Contents
Introductory Remark: Acting Deputy Minister For Maritime 04 Sovereignty and Energy, Indonesian Coordinating Ministry for Maritime and Investment Affairs
06 Introductory Remark: UNDP Indonesia Resident Representative 10 Chapter 1. Fostering Collaboration, Enabling Innovation 12 Chapter 2. Areas of Cooperation 2.1. Climate Change Mitigation and Adaptation 2.2. Blue Economy 2.3. Marine Plastic Debris 2.4. Good Maritime Governance
15 Chapter 3. Research and Development 21 Chapter 4. Entrepreneurship 25 Chapter 5. Innovative Financing 29 Chapter 6. Partnership & International Collaboration 6.1. Smart and Innovative solution 6.2. Partnership
36 Chapter 7. AIS Country’s Support
37 Chapter 8. Way Forward
40 Chapter 9. Progress in Numbers
3 Introductory Remark: Acting Deputy Minister For Maritime Sovereignty and Energy, Indonesian Coordinating Ministry for Maritime and Investment Affairs Dedicated To the Universal Wellbeing of Archipelagic and Island States
he Archipelagic and Island States (AIS) Forum is committed to creating an inclusive ecosystem for all archipelagic and island states, regardless of their location, size, Tor level of development. Given their geographic similarities, many archipelagic and island states are facing the same types of development issues. For example, climate change, natural disasters, marine pollution, overfishing, and gross inequality in ocean- based industries are common but complex challenges held by archipelagic and island states. Without concrete policy and management interventions, these issues can become increasingly more difficult to address. Therefore, the AIS Forum offers the ability for archipelagic and island states to collectively enhance their understanding of the shared issues affecting their development and the chance to synergistically work towards a more sustainable future.
In consideration of the above-mentioned development challenges, the AIS Forum has sought to formulate Prof. Tri Widodo common goals and feasible objectives that can help Acting Deputy Minister For Maritime foster universal wellbeing for the people of the world’s Sovereignty and Energy, Indonesian archipelagic and island states. These common goals and Coordinating Ministry for Maritime objectives were then translated into the AIS Forum’s and Investment Affairs
4 four areas of cooperation, which commit archipelagic and island states to working together on climate change mitigation, adaptation and disaster management; economic challenges and opportunities in the blue economy, including sustainable fisheries and aquaculture as well as decent working opportunities; the management of marine plastic debris; and good maritime governance.
We, the AIS Forum, have decided the optimal method for addressing the common development challenges of archipelagic and island states is through the discovery of smart and innovative solutions. The COVID-19 pandemic has pushed many of the traditional aspects of life towards a more digital existence. For example, we have seen innovative organizations and startups utilize their understanding of technology and their digital approach to problem solving to help fill societal gaps caused by lockdowns and other pandemic restrictions. In this newdigital oriented environment, having a digital strategy is essential for achieving our goal.
Strong cooperation and good communication are necessary to keeping the AIS Forum operational as well as critical for achieving tangible development solutions for archipelagic and island states. By establishing complex networks between stakeholders from government, civil society, academia, philanthropy, the private sector, and international organizations, the AIS Forum seeks to enhance the development and implementation of novel smart solutions. Furthermore, sharing information and best practices between archipelagic and island states can magnify our efforts to meet common goals, such as by allowing for the rapid application of breakthrough ideas and by inspiring others to work towards the development of a healthy blue economy.
We believe with good purpose and a smart approach the AIS Forum Secretariat can deliver their promise of building more prosperous and sustainably managed archipelagic and island states. For this reason alone, we are fully committed to supporting the AIS Forum initiative.
5 Introductory Remark: UNDP Indonesia Resident Representative Together Building A Blue Archipelagic and Island Bastion That Will Last
e live on a blue planet with an ocean that has been kind to humanity. Coastal and marine ecosystems and the biodiversity they support provide Wlivelihoods for over 3 billion people and help facilitate 80% of global trade. Additionally, coastal and marine ecosystems absorb 30% of carbon dioxide produced by humans and have absorbed more than 90% of the excess heat in our climate system generated over the last 50 years, which has been critical in maintaining the habitability of Earth. Thus, more than putting food on the table and enabling development, the ocean also sustains us.
The welfare of humanity depends on the ocean, and unfortunately, we have been careless in harnessing this blessing. Currently, unsustainable development practices, pollution, and climate change are negatively impacting the ocean, which will likely lead to dire consequences in the future. This global dilemma in ocean development could not be more true for archipelagic and island states, as their wellbeing and Norimasa Shimomura continued existence are directly tied to the health of UNDP Indonesia coastal and marine ecosystems. Resident Representative
6 Moving forward, it is important to remember that climate change and unsustainable practices in the blue economy are substantial issues that cannot be solved by a single country alone. Fortunately, joint efforts have been made to respond to the suite of evolving threats affecting the health of the global ocean, with an emphasis on archipelagic and island states. Through the AIS Forum Secretariat, UNDP has built a solid foundation to facilitate a coordinated effort capable of addressing the profound development challenges faced by archipelagic and island states.
The AIS Forum Secretariat translates the development needs of archipelagic and island states into smart and innovative solutions by leveraging the innovative prowess of researchers and entrepreneurs. Furthermore, the AIS Forum Secretariat seeks to enhance the entrepreneurial communities of archipelagic and island states by bringing together innovators and entrepreneurs to collaborate on technology-based solutions to issues in environmental sustainability. In addition to entrepreneurship, the AIS Forum Secretariat also focuses its resources on supporting research and development in archipelagic and island states.
The development of the AIS Forum is only beginning, yet during the initiative’s short existence we have seen it take shape into a formidable international cooperation platform. For instance, the AIS Forum has stimulated the transfer of ideas, promoted good maritime practices among its members, and begun to build an international network of stakeholders to preserve the natural state of the ocean and to promote a sustainable and equitable future. Hence, the AIS Forum is an evolving development platform that can unite sporadic efforts into a monumental push.
7 AIS Secretariat Team Profile
Akhmad Arsya Sani Head of AIS Forum Secretariat Akhmad Sani joined the AIS Forum Secretariat in March 2020. Akhmad has experience in multiple sectors including energy, tech, and the public sector where he served as an advisor at the Presidential Executive Office of Indonesia. He graduated with a Master of Public Administration in Energy Management and Policy from Columbia University.
Riny Hefriani Modaso AIS Forum Secretariat Partnership Riny joined the AIS Forum Secretariat in January 2020, she is responsible for handling Partnership and International Collaboration. Riny has a strong experience in the marine and fishery sector. Before joining AIS Secretariat, she spent a few years at the Coordinating Ministry for Maritime and Investment Affairs Indonesia. She graduated with a Master of Science in Aquatic Science from Sam Ratulangi University.
Marsella Winata AIS Blue Startup Hub Coordinator Marsella Winata is a Bachelor of International Relations graduate from the BINUS University. She joined the AIS Forum Secretariat in February 2020. She’s currently responsible for managing the AIS Blue Startup Hub initiatives where she leads the startup programs and activities.
8 Livita Sumali AIS Forum Secretariat Technical Assistant Livita Sumali joined AIS in early 2020 and is currently responsible for Joint Research Program, University Network and Operations. Before joining AIS, Livita was previously an Infrastructure and Energy officer at the British Embassy Jakarta and project manager in the British Embassy The Hague, Netherlands. She graduated with a Master of Arts in Development Studies majoring Governance and Development Policies from International Institute of Social Studies, Erasmus University Rotterdam.
Nabilla Utami Dhiya Rahmani AIS Forum Secretariat Communication Nabilla joined the AIS Forum Secretariat in September 2020. She is a Master of International Law graduate from the University of Sydney who has a strong passion and extensive experience in communication and advocacy. She previously worked in various sectors including education, health, and energy. She is responsible for managing the communication contents and strategies of the AIS Forum initiatives.
Triasterina Lastanti AIS Forum Secretariat Support Specialist Triasterina Lastanti joined the AIS Forum Secretariat in October 2020. She is responsible for managing the administration, finance and procurement matters within the organization. She has worked in mostly media industries for 8 years, 5 of which she has spent in editorial and promotional division of the Bloomberg Businessweek Indonesia. Triasterina has been working for UNDP for the past 3 years.
9 Chapter 1
Fostering collaboration, enabling innovation
n the face of a global pandemic and changing climate, close cooperation between archipelagic and island states has never been more important as the speed of responses will determine the severity and the impact of these Ichallenges on their economy. Strong partnerships not only allow these countries to synergize resources but also ensures the exchange of knowledge and good practice. The AIS Forum enables that synergy. As outlined in the Manado Joint- Declaration and the Final Outcome of 2019, the AIS Forum through its secretariat is designed to facilitate collaboration The AIS Forum between governments, the private sector, philanthropists, Secretariat tries media, academia and research institutes, and NGO or local to leverage the organizations/individuals. Together, under one platform, these expertise of academic stakeholders can work together to develop and implement communities and smart and innovative solutions, island-based solutions, to entrepreneurs common problems. and facilitates the collaboration and Despite the coronavirus pandemic, the AIS Forum Secretariat sharing of good still managed to deliver its programs and initiatives. The practice between AIS Forum Secretariat has focused its activities in building government foundations that will support and allow the organization to authorities in achieve its long-term objectives. These activities include AIS participating strengthening the organization by establishing roles and countries.
10 responsibilities within the secretariat, developing programs around the areas of cooperation, building partnerships with international and local communities, and conducting bilateral meetings with regional/global initiatives (Annex I).
The AIS Forum Secretariat has developed and implemented programs around research and development as well as entrepreneurship to create an environment of innovation. The joint research grant program provides funding and encourages cross-national cooperation between academic institutions and research organizations in AIS participating countries. In entrepreneurship, the AIS Forum secretariat has launched the Blue Hub to assist these countries to establish and grow start-up ecosystems. The Blue Hub aims to become a center of collaboration for entrepreneurs, investors, and incubators.
The COVID-19 pandemic has shown the importance of close cooperation between countries. The pandemic has disconnected the world and devastated the economies of many countries. Some of the archipelagic and island states, which rely heavily on the tourism industry, have seen deep contractions within their economies as countries close borders to control the spread of the virus. As a response to this crisis, the Secretariat has facilitated discussions with several AIS participating countries to establish immediate and long-term plans to adapt to this new environment.
As a global platform, the AIS Forum needs to develop a way to reach its stakeholders that are dispersed throughout the globe. Optimizing digital technologies is the most feasible way to achieve this outcome. The pandemic has helped to accelerate the full adoption and transition towards digital technologies. The Secretariat has conducted virtual events such as webinars, online lectures, and virtual meetings in an effort to maintain communication with AIS participating countries and create a knowledge resource platform for its stakeholders. Prominent academics, policymakers, and professionals from the private sector have attended these events to share their knowledge and experience around the AIS areas of cooperation (climate change mitigation and adaptation, the blue economy, marine plastic debris, and good maritime governance).
The areas of cooperation epitomize the issues pertaining to archipelagic and island states. Each presents its own challenges. In addressing these problem areas, the AIS Forum Secretariat tries to leverage the expertise of academic communities and entrepreneurs and facilitates the collaboration and sharing of good practice between government authorities in AIS participating countries. In addition to finding the right technologies and solutions, it is also important to share and understand practices that have been implemented by AIS participating countries. The AIS Forum Secretariat, through its workshops, training, and discussion, enables the sharing of knowledge between member countries.
11 Chapter 2
Areas of cooperation
he AIS Forum was designed as an open-ended plat- form with a variety of functions, including the cre- ation of a space for inclusive dialogue, the forma- tion of collaborative partnerships, the development Tof smart and innovative solutions, and the effective useof global communication and knowledge resource platforms. In addition, the AIS Forum creates unique opportunities for AIS participating countries through collaborative initiatives that form a united global front capable of effectively addressing the shared challenges of AIS countries. Thus, the AIS Forum is a collaborative platform designed to fill gaps within the inter- national development community as well as complement and strengthen existing efforts to address the shared challenges of the AIS participating countries.
2.1. Climate change mitigation and adaptation and disaster management The AIS Forum Climate change mitigation: archipelagic and island states is a collaborative face the spatial characteristics of island geography that platform designed to make access provision to modern energy challenging. Use of strenghten existing renewable energy may offer solutions for decentralized energy efforts to address the generation, while reducing greenhouse gases emissions. Smart shared challenges and innovative solutions may include, but are not limited of AIS participating to, the development of renewable energy for small-island countries.
12 electrification, development of smart grid systems on islands, and the exchange of expertise and technology between participating AIS countries.
Climate action adaptation: archipelagic and island states are highly vulnerable to climate change. Rising sea levels threaten many such nations. Natural disasters such as cyclones and tsunamis often cause considerable per-capita damage. This intensifies country vulnerabilities, leaving the economic conditions in many archipelagic and island States precarious. Smart and innovative solutions are needed to strengthen the adaptive capacities of AIS countries and reduce vulnerabilities. Solutions may include the advancement of blue carbon, promoting best practices for integrating coral transplantation, and mangrove rehabilitation as eco-tourism and local economic development activities.
Disaster management: archipelagic and island states are prone to disaster-related both natural, such as tsunamis, earthquakes, and volcanic eruptions, and human-caused factors, such as climate change and environmental destruction. Smart and innovative solutions to address these issues may include, knowledge exchange on early warning systems for tsunamis and increasing functional capacity building to tackle tsunami disasters, earthquakes, forest fires, oil spills in seas, and meteorological data exchange.
2.2. The blue economy Blue economic development: archipelagic or island nations often have more sea than land area and have economies and livelihoods that are intimately linked with marine biodiversity and environmental quality. Smart and innovative solutions may include, the mainstreaming of the blue economy into national development planning, the implementation of gender sensitive development project, institutional setups, exploring innovative blue economy financing, and widening the blue commodities market.
Sustainable fisheries: some archipelagic and island States are lacking sufficient arable land for farming that makes agriculture difficult. Seafood is an integral part of people’s diet in island states, which is threatened by overfishing and water pollution. Smart and innovative solutions may include, the introduction of sustainable aquafarming, fishing quota policies, tackling illegal fishing on fish catch, seaweed, and pearls.
Decent work and economic growth: most archipelagic and island States are vulnerable to climate change. The small area of some archipelagic and island States also often leads to a lack of natural resources and a reliance on a narrow range of products. Smart and innovative
13 solutions may include, the promotion of web-based technologies to create sustainable start- up projects (i.e., e-fishery), increasing the role of youth and women, bringing multiple funding sources to finance innovative projects, and increasing the provision of value-added products.
2.3. Marine plastic debris Marine plastic debris: archipelagic and island states are facing this critical issue. Shortage of land areas and resources available for the safe disposal of waste and population growth are contributing to this situation. Poorly managed garbage dumps and the disposal of toxic chemicals are significant contributors to marine pollution and coastal degradation. A study conducted by the World Bank demonstrated that 70% of marine plastic debris in Indonesia was due to land leakage. Smart and innovative solutions may include, transforming plastic waste into energy, bricks, or asphalt mixing, engaging the private sector to produce alternative products, and involving religious leaders and local champions to shift public behaviour on plastic waste disposal.
2.4. Good maritime governance One of the significant challenges of archipelagic and island states is that it faces public accountability issues and public participation in decision-making processes, which contributes significantly to quality growth. Smart and innovative solutions may include, establishing or enhancing a multi-door approach for tackling environmental and natural resource related crimes.
14 Chapter 3
Research and development
he academic communities play a critical role in advancing research and development to solve today’s most pressing issues. The AIS Forum, as a platform for archipelagic and island states, aims to promote Tresearch into novel ideas that can improve the recovery efforts of the current crisis and to enhance future adaptability. This program can bring together researchers from universities, research institutions, and think-tanks to work together solve the shared problems of archipelagic and island states. The Research 3.1. Joint-research grant and Development The Joint-Research Grant Program provides funding for programs are research teams from universities or academic institutions designed to from AIS participating countries. Each team consists of bring together researchers from multiple institutions. The program places researchers and think-tanks to emphasis on applied research that focuses on practical find the practical solutions to the climate, environmental, and socioeconomic solutions to challenges affecting archipelagic and island states. the climate, The objectives of the program, are: environmental, and socioeconomic ● Fostering competitive research and development challenges affecting initiatives between AIS participating countries in the archipelagic and cooperative working relationships to create new or island nations.
15 further develop existing market-oriented technologies, products, or services, ● Promoting and implementing smart and innovative solutions through the development of a collaborative research and innovation platform for academic stakeholders in AIS’ participating countries, ● Identifying and integrating activities and expertise of AIS participating countries within the framework of international cooperation—with an emphasis on the AIS thematic areas, ● Establishing academic networks between AIS participating countries through stakeholders such as universities, think tanks, civil society organizations, and other relevant institutions, and ● Through this Joint Research Program, the AIS forum seeks to promote research in sustainable development by linking research findings to needs in the private sector.
3.1.1. Research areas
Permissible areas of research include topics in one or more of the four AIS Forum thematic areas, including but not limited to:
● Climate Change: research projects to reduce the atmospheric greenhouse gases levels through carbon capture and storage technology, ● Blue Economy: research projects to create methods for improved measuring of fish stocks or development of fishing gear with reduced environmental impacts, ● Marine Plastic Debris: research projects to find sustainable alternatives to conventional plastic production techniques, and ● Good Maritime Governance: research projects that focus on the formation of marine protected areas through effective policy measures that are socially and ecologically responsible.
3.1.2. Development progress
The AIS Joint Research program awarded grants to two projects which will receive US$60,000 in funding. There were 11 eligible proposals received from 21 institutions and 5 countries including Indonesia, Singapore, United Kingdom, The Philippines, and Japan (Annex II).
