of CBIB
must be at a level that GDP Presidential Decree No.
ensures it can continue 43of 2016
indefinitely and the fish Regulation of
population can remain the Minister of Marine
productive and healthy. and Fisheries No. 5 of 2018
Effective aquaculture Ministerial Regulation No.
must comply adopt or 18 of 2013
abide to state-of-the-art Licensing regulations
certification and business LBPI
practices. Food quality assurance

93
Sector Definition
Sapphire Blue (Moderate Relevance)
Disaster Activities and programs
management and that promote and help to
risk reduction plan the reduction of
disaster risks, since
Indonesia is extremely
prone to man-made and
natural disasters which
are worsened by climate
change and exacerbated
with Indonesia being
located in the ring of fire,
e.g. flood, drought,
earthquakes, etc.
Marine Small island states have
renewable the potential to rapidly
energy transition their energy
systems to renewable
energy.
Marine bio- Research and
technology development and
investments which
produce innovative
products or technologies
and process innovation to
support sustainable
marine value chains
(initiative)
Ecotourism Coastal and ocean-
related ecotourism which
promote conservation
and sustainable use of
marine environments and
species, generate income
for local communities,
and maintain and respect
local cultures, traditions,
and heritage.
Sky Blue (Modest Relevance)
Marine Research and investment
Technology which aims to transform
the impacts of the
shipping and port
industries to be more
sustainable to minimize
adverse impacts.
Indicators
SDG target 11.b: in line with
the Sendai Framework for
Disaster Risk Reduction 2015-
2030, holistic disaster risk
management at all levels.
SDG 11.b.1: Disaster risk
reduction strategies
SDG 11.b.2: Risk reduction
GHG reduction
Energy produced (Kwh or
Megawatt hour)
SDG 14.3.1: Average marine
acidity (pH) measured at
agreed suite of representative
sampling station
SDG 14.a.1: Proportion of total
research budget allocated to
research in the field of
marine technology
Sustainable tourism index
(Ministry of Tourism and
Creative Economy)
SDG 14.1.1: Index of coastal
eutrophication and floating
plastic debris density
SDG 14.a.1: Proportion of total
research budget allocated to
research in the field of
marine technology (including
the supporting infrastructure)
94
Reference
Law No. 24 of 2007
Government Regulation No.
21 of 2008
Government Regulation No.
64 of 2010
Presidential Decree No. 79
of 2014
Clean energy
Presidential decree No
59/2017 (RAN SDG)
Decree of the Minister of
Energy and Mineral
Resources No. 16 year 2020
Decree of the Minister of
Environment and Forestry
No. 51 of 2004
Decree of the Minister of
Environment and Forestry
No. 147 of 2004
Regulation of The Minister
of Tourism No.14 of 2016
Minister of Research,
Technology and Higher
Education regulations No.
20/2018
 Appendix
Appendix Table
Table A4.A4. Eligibleprojects
Eligible projects and
andtimelines
timelines
Time Frame Suitable Financing Options*
Sector Subsector Eligible Projects Short Medium Long Term
Term Term
Navy Blue (High Relevance)
1. Waste Marine Debris/Litter Waste collection ✓ CSR, Religious Funds,
management Waste-to-Energy Crowdfunding
Wastewater treatment
Plastic waste conversion into ✓ Blue Bond/Sukuk, SIB and
infrastructure material DIB, Impact Investment

2. Marine and coastal Mangrove
protection and Seagrass and coral reefs
restoration of Ecosystem conservation
biodiversity and High seas activities
ecosystems Conservation and research
on migratory species in high
sea
Marine Protected Areas (MPAs)
expansion and management
Mangrove and Seagrass
replantation
Coral reef rehabilitation
✓ BPD LH, Trust Fund, Blue
Bond, Impact Investment
✓ CSR, Religious Funds,
Crowdfunding, Blue Bond,
Impact Investment
✓ Blue Bond, Impact
Investment, SIB and DIB