The panel members consisted of representatives from the Coordinating Ministry for Maritime Affairs and Investment Republic of Indonesia, the Research and Innovation Program of British Embassy in Indonesia, and the UNDP Indonesia. There were seven criteria to determine the awarding of the grants, such as the general research idea, AIS
16 country engagement, research methodology, research output and sustainability, workplan, timeline and performance targets, the quality of research personnel, and budgeting.
The program grants were awarded to four universities (which came under 2 research group), which will conduct the research for a duration of 12 months starting from November 2020 until November 2021. The grant for the “Blue Economy” and “Marine Plastic Debris” category was as follows:
Title: Mobile Technology as an Incentive for Sustainable Fishing Practices
Institutions: Tropical Future Institute, James Cook University, Singapore Faculty of Fisheries and Marine Science, Sam Ratulangi University, Indonesia
Research Brief:
Eachmiles technology, as part of the Fishcoin Initiative, has developed a cryptographic utility token that powers a blockchain (a secure and immutable data storage technology) that can also be a medium of value exchange and an incentive for the gathering and sharing of data. On the mFish downloadable application, Fishcoin tokens can be created when bought by downstream actors in the seafood supply chain and redeemed by fishers and fish farmers for mobile airtime top-ups in over 150 countries with over 550 mobile operators. This mechanism for incentivizing the sharing and storing of data could have numerous applications in fisheries and fish farming, and research is needed to understand how this mechanism could help incentivize behavior modification such as, the logging of catch/harvest data for reporting and traceability purposes, and the tagging and releasing of juvenile fish to help maximize sustainable and economic yield. The research also aims to explore the role of extrinsic incentives to develop intrinsic motivations to gather and share data and adopt sustainable fishing practicesAnnex ( III.a).
Research Outputs:
1. mFish implementation: Technology in the form of an app translated into Indonesian and adapted for local fishers needs. Including the production of training materials. 2. Capacity building in the form of: a. training in use of app, and b. training in tagging techniques to fishing communities. 3. Scientific advice to stakeholder groups including:
17 a. provincial and national fisheries management authorities, and b. fishing communities.
Title: Development of Ocean Monitoring Instrument for Archipelagic and Island States
Institutions: The University of the Philippines Marine Science Institute, The Philippines, Padjadjaran University, Indonesia
Research Brief:
The research aims to create the ocean-measuring instruments which acquire real time data. The instrument is called RHEA (Drifter GPS Oceanography Coverage Area). It is a low-cost instrument (around US$10,000), portable, and suitable for varied water conditions. This instrument is capable of working in any ocean environment and is useful for monitoring oceanographic conditions. The instrument is geographically suitable for use in both Indonesia and the Philippines. The main focus for this research will be in both country’s seas to gather monitoring data. Both institutions are currently focusing on ecosystem degradation caused by global warming and human activities. Therefore, ocean monitoring data is highly desirable to provide early warning to stakeholders (Annex III.b).
Research outputs:
1. ARHEA (Advanced dRifter gps oceanograpHy covErage Area), Ease of use, low cost and modularity are the basic principles of this technology, which is ideal for deployment from voluntary boats or non-specialized operators. 2. A database of ocean data and open, free use. The database is free in order to gain more research in marine science with high precision data. 3. A website with full features such as data, news, and other information related to marine issues. 4. Observation networking between SEA (South East Asia) countries.
3.1.3. Future development
AIS secretariat will closely monitor the research activities for the next 12 months and ensure the research activities maintain timeframes. At the end of the research period, we are expecting that the research results will be ready to be disseminated to the AIS participating countries.
18 3.2. Blue Economy Development Index (BEDI)
The BEDI’s primary objective is to be used as a tracking tool to determine the current uses of coastal and marine resources in relation to a variety of parameters and level of sustainability. It was created to collect data on all activities related to the sustainable use of coastal and marine resources, which can enable adaptive management strategies, improved policy frameworks, and the efficient and equitable distribution of resources.
The creation of the BEDI aimed to achieve four main objectives, each of which help facilitate solutions for local, regional, and global actors as they seek to attain the sustainable use of ocean and marine resources. These objectives include: A tracking tool for AIS nations utilized to assess current ocean use in relation to sustainability, to inform policy options related to ocean resource use, to highlight potential solutions to identified problems, and as a platform for regional and international diplomacy and cooperation. These objectives include:
a. Tracking tool: The BEDI’s primary objective is to be used as a tracking tool to determine the current uses of coastal and marine resources in relation to a variety of parameters and level of sustainability. b. Policy formation: The second objective of the BEDI is to be used as a tool for policy makers to ensure that current and future policy frameworks are conducive to meeting the main blue economy objective of sustainable development. c. Potential solutions: The third objective of the BEDI is to help formulate potential solutions to issues plaguing the blue economy at various scales (local, regional, and international). d. Platform and diplomacy: The BEDI works at multiple scales, including internationally amongst AIS member nations.
3.2.1. Development Progress
In 2019, the BEDI framework was launched in the 2nd Ministerial Meeting of the AIS Forum. Furthermore, in 2020 the AIS Forum Secretariat, working together with IPB University (Institut Pertanian Bogor), began collecting data based on selected BEDI indicators (ocean capital, enabling factors, social capital, and sustainable growth). The BEDI uses a system of evaluation that incorporates a central algorithm as the basis for analyzing relevant datasets across a variety of marine economic sectors to determine where development gaps exist. The algorithm was based on two main components of analysis, which are the Degree of Blue Economy Importance and the Degree of Blue Economy Impact.
19 The degree of Blue Economy Importance relates to the level of ocean and human resources available within a nation that allows for a blue economy to grow, with two indicators of evaluation, ocean capital and enabling factors. Furthermore, ocean capital has two parameters of measurement, ecosystem scale and resources scale, while enabling factors are composed of governance capacity and technology and innovation capacity.
Similarly, the degree of Blue Economy Impact relates to the social and economic outcomes that occur from the development of the blue economy, with two indicators of evaluation, social capital and sustainable growth. Social capital consists of two parameters of measurement, inclusiveness and income inequality, while sustainable growth measures include economic growth rate and employment rate. Greater detail can be found in the “Blue Economy Development Index (BEDI) A Preliminary Study with the Case Studies of 10 Archipelagic and Island States”.
3.2.2. Future development
In achieving the breakthroughs that are required to exploit sustainably, BEDI algorithm will be applied in a form of online tool, which shows the overall rank and indicators for each country, that allow AIS participating countries to monitor and update the index progress. This tool will also enable policymakers, academics, civil society organizations, and the private sector to obtain data and information across a variety of marine economic sectors to determine where development gaps exist.
20 Chapter 4
Entrepreneurship
n line with the Final Outcome of 2019, to identify inno- vative start-ups as champions to support entrepreneur- ial endeavors in archipelagic and island states, the AIS Forum Secretariat launched the AIS Blue Startup Hub. IThrough this initiative, the Secretariat intends to assist the AIS participating countries to building and grow startup ecosystems by creating the perfect environment for start- ups to expand their networks and engage with stakehold- Through this ers. In supporting the creation of innovative ideas and solu- initiative, the Secretariat intends tions, the hub will allow startups to share their knowledge to assist the AIS and experiences. participating 4.1. AIS Blue Startup Hub countries to building and The introduction of the Blue Startup Hub will allow the grow startup AIS Forum to identify innovative startups as champions to ecosystems by support archipelagic and island state members and their creating the perfect challenges. To ensure the programs can reach entrepreneurs environment for from archipelagic and island states around the globe, the Blue startups to expand Startup Hub has launched an online platform. The platform their networks acts as a global communications and knowledge resource site and engage with to engage stakeholders in the AIS participating countries. stakeholders.
21 4.2. Development Progress The AIS Blue Startup Hub intends to identify innovative startups and become a platform to engage entrepreneurs, investors, and incubators from AIS participating countries. To achieve this objective, the AIS Forum Secretariat has introduced the following initiatives:
AIS Blue Hub Website
The AIS Blue Startup Hub website is a platform where startups, incubators, accelerators, mentors, and governments from the AIS participating countries can use to connect to each other. The website serves as a virtual ecosystem for businesses in blue sector industries that are looking to form meaningful connections and find new inspiration to grow their companies. The long-term vision of the program is to form a network of business communities across archipelagic and island states. Our mission is to build a strong entrepreneurial environment by creating a novel business ecosystem as well as by accessing global opportunities that allow startups to tap into new markets and talent pools within the international community.
The AIS Forum Secretariat has identified 115 startups and 196 incubators across the AIS participating countries. This is a significant potential that can be explored and encouraged in the development of startups, especially in sectors that support blue sector activity in the AIS participating countries. Currently, there are 28 startups from Singapore, New Zealand, Philippines, Mauritius, Japan, Madagascar, Indonesia, and Barbados, and 1 incubator from Saint Kitts and Nevis has joined the Hub community. Visit to https://aisbluehub.com for more information.
AIS Blue Hub Innovative Solutions
Partnership with local and global communities and government authorities is essential in achieving the Blue Hub’s objectives. There are two program activities in these areas, namely Ideation and the Innovation Challenge. a. Ideation
These activities aim to engage more startups to join the AIS Blue Startup Hub community and promote the growth of the startups by providing them with expert knowledge and increase public awareness in the real issues surrounding the impact of climate change in which startups and the society at large can help. Through a virtual platform, AIS Blue Hub
22 will collaborate with startups and private enterprises through workshops, talk shows, and training on various topics such as “Creating resilience in business”, “Marketing for startups”, and “Blue innovation: Opportunities in building solutions for the sustainable ocean economy”. These events aim to encourage entrepreneurs to explore opportunities in the Blue Economy sector as well as address notable challenges across different focus areas. b. The Innovation Challenge
The AIS Innovation Challenge is a competition that seeks out solutions or business ideas that can withstand a crisis situation or help other companies or societies at large overcome a crisis. The goal is to find innovative ideas and breakthroughs that can help societies and businesses to be more resilient and adaptive during crisis situations. The event seeks to gather participants from AIS participating countries and encourage cooperation between them. The event focuses more on identifying solutions that minimize disruptions during crisis and less on those that address climate change impacts (i.e, sea-level rise, heavy storm, long drought, etc), unsustainable use of ocean resources, marine plastic debris, and other natural disasters (i.e, earthquakes, volcanic eruptions, and tsunamis).
Progress
The AIS Innovation Challenge programreceived business proposals from more than 150 startups from 6 countries including Barbados, Fiji, Indonesia, Mauritius, Philippines, and Sri Lanka. In the 1st round, the Blue Hub and its partner, Angel Investment Network Indonesia (ANGIN), selected 20 proposals to go to the next round. In the 2nd round, 20 startups conducted virtual pitching sessions to a panel of judges, which consisted of representatives from the Coordinating Ministry for Maritime Affairs and Investment of Republic of Indonesia, MDI Ventures, the Irish Embassy in Jakarta, the IIsla Venture, UK, Villgro, Philippines, and Earth Company, Japan.
Top-10 startups were selected to participate in the mentoring program of the AIS Blue Startup Hub (Annex IV). The winner and the runner up of the competition will receive US$10,000 and US$5,000 in seed funding, respectively.
AIS Blue Hub Mentoring
The AIS Blue Startup Hub Mentoring Program is an 8-session intensive discussion between AIS startups and experts from the startup communities of ANGIN. The program lasts for 8 weeks and it is meant to help the startups to discover solutions to their problems and to enhance their
23 networks in the region. The curriculum of the program is created based on the assessment conducted by ANGIN to understand their needs. The mentoring program was attended by 18 startups from 6 archipelagic and island states, including Fiji, Indonesia, Mauritius, Sri Lanka, Philippines, and Madagascar.
The mentoring program developed a curriculum which was divided into three module, Fundraising, Business development, and Talent management.
1. Fundraising
This module aims to equip entrepreneurs before they go seeking for external funding (fundraising). There are several key points, including understanding why they need to do fundraising, assessing whether they are ready to raise funds, mapping out the different profile of investors at the early stage investment landscape, and understanding how to navigate the most suitable investors according to their fundraising needs. They will also learn what are the typical factors that investors usually seek when looking at investment opportunities.
2. Business development
Business development includes any tasks and efforts to contribute to the growth of an enterprise. Within the broad range of business development elements, this module will highlight the importance of market analysis. It aims to help entrepreneurs understand the demand side through market analysis tools including sizing the market, understanding shifting market behaviour, and understanding different customer segmentations. This module also covers how to ensure the business development efforts align with their impact mission through the use of impact measurement and management tools.
3. Talent management
The growth and the sustainability of an enterprise is very reliant on the people inside the organization. This module serves to provide various tools to help an entrepreneur to manage and attract talent and ensuring mission alignment within the internal team.
These modules are included in the mentoring program and were built based on the assessment of the startups needs. The mentor of each module was selected based on their expertise from the AIS participating countries (Annex V)
24 Chapter 5
Innovative financing
espite a common understanding of the importance of the ocean and coastal environments, there is still a considerable gap between the allocated and required funding to achieve Sustainable DDevelopment Goal (SDG) targets, which according to a recent study is close to US$149 billion per year1. Given this challenge, the AIS Forum Secretariat, partnering with the Innovative Financing Lab (IFL) of the UNDP and the DBS Bank Singapore, are developing Blue Financing guidelines to provide guidance for the private sector to finance projects in the blue economy. As mandated in the Final Outcome of 2019, the AIS Forum Secretariat intends to develop innovative financial mechanisms to assist the implementation of the four areas of cooperation of the AIS Forum. AIS Forum Secretariat 5.1. Blue financing framework intends to develop The Blue Financing initiative aims to open capital markets innovative financial for investment in sustainable ocean-based and ocean-related mechanisms to assist the economic activities. The involvement of private financial implementation of enterprises has become urgent and is critical to meet the the four areas of funding required to accelerate the transition towards a more cooperation of the sustainable ocean economy. The guidance will encourage the AIS Forum.
1 The funding gap. According to the estimates presented here, achieving SDG 14 by 2030 will require resources of US$174.52 billion per year, while currently US$25.5 billion is spent annually. This indicates a funding gap of US$149.02 billion per year. Retrieved from https://doi.org/10.1016/j.marpol.2019.103783
25 development of innovative financial mechanisms that can support marine conservation and other sustainable ocean-related projects. The Blue financing initiative comprises of three activities:
● Development of a strategic document and framework, ● Dissemination of information and public discussion, and ● Project selection and financing.
The Blue Financing Strategic Document acts as a guidance for making investment in “Blue projects”. The document outlines the eight sectors that have been selected and are included as part of the blue economy, including sustainable fisheries, marine renewable energy, waste management, marine protection and restoration, disaster management and risk reduction, marine biotechnology, tourism, and marine technology. The strategic document also outlines a grading system for the sectors by measuring their impact based on environmental, economic and social factors. The detailed report of the Blue Financing can be found in the “Blue Financing Strategic Document”.
In addition to the strategic document, the team has also developed a Blue Bonds andBlue Sukuk Framework, which can guide archipelagic and island states in issuing debt instruments for sustainable ocean projects. Greater detail can be found in the “Blue Bonds and Sukuk Framework” document. The framework explains the stages of bond and sukuk issuance, starting from the management of proceeds, to the project selection, and evaluation process. It also describes the decision making process used to determine the eligibility of the projects and their final selection.
5.2. Development progress Currently, the Secretariat is developing the Blue Financing Strategic Document as well as the Blue Bonds and Blue Sukuk Framework. In the strategic document, the team has identified eight sectors in the blue economy. The sector selection process considers several factors. First, the three components of sustainable development, which include: (1) the environment, (2) the economy, and (3) social context. Sectors being selected must have balanced attributes from the three underlying elements of sustainable development. Second, the process of sector selection needs to include both stakeholders’ views and the judgement of experts. Series FGD and interviews with experts from governments, international organizations, and the private sector have been conducted from February to September 2019. Finally, a review of global criteria relating to sustainable development was also conducted to provide additional information for the sector selection process.
26 In addition to the sector selection, the strategic document also provides guidelines to grade the sectors. The grading system focuses on sector impact to environmental, economic, and social factors. The impact of these selected sectors to these three factors can be categorized as:
● Navy Blue (High impact):
Projects that have a high-level of urgency and have a broad or significant impact on the three grading factors. Under this category, the project needs to have a high impact on the environment and high or medium impact on economic and social factors.
● Sapphire Blue (Medium impact):
Projects of mid-level urgency that generate tangible impacts with clear links to the three grading factors. Under this category the project needs to have a medium impact on the environment and high or medium impact on economic and social factors.
● Sky Blue (Low impact):
Projects of a low-level of urgency with an impact that is low in the three targeted factors. Under this category the project may have a low impact on the environment and high or medium impact on economic and social factors.
Aside from the Blue Financing Strategic Document, the team is also developing a Blue Bonds and Blue Sukuk Framework. The framework will consist of 4 pillars that will describe the process of issuing a Blue Bond or Sukuk:
● Pillar 1 (Use of proceeds): description of eligible project categories that can be financed by a Blue Bond or Sukuk, ● Pillar 2 (Process of evaluation & selection of project): description of the internal governance process in determining and selecting the projects that meet the requirements, ● Pillar 3 (Management of proceeds): description of the management, disbursement, and tracking of the proceeds throughout the duration of the Blue Bond or Sukuk, and ● Pillar 4 (Reporting): description of the actual allocation of the proceeds, including the explanation of the environmental and social benefits created by the financed projects.