Abrasion mitigation (Building ✓ Blue Bond, SIB & DIB

with Nature)
3. Sustainable Sustainable fishing Fish stock rebuilding actions ✓ ✓ SIB & DIB, Blue Bond, Impact
fisheries Sustainable aquaculture Investment
Food security
Food processing Promotion of sustainable ✓ BLU LPMUKP, Banking Sector
practices for activities along
fishery value chain (e.g. fish
processing equipment, fish
feeds supply, packaging,
marketing, distribution)
Investment in goods and ✓ ✓ BLU LPMUKP, Banking Sector
services to guarantee effective
fisheries management
Monitoring in protected areas ✓ BPD LH
and enforcement of regulations
against IUU fishing

95
Sapphire Blue (Moderate Relevance)
4. Disaster Research on infrastructure
management and risk for disaster risk reduction
reduction Research on ocean disaster
management (mitigation,
preparedness, response,
recovery)
5. Marine renewable Clean energy for small
energy islands and coastal areas
Transmission of energy from
renewable resources
6. Marine bio- Research and development
technology (R&D) for chemicals,
pharmaceuticals, or
nutraceuticals derived from
marine creatures
7. Ecotourism Ecotourism in
coastal/marine area
Sky Blue (Modest Relevance)
8. Marine Technology Research and Development
(R&D) for technology that
sustains business activity of
the maritime sector
*Note: this list is by no means exhaustive and is only intended to suggest some of the possible financing options for blue economy projects.
Disaster risk reduction ✓ Parametric Insurance
Disaster mitigation programs ✓ Parametric Insurance,
Crowdfunding
Disaster preparedness programs ✓ SIB and DIB
Development of disaster risk ✓ ✓ SIB and DIB
reduction infrastructures
Wind, hydro, stream-based ✓ ✓ Blue Bond/Sukuk, Impact
powerplant developed in (coastal / Investment
marine areas)
Ocean thermal energy conversion ✓ ✓ Blue Bond/Sukuk, Impact
plants Investment
Provision of solar lights into the ✓ ✓ Blue Bond/Sukuk, Impact
coastal areas for consumptions, Investment
for ships
R&D for health care, cosmetic, ✓ ✓ Banking sector, Blended
enzyme, nutraceutical, and other Financing
industries
R&D for technology that sustains ✓ ✓ Banking sector, Blended
marine ecosystems (e.g. Biofuels Financing
from marine algae)
Special designated coastal/marine ✓ ✓ Blue Bonds, SIB and DIB,
areas for eco-tourism BPD LH
development
Eco-friendly hotel/homestays and ✓ Banking sector, Blue
services in coastal/marine area Bonds/Sukuk
Relevant tools and equipment in ✓ ✓ Banking sector, Blended
business activities of the Financing
maritime sector (e.g. shipping,
container, logistic, tanker, port)
Research and capacity building ✓ Banking sector, Blended
campaign for sustainable blue Financing
ocean economy
96
 Appendix TableTable
Appendix A5. Blue Economy
A5. Blue GDP
Economy GDPCalculation
Calculation

In calculating the blue economy investment requirement and contribution, this document mainly
In calculating the blue economy investment requirement and contribution, this document mainly
refers to the “Maritime GDP 2010-2016” published by BPS in 2017. The calculation process included
refers tothe
finding theconcordance
“Maritime GDP 2010-2016”
between published
the eight by BPS insectors
blue economy 2017. The calculation
identified process
in this included
document and
finding the concordance between the eight blue economy sectors identified in this
the blue economy clusters used in the calculation of the 2010-2016 Maritime GDP. The table below document
and the
lists howblue economy
the sectors clusters
are matchedused inthe
with theclusters,
calculation of the
as well as2010-2016 Maritime
caveats which needs GDP. The
to be table
kept in
mind in interpreting investment requirements.
below lists how the sectors are matched with the clusters, as well as caveats which needs to be

BPS PDB
UNDP 8 BE Detail
Maritime Calculation
Sectors
Clusters

Navy Blue (High Relevance)

Sustainable Fisheries Sustainable fisheries is
fisheries Maritime GDP, BPS (2010-2016); embedded in BPS's fisheries
BPS (2016 until 2020) sector.
Marine Waste Maritime 2010-2016: Maritime GDP, BPS; Marine waste management is
Management Services 2016-2019: Linear Projection; embedded in BPS's Marine
2020: Projection based on 2019 Services cluster. The figure may
proportion be an overestimation, as the
proportion of BPS's cluster
dedicated solely to marine
waste management is
unknown.

Marine and Marine Tourism 2010-2016: Maritime GDP, BPS; Marine and coastal protection
Coastal 2016-2019: Linear Projection; and restoration of biodiversity
Protection and 2020: Projection based on 2019 and ecosystems
Restoration of proportion
Biodiversity and
Ecosystems
Sapphire Blue (Moderate Relevance)
Marine Eco Marine Tourism 2010-2016: Maritime GDP, BPS; Marine ecotourism is
Tourism 2016-2019: Linear Projection; embedded in BPS's Marine
2020: Projection based on 2019 Tourism cluster. The actual
proportion proportion dedicated to
environmental preservation is
unknown.

Marine Energy and Using data from the electricity

Renewable Mineral sector. BPS classified Electrical
Energy Resources Power Generation (Pembangkitan
(exc. oil, gas, Tenaga Listrik) and Electrical
and mineral) Power Distribution (Distribusi
Tenaga Listrik) as part of ESDM
cluster in their PDB Maritime
2010-2016. Starting from 2015,
the amount is that adjusted to
the 2018 proportion of energy
produced by Marine Vessels
Power Plant to the overall
electricity generated by PLN,
calculated at 1.117% (480
Megawatt Hour/40,814.92
megawatt hour)

97
Disaster Ocean 2010-2016: Maritime GDP, BPS; Disaster management and risk
Management and Infrastructure 2016-2019: Linear Projection; reduction is embedded in BPS's
Risk Reduction 2020: Projection based on 2019 ocean infrastructure sector.
proportion The figure may be an
overestimation, as the
proportion of BPS's cluster
dedicated solely to disaster
management and risk reduction
is unknown.

Marine Bio- Biotechnology 2010-2016: Maritime GDP, BPS; Marine Biotechnology cluster is
Technology Industry 2016-2019: Linear Projection; embedded in BPS’s
2020: Projection based on 2019 Biotechnology Industry cluster.
proportion
Sky Blue (Modest Relevance)
Marine Ocean 2010-2016: Maritime GDP, BPS; Marine technology is embedded in
Technology Connectivity 2016-2019: Linear Projection; BPS's Ocean Connectivity and
and Maritime 2020: Projection based on 2019
Maritime Industry cluster. The
Industry proportion
figure may be an overestimation, as
the proportion of BPS's clusters
dedicated solely to marine
technology is unknown.

This document does not include the marine defence and security cluster as part of the blue economy
sectors. However, the cluster’s contribution is included in the calculation to provide a full representation
of the Maritime GDP.

Maritime 2010-2016: Maritime GDP, BPS;

Defence and 2016-2019: Linear Projection;
Security 2020: Projection based on 2019
proportion

98
 Appendix Table A6. Potential overlaps and gaps between green and blue economic
frameworks
Appendix Table A6 Potential overlaps and gaps between green and blue economic frameworks

Eligible project: Eligible project:

Sector Eligible project Blue economy Green sukuk and Notes
platform bond platform

Navy Blue (High Relevance)

1. Waste Management Marine waste collection ✓ + Part of
improving waste
management
Marine plastic ✓ + project
management
2. Marine and coastal Marine Protected Areas ✓ + Part of habitat
protection and (MPAs) expansion and and biodiversity
restoration of management conservation
biodiversity and Mangrove and Seagrass ✓ + program
ecosystems replantation
Coral reef rehabilitation ✓ + Part of
sustainable
management of
fisheries