27 5.3. Future development Once the strategic document and the framework have been completed, the AIS Forum Secretariat will conduct a series of focus group discussions and workshops with private enterprises, government authorities, and academics from Indonesia and other archipelagic and island states. In order to refine these documents and ensure it is applicable in the market, the inputs from these organizations are essential. The group discussions and workshops are expected to solidify the two documents before they are ready to be used to support project selection. For the pilot project, the AIS Forum Secretariat, together with UNDP IFL and DBS Bank, will work together with the Government of Indonesia to identify projects in the blue sector that can be financed by a Blue Bond or Sukuk. Moving forward, the Secretariat intends to work with other archipelagic and island states to apply the financing framework and discover more blue projects.
28 Chapter 6
Partnerships and international collaboration
ne of the roles of the AIS Forum Secretariat is to facilitate closer collaboration between - ar chipelagic and island states in the four areas of cooperation. In doing so, the Secretariat de- Ovelops partnerships with relevant parties including private enterprises, government authorities, universities, NGOs, media, and global or regional organizations. The idea of this approach is to create a network of experts, researchers, and policymakers who are able to provide their insights and ser- vices to help the AIS Forum in achieving its missions.
To foster ongoing cooperation and sustain momentum within As a platform the AIS Forum, the secretariat supported and facilitated the for concrete annual meeting of AIS Forum as a direction from the forum. cooperation The initiative of multilateral cooperation in the Senior between Official Meeting, Ministerial Meeting, High-Level Meeting, archipelagic and or UN Agenda that eventually benefit the achievement of island states, various global objectives, including SDGs 2030. the forum is expected to build The AIS Forum Secretariat in cooperation with the Govern- cooperation within ment of Indonesia, AIS Participating Countries, global or re- the framework of gional organizations have developed Smart and Innovative partnerships.
29 Solutions. As a platform for concrete cooperation between archipelagic and island states, the forum is expected to build cooperation within the framework of partnerships through capacity building and development programs that refer to the four thematic areas of the AIS Forum cooperation.
6.1. Smart and innovative solutions Addressing those challenges faced by archipelagic and island states will require smart and innovative solutions, which will be the implementation approach of AIS Forum programs. For that purpose, data integrity, state of the art technology, a wide-range of finance sources, and non-traditional partnerships, are tools that may produce smart and innovative solutions— translating challenges into opportunities. a. Smart and Innovative Solutions on Climate Change Mitigation and Adaptation, and Disaster Management • Seagrass Carbon Converter (SCC) The AIS Forum Secretariat collaborates with the Centre for Oceanography, of the Indonesian Institute of Science to develop SCC mobile-operating-systems-based applications that can be used for several functions. For example, calculating the seagrass carbon inventory and the carbon emission reductions from the climate change mitigation activity of the Conservation/Protection Seagrass Ecosystem. The SCC is established by applying a formula that converts the value of biomass, density, and percentage of seagrass cover into carbon stock and absorption values. The SCC is expected to for assist all parties to understand the potential blue carbon balance of a particular seagrass ecosystem.
The Center for Oceanography also developed an MRV method for calculating the carbon emission reduction from the climate change mitigation activity ofthe Conservation/Protection Seagrass Ecosystem on Marine Protected Areas. The MRV method includes 1) a carbon inventory measurement, 2) formula development, and 3) the calculation steps for carbon emission inventory: baseline emission (within the business as usual scenario), emission leakage when implementing the activity, and emission reduction. The center has developed a web-based application called the Seagrass Carbon Converter (http://scc.oseanografi.lipi.go.id/) to help the relevant stakeholders in reporting the potential blue carbon balance of a seagrass ecosystem.
30 • Mangrove Health Index (MHI) The AIS Forum Secretariat, partnering with the Indonesian Institute of Science, has also conducted training on how to measure the health of the mangrove ecosystem by using the “Mangrove Health Index” tool. As commonly known, mangroves can help stabilize coastlines and reduce the impacts of storm waves and flooding by slowing the movement of water and trapping sediment. This will help archipelagic and island states to minimize the impact of rising sea levels.
• Maritime and Aviation Search and Rescue Planning (BNPP) Partnering with the National Search and Rescue Agency of Indonesia, training will be conducted to introduce the Maritime and Aviation Search and Rescue Planning program. This program aims to provide the knowledge and technical skills for the planning of search and rescue operations In the case of accidents, disasters, and conditions that endanger human lives. The training will determine suspected locations, search areas, deployment of personnel and equipment from BNPP or potential search and rescue required, as well as supporting facilities and infrastructure both on land, sea and air, and establishing cross-sectoral coordination with potential search and rescue, until final reporting is well planned.
• Weather Information Service The AIS Forum Secretariat, partnering with Meteorology, Climatology, and Geophysical Agency Indonesia, will conduct a training course on Weather Information Service Capacity. The program will provide basic training for weather forecasting, that can build the technical capacity of those involved in the operation of the Climate Early Warning System (CWES) in the participating countries and is designed mostly for weather forecasters.
• Numerical Weather Prediction (NWP) Numerical weather prediction (NWP) is a method of weather forecasting that employs a set of equations that describe the flow of fluids. Collaborating with Meteorology, Climatology, and Geophysical Agency Indonesia, the AIS Forum Secretariat will conduct a training course on numerical weather prediction (NWP). The training will introduce recent developments in NWP models with a focus on the techniques for processing, visualizing, and developing guidance from NWP.
31 b. Smart and Innovative Solutions on the Blue Economy • AIS Pledge to Ecotourism The AIS Pledge to Ecotourism was launched at the 2019 AIS Forum. The pledge is based on the Palau Pledge and comprises the following three main components: 1) respecting locals, 2) reducing marine litter, 3) supporting coastal and marine ecosystem protection, 4) promoting the local economy in the destination areas, and 5) protecting children in travel and tourism.
• Implementation of the Sustainable Development Goals (SDGs) in Tourism Industry Partnering with the Gadjah Mada University, the AIS Forum Secretariat will conduct a training course that will focus on how Indonesian experiences can aid in the implementation of SDG indicators in the marine tourism industry. The training will provide an overview of SDGs relevant to the marine and coastal tourism industry and best practice from the business community such as investors and entrepreneurs in the tourism industry while realistically integrating the SDGs into coastal and marine tourism policy.
• The “Building with Nature” Approach in Coastal Management Together with the Ministry of Maritime Affairs and Fisheries, the AIS Forum Secretariat organized a training course on the Building with Nature Approach in Coastal Management. The training will enhance the resilience of coastal communities by expanding and strengthening coastal area protection and improve the adaptive capacity of coastal communities. c. Smart and Innovative Solutions on Marine Plastic Debris • Ending Plastic Pollution Innovation Challenge (EPPIC) Responding to this challenge, the AIS Forum Secretariat, partnering with the Marine Plastic Debris project from the UNDP Indonesia, in collaboration with the UNDP Viet Nam and Thailand is working on an initiative to discover innovative breakthroughs that could address marine plastic pollution. The program, Ending Plastic Pollution Innovation Challenge (EPPIC), aims to contribute to the reduction of plastic pollution in coastal areas in South-East Asian countries including Indonesia and the Philippines by bringing together citizens, local governments, and the private sector to collaborate in establishing effective and innovative solutions. The pilot implementation of EPPIC under the AIS Forum Secretariat and UNDP Indonesia will begin in Indonesia in the first quarter of 2021.
32 d. Smart and Innovative Solutions on Good Maritime Governance • Deep Seabed Mining in the Area Seabed mining (SBM) is an emerging sector where mining companies try to extract mineral deposits from the ocean floor. The exploration and exploitation of seabed minerals is governed by the International Seabed Authority (ISA) under authority conferred by the United Nations Convention of the Law of the Sea (UNCLOS). To increase the awareness of the work carried out by the ISA, the AIS Forum Secretariat, working together with the Pacific Islands Development Forum, Coordinating Ministry for Maritime and Investment Affairs, and Max Planck Institute organized a virtual International Seminar through on the Work of ISA and State Practices in Regulating Deep Seabed Mining in the Area.
• Marine Spatial Planning (MSP) Marine spatial planning is intended to align multiple users of the ocean – including energy, industry, government, conservation, and recreation – to make informed and coordinated decisions about how to use marine resources sustainably. It will create a strategic and integrated plan for marine management to manage possible conflicting uses, the cumulative effects of human activities, and marine protection. Together with the Ministry of Maritimes Affairs and Fisheries, the AIS Forum Secretariat will conduct a training session on the Application of Marine Spatial Planning for Sustainable Ocean Development. The training will provide information and share best practices to encourage participating countries to develop and implement their own MSPs to Improve the management and ongoing development of coastal and marine resources.
6.2. Partnerships To ensure the programs and initiatives are aligned with the needs and expectations of AIS participating countries, the Secretariat will maintain communication with country representatives and will continue to facilitate dialogue and discussion. In 2020, the AIS Forum Secretariat expanded communication with the Government of the archipelagic and island states representatives in Jakarta. However, given the pandemic and subsequent lockdowns, the Secretariat has only managed to have discussions with the Kingdom of Bahrain, the Republic of Cuba, the Republic of Fiji, the Republic of Guinea-Bissau, Ireland, Japan, the Honorary Consulate of Jamaica, New Zealand, the Republic of the Philippines, the Republic of Singapore, the Solomon Islands, the Democratic Socialist Republic of Sri Lanka, and the United Kingdom.
33 The AIS Forum Secretariat facilitated a virtual meeting between the Pacific Island Development Forum, the Government of Indonesia, and the UNDP. There are several areas of cooperation that these parties have decided to focus on, such as COVID-19 response, digital connectivity, and the blue economy together with innovative financing mechanisms.
Digitalization is the inevitable pathway for the global economy in the future. The global pandemic has only accelerated digital adoption in many sectors of the economy. The AIS Forum Secretariat will continue to allocate resources to enhance its digital platform to ensure it can reach its stakeholders that are spread throughout the globe and have multiple different time zones. The Secretariat has started an initial engagement with Island Innovation, a digital media company that supports sustainable development and communications by bringing together government, the private sector, NGOs, and universities to advance innovation for sustainability and prosperity in islands worldwide. This collaboration will enable the AIS Forum Secretariat to strengthen its digital channel and establish a global island network.
Innovator Scholarship (Institute Technology Bandung)
In 2020, the AIS Forum Secretariat entered into a partnership with the Bandung Institute of Technology (ITB) as the first university to host the Innovator Scholarship program. Through this program, the Secretariat provides student exchange scholarships for bachelor and master’s students from AIS participating countries. AIS Scholars will receive around US$10,000 to support a one-semester exchange program at ITB. The scholarship provided by the AIS Forum covers costs, such as admission and tuition fees for one semester, visa and residence permits, travel and transportation, monthly living expenses, and health insurance.
In line with the Final Outcome of 2019, the Innovator Scholarship program will bring together students from various universities from archipelagic and island states to collaborate under one platform. Through this initiative, they will have the opportunity to work together with prominent entrepreneurs, academics, and policymakers from AIS participating countries in developing their ideas. The experience can then be brought back and adapted to address similar issues in their home countries.
Progress
The AIS Forum Secretariat has awarded the scholarship to two candidates from the Philippines and Madagascar. The first candidate from the Philippines, Danica Aposaga, is a graduate student in Food Science majoring in Food Chemistry from the University of Philippines (Visayas). Her
34 proposed concept was to address the issues around AIS 4 thematic areas focusing on food waste systems. In her essay, she explained:
“making use of zero value food remains to advance the postharvest technology aimed at reducing food wastes and increasing the economy. Targeting the problem by looking at its root cause in terms of food waste systems...This proposed food utilization system is not only exclusive for edible coating production, but for other venues of commercialization through the ethanol produced from banana peels as disinfectants, and the starch itself from the peelings can be used to produce bioplastics, which in turn can be marketed to be an alternative to plastics.”
Danica will join the MBA program of SBM-ITB.
The Second candidate from Madagascar, Rakotoarisoa Sedera, is a graduate student in Management (MM) majoring in Finance and Banking from the University of Sebelas Maret Indonesia. His research focus is sustainable forest management, specifically trying to establish ways to reduce the demand for timber. In his essay, he explains:
“The main motivation for writing this research came from two sources: “The demand in the forestry sector is considered a major cause of deforestation vice-versa policy of subvention in the forestry sector could maintain our forest over the long term. Therefore, this study aims to examine whether forestry subvention can guarantee the feasibility of sustainable forest management.”
Rakoto will join the Master of Science in Management program at SBM-ITB.
The two AIS Scholars will start the program at the School of Business and Management of Bandung Institute of Technology in early 2021.
35 Chapter 7
AIS country’s support
ndonesia has shown its commitment to support the objectives of the AIS Forum. Through its US$1 million contribution spread over the course of three years (2019-2021), it has enabled the AIS Forum Secretariat, which was established at the 2nd Ministerial IMeeting in November 2019, to achieve significant progress. Using the allocated funds from 2019 and 2020, the Secretariat has commenced research initiatives around the four areas of cooperation and developing a support system for entrepreneurs.
Indonesia is considering pledging its second round of financial sup- port to ensure the future implementation of the AIS Forum pro- gram. Other participating countries have been encouraged to con- tribute, which is voluntary in nature. To ensure sustainable financing is achieved, the AIS Forum has created a network of international financial institutions and private sector stakeholders to help devel- op innovative financing schemes.
The COVID-19 pandemic of 2020, presented the momentum for the AIS Forum Secretariat to rethink its approach and develop a digital strategy that will allow it to continue its work and achieve its missions even during a global lockdown. The Secretariat quickly reacted to the changing circumstances by reallocating resources from activities and programs that were not possible given the international travel restrictions. In this way, it allows the Secretariat to provide more research grants, accommodate more entrepreneurs under its incubation program, and conduct the collaboration activities through an online platform.
36 Chapter 8
The way forward
nder the Manado Joint Declaration, the AIS Fo- rum was established to become a platform that could identify and work towards actionable, con- crete collaborations and partnerships to address Uthe challenges faced by archipelagic and island states. To facilitate the process of finding smart and innovative solu- tions, the AIS Forum Secretariat was established under the Final Outcome of 2019.
The objectives of the AIS Forum Secretariat, which are outlined in the Final Outcome of 2019, were then translated into programs and initiatives that can be categorized into three components: Research and development, Entrepreneurship, and Partnership and international collaboration. Each component contributes to the creation of an innovation The AIS Forum environment in archipelagic and island states, led by AIS Secretariat universities and business communities with the support of will continue government authorities and policymakers. to facilitate collaboration 8.1. Research and development in sharing and implementing The AIS Forum Secretariat will continue to allocate resources best practices to to support not only research and development, but also increase network provide a demonstration of solution prototypes that could access and potentially be scaled up. In the near term, the Secretariat communication in seeks to build public-private partnerships with universities AIS participating and research institutions to conduct thematic research that countries.
37 looks to enhance the adaptation and resilience of archipelagic and island states. From the four thematic areas of the AIS Forum, priorities will be given for research and development around climate change mitigation and adaptation, biodiversity loss, marine pollution, and the empowerment of coastal communities.
8.2. Entrepreneurship The focus of the initiatives around entrepreneurship will be to support the establishment of the blue economy in AIS participating countries. The AIS Forum Secretariat aims to achieve this objective by building startup ecosystems through the AIS Blue Hub, introducing blue financing mechanisms, and empowering the archipelagic and island communities with digital access and technologies.
The AIS Blue Startup Hub plays a unique role in discovering startups that promotes sustainable practices in the marine and ocean-related industry. The system it creates to discover and grow entrepreneurial talents in the blue economy sector has created a niche that makes it unique. Startups that are selected from the Innovation Challenge will undergo an incubation program under the hub and have the opportunity to broaden their network and market access through this program. The hub intends to replicate this system in archipelagic and island states. To have a well-established startup ecosystem, an archipelagic or island state needs to have access to digital connectivity. The AIS Forum Secretariat will continue to facilitate collaboration in sharing and implementing best practices to increase network access and communication in AIS participating countries.
In addition to access to digital connectivity, access to capital is also important to grow startups and business communities. After completing the initial blue financing documents, theAIS Forum Secretariat and its partners will start introducing the blue financing mechanisms that have been developed and explore opportunities to facilitate project selection with government authorities or private enterprises.
The COVID-19 pandemic presented the momentum to establish a sustainable ocean economy through “blue recovery” efforts. Without ignoring the challenges, there is an opportunity for archipelagic and island states to fully adopt sustainable practices in their marine and coastal communities with the assistance provided by the AIS Forum.
38 8.3. Partnerships and international collaboration The AIS Forum Secretariat will continue to facilitate the sharing of information and best practices in the four areas of cooperation. It seeks to achieve these objectives through several key activities, such as:
● Facilitating bilateral or multilateral meeting or discussions between archipelagic and island states or other regional/global initiatives, ● Providing technical aids in the form of smart and innovative solutions, and ● Establishing partnerships at the regional and global scale.
The AIS Forum Secretariat seeks to address the immediate need of archipelagic and island states to respond to the challenges presented by the COVID-19 pandemic. After initial discussions within the Pacific region, it is working to facilitate more discussions with other regions to understand their needs and develop a mitigation plan.
The AIS Forum will complement existing fora at the regional or global level, thereby avoiding duplication. The AIS Forum is also opened to establish triangular cooperation with prospective countries or stakeholders. The AIS must be part and parcel of the global community efforts to address climate change and development issues.
39 Chapter 9 Our Progress in Numbers
Joint-Research stats: No of proposals submitted 13 Total grants awarded 60,000 USD No of universities participated 23 No of countries participated 5
Entrepreneurship stats:
No of startups in the blue hub platform 28
List of countries and number of startups from each country 9 Most represented sectors 3 Innovation challenge: No of startups participated 150 No of startups selected for the final round 10 Amount of prize money 15,000 USD
40 AIS Forum’s Virtual Events 2020
41 Annex I. Events and meetings
January April ● AIS Secretariat preparation for AIS Partnership Visit to Fiji ● Smart and Innovative ● AIS collaboration engagement preparation Solution coordination ● AIS Startups Ecosystem mapping ● AIS Startups Website preparation February ● AIS stakeholder engagement with the Embassy of Sri Lanka in Indonesia ● Partnership Discussion with BRI Microfinance Center ● AIS stakeholder engagement with the May Embassy of Philippines in Indonesia ● Webinar with ITB ● AIS stakeholder engagement with the School of Business Embassy of Cuba in Indonesia Management: Creating ● Socialization of AIS Pledge on Eco-tourism Resilient Business at ASTINDO Travel Fair ● Joint Research ● AIS stakeholder engagement with the Mechanism Embassy of Guinea Bissau in Indonesia ● Innovator Scholarship ● AIS collaboration engagement with Binus Mechanism University
March ● AIS stakeholder engagement with the Embassy of Ireland in Indonesia ● AIS stakeholder engagement with the Embassy of Solomon Islands in Indonesia ● AIS stakeholder engagement with the Embassy of Japan in Indonesia ● AIS stakeholder engagement with the Consulate of Jamaica in Indonesia ● AIS collaboration engagement with Bakrie University ● AIS collaboration engagement with Sahid University
42 Annex I. Events and meetings
June August ● Ambassadorial Lecture Series: Indonesia ● PIDF x AIS Forum bilateral meeting ● Workshop on Ecotourism in ● Talkshow with PIDF, Madagascar AIS Post COVID-19 Pandemic Ministry of Fisheries, Embassy of Malta with Sri Lanka Embassy in India, Embassy of Fiji in Jakarta ● BEDI Development ● Blue Start Hub soft launch ● Partnership collaboration ● Joint Research launch ● Develop Innovator ● Partnership Collaboration Scholarship program with ● AIS Innovation Challenge (Ideation) SBM-ITB launch ● AIS Blue Startup Hub ● International Conference with Binus Website Development University on Biospheric Harmony ● AIS Blue Mentoring Program advance Research reparation ● Joint research assessment
July September ● Fiji Chamber of Commerce talk show: ● Workshop on Blue Financing Building Climate Resilience and - Unlocking the Potential of Adaptive Capacity for Business Sustainable Ocean Economy and Society ● Collaboration with Island ● AIS Innovation Challenge: Innovation Pitching Session ● Seagrass Carbon Converter ● Startup knowledge sharing: program launch Turn your ideas into gold! ● Partnership collaboration ● Partnership Collaboration ● Ignition 1000 startup digital
43 Annex I. Events and meetings
October November ● Workshop collaboration on Seabed ● Result announcement of Mining Regulation Joint-research ● Kick off meeting of Joint Research with ● Announcement of AIS James Cook University and Innovator Scholarship Sam Ratulangi University Awardees ● Sharing knowledge on AIS Forum with ● Mangrove Health Index Universitas Gadjah Mada and Komunitas Training Seni Budaya Gerbang Timur ● Workshop on ● Kick Off meeting Joint Research with Mainstreaming Ocean- Universitas Padjadjaran and University of Climate Relations in Global the Philippines Marine Science Institute Climate Discussion ● Smart and Innovative Solution Partnership ● Workshop on Sea Level ● AIS Blue Hub Mentoring Program series Rise and Sovereignty Boundary Issues due to Climate Change Impacts ● Training on Sustainable Development Goals in Tourism Industry with Universitas Gadjah Mada December ● Blue Innovation: Opportunities in Building ● Advisory board engagement Solution for the Sustainable ● Workshop on Marine Spatial Planning Ocean Economy for Sustainable Ocean Development ● Ending Plastic Pollution ● Workshop on the Building with Nature Innovation Approach in Coastal Management ● The 5th Senior Official ● Competition and Campaign on Marine Meeting AIS Forum Plastic Debris ● The 3rd Ministerial Meeting ● AIS Womenpreneurs Event preparation ● Stakeholder engagement
44 Annex II. Joint Research Program proposal table
Proposals received for AIS Joint Research
Code Institution Country of Origin Joint Research Title
Institut Teknologi Sepuluh Indonesia Plastic Waste Management in Nopember (ITS) Island Communities: Increasing 001 Value of Recycled Materials to Newcastle University United Kingdom Promote Sustainable Marine Environment Chiba University Japan
Research Center for Chemistry - Indonesia The Development of Indonesian Institute of Sciences (LIPI) Biodegradable Plastic derived 002 from Industrial Waste as Chemical Science and Engineering Japan Alternative to Reduce Plastic Department - Kobe University Pollution in Environment
Faculty of Fishery and Marine Sciences (FPIK), Universitas Indonesia Padjadjaran Development of Ocean 003 Monitoring Instrument for Developing Countries University of The Philippines Marine The Philippines Science Institute
Faculty of Fishery and Marine Sciences (FPIK), Universitas Indonesia Padjadjaran Near Real-Time Monitoring 004 System on Coastal Ecosystems for MPA Assessment University of The Philippines Marine The Philippines Science Institute
Nanyang Technological University Singapore
Volcanology Survey Indonesia Indonesia An assessment of lahar susceptibility in Southeast Asia 005 State Polytechnic of Malang Indonesia Volcanoes under a changing climate Philippine Atmospheric, Geophysical and Astronomical Services The Philippines Administration
45 Code Institution Country of Origin Joint Research Title
Research Center for Oceanography (Deputy of Earth Science, Indonesia Ocean Carbon Cycle Assessment in a High-CO2 006 Indonesian Institute of Sciences) World for Potential Benefit on Nanyang Technological University of Low Carbon Development Singapore Singapore
Center of Deep-Sea Research, Indonesian Institute of Sciences Indonesia Management effectiveness (LIPI), Ambon of the Marine Protected Area 007 policy implemented in the Davao Oriental State College of Banda Sea, Indonesia and Science and Technology, Mati City, The Philippines Davao Gulf, Philippines Davao Oriental
Study of socio-economic Center for Coastal and Marine Indonesia impacts of marine debris Resources Studies, IPB University on small islands towards 008 sustainable management: Mindanao State University Naawan The Philippines Case of Seribu Island, Jakarta, Indonesia
Universitas Sumatera Utara, Medan Indonesia
Universitas Pembangunan Panca Indonesia Budi, Medan e-Tangkahan (Online Fish 009 Auction for the Malacca Strait Institut Bisnis dan Teknologi Pelita Coastal Communities) Indonesia Indonesia, Pekanbaru
University of Southampton United Kingdom
Tropical Futures Institute, James Singapore Mobile technology as an 010 Cook University incentive for sustainable fishing practices Sam Ratulangi University Indonesia
Padjadjaran University Indonesia Reassessing ‘ASEAN Way’ to manage its regional maritime 011 environment protection: University of Philippines The Philippines Indonesia and Philippines perspective
46 Annex III. AIS Joint Research Methods
III A. Tropical Future Institute, James Cook University Singapore and Faculty of Fisheries and Marine Science, Sam Ratulangi University, Indonesia Research strategy
Aim: To examine the use of an extrinsic incentive for artisanal/small scale fishers and fish farmers to share data and create intrinsic motivations for behaviour modification.
Objectives: 1. To implement a mark, release and recapture (MRR) program using a mobile application and a top-up incentive to gather data for fisheries management and improve economic yield. 2. To examine at what value a mobile airtime top-up will incentivize fishers to tag (mark) and release juvenile fish to reach a more marketable size.
Research methodology Step 1: Selecting the fishery industry In Bitung it was necessary to assess and select a community of fishers to participate in the trial to incentivize the MRR of fish. In addition to the selection criteria Eachmile is typically used to assess the suitability of a fishery for a trial using mobile applications. Fishing community selection considerations), and is required to consider the following: 1) Suitability of the species and their size distribution for tagging, 2) need for new novel tagging techniques, 3) training of fishers in tagging and release techniques, and 4) need for further development of the mobile application.
Step 2: Training fishers MRR procedure and mFish instructions Once the fisher community has been identified, workshops will be held with the fishers on the topic of MRR and the mFish app. This involves training on how to download and use the features of the mFish app, and how to log catch data. Fishcoins will be awarded for each upload, which can be exchanged for mobile top-up credits through the app.1 To foster relationships, monitor challenges and learning points, and offer assistance to the communities, researchers would be sent for regular site visits once a week on the day that the fishers land their catch in Bitung market. However, given COVID-19, these original plans remain tentative.
47 Engagement and training
Twenty to fifty fishers will be trained in the process of handling and tagging fish, enteringthe information into the mFish app, and releasing the catch. Each tag comes with a unique number linked to each fisher and their boat. These fishers will need to have a smartphone with a working camera in order to be able to participate.
Step 3: mFish and MRR Trials After attending the workshop, the fishers would be equipped to use the tags and mFish app to carry out the MRR trials. Research assistants would visit the community weekly at Bitung market on landing days to observe the size of the fishers’ catch, troubleshoot any issues that the fishers may encounter with tagging and using mFish, and record relevant data.
MRR Process
Once a suitably sized juvenile fish of the target species has been caught, the fishers will tag and enter the tag number and fish-related data into the mFish app. After logging the information FishCoin tokens will be awarded to their account. These tokens can be exchanged for credit top up to the fisher’s or someone else’s mobile phone through the app.
The value of the tokens exchanged for the tagging and data exchange would need to be set with the fishers in advance, according to the species and size of the fish. A pricing system (based on current prices) will be developed that will profit the release of juvenile fish and result in only sufficiently grown fish being caught. This will encourage the fishing of only the adult fish populations, reducing the decimation of fish populations from the overfishing juvenile fish populations (see APPENDIX: Value of FishCoin tokens paid for MRR).
Methodology tables and diagrams Fishing community selection considerations
Guidelines for assessing the suitability of a fishing and fish farming community for Fishing/Farming Industry digital mobile technology trials. Mobile Technologies
48 Cellular coverage and mobile connectivity in Number of fishers/farmers in the community and around the location of the trial Type of fishing vessels and gear used or type Mobile devices used by the target of farming population Fishing grounds/farm locations and Digital literacy of the target population frequency/seasonality of fishing/farming Ratio of prepaid to postpaid subscriptions Species caught (targeted, incidental, discarded) or farmed Diversity and predominant mobile operators used by the target population Method of euthanization, preservation (e.g. asphyxiation/ikejime, ice/cold chain) Frequency of number/mobile operator changes by the target population Supply and financial chain mapping and flow or product/money (e.g. clan/debt Types and use of messaging applications, relationships, processing/value adding) email etc. Organizational structures (e.g. cooperatives) Cellular data usage Legal frameworks (licensing, permits etc.) Management and reporting The role of women
Tag selection
Mark, release, and recapture is a technique used to assess population size as well as to gather other useful data like growth rates. The process involves marking (tagging), recording data, releasing the animals, and then obtaining data again when they are recaptured. In a fisheries context, scientists often do the tagging and the fishers are rewarded for retrieving a tag and providing information (such as the fish length and weight). It will be important to select the most appropriate tags for both the species to be tagged, their size, the ease of application, and cost and availability.
49 Training materials
Materials and diagrams will be developed to explain the steps and processes involved from the capture, tagging, and release of the fish, to their recapture and release until landing - along with how to enter and share the data, receive tokens, and top up their mobile phones or the phones of others (Step 1).
Step 1. Fisher tags a fish, records data, and releases a fish. Once the record is sent, the fisher receives Fishcoin tokens that can be exchanged for airtime top up.
Step 2. A fisherman recaptures a tagged fish and is incentivized to record the fish data and the tag number, and then re-release the fish. Soon after the second fisher receives tokens, and the first fisher would receive more tokens thus further incentivizing fishers to be a part of the program.
Step 3. The tagged fish is recaptured, the tag number and data are recorded and transferred. The second fisher receives tokens along with the first fisher who originally tagged the fish.
50 This can continue until a fisher captures the fish and chooses to land it as, for example, it is at a minimal size as part of a Fishery Improvement Project. When a fisher lands a fish and records and transfers the information the fisher will receive tokens. Soon after, the previous fisher who tagged and released the fish will also receive more tokens.
Step 4. A third fisher lands the fish, records and transfers the information and receives tokens. At the same time the second and first fishers receive tokens again.
Value of Fishcoin tokens paid for MRR The value of the tokens exchanged for the tagging and data exchange would need to be set in advance by species and size and in agreement with the fisher*. In the case of the juvenile coral trout pictured above, caught in Lombok, the fisher claimed he would receive IDR 1,000, so he may be incentivized to do this by as little as IDR 1,000 worth of tokens.
Example table of fish size and payment for tagging and/or releasing
Species Size 1 Price IDR Size 2 Price IDR Size 3 Price IDR
Coral Trout Up to 300g 1,000 300-500g 1,500 500g-1kg 5,000
Parrot Fish Up to 300g 800 300-500g 1,200 500g-1kg 3,000
Yellowfin Tuna Up to 1,000g 2,000 1-3kg 5,000 3-5kg 15,000 Skipjack Up to 500g 1,500 0.5 to 1.5kg 3,000 1.5-3kg 8,000 * Prices at local markets can be used as a guide.
51 Using mFish app
Fishers enter the data into the mFish app by clicking on the plus button and selecting “send a new record” (left) and choosing who they are sending it to (middle) and then their own details entered during on-boarding are auto-filled (right).
The fishers then enter the data such as the port of departure and return as well as the dates (left), the species (middle), an estimate of the weight and the tag number in additional info (right)
52 Based on the size of the fish and the pre-agreed value of fishcoin tokens that are to be sent for tagging and releasing, or releasing a tagged fish, the number of tokens are entered (left), and sent to the receiver (right) and once accepted by the receiver, the tokens are sent and a record is stored on the blockchain.
53 III B. The University of the Philippines Marine Science Institute and Padjadjaran University, Indonesia
Research strategy In the early development stage (2016-2019), the instrument and sensors for ARHEA had been co-developed with Robo Marine Indonesia. Throughout that time, development focused on the advancement of sensors, integration of server database with the PODC (Padjadjaran Oceanographic Data Centre) website, management systems, and mass production. ARHEA will provide further information from the surface to around 150 meters.
The next step will be to conduct joint research with researchers from the Philippines to test the inter-regional capability of this instrument. Both countries are similar archipelago countries that need real time ocean data for their development. Both countries also share some similar issues in the marine environment such as MPA (Marine Protected Area) monitoring, climate change, border issues, ecosystem degradation, and illegal fishing. For this reason, the joint research will provide significant benefits for both countries.
Basic Adjusted Fabrication Assembly Finishing Lab Trial Sea Trial Design Design
• Component Selection • Mechanical System • Functional Testing • Comprehensif Review • Component Library • Electronic System • Assembling and Testing • Sea Trial building • Component procurement • Schematic design
ACTIVITIES • Detail mechanical design • Wiring design • Laboratory Design • Detail electrical design • Fixation & mounting frame • Field Testing • Detail software
• Bill of material • Hull unit • 1 unit complete unit document • Manufacturing drawing • Bill of material • Schematic Design • PCB unit document • Pin Assignment • 1 unit prototype document • Blueprint • Document system • Mounting frame • Mechanical Assembly modul • Structure Design
OUTCOMES • Diagram port & • Lab trial report Connection System • Control System • GUI Design
Figure 2. Development stages of the ARHEA instrument
54 From the series of development stages, several national and international publications generated from the development of the instrument can be seen below:
1. Purba, N.P., Faizal, I., Mulyani, P.G., Prayogo, N., Prasetyo, T., Khan, A.M.A. 2019. Performance of Lagrangian Drifter Oceanography Coverage Area: Second Phase. International Journal of Oceans and Oceanography, 13(2), 353-361. 2. Purba, N.P., Faizal I., Khan, A.M.A. 2019. A Progress Report of New Observational Instrument: RHEA (DrifteR GPS oceanograpHy covErage Area). Nano News, 16, 14-15. 3. Draft Patent for Artificial Debris. Submitted to DRPMI Universitas Padjadjaran for patent process to KEMENKUMHAM (Minsitry of Law and Human Rights Indonesia).. 4. Purba, N.P., Harahap, S.A., Prihadi, D.J., Faizal, I., Mulyani, I., Fitriadi, C.A., Pangestu. I.F., Atmoko, P.D., Alfath, A., Sitio, J.T. 2017. Pengembangan Instrumen Lagrangian Gps Drifter Combined (Gerned) Untuk Observasi Laut. Jurnal Segara, 13(2), 109-116. 5. (http://www.unpad.ac.id/profil/noir-primadona-purba-m-si-rancang-alat-ukur-perairan- berbiaya-murah-andal-dan-efektif/) 6. PPTI 2018 products exhibition in Jakarta and Manado (AIS Forum) for RHEA product
The drifter’s design has to fit with various ocean conditions (Hunt et al., 2012) such as coastal area, rough waves, and fast currents. Numerous drifters have been created by researchers (Austin and Atkinson, 2004; Swallow, 1955), equipped with GPS (George and Largier, 1996), and real-time data transmitters (Perez et al., 2003). The drag ratio between the emerged and submerged drifters’ structure is usually at least 1:40, following the near-surface currents quite accurately (Gerin et al., 2018). ARHEA is a surface drifter that uses the lagrangian principle, following the flow of surface currents. ARHE is also equipped with several sensors that are useful in acquiring water quality data. Sensors that are on board the ARHEA include turbidity, pH, dissolved oxygen, water temperature, atmospheric temperature, humidity, GPS, and pressure.