Abrasion mitigation ✓
(Building with Nature)
3. Sustainable Fish stock rebuilding ✓ + Part of
fisheries actions sustainable
Promotion of ✓ + management of
sustainable practices fisheries project
Investment in goods and ✓ +
services to guarantee
effective fisheries
management
Fish processing ✓ +
equipment, packaging,
marketing, distribution
that minimize
environmental impact
Fish seeds supply ✓
(Secondary fisheries
sector)
Monitoring in protected ✓
areas and enforcement
of regulations against
IUU fishing
Sapphire Blue (Moderate Relevance)
4. Disaster Disaster risk reduction ✓ + Addition to
management and risk disaster risk
Development of disaster ✓ +
reduction risk reduction reduction sector
infrastructures
Disaster mitigation ✓ + Part of flood
programs mitigation
project

99
 Disaster preparedness ✓
programs
5. Marine renewable Wind, hydro, stream- ✓ + Part of
energy based powerplant generating
developed in (coastal / energy from
marine areas) renewable
Ocean thermal energy ✓ + energy project
conversion plants
(Provision of solar lights ✓ +
in the coastal areas for
consumption for ships)
6. Marine bio- R&D for health care, ✓
technology cosmetic, enzyme,
nutraceutical, and other
industries
R&D for technology that ✓
sustains marine
ecosystems (e.g.
Biofuels from marine
algae)
7. Ecotourism Special designated ✓ + Part of new
areas for marine green tourism
ecotourism project
development
Eco-friendly ✓ + Part of new
hotel/homestay and green tourism or
services for marine tourism and
ecotourism resilience
against climate
change project

Sky Blue (Modest Relevance)

8. Marine Technology R&D for technology that ✓
sustains relevant tools
and equipment in the
business activities of
the maritime sector
Research and capacity ✓
building campaign for
sustainable blue ocean
economy
Note: + = overlaps with green project

100
 Appendix A7. Proposed outline of blue economy project-level impact analysis and identification
of sectoral investment need

1. Objectives of the follow-up document

The Blue Financing Strategic Document has mapped sectors which are eligible for classification
as part of the blue economy, graded them based on relevance assessment, provided details of
the overall investment needs to expand the blue economy’s contribution to the GDP, as well as
highlighting financing instruments which may aid in catering to the investment needs. A follow-
up document is required to supplement the Blue Financing Strategic Document by providing
more detailed information related to sectoral investment gaps in the blue economy, possible
contributions by public and private sectors, as well as impact analysis of sample projects from
each of the eligible blue sectors. The fundamentals of how each objective will be achieved are
detailed in the following sections.

2. Identification of detailed investment need and market demand for blue financing

a. Identification of existing public and private investment in the blue economy

Prior to the identification of blue economy investment needs, the document shall detail
existing public or private financial resources currently embedded in efforts aimed at
developing the blue economy at the overall and sectoral level. This section shall also
gauge the market demand for blue financing, based on experience in other countries as
well as Indonesia and measures to ensure an adequate market demand for blue financing
(perhaps through de-risking/insurance mechanism).

b. Calculation of investment need

In identifying the detailed investment need, the estimation will be approached from two
levels. The first is an assessment of the overall investment required to advance the blue
economy sectors’ contribution to Indonesia’s GDP. Second is the assessment of sectoral
investment required to expand each blue economy sector’s contribution to Indonesia’s
output.

c. Mapping of the investment gap, possible contributions from public and private
sectors, and viable instruments

Comparing the amount of investment needed to expand the blue economy at overall
and sectoral level with the existing investment will aid in mapping the investment gap.
Furthermore, comparing existing public and private contributions against investment
needs at overall and sectoral level will calibrate the extent to which public and private
parties may support the financial groundwork for blue economy development. Ultimately,
this section will also delineate financial instruments which can be viable options to close
the investment gap.

101
3. Project-level impact analysis

This section of the document will undertake the impact analysis of one sample project from each
eligible blue economy sector. Prior to the impact analysis, several features of the projects will
need to be mapped, namely:

a. Prioritized location or region of the project

b. Calculation of the financial needs of the project and its feasible financing options

c. Project timeline estimation

d. Project implementation scale

e. Stakeholders which may be involved in the project

Identification of such features will ease the process of the project impact analysis. In doing so,
the process may refer to the Swiss Federal Office for Spatial Development (ARE) Sustainability
Assessment (ARE, 2004) and OECD Sustainability Impact Assessment (OECD, 2010). The steps for
undertaking the impact analysis include defining the methodology, conducting the assessment,
and formulating recommendations on project feasibility.