Figure 4. Design of RHEA and new module/model and system will be attached
55 RHEA as a first instrument can only float on the sea surface, while ARHEA can sink up to 150 meter in the water column to measure physical parameters. ARHEA operates by a deployment system, like other drifters, and the transmission of the data is via a communications satellite. The operation of the ARHEA can be undertaken in both shallow waters and deep waters, because the instrument is equipped with buoys for the shallow waters and blades for deeper waters. These considerations are based on the design needs that can be seen in the following:
1. Displacement/weight. The size of the ARHEA instrument was made as small as possible, allowing easy mobilization and deployment by one or two individuals. The limit for the desirable weight was 20 kg. 2. Battery. A battery with great durability and a system to monitor the battery’s status were needed. This correlates with the sustainability of the instrument when operated. The desirable operational duration for the instrument was 30 days. 3. Navigation and communication. Navigation as a way to detect the instrument’s location is facilitated by GPS, while the communication with on-land stations uses the Iridium communications satellite.
The development of the ARHEA in the second stage created an instrument with a length of 1 meter, weight in the air of 10 kg, a diameter of 140 mm, a battery capacity of 480 Wh, and the endurance of 30 days. The instrument was capable of acquiring 7 parameters, turbidity, pH, dissolved oxygen, air temperature, water temperature, humidity, and hydraulic pressure.
Figure 4. Roadmap for the ARHEA instrument progress
56 ARHEA were designed to be compact, man portable, and able to be deployed from the shore or from a research vessel. ARHEA was also designed to accommodate several survey sensors as its payload, thus demanding a modular interface system. The global description of the ARHEA’s control system and sensor management can be seen below:
Table 1. Sensors and precision attached in ARHEA
No Sensors Precision Company Remarks
1 GPS 0.01 m + 1 ppm CEP Sparkfun ZED-F9P
2 Air temperature and humidity 0 – 50°C Sensirion
±0.5°C accuracy from Dallas 3 Water temperature DS18B20 - 10°C to +85°C Semiconductor
4 Conductivity 0.001mS/cm Valeport Fast CTD Profiler
5 pH 7 + 0.5 Vernier PH-BTA
6 Altimeter +1 m Adafruit 0 – 9.2 above sea level
7 Pressure 12 Adafruit 30.000 –110.000 Pa
A database for receiving and distributing data from the ARHEA is currently in the development stage. The previous server and website, the PODC, which is owned by MEAL Universitas Padjadjaran has been working together with the KOMITMEN Research Group since 2015, with the purpose of data storage from surveys, student’s research, and other sources. This system will be perfected in 2021 development to be able to receive and distribute data directly. PODC is a provider of free, downloadable ocean data.
Figure 5. Prototype of the Padjadjaran Oceanographic Data Centre website (www.podc.fpik.unpad.ac.id)
57 In the final stage, a large amount of data will be collected via the server and published on the PODC website. In this project, potential risks have already been identified that may occur and disrupt the project. Below is a brief list of potential risks and plans to address these problems. The project depends on the system in the micro-controller to process the data. There is always the risk of malfunction or that the instrument might sink to the sea bottom. A solution to this challenge was to deploy the instrument with a rope attachment and evaluate the system at every testing.
● It was expected that the project would include field-based validation which would require travelling. Travelling as a group during the COVID-19 pandemic, poses a potential risk. Research permits may be rejected due to government restrictions. To address this situation the project includes two types of validation. Ensuring at least one validation process if fieldwork is not possible. General output and sustainability of the research
To measure the ARHEA for the public market, the technology readiness level (TRL) parameter is used. TRLs are a type of measurement system used to assess the maturity level of a particular technology. Each technology project is evaluated against the parameters for each technology level and is then assigned a TRL rating based on the project’s progress.
Figure 6. Technology readiness level (TRL) parameters
58 In 2019, the RHEA instrument was tested using the TRL from Universitas Padjadjaran and reached a level 9 and was categorized as a “system proven” through the success of the instrument’s operation. The ARHEA instrument will be designed and produced with as many local components as possible. Currently, the total of local components for the ARHEA is 65.4% and is expected to increase along with greater understanding of this technology. With the majority of the raw material, human resources, and fabrication tools coming from local industries, this project is expected to boost the local economy.
Details of the research have already been published in the media, a peer-review journal, and via seminar and will aim to have the results more broadly disseminated nationally and internationally. The results will also aim to the published in scientific journals with an Impact Factor 0.1 - 1 such as The Journal of Ocean Technology, to ensure wider acceptance by the scientific community.
59 Annex IV. AIS 2020 Innovation Challenge Top 10 Winners who joined the AIS Blue Hub Mentoring Program
Koinpack, Indonesia Azura Marine, Indonesia Koinpack designed a re- Azura Marine Indonesia fill solution to replace is a social enterprise pro- sachets in the consumer viding 100% clean sailing goods industry based on a deposit and reward electric propulsion. The product is electric pro- model. Koinpack works for multiple types of pulsion for a small boat powered by in-house products including detergents, personal care, designed Li-ion battery called Manta. Manta re- and coffee. Products are sold to customers in places conventional 4-strokes engines that need a reusable bottle through local warung stores at least 5L of gasoline to operate and its equal and peer-to-peer sales. The customers pay a with a 11,5 kg carbon footprint per fishing trip. small deposit for the bottle and when they re- Manta was born from a mission to help low-in- turn the bottle, they receive back the depos- come fishermen in remote areas make a better it and a discount on the next buy. Koinpack living by reducing daily operation costs by up to collects, cleans, and refills the empty bottles 30% with a zero-carbon footprint emission. and maintains the incentive system. Koinpack is currently successfully piloting with the first Kampung Marketer, product group. The next step will be to fully Indonesia develop the business to scale further and to Kampung Marketer expand to more product groups, together with is a platform that collaborates between SMEs FMCGs companies. in Indonesia and rural youth to help optimize their sales on the internet. Rural youth are Bulalance, Fiji trained with a curriculum in the field of e-com- BulaLance is a freelance merce to create competent human resources marketplace connecting to further assist and collaborate with SMEs. local Fijian talent to busi- nesses and entrepreneurs globally. It is also a Meja Kita, Indonesia platform to bridge the gap between current job MejaKita (www.me- market demand and skill availability through jakita.com) is a pioneering peer-to-peer learn- capacity building programs. It is a platform that ing platform in Indonesia that empowers stu- foster new skills and provides income generat- dents nationwide to collaborate in learning. ing opportunities whilst supporting the busi- Since April 2016, the platform has been able ness community during this pandemic. to garner over 30,000 students from over 316
60 cities in the country. Through MejaKita, the to 8%. The application of GENÜS-H globally aim is to connect students countrywide to be will significantly reduce fossil fuel consump- able to break boundaries in learning. The plat- tion, reducing diesel-oil use by up to 1.03 bil- form aims to attend to students’ spontaneous lion litre per year and reduce harmful emissions and dynamic, day-to-day learning needs, as of CO2e by up to 2.72 million tons per year. they are able to find value in consuming and contributing academic content. Students may Wujudkan, Indonesia ask or answer questions in the community fo- Wujudkan is a startup rum, share learning notes and academic videos, company that focuses and much more. Instead of monetizing content, on climate change adaptation by delivering wa- MejaKita capitalizes on students’ interactions, ter a harvesting technology that allows people by providing value in automated, enhanced cu- to consume and conserve water at the same ration of users with suitable contributors and time. The current product being developed is a thus relevant learning content that is unique rainwater harvesting system with a TRAP that to their personalized learning needs. The more allows the drinking of rainwater and conserva- users that interact with the platform, the better tion of rainwater into the ground. The product the recommendation and thus acumination of was patented in 2016 and has been implement- users with the Contributors and academic ma- ed across 11 provinces in Indonesia. Wujud- terials that are well-suited to them based on kan! is based in Yogyakarta and was founded their unique learning behaviours. in October 2018 through the Indonesia 1000 Startup Program. In early 2019 Wujudkan! was Teknus, Indonesia incubated by Universitas Gadjah Mada and in TEKNÜS is an Indonesia June 2020 Wujudkan! was accelerated by Uni- based startup, specializ- versitas Gadjah Mada. ing in cleantech and ener- gy efficiency technology RE2H2, Sri Lanka to provide low cost and RE2H2 Energy Technol- ecofriendly solutions for the sustainability of ogies (Pvt) Ltd. is a tech- low and medium scale fishery industries in de- nology solutions provider veloping countries. The first product that is be- and project development ing developed is GENÜS-H, a new innovative company specializing in renewable hydrogen ocean wave powered sea water chiller machine infrastructure and fuel cell systems. RE2H2’s for low cost onboard fishery catch preservation focuses on renewable energy solutions with purposes. The application of GENÜS-H will remote fuel cell applications, including off-grid save operating costs and increase profits by up power applications such as mobile telecommu-
61 nication towers, critical infrastructure such as Plépah, Indonesia hospitals, and emergency services. The system Plépah is a project can also meet the energy demands of numer- that develops ecof- ous transportation requirements. RE2H2 has riendly, non-timber forest products (NTFP) to evolved from the project conceptualization empower rural villages in South Sumatra and stage to providing market assessment, identify- Jambi, Indonesia through the cultivation of the ing suitable technologies for the project, to de- Areca palm waste as an alternative economic signing the overall system, performing financial commodity for the community and farmers. modeling, to negotiating off-take contracts,- ar Following the global initiative to diminish sin- ranging the EPC contracts, and financial struc- gle-used plastics, Plépah focuses on trans- turing. RE2H2’s management team has several forming the Areca palm leaf sheath into a bio- decades of expertise in the power and energy degradable food packaging product as a means industry globally, with expertise in renewable to reduce packaging waste in Indonesia. Plépah energy project development, implementation, is community development scheme providing and project finance. The management team village-owned enterprises/corporations with a has a significant knowledge base and global in- sustainable business model where impacts will dustry relationships with the rapidly evolving resonate with the community’s livelihood. Giv- hydrogen, fuel cell, and renewable energy in- en the remote location of the area in which the dustry landscape. project works, the concept of micro-manufac- turing is used and is a system that democra- Discover Mauritius, tizes technology. The small scale, decentralized Mauritius approach to manufacturing allows the pro- Discover Mauritius™ duction system to be more flexible, adaptable, is a travel and tourism media, with an offline cost-effective, and appropriate to the capacity travel guide app and an online radio promot- of the local resources, therefore the output will ing the culture and the beauty of Mauritius by be more affordable and in return account for a allowing users to plan their own trip and dis- greater market absorption rate. cover the local culture and listen to local mu- sic for free. Discover Mauritius™ works with- out an internet connection, displays the places to visit according to the users geo-location, and informs them of things around them and events with push notifications via geo-located beacons and received an award - “Best Media Partner 2019” by the Global Startup Awards.
62 Annex V. AIS Blue Startup Hub Mentoring Program Curriculum
The “AIS Blue Startup Hub Incubation Program” is a case study mentorship program, where the program will deep dive into the real challenges faced by startups. The objective of the program is to help startups identify and solve challenges that they are facing. With the experienced startup founders, investors, public sector actors, and others, the program will share knowledge, ideas, and other advantages required to accelerate business growth.
Session format
The sessions will be conducted in the form of mini focus group discussions (FGD) taking approximately 60-90 minutes for each session.
CASE CRUNCH PART A: Current Practice and Challenge (30-45 Minutes) Objective: Startups can identify the root cause of their challenges by evaluating their past and current operation.
Activity: • Discuss the current practice and challenges faced by each startup • Assess and examine the key factors that hinder startups’
CASE CRUNCH PART B: Proposing Solutions (15-30 Minutes) Objective: Startups can determine and assess (10 minutes) Introduction Topic the viability of solution to the identified challenges by looking at their future operation.
Activity:
• Identify the range of solutions to try (10 minutes) session brief and next remarks Concluding • Evaluate the suitability of proposed solution
63 A. Technical requirements and tools 1. The participant is required to join at least three of the total classroom sessions that match their identified challenges but are also able to join other sessions. However, the program will only focus to dig deeper into the other startups that have particular challenges on the topic that day.
2. The program uses Google Forms to conduct short “Pre-Session” and “Post-Session” assignments to help the facilitators and experts/mentors understand the identified problems and then flesh out solutions. The program will share the “Pre-Session” Google Form two days prior to the session.
B. Mentors List of mentors of the AIS Blue Startup Hub Mentoring Program 2020
No Name of Mentor Title Expertise Attendees
• Koinpack • Mejakita Aparna Saxena 1 CEO - Torajamelo • Logistics • Dream Agritech (India, Indonesia) • Sampangan • Kampung Marketer
Arlin Chondro • Business • Kerssential 2 Founder - peek.me natural (Indonesia) Development • Azura Marine
• Docking ID • Plepah • Greenstika Benedikta Atika Impact Investment Lead - • Fundraising 3 • Discover Mauritius (Indonesia) ANGIN • Impact Investing • Bulalance • Kerssentials • Pijakbumi • Docking ID • Plepah • Greenstika • Fundraising David Soukhasing Managing Director - • Discover Mauritius 4 • Indonesian entry (France, Indonesia) ANGIN • Bulalance market strategy • Kerssentials • Pijakbumi • RE2H2
64 No Name of Mentor Title Expertise Attendees
• Data Analyst Analytics Lead and Senior Juan Kanggrawan • International 5 Technical Data Product • Discover Mauritius (Singapore) expansion Manager - Traveloka • Product Development
• Indofishery • Gender Lens • Nanobubble ID Michella Irawan Managing Director - • Women 6 • Teknus (Indonesia) PT Etmieco Group Empowerment • Wujudkan • Fishery expert • Azura Marine
Peter Jacob Ex Managing Director - • Seafood industry • Indofishery 7 (Indonesia) PT Reap Indonesia expert • Nanobubble ID
1. Ex Financial Due • Azura Marine Diligence Team - • Bulalance Stevie Susanto PwC Japan • Impact Analyst • Dream Agritech 8 (Japan, Indonesia, 2. Certified Impact Analyst • Financial Management • Plepah France) 3. Current MBA Student of • Wujudkan HEC Paris • Teknus
Viktor Kyosev • Public Relation (Denmark, • Pijakbumi 9 COO - Greenhouse.co • International Indonesia, Taiwan, • Sampangan Expansion Malaysia)
65
Interlude
The most importance key to success in ocean governance is leadership (Gail Osherenko, 2002)
2
Disclaimer
This preliminary report is submitted to UNDP and Coordinating Ministry for Maritime Affairs and Invesment, Republic of Indonesia for internal use within the Archipelagic and Islands States (AIS) Forum. Thank you very much for fullly direction and assistance especially goes to Dr. Purbaya Yudhi Sadewa (former Deputy Coordinating Ministry for Maritime Affairs and Investment), Mr. Sora Lokita (Deputy Assistant for Maritime Zoning and Boundaries, Coordinating Ministry for Maritime Affairs and Invesment, Republic of Indonesia), Mrs. Riny Modaso of Coordinating Ministry for Maritime Affairs and Invesment, Republic of Indonesia. Grateful thanks also goes to Mr. Abdul Situmorang and Mr. Akhmad Arsya Sani of UNDP.
This preliminary report is not necessarily representing the institution where the authors origins from.
Bogor, 7 November 2020
3
Table of Contents
Table of Contents ...... 4 List of Tables ...... 6 List of Figures ...... 7 1. INTRODUCTION ...... 8 1.1. Blue Economy and Ocean Ecosystem Challenges ...... 8 1.2. Blue Economy: Integrated Definition ...... 10 1.3. BEDI Concept, Principles and Framework ...... 11 1.4. BEDI Goals and Policy Connections ...... 12 2. BEDI METHODOLOGY ...... 14 2.1. Guiding Principles ...... 14 2.2. Data Availability and Collection ...... 15 2.3. Data Measurement and Analysis ...... 16 2.3.1. BEDI Domains, Indicators and Parameters ...... 16 2.3.2. BEDI Indicators ...... 18 2.3.3. BEDI Eisenhower Matrix ...... 33 3. BLUE ECONOMY DEVELOPMENT INDEX (BEDI) PRELIMINARY RESULT ...... 36 3.1. BEDI Disclaimer ...... 36 3.2. BEDI Map of AIS Countries ...... 37 3.3. BEDI Degree of Importance ...... 39 3.4. BEDI Degree of Impact ...... 40 3.5. Relationship between Degree of Importance and Degree of Impact ...... 41 3.6. BEDI Score: Criteria and Eisenhower Matrix ...... 43
4
4. CONCLUSIONS ...... 46 References ...... 47 Appendices ...... 52
5
List of Table
Table 1. BEDI Domains, Indicators and Parameters ...... 17 Table 2. BEDI Scores and Criteria ...... 34 Table 3. 10 AIS countries with complete BEDI data and country codes ...... 38 Table 4. Total Degree of Importance ...... 40 Table 5. Total Degree of Impact ...... 40 Table 6. Aggregate Score and Criteria ...... 43
6
List of Figure
Figure 1. BEDI Algorithm: SMART MODEL ...... 18 Figure 2. Scores and weights of Degree of Importance ...... 20 Figure 3. Scores and weights of Degree of Impact ...... 22 Figure 4. Modified Eisenhower Matrix of BEDI ...... 35 Figure 5. 10 AIS countries on world map ...... 39 Figure 6. Radar chart of total Degree of Importance ...... 42 Figure 7. BEDI Einshower Matrix ...... 44 Figure 8. BEDI Score ...... 45
7
1. INTRODUCTION
1.1. Blue Economy and Ocean Ecosystem Challenges
Over 70% of the Earth’s surface is covered by ocean, which accounts for 97% of all water on the planet (National Oceanic and Atmospheric Association [NOAA], n.d.a). The extensive coverage of the world’s oceans—which includes the Atlantic, Pacific, Indian, Arctic, and Southern Oceans (NOAA, n.d.b)—has led to the moniker the blue planet. Therefore, it is unsurprising that the water-covered surface of the Earth supports a complex ocean economy that is predicted to expand from US$1.5 trillion in 2010, or 5% of global gross domestic product (GDP), to an estimated $3 trillion by 2030 (Organisation for Economic Co-operation and Development [OECD], n.d.).
The high value and strong growth potential of the ocean economy has led to a concentration of human settlements in coastal areas, with 40 percent of the global population (approximately 2.4 billion individuals) residing within 100 km of the coastline (United Nations [UN], 2017). This coastal boom has helped drive growth across numerous industries that utilize coastal and marine resources, such as shipping, tourism and mining, which directly support the livelihoods of approximately 3 billion people (OECD, 2020). However, the same industries that have led to a robust and expanding ocean economy have begun to compromise its long-term growth potential, as anthropogenic activities are causing drastic and sometimes irreversible changes to biotic and abiotic factors in coastal and marine ecosystems.
The list of negative impacts affecting coastal and marine areas from unsustainable anthropogenic activities are too numerous to list in this report. However, a cursory review indicates the main consequences of current development practices are climate change-induced changes, such as an increasing frequency of extreme weather events, ocean acidification, sea level rise, ocean temperature increases, deoxygenation (International Union for Conservation of Nature [IUCN], 2019a), and annual sea-ice coverage losses. Other impacts to coastal and marine ecosystems include overfishing; ship strikes and wildlife mortality; destruction of critical coastal and marine habitat, which includes spawning and nursery grounds; harmful inputs into marine environments, such as toxicants, radioactive materials, excess nutrients, plastic waste, and hydrocarbons (e.g. oil); underwater noise pollution; flow restriction and loss of ecological spatial connectivity; and the introduction of non-native species to coastal and marine habitats (UN, 2016a). Individually, these human-induced stressors elicit changes in coastal and marine ecosystems; however, locations with the highest number of cumulative anthropogenic impacts also experience the most rapid and drastic environmental changes, which require meaningful cross-sectoral collaboration to adequately manage (Halpern et al., 2019). Compounding the issue of anthropogenic impacts on the marine environment is the loss of ecosystem services (ES).
8
ES generated from functioning coastal and marine ecosystems provide immeasurable social and economic benefits to humanity and include oxygen production, climate regulation, carbon sequestration and storage (IUCN, 2019a), biotechnology applications (OECD, 2016), harvestable energy, nutrient cycling, and cultural services (e.g. recreation, education and traditional cultural practices [Convention on Biological Diversity, n.d]). Despite the numerous social and economic benefits to humanity derived from available ES, the implementation of unsustainable human use patterns in coastal and marine areas has begun to compromise many forms of ES. For example, 34.2% (2017) of fish stocks are currently being exploited at unsustainable levels (Food and Agriculture Organization of the United Nations [FAO], 2020). As 17% of the global protein intake comes from seafood (FAO, 2020) and because fisheries and aquaculture-based industries employ approximately 260 million individuals globally (UN, 2017), food security is being jeopardized by unsustainable fisheries practices and a reduction in available ES (i.e. food provisioning services). If meaningful action is not taken to address the anthropogenic stressors impacting the marine environment and causing a reduction or loss of ES, then related social and economic issues, such as food insecurity, will increase in prevalence and severity.
To overcome the social, economic and environmental issues stemming from anthropogenic impacts on the marine environment and the ensuing loss of ES, such as rising food insecurity (FAO, 2020), a new paradigm in coastal and marine resource use must be established. One concept capable of improving current methods of coastal and marine resource use is the blue economy, which is an inclusive economic system of ocean-based development that prioritizes sustainable practices and the equitable distribution of economic benefits (IUCN, 2019b). While the blue economy represents a new method for utilizing coastal and marine resources that can help overcome many of the current development challenges faced by humanity, a dearth of monitoring data hinders the effectiveness of its implementation at national and international scales (OECD, 2019). Therefore, international collaboration on the monitoring of coastal and marine ecosystems is required if a new form of coastal and marine resource use is to be achieved through the adoption of the blue economy concept of development.
Aside from establishing international monitoring networks, indexes are another tool capable of mitigating the issue of poor data availability. Indexes offer the ability to collate data from a wide variety of sources for repurposing into comparable data sets that provide an overview of coastal and marine resource use over time and at varying scales. By utilizing indexes, improved policy and management outcomes can be achieved through a holistic understanding of coastal and marine resource development as well as through the implementation of adaptive management strategies. Furthermore, indexes that encompass both the public and private sectors improve the ability of external funding schemes to address gaps delaying the transition to more sustainable models of ocean use, such as the blue economy.
While challenges to effectively utilizing coastal and marine resources in a sustainable and equitable manner are numerous, collaboration at local, national and international scales can overcome these obstacles through improved monitoring, informed policy frameworks and adaptive management strategies. Moreover, by integrating the use of indexes into the formation of policy frameworks and management strategies, positive development outcomes can be achieved through enhanced funding schemes that incentivize sustainable development initiatives. Thus, combining
9 a variety of approaches to the sustainable development of coastal and marine resources can help mitigate negative anthropogenic impacts and maintain or restore ES, which aids in the transition to a blue economy with long-term social, economic and environmental benefits for humanity.
1.2. Blue Economy: Integrated Definition
The value derived from the ocean economy is divided into two distinct components. The first component of the ocean economy is market flows and services, or the direct value generated from the utilization of coastal and marine resources, combined with the value assets of ocean-based industries (OECD, 2016). For example, the value generated from the extraction of undersea hydrocarbon deposits in combination with vessels and mining equipment. The second component of the ocean economy comprises non-market flows and services, or the indirect value of the goods and services generated from natural capital assets (i.e. ES), in combination with the intrinsic value of said natural capital assets (OECD, 2016). For example, seagrass meadows, carbon sequestration and storage, and recreation. Despite being distinct components, the two segments of the ocean economy are in constant interaction, which determines the current and future value of the ocean economy.
To ensure the ocean economy reaches its economic potential, the two components of the ocean economy must be developed in a holistic and sustainable manner (OECD, 2016), as many coastal and marine ecosystems are already impacted by anthropogenic pressures (UN, n.d.; Halpern et al., 2019; FAO, 2020). The blue economy concept—defined by the United Nations Environment Programme Finance Initiative as a form of development “that seeks to promote economic growth and preserve and improve livelihoods across a range of sectors, while ensuring the sustainable use of marine resources”—is one model of development that tries to merge the management of both components of the ocean economy to provide long-term economic and social benefits without compromising the ecological integrity of the planet (United Nations Environment Programme [UNEP], n.d., p.3). Furthermore, the blue economy concept recognizes the many connections between terrestrial and marine areas and ensures that land-based industries with direct or indirect links to coastal and marine ecosystems are included in the management of coastal and marine resource use (European Commission [EC], n.d.; UNEP, n.d.). To facilitate the shift in development strategies from current models of coastal and marine resource use to the more sustainable and equitable modes of development of the blue economy, collaboration between a variety of stakeholders will need to occur.
Collaboration between relevant stakeholders is critically important in adopting the new blue economy paradigm of coastal and marine resource use, as the ocean is a highly interconnected landscape that is influenced by disparate terrestrial and marine resource users, regardless of geographic proximity (Holthus, 2018). Broadly, this requires ocean governance at the international level to adopt the principles of the blue economy, such as sustainability, inclusivity and science-based decision-making (EC, n.d.; Partnerships in Environmental Management for the Seas of East Asia [PEMSEA], 2015), as this will help ensure good maritime governance is achieved in the communally managed Areas Beyond National Jurisdiction (IUCN, 2020). Additionally, implementing the blue economy paradigm successfully will require cross-sectoral collaboration, as maritime
10 activities often have overlapping areas of influence due to the interconnected landscape of the ocean (PEMSEA, 2015). For example, coral reef habitat acting as a nursery ground for marine organisms while also being utilized for tourism, fisheries and biotechnology-related purposes.
Another benefit of employing cross-sectoral collaboration in the management and ongoing development of coastal and marine resources is the ability to promote growth across both established (e.g. shipping, fisheries and tourism) and emerging (e.g. marine biotechnology, deep-seabed mining and renewable energy) maritime industries without causing gross environmental harms (OECD, 2016; EC, n.d.). To promote cross-sectoral collaboration in the blue economy and to assist in the growth of established and emerging industries, proven development tools should be implemented in the development of coastal and marine resources. For example, Integrated Coastal Zone Management (ICZM) and Marine Spatial Planning (MSP) are two development tools for coastal and marine areas that help guide policy, management strategies and investments by integrating social, economic and environmental factors into holistic, multisector development planning (World Bank, 2019; Institute of Marine Affairs, 2020). Thus, to achieve a prosperous blue economy, proven development tools, such as ICZM and MSP, should be operationalized to mitigate issues around cross-sectoral collaboration and the sustainable development of coastal and marine resources. Moreover, by promoting investments into sustainable industries, ICZM and MSP can expedite the adoption of the blue economy paradigm by aligning economic priorities with social and environmental needs.
Despite the optimistic growth trajectory of the blue economy, the COVID-19 pandemic has altered the development of coastal and marine resources at a global scale (UN, n.d.). For example, the UN Ocean Conference, a yearly development forum that brings together the world’s maritime nations to discuss the development of coastal and marine industries, has been cancelled for 2020 (UN, 2020). Even though normal development activities have been disrupted, the responsible and sustainable use of coastal and marine resources is still providing immeasurable social and economic benefits to society, including the use of deep-sea bacteria as components in COVID-19 rapid test kits (United Nations Educational, Scientific and Cultural Organization [UNESCO], 2020).
1.3. BEDI Concept and Framework
The policy and management actions capable of inducing a paradigm shift in coastal and marine resource use at a global scale will require large amounts of data to inform their development and effective implementation. Moreover, this data must encompass stakeholders from both the public and private sectors to ensure the development of holistic policy measures and management strategies. However, there is currently a lack of data related to coastal and marine ecosystems at both national and international scales (OECD, 2019). To enable the development of informed policy and management actions that can help facilitate the shift toward more sustainable and equitable models of coastal and marine resource use under the blue economy concept, the Blue Economy Development Index (BEDI) is being launched in 2020.
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The BEDI is an index that takes a holistic approach to coastal and marine resource use by using social, economic and environmental indicators to track changes over time at both national and international levels. Presently, the BEDI is being constructed to support the development of archipelagic and island states, which are a group of nations whose ongoing development is linked to the health of coastal and marine ecosystems. It is hoped the BEDI will be used as a policy and management tool by archipelagic and island states to collectively work toward operationalizing the blue economy through the utilization of coastal and marine resources sustainably and equitably while maximizing economic benefits. The framework for the 2020 BEDI Report includes a central algorithm with eight unique parameters that measure social, economic and environmental factors, which are split under four indicators and two domains. Using the core algorithm to analyze the data, each parameter is plotted onto a modified Eisenhower Matrix that indicates what areas of a nation’s blue economy are strong and what areas need improvement. In the 2020 BEDI Report, there are 10 archipelagic and island countries, while future BEDI reports will feature an expanded country list as more data becomes available.
1.4. BEDI Goals and Policy Connections
The 2020 BEDI Report was created to help facilitate a global paradigm shift to a blue economy model of coastal and marine resource development through the achievement of four main goals. The first goal is to enhance the ability to monitor the development of the blue economy at national and international scales. The second goal is to aid in the development of solutions to identified problems in the ongoing development of the blue economy. The third goal is to aid in the development of scientifically informed policy frameworks. The fourth and final goal of the BEDI is to encourage diplomatic relations between nations engaged in the blue economy.
1. Tracking tool: The 2020 BEDI Report’s primary goal is to be used as a tracking tool to assess the ongoing development of the blue economy at national and international scales. Specifically, the BEDI will track social, economic and environmental parameters over time, which can be used to highlight areas of strength and weakness in the ongoing development of the blue economy for adaptive policy and management changes. Additionally, the parameters being tracked are evaluated on a cross-sectoral basis and can extend to terrestrial areas that are critical to the sustainable use of coastal and marine resources, such as the agricultural industry and pesticide and fertilizer runoff. 2. Potential solutions: The second goal of the 2020 BEDI Report is to generate solutions to issues affecting the development of the blue economy at national and international scales. The 2020 BEDI Report seeks to accomplish this goal by indicating areas of weakness in a nation’s blue economy, as this information can be used to coordinate resources between the public and private sectors for the development and implementation of meaningful solutions. Moreover, the 2020 BEDI Report can be combined with other development tools, such as the blue bond framework, to further improve the allocation of resources critical to the sustainable and equitable development of coastal and marine resources.
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3. Policy formulation: The third goal of the 2020 BEDI Report is to assist policymakers in developing policy frameworks conducive to meeting the main blue economy objectives of sustainable and equitable development. The 2020 BEDI Report aims to accomplish this goal by using the latest scientific and economic data to indicate how various components of a country’s blue economy interact. Furthermore, the 2020 BEDI Report can be combined with future iterations of the BEDI to track changes to a nation’s blue economy over time for adaptive policy changes. 4. Diplomacy: The fourth goal of the 2020 BEDI Report is to promote diplomatic relations between nations engaged in the ongoing development of the blue economy. The 2020 BEDI Report attempts to accomplish this goal by creating points of engagement between nations through a comparison of their blue economies. By highlighting areas of strength and weakness between maritime nations’ blue economies, countries are better able to coordinate resources to operationalize the blue economy at a global scale. The 2020 BEDI Report can also be used to hold nations accountable for their actions by highlighting problem areas in coastal and marine resource use that are preventing the global adoption of the blue economy paradigm.
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2. BEDI METHODOLOGY
2.1. Guiding Principles
There are five principles that underpin the BEDI as foundational ideas that allow for a comprehensive analysis of each AIS member nation’s blue economy and the effective development of future marine governance strategies (Adrianto, Eisner, and Situmorang, 2019). By using each of the principles in tandem with one another, a strong understanding of current and future economic trends can be ascertained, improving policy formation and the attainment of successful blue economic outcomes for AIS member nations. The main principles of the BEDI are sustainable development, adaptive management, ecosystem-based management (EBM), the precautionary principle, and good maritime governance. Each of these guiding principles will now be outlined in further detail.
1. Sustainable development: The United Nations defines the principle of sustainable development as, “development that meets the needs of the present without compromising the ability of future generations to meet their own needs” (UN, 2019). Additionally, sustainable development comprises three main factors—economic growth, social inclusiveness and environmental protection—that must work in a synergistic manner if true sustainability is to be achieved (UN, 2019). Therefore, a socially inclusive form of economic development that prioritizes environmental sustainability is the model of sustainable development that should guide BEDI operations, ensuring long-term and equitable prosperity is achieved for intergenerational use of ocean resources.
2. Adaptive management: A “learning-by-doing” iterative process, adaptive management seeks to find optimal management systems by continually updating management practices with the best available scientific data, including information gleaned from past management efforts (FAO, 2003; New South Wales Government, 2019). This means that core indicators are assessed on a rolling basis, with adjustments made at pre-determined intervals to rectify any shortcoming in management strategies (FAO, 2003). For BEDI, the use of adaptive management is a core principle, as it is an evaluative management tool allowing policymakers to view management outcomes from multidimensional perspectives (economic, social and environmental), prioritizing management changes through ongoing use of the index. If the BEDI is not consistently employed, its efficacy as a management tool is lessened, as it requires temporal analysis to fully understand how cross-sectoral policies elicit changes in the development of ocean resources.
3. Ecosystem-based management: A holistic approach to environmental management, EBM considers all ecosystem interactions when determining optimal management strategies, including the incorporation of humans as an element within the environment (NOAA, n.d.c). Therefore, EBM is a systems approach that accounts for the cumulative effects of various forms of anthropogenic impacts to manage ecosystems in a sustainable manner through integrated policy measures that encompass terrestrial, marine and living resources (UNEP, 2006).
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EBM is a guiding principle of the BEDI, as ICZM and the understanding of cross-sectoral impacts on coastal and marine ecosystems are critical to achieving sustainable ocean use and a thriving blue economy (EC, 2019).
4. Precautionary principle: A method for mitigating negative environmental impacts when operating in a data-poor context, the precautionary principle aids in decision-making and policy formulation by declaring that management should not be delayed by scientific uncertainty in potentially risky scenarios (EC, 2017; Department of Fisheries and Oceans Canada, 2018). As data pertaining to both biophysical ocean characteristics and environmental impacts from human use patterns are often difficult to attain, such an approach to management is critical to achieving sustainable ocean resource use (OECD, 2016; OECD, 2019). Furthermore, additional uncertainty is present because of the expansion of new and untested sectors in the blue economy, such as deep-sea mining (OECD, 2016). As a result, the BEDI and its implementation in future policy formation must ensure that the precautionary principle is actively employed, otherwise sustainability in a rapidly expanding blue economy is unlikely to be achieved.