The objective of the analysis is to assess project feasibility and potential impacts along social,
environmental, and economic dimensions. Prior to the impact analysis, a methodology needs to
be chosen. The Swiss Federal Office for Spatial Development (2004) outlined several methods
which can be used to analyze the impacts of a project by the dimensions in which we are
interested in, as described in the figure below.

SOCIAL
Forum processes

Empirical surveys

Consultative, participatory
approaces
Survey of experts
Regression analyses
Modelling
Case studies Simulations
Scenarion development

Incidience analyses
Inventories
Equilibrium modelsL ife cycle analysis Emission/ pollutant models

Source: Swiss Federal Office for Spatial Development (2004)

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Several methods of impact assessment can be employed, including Comparative Value Analysis
(CVA), Utility Analysis (UA), Cost-Impact Analysis (CIA), Cost-Benefit Analysis (CBA), and the
Extended Cost and Benefit Analysis (eCBA). In assessing feasibility and potential impacts, the
projects will be analyzed in accordance with criteria and indicators of each of the sustainability
dimensions outlined in Table 3 of the Blue Financing Strategic Document. Results from the
impact analysis will aid in determining the feasibility of projects from sustainability and economic
perspectives and conclude its importance for financing.

 4. Conclusion

The conclusion section of the document shall summarize the value of investment needed at overall
and sectoral levels, as well as the financing options feasible to fund it. Expected contributions
from the public and private sectors may also be outlined to optimize the channeling of resources
available. This section will also describe which sectors are in greatest need of financial support
and which projects will generate the greatest positive impacts along social, economic, and
environmental dimensions.

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 Appendix A8. Proposed outline of blue bond impact reporting

As a foundation of Indonesia’s blue bond framework, this document proposes the following
outline to aid the development of a routine blue bond impact reporting system. The sections
proposed in the outline are by no means final, meaning that other relevant information may be
included in the future, as appropriate. This outline is mainly built upon the Ministry of Finance’s
annual Green Sukuk Allocation and Impact Report.

In general, routine blue bond impact reporting should be published annually by related Government
institutions, such as the Ministry of Finance with support from the Coordinating Ministry for
Maritime Affairs and Investment. The main information to be highlighted from the report shall
be the amount committed for projects financed by Indonesia’s blue bonds as well as progress
in improving the ocean environment. With regards to environmental impact assessment of
projects, the main indicators proposed to be the focus of the report include the index of coastal
eutrophication and plastic debris density (SDG 14.1.1) and the average marine acidity (pH) measured
at agreed sites of representative sampling stations (SDG 14.3.1). However, other indicators related
to ocean environment conservation achievements should also be reported when appropriate.

The proposed outline of routine blue bond impact reporting is as follows:

1. Indonesia’s blue bond milestones

This section shall outline the process undertaken culminating in the development of the blue
bond framework, as well as issuance of Indonesia’s blue bonds.

2. Geographic locations of projects financed by blue bonds

This section maps the locations of projects financed by the issued blue bonds, including the
blue sectors grading group to which each project belongs.

3. Summary of the blue bond framework

This section shall briefly describe the eligible blue economy sectors and gradings based on the
relevance assessment, project selection procedures, as well as management of the proceeds
of the blue bonds.

4. Summary of amount committed from proceeds of Indonesia’s blue bonds as well as

impacts on the environment.

In this section, the document shall summarize the amount committed for projects from
proceeds of Indonesia’s blue bonds and the accumulated contribution in reducing average
marine acidity levels or improvement in the index of coastal eutrophication and plastic debris
density.

5. List of projects funded by blue bonds

This section shall detail the list of projects financed by Indonesia’s blue bond allocation for the
reporting period. Information related to the sector, name, brief description, location, timeline
of the project as well as the amount committed from the blue bond allocation should be
specified in this section. Each project shall also report its contribution in reducing the average
marine acidity level and/or improvement in the index of coastal eutrophication and plastic
debris density, and other indicators, as appropriate.

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