5. Good maritime governance: Good maritime governance can be defined as the sharing of policy-making responsibilities in a platform that allows for negotiation of management systems (e.g. rules, processes and agreements) between government institutions at varying levels (international, supranational and subnational) and non-state actors (private enterprises, civil society and local communities) concerning anthropogenic ocean uses (Van Tatenhove, 2011; Soma, van Tatenhove and van Leeuwen, 2015; Holthus, 2018). Good maritime governance is often assessed using several factors that underpin maritime governance systems and can include the following principles of evaluations: transparency, accountability, consultation, participation and inclusivity, communication, conflict management, trust, rule of law, and legitimacy (Bennett et al., 2019). Achieving good maritime governance is often difficult in real world settings, due to the variety of overlapping human activities in the marine environment as well as the influence of terrestrial industries on marine ecosystem health and function (Soma et al., 2015). Nonetheless, attaining good maritime governance is the key to the development and ongoing use of ocean ecosystems in a sustainable manner due to the interconnectedness of ocean habitats and linkages to terrestrial coastal ecosystems (Holthus, 2018); thus, making it a key principle of the BEDI.
2.2. Data Availability and Collection
Each BEDI Indicator and associated parameters need to be populated with pertinent datasets to enable the core algorithm to function to determine which areas of the blue economy are doing well and which portions need further improvement—with both national and international levels of analysis. Much of the data currently available for use in the BEDI comes from other indexes, but only some of the information is pertinent to the development of coastal and marine resources and must be adapted. Other data sources available for use in the BEDI can be taken from
15 international organizations, academic institutions and government databases. For the 2020 BEDI Report, data was collected from the various sources which can be seen in References.
Even though enough relevant data was available to populate the 2020 BEDI Report for 10 countries, a lack of information pertaining to coastal and marine resources and maritime industries has meant the vast majority of archipelagic and island states had to be omitted. Therefore, it is critical that archipelagic and island states improve their monitoring of coastal and marine resources and maritime industries, as the current lack of data is hampering their ability utilize science-based policy and management tools, such as the BEDI. Moreover, by improving monitoring efforts, such as through the creation of an archipelagic and island states monitoring network, future iterations of the BEDI can provide more accurate interpretations of the blue economy and its development at national and international scales.
2.3. Data Measurement and Analysis
BEDI Domains, Indicators and Parameters
The BEDI uses a system of evaluation that incorporates a central algorithm as the basis for analyzing relevant datasets across a variety of marine economic sectors to determine where development gaps exist. The algorithm is based on two main components of analysis, which are Degree of Blue Economy Importance and Degree of Blue Economy Impact. Degree of Blue Economy Importance is related to the level of ocean and human resources available within a nation that allow for a blue economy to grow, with two indicators of evaluation: ocean capital and enabling factors. Furthermore, ocean capital has two parameters of measurement: ecosystem scale and resources scale; while enabling factors comprise governance capacity, technology capacity and innovation capacity. Similarly, the Degree of Blue Economy Impact relates to the social and economic outcomes that occur from development of the blue economy, with two indicators of evaluation: social capital and sustainable growth. Social capital comprises two parameters of measurement: inclusiveness and income inequality; while sustainable growth measures a country’s economic growth and its employment rate.
By using the four indicators underneath the two overarching domains, the BEDI algorithm can determine how various components of an AIS nation’s blue economy are performing in relation to blue economy principles of environmentally sustainable and equitable economic growth. The performance of each component of an AIS nation’s blue economy, represented by the four indicators and eight parameters, are then used to formulate an aggregate national score displaying the degree of success of blue economy implementation in relation to other AIS member states. By creating a system of prioritization for various components of blue economy development and placing them in national and international contexts, the BEDI can effectively ensure gaps in development can be alleviated through targeted policy formulation and efficient direction of key resources.
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Table 1. BEDI Domains, Indicators and Parameters
Domain Indicator Parameter Notes
Degree of Blue Ocean capital Ecosystem scale Ocean area Economy (percentage ocean to Importance total area) Resources quality Quality of ecosystems Enabling factors Governance index Governance system
Technology and Level of technology innovation index used
Degree of Blue Social capital Inclusiveness index Level of inclusive Economy Impact approach Income fairness Gini Ratio Index
Sustainable growth Economic contribution Contribution maritime sectors to national economy Employment rate Percentage of employment in maritime sectors
As can be seen in Table 1, the BEDI components consist of two domains, namely the Degree of Importance and Degree of Impact. The Degree of Importance consists of two indicators, namely ocean capital and enabling factors. Ocean capital can be measured from two parameters, namely ecosystem scale and resource quality. Enabling factors can be measured from two parameters, namely the governance index and the technology- innovation index. The Degree of Impact consists of two indicators, namely social capital and sustainable growth. Social capital can be measured from two parameters, namely the inclusiveness index and income fairness. Sustainable growth can be measured from two parameters, namely the ocean economy and employment rate. Furthermore, each parameter value from the data obtained will be converted into a score (Si) with the following scale: score 1 (low), 2 (medium), and 3 (high). The score for each parameter is then multiplied by the weight (Wi) determined by Adrianto
17 and Nababan (2020). The multiplication of the parameter score and the weight of each parameter will give the total score (TSi) for each parameter. These details are described in Figure 1.
Modified from Penrong (2016) and after Adrianto (2017)
Figure 1. BEDI Algorithm: SMART MODEL
BEDI Indicators
Indicators for the BEDI were chosen as factors that can be effectively measured and which highlight key points of information pertaining to the development of blue economies across AIS nations. These indicators encompass the three main components of sustainable development that underpin the blue economy, which are economic, social and environmental issues (UN, 2019). Each selected indicator has a focus on a specific sustainable development component, depending on the goal of the indicator. By incorporating indicators that include the three main pillars of sustainable development (economy, society and the environment), a holistic monitoring and management tool is created that can facilitate the
18 sustainable and equitable growth of blue economies for AIS nations through identification of management gaps and formation of efficient policy solutions. An overview of the four selected indicators (ocean capital, enabling factors, social capital, and sustainable growth) and their individual parameters of measurement will be outlined, as this will allow for an improved understanding of the BEDI and its intended outcomes.
The first indicator of the BEDI is ocean capital, which examines the extent of ocean resources available for development. The first parameter to be measured under ocean capital is ecosystem scale. Ecosystem scale is a nation’s total area divided into terrestrial and ocean territories. The second parameter measured under ocean capital is resource scale, which is the amount of resources available to a nation within its territorial limits. This can include individual factors, such as: habitat extent coverage (e.g. corals, mangroves and seagrass), fish stocks, offshore aquaculture capable zones, undersea minerals, oil and gas deposits, and marine biodiversity (OECD, 2016). By combining the two parameters under ocean capital, the sustainability of ocean resources can be understood, such as spatial and temporal changes in habitat extent coverage within a nation’s exclusive economic zone, as well as fluctuations in national marine biodiversity.
The second indicator used in the BEDI algorithm is enabling factors, which acts as a measurement of conditions that allow for the sustainable use of ocean resources within national maritime boundaries. The first parameter measuring enabling factors is governance capacity. Governance capacity relates to the capabilities of a nation to conduct good maritime governance based on key marine governance principles, including responsibility, representation, transparency, accountability and legitimacy (Soma, van Tatenhove, and van Leeuwen, 2015). Technology and innovation capacity is the second parameter measured and pertains to the current level of technological resources available to a country, as well as the ability to foster innovation to improve future technological capabilities.
By combining governance capacity with technology and innovation capacity, the BEDI can explore whether a nation is able to effectively manage its resources through enforcement of governance mechanisms. For example, Sierra Leone’s inadequate implementation of governance principles (e.g. representation) and insufficient technological capabilities to manage its fisheries have led to the exploitation of marine resources by foreign fishing fleets (Institute for Security Studies, 2019). These metrics also determine if a nation can use the resources within its territories based on current technological capabilities and future innovation potential. For example, deep-sea methane hydrate deposits—an abundant potential energy source on the seafloor—represents a resource that is particularly enticing to nations with limited oil and gas reserves (e.g. Japan), but is inaccessible at commercial scales due to technological limitations (World Ocean Review, 2014).
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Figure 2. Scores and weights of the Degree of Importance
The third indicator used in the BEDI is social capital, incorporated to assess the degree of equity present in marine sectors, because improving livelihoods and equitably distributing resources are core principles of the blue economy (IUCN, 2019b). The first parameter measured under social capital is inclusiveness, which is a cross-sectional analysis of individuals participating in marine industries, with consideration for factors such as gender, ethnicity, age (United Nations Department of Economic and Social Affairs [UN DESA], 2018), religion, disability, migration status, etc. (UN DESA, 2016). Income inequality, the second parameter measured under social capital, examines how wealth is distributed within a society based on household income generation (OECD, 2018) and levels of household consumption, measured using the Gini coefficient (the World Bank, 2019).
If a society is less inclusive, it is also likely to experience higher rates of income inequality and poor overall economic performance, which reduces future employment opportunities (World Economic Forum, 2019). As a result, social inclusiveness, income inequality and economic performance are linked in a circular system of exchange, with the use of both social capital parameters (inclusiveness and income inequality) capable of deciphering the underlying social factors related to maritime economic issues. By identifying the communities experiencing societal exclusion and
20 unfair income distribution, effectively structured policies can remediate systemic gaps in economic regimes and improve future growth in the blue economy.
The fourth and final indicator for the BEDI is sustainable growth, which is a measurement of economic growth patterns in the blue economy to maximize future growth potential. Economic growth within the blue economy is the first parameter measured, which highlights the growth of an AIS nation’s blue economy and relevant maritime industries. The ocean economy can be defined as the value derived from a combination of economic sectors related to the use of ocean resources, as well as non-market flow environmental assets through the provision of ecosystem services (OECD, 2016; OECD, 2019). Despite valuing both portions of the ocean economy, ecosystem service valuation is still in its infancy, with further research necessary before it can be included into a quantitative evaluation of the blue economy (OECD, 2016; OECD, 2019). Therefore, only industries directly involved in ocean related use and development can be measured presently for inclusion in the BEDI, with future research possibly enabling a more holistic method of evaluation that includes ecosystem service valuation.
The second parameter of evaluation is employment rate, which is measured using full-time equivalent employment statistics from industries directly involved in ocean-based economic activities. This does not include the informal economy sector. For example, small-scale and artisanal fisheries contribute approximately 50 percent of all fisheries landings and employ around 90 percent of fisherfolk globally, many of whom are situated in the informal economy (FAO, 2019). Therefore, more research is needed to include the full breadth of jobs in the blue economy, as well- informed management decisions that are inclusive of all pertinent voices are necessary to ensure sustainable use of ocean resources. Nevertheless, both parameters (economic growth and employment rate) can ensure that human resources are efficiently channeled for adaptive and sustainable management frameworks that can aid in removing skill and knowledge gaps in an ever-evolving and expanding blue economy.
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2 Degree of Impact GR ≤ 0,3
EC ≤ 5%
5% < EC < 7%
EC ≥ 7%
Figure 3. Scores and weights of the Degree of Impact
The BEDI algorithm uses available data compiled from official numbers issued by institutions that issue statistical data and international indexes. The value of data issued by international indexers can be used directly, but the next step is indexed by the BEDI algorithm to produce a parameter score. Meanwhile, for raw data, the data must be adjusted to produce the same value calculation for each country.
The ocean capital indicator uses two parameters for measurement, namely ecosystem scale and resources quality. The data used for ecosystem scale is the ocean area or percentage of ocean area compared to the total area of the country. The data for resources quality uses marine health data compiled by the Ocean Health Index. Enabling factors consist of two parameters, namely the governance index and the tech-innovation index. The governance index used must be related to coastal or marine governance. The tech-innovation index cannot be differentiated only for coastal and marine areas, so it is more generally applicable to the level of technological readiness of a country. These two parameters use data from an international index, namely the Coastal Governance Index and the Technology Readiness Level.
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Social capital indicators use two parameters, namely inclusiveness level and income fairness. The data used for the inclusiveness level is indexed by the World Economic Forum on the Inclusive Development Index. Income fairness uses Gini ratio data issued by both the World Bank and Knoema Corporation. To source the latest Gini ratio data, the official websites for each archipelagic country can be browsed. Sustainable growth consists of two parameters, namely the ocean economy and maritime employment rate. The ocean economy used must show the contribution driven by the marine economy or from the maritime sector. The required employment rate is the amount of workforce absorbed in the maritime sector. Therefore, for the ocean economy, the BEDI uses maritime GDP data and maritime employment rates from each country. Both data for sustainable growth have not been indexed by international indexing agencies. Data tracking is carried out via the official websites or statistical data of each country. If an archipelagic country has calculated its maritime GDP and maritime employment rate, then the available currency is adjusted to be used in the BEDI algorithm. However, if it is not available, then it must be traced to the statistical data of the country and it is adjusted in the same way in every country that does not have data values for these two parameters.
1. Ocean Capital
Ocean capital is expressed by two parameters, namely ecosystem scale and resources quality. Ecosystem scale can be expressed from the ownership of the ecosystem by a country with data that represents the ocean area. Resources quality is stated from the condition of the resources owned by a country. These two parameters are important indicators of ocean capital because even though the ecosystem scale they have is very broad if the resources are in a damaged condition, the ocean capital indicator will decline. Likewise, if the resources quality is in good condition, but the area owned is small, it will limit ocean capital as the development capital of the marine sector.
A. Ecosystem Scale (Ocean Area) According to the United Nations Third Convention on the Law of the Sea of 1982 (UNCLOS 1982), “area” of the sea means the seabed and ocean floor and the land beneath them outside the boundaries of national jurisdiction. UNCLOS 1982 divides the sea into three zones. First, the sea which is part of the sovereign territory of a country (territorial sea and inland sea). Second, the sea which is not a sovereign territory of a country but to which that country has several rights and jurisdiction over certain activities (additional zones and exclusive economic zones). Third, the sea which is not a part of a sovereign territory and is not the right/jurisdiction of any country, namely the zone-free High Seas.
One of the most revolutionary features of UNCLOS 1982 is that it has a significant impact on the management and conservation of marine resources. The exclusive economic zone regime curates historic unilateral claims to waters by countries, by granting coastal states rights to exploration and exploitation, management and conservation of living and non-living natural resources from the seabed and the land beneath it and the water upon it. Other activities for economic exploration and exploitation of such zones include the generation of energy from water, ocean
23 currents and wind. This has the impact that the management of marine areas by a country can improve the welfare of the maritime state under the national regulations of each country. To obtain welfare from the sea, a country must have sovereignty over the sea.
Owning an ocean area that is larger than its land area presents both challenges and opportunities to a country seeking to advance its maritime affairs. Potential maritime resources include: 1) marine fisheries (aquaculture and capture fisheries), 2) marine transportation, 3) marine tourism, 4) marine industry, 5) mining and energy, 6) marine building, and 7) marine services sector. This has an impact that the wider sea area will contribute to welfare, which further increases the importance score of the BEDI from the marine capital owned by each country.
The method of calculating scores is given as follow :
Percentage of Sea Area: ��� ���� %�� = ��� ����� ���� �� ��� �������
Score calculation technique : Score (1; 2; 3) = if (%OA) Terms: OA ≤ 50% then the score is 1 OA> 50% -70% then the score is 2 OA> 70% -100% then the score is 3
Total Score of Ecosystem Scale: Score indicator of ocean area x weight
Sources of Data Data is compiled from the following websites: 1. Official website of each country for ocean area data 2. Statistical data of each country 3. The laws of each country
Updating Data Data updates can be performed every year
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B. Resources Quality The Resources Quality in BEDI uses the parameter values generated from the Ocean Health Index (OHI). OHI on its website states, "Healthy seas in a sustainable manner provide various benefits for humans now and in the future. The Ocean Health Index is a comprehensive framework used to measure ocean health from global to local scales." (OHI, 2020). OHI uses indicator goals to measure the delivery of specific ecological, social and economic benefits concerning sustainable targets. All the indicators are averaged into one value for the Marine Health Index for each country. A goal receives a score of 100 if its maximum sustainable benefits are obtained in ways that does not interfere with the ocean's ability to provide those benefits in the future. Lower scores indicate that more benefits can be obtained or that current methods undermine the delivery of future benefits.
The OHI provides useful information on ecological, social and economic efforts of countries to manage their marine resources. The better the quality of marine resources, the more positive benefits for the performance of the marine sector to increase the BEDI Degree of Importance score of the ocean capital owned by each country.
The method of calculating scores
Score calculation technique: Score (1; 2; 3) = if (OHI) Terms OHI ≤ 25 then the score is 1 OHI > 25-75 then the score is 2 OHI > 75 then the score is 3
Total Score of Resources Quality: Score indicator OHI x weight
Sources of Data Data is compiled from the Ocean Health Index website: http://www.oceanhealthindex.org/
Updating Data Data updates can be performed every year
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2. Enabling Factors
The supporting factors for the BEDI in the domain of Degree of Importance are the governance index and the technology-innovation index. Marine development in the future is expected to take place efficiently and with high competitiveness to be able to benefit all business actors and contribute to high economic growth (more than 7% per year) on a sustainable basis. Therefore, the blueprint for optimal and sustainable marine development must be based on science-innovation-technology and professional governance.
A. Governance Index
Marine development must be equitable so that all business actors can fulfill their basic needs (food, clothing, housing, health, and education) and live in prosperity. Marine development must be environmentally friendly, which ensures the sustainability of marine resources and their ecosystems. From the planning stage, the process of implementing and controlling development programs must be carried out in an integrated manner between sectors, levels of government, government-private sector-community, spatially, and between countries. This shows that good governance of a country will enhance good marine management. In this case, the World Bank records the governance index of all countries in the Worldwide Governance Indicators.
The method of calculating scores
Score calculation technique: Score (1; 2; 3) = if (WGI) Terms WGI ≤ -0.833 then the score is 1 WGI > -0.833 – 0.833 then the score is 2 WGI > 0.833 then the score is 3
Total Score of Governance Index: Score indicator WGI x weight
Sources of Data Data is compiled from the World Bank website: https://info.worldbank.org/governance/wgi/Home/Reports
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Updating Data Data updates can be performed every year
B. Technology and Innovation Index
Science-technology-innovation is fundamental and urgent in sustainable marine management. Science is necessary to study the biological aspects of marine organisms, life cycles, types of food, and reproductive characteristics of life in the sea. Many archipelagic countries need to improve the science and technology of their human resources for better management of marine resources. Island and archipelagic countries with economic potential and marine resources require technological innovation and human resources so that the management of the marine sector can run optimally according to the government targets of each country.
Governments can encourage collaboration with research institutions to ensure sustainable marine resource management so that it can be adopted by the community. Capture fisheries technology is vital in maintaining the sustainability of fisheries resources. Monitoring Control and Surveillance (MCS) is a system that has been used in many countries. Internationally, MCS has been jointly managed since 2001. The International MCS Network coordinates and cooperates among its members to prevent and eliminate illegal, unreported and unregulated fishing.
Technology for processing capture fisheries products is necessary for archipelagic states to become reliable food providers for the world. Improved processing technology for fisheries products is required by the digital industry to create and market future products, such as through innovative product displays, ready-to-eat products, and standardized processing and packaging.
Marketing technology in the current digitalization era has prompted many creative young people to develop startups, including in the marine sector. They are expected to be able to present an efficient business model to the public. With the technology development carried out by startups, in the future, the marine business will be able to compete and not be left behind by other sectors in the use of digital technology.
The marine and fisheries sector is highly competitive, so it needs technological innovation, preparing reliable human resources that are expected to be able to compete on the global stage by meeting international standards. Therefore, the application of technological innovation to develop the marine and fisheries sector is urgent, relevant and essential.
The application of technological innovations based on the marine and fisheries sector is important to become the foundation for the development of the island and archipelagic states in the future. No economy grows without technological advances. Economic growth and technological progress are determined by the strength and power of innovation.
The technological readiness of a country will promote good management of marine resources. In this case, the World Bank has recorded the Technological Readiness Index, which measures the technological readiness of all countries.
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The method of calculating scores
Score calculation technique: Score (1; 2; 3) = if (TRI) Terms TRI ≤ 2 then the score is 1 TRI > 2-5 then the score is 2 TRI > 5 then the score is 3
Total Score of Technology Index = Score indicator TRI x weight
Sources of Data Data is compiled from the World Bank website: https://tcdata360.worldbank.org/indicators/hf74f651d?country=BRA&indicator=741&countries=IDN&viz=line_chart&years=2007,2017
Updating Data Data updates can be performed every year
3. Social Capital Social capital is essential factors in BEDI in relation to the quality of implementation of ocean economic policy in the AIS. In this regards, there are two component of this domain, namely (1) Inclusive Index and (2) Income Fairnes (Gini Ratio).
A. Inclusiveness Index The Inclusive Development Index (IDI) is an annual assessment of 103 countries’ economic performance that measures how countries perform on 11 dimensions of economic progress in addition to GDP. It has three pillars: growth and development; inclusion; and intergenerational equity.
The IDI aims to inform and enable sustained and inclusive economic progress through deepened public-private cooperation via thought leadership and analysis, strategic dialogue and concrete cooperation, including by accelerating social impact through corporate action.
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The structural policies and institutions in these domains collectively represent the system through which modern market economies diffuse gains in living standards. Governments often fail to appreciate the potential of policy in these areas to increase the rate of growth and spread its benefits more widely.
Underemphasis of these policies relative to macroeconomic, trade and financial stability policies is a key reason for many governments’ failure in recent decades to mobilize a more effective response to widening inequality and stagnating median income as technological change and globalization have gathered force. This policy imbalance is reinforced by the prevailing metric of national economic performance, the gross domestic product (GDP), which measures the aggregate amount of goods and services produced in an economy.
Most citizens evaluate their respective countries’ economic progress not by published GDP growth statistics but by changes in their households’ standard of living—a multidimensional phenomenon that encompasses income, employment opportunity, economic security and quality of life. And yet, GDP growth remains the primary focus of both policymakers and the media, and is still the standard measure of economic success. What gets measured gets managed, and the primacy of GDP statistics tends to reinforce the amount of attention paid by political and business leaders to macroeconomic and financial stability policies, which influence the overall level of economic activity, relative to that paid to the strength and equity of institutions and policy incentives in such areas as skills development, labor markets, competition and rents, investor and corporate governance, social protection, infrastructure and basic services.
The method of calculating scores
Score calculation technique : Score (1; 2; 3) = if (IDI) Terms IDI ≤ 3 then the score is 1 IDI >3-5 then the score is 2 IDI >5 then the score is 3
Total score of IDI = Score indicator IDI x weight
Sources of Data Data is compiled from the website of the World Economic Forum: http://www3.weforum.org/docs/WEF_Forum_IncGrwth_2018.pdf
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Updating Data Data updates can be performed every year
B. Income Fairness (Gini Ratio) The Gini Index or Gini Coefficient is an indicator that shows the level of overall income inequality. The value of the Gini coefficient ranges from 0 to 1. A Gini coefficient of 0 indicates a perfect income distribution, or everyone has the same income. Meanwhile, a Gini coefficient of 1 indicates perfect inequality or one person has everything while the other people have nothing. The Gini coefficient strives to be close to 0 to indicate an even distribution of income among citizens.
The method of calculating scores
Score calculation technique: Score (1; 2; 3) = if (Value GR)
Terms GR ≤ 0.3 then the score is 1 GR >0.3-0.5 then the score is 2 GR >0.5-1 then the score is 3
Total score of Gini Ratio = Score indicator GR x weight
Sources of Data Data is compiled from the following websites: 1. Official website of each country for Gini ratio data 2. https://knoema.com/atlas/ 3. https://data.worldbank.org/indicator/SI.POV.GINI
Updating Data Data updates can be performed every year
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4. Sustainable Growth The parameters used to describe the indicators of sustainable growth are the economic contribution and the employment rate. The economic contribution is seen from the maritime contribution toward GDP.
A. Economic Contribution An economic contribution is defined as the gross changes in a region’s existing economy that can be attributed to a given industry, event or policy. GDP can be defined as the sum of all value added at every stage of production within a defined region. The total direct contribution to GDP of a given sector is calculated by the value of its output minus what it has paid on intermediate consumption.
The development of the maritime sector and accompanying infrastructure provides considerable economic opportunities to coastal communities and has benefitted hinterland development as well. Many economic activities are carried out at sea and in support of activities at sea contribute significantly to the economic development of individual nations.
The major economic activities in the maritime sector are as follows: a) Maritime trade b) Ports c) Shipping d) Maritime ancillary services e) Offshore oil and gas f) Fisheries g) Ship building and repairing h) Marine tourism and leisure The method of calculating scores
Score calculation technique: Score (1; 2; 3) = if (EC) Terms EC ≤ 5% then the score is 1 EC > 5%-7% then the score is 2 EC >7% then the score is 3
Total Score of IDI = Score indicator EC x weight
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Sources of Data Data is compiled from the following websites: 1. Official country websites listing data on marine contribution to national economic growth (GDP) 2. Statistical data of each country 3. International journals covering marine economic contribution 4. World Bank database covering marine economic contribution
Updating Data Data updates can be performed every year
B. Employment Rate Employment rates are defined as a measure of the extent to which available labor resources (people available to work) are being used. They are calculated as the ratio of the employed to the working age population. Employment rates are sensitive to the economic cycle, but in the longer term they are significantly affected by governments' higher education and income support policies and by policies that facilitate employment of women and disadvantaged groups. Employed people are those aged 15 or over who report that they have worked in gainful employment for at least one hour in the previous week or who had a job but were absent from work during the reference week. The working age population refers to people aged 15 to 64.
Maritime employment can be narrowly defined as an employment or a job related to the loading, unloading, construction or repair of a vessel. More broadly, it can refer to any job related to the sea or activities within the sea area. Maritime employment is dependent upon the location, nature and purpose of the employee's activities. Particular skills used are irrelevant in determining whether a job falls under maritime employment. Despite that, under maritime employment, a person’s work activity should have a significant relationship to traditional maritime activity.
The method of calculating scores
Score calculation technique : Score (1; 2; 3) = if (ER) Terms EC ≤ 0.3 then the score is 1 EC > 0.3-0.5 then the score is 2 EC >0.5 then the score is 3
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Total Score of IDI = Score indicator ER x weight
Sources of Data Data is compiled from the following websites: 1. Official websites for data on marine employment 2. Statistical data of each country 3. International journals covering marine employment 4. World Bank database covering marine employment
Updating Data Data updates can be performed every year
BEDI Eisenhower Matrix
The BEDI algorithm is a complex multi-variate analysis of four indicators and eight individual parameters related to oceans and human use patterns. Each of the indicators and their associated parameters will need to have their baselines set before attempting to document any changes. To form the baselines, the data compiled from the relevant sources listed in the previous section will need to be entered into a software management and analysis system, with changes made to ensure the data is in a comparable format. This is because standardized methods of data collection have not been practiced between data sources (OECD, 2019). Once each of the data sources is comparable within the individual parameters, an individual score can be made based on each parameter’s goal and pre-determined points of measurement. Afterwards, a cross-comparison between indicators can be accomplished, which will assign an overall country score based on each of the indicator scores achieved in Table 2.
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Table 2. BEDI Scores and Criteria
Degree of Importance Degree of Impact Aggregate Score Note
No AIS Country Score Technology Governance Total Impact Total Inclusiveness
Scale Resources Ecosystem scale Ecosystem Income Fairness Income Total Importance Total Economic Growth Economic Rate Employment Weight 0.25 0.35 0.15 0.25 1.0 0.25 0.15 0.25 0.35 1.0
1 A Score 1 1 1 1 1 1 1 1 Aggregate 0.25 0.35 0.15 0.25 1 0.25 0.15 0.25 0.35 1 1 LOW
2 B Score 2 2 2 2 2 2 2 2
Aggregate 0.5 0.7 0.3 0.5 2 0.5 0.3 0.5 0.7 2 4 MEDIUM
3 C Score 3 3 3 3 3 3 3 3
Aggregate 0.75 1.05 0.45 0.75 3 0.75 0.45 0.75 1.05 3 9 HIGH
This will allow for each country to be placed on a modified Eisenhower Matrix, which will prioritize development needs at an international scale (Figure 4).
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M H H
High
L M H
Medium
Degree of BE Importance Degree L L M Low
Low Medium High
Degree of BE Impact
Figure 4. Modified Eisenhower Matrix of BEDI
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3. BLUE ECONOMY DEVELOPMENT INDEX (BEDI) PRELIMINARY RESULT
3.1. BEDI Disclaimer
Code of Conduct
We want all BEDI users to have an exciting, friendly and safe experience. Accordingly, all site users and any contributions they make must comply with this Code of Conduct. By engaging with BEDI you accept and agree to abide by this Code of Conduct.
Within this Code of Conduct, "contribution" means any material posted or uploaded to our websites by a member of the public, including any text, photographs, graphics, video or audio material.
General Rules:
Users must not: 1. Use BEDI to send offensive or harassing material to other users; 2. Publish defamatory and/or knowingly false material about any person, other users or entities; 3. Reveal confidential information in a personal online posting, upload or transmission—including financial information and information relating to customers, business plans, policies, staff, and/or internal discussions relating to any entity; 4. Undertake deliberate activities that undermines the purpose of BEDI; 5. Introduce any form of malicious software into the community.
Your Contributions: 1. The data used for BEDI is sourced from official websites. 2. If data discrepancies occur, data updating can be done by submitting the latest data to the official BEDI institution. 3. Must not plagiarize or violate copyright, database, trademark, trade secret, privacy, personal or proprietary rights of any kind. Therefore, users will generally need the explicit permission from copyright owners of any existing articles, news reports, music, video clips or other copyrighted material before posting them to the website. 4. Must not contain unlawful, objectionable, disruptive, offensive, harassing, threatening, defamatory, obscene, offensive, abusive, hateful, inflammatory, profane, racially offensive, sexually offensive, or religiously offensive content. Please be respectful and civil to other members, even if you disagree with them. Debates should be productive and founded on constructive criticism.
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5. Must address development-related topics. Contributions must not contain unsuitable or irrelevant website addresses or URLs. Links to pornography, commercial or other inappropriate content will be deleted. 6. Must not promote illegal behavior. Contributions must not contain violent or sexually explicit material or advocate, promote or assist any unlawful act such as (by way of example only) terrorist acts, copyright infringement or computer misuse. 7. Must not misrepresent their origins. Contributions and/or usernames may not be used to impersonate any other person, to misrepresent your identity or affiliation with any person, or to give the impression that they emanate from the UN when is not the case. 8. Must not involve any flooding, spamming or advertising. Flooding is when the same comment is posted repeatedly in the same forum; spamming is the posting of the same comment (or very similar) to more than one forum. All advertisements, chain letters, pyramid schemes, junk mail and any other forms of commercial solicitation are prohibited. 9. Are all public and may appear in public search results. Accordingly, users should not post personal details or information that should not be publically available. 10. Users who violate these rules and contribution guidelines will be sent a warning message by the BEDI team identifying the issue at stake and notifying them of its removal. Users who repeat offenses after receiving warnings will be banned from the site. If you reasonably believe that any contribution to the platform made by another user contravenes this Code of Conduct and/or any of the Website Terms, please notify us via email at: [email protected]
The team will periodically revise the Code of Conduct by amending this page. Please visit this page regularly to ensure you are aware of any changes made as they are legally binding.
This is a public and open platform; the information you post here is public and may appear in search results. Therefore you should not post personal details or information you do not want to be available publicly.
3.2. BEDI Map of AIS Countries
Data availability is very important for the BEDI algorithm. The data required is in the form of an appropriate value for each indicator of the degree of importance and degree of impact. Until now, BEDI scores for which data have been completed are 10 countries. If the availability of data from all AIS countries is complete, BEDI will be more detailed and ready to be used for all AIS countries. Each year, there will be updating of the data for the values of the BEDI indicators, so that changes in the BEDI index can be seen every year for the AIS countries. The 10 countries with complete data are listed in Table 3.
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Table 3. 10 AIS countries with complete BEDI data and country codes
Country Code* Indonesia IDN Japan JPN Philippines PHL United Kingdom GBR New Zealand NZL Singapore SGP Sri Lanka LKA Ireland IRL Malta MLT Madagascar MDG *Country code based on https://countrycode.org/
The 10 countries are then shown on a world map (Figure 5).
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1 The State/Country Measured
GBR IRL
JPN
MLT
LKA PHL SGP
MDG IDN
NZL
Figure 5. The locations of the 10 AIS countries
3.3. BEDI Degree of Importance
The first domain shows the Degree of Importance, which consists of the Ocean Capital indicator and the Enable indicators. Ocean Capital consists of the Ecosystem Scale, which refers to ocean area and resources quality, which refers to the Ocean Health Index. Enabling factors consist of a governance index that refers to the Worldwide Governance Indicators and a technology index that refers to the Technological Readiness Index.
The available data entered into each indicator is determined into an algorithm that has been compiled into parameter scores (consisting of 1, 2 and 3). The results of each parameter are then weighted according to the weighting carried out by Adrianto and Nababan (2020). The multiplication result of these scores and weights will produce the total score for each parameter. The total value of each parameter is then summed so that the value of the degree of importance of each country will be obtained.
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The Degree of Importance value ranges from 1 (not good) to 3 (good). Table 4 shows the total Degree of Importance of the initial 10 AIS countries. The Degree of Importance of each country can be seen from its score and color gradation, where the closer to 1 or the lighter the color, indicates a low score signifying a poor condition. Whereas a score closer to 3 or the darker the color, indicates a high score, signifying a good condition. The total Degree of Importance domain is detailed in Table 4.
Table 4. Total Degree of Importance
A Degree of importance IDN JPN PHL GBR NZL SGP LKA IRL MLT MDG A1 Ecosystem Scale 0.75 0.75 0.75 0.75 0.75 0.25 0.75 0.75 0.75 0.50 A2 Resources Quality 0.70 0.70 0.70 0.70 1.05 0.70 0.70 0.70 1.05 0.70 A3 Governance Index 0.30 0.30 0.30 0.45 0.45 0.45 0.30 0.45 0.45 0.15 A4 Technology Index 0.50 0.75 0.50 0.75 0.75 0.75 0.50 0.75 0.75 0.50 Total Degree Importance 2.25 2.50 2.25 2.65 3.00 2.15 2.25 2.65 3.00 1.85
3.4. BEDI Degree of Impact
The second domain shows the Degree of Impact, which consists of Social Capital and Sustainable Growth indicators. Social Capital consists of an inclusiveness index, which refers to the Inclusive Development Index, and income fairness, which refers to the Gini ratio. Sustainable Growth consists of an economic contribution that refers to the contribution of the maritime sector to the national economy (GDP), and the employment rate, which refers to the percentage of employment in the maritime sector.
The same stage in the Degree of Importance domain is also carried out in the Degree of Impact domain. The Degree of Impact domain is a value ranging from 1 (not good) to 3 (good). Table 5 shows the total Degree of Impact of the initial 10 AIS countries. The Degree of Impact of each country can be seen from its score and color gradation, where the closer to 1 or the lighter the color, indicates a lower score. Whereas a score closer to 3 or the darker the color, indicates a good condition. The total Degree of Impact domain is detailed in Table 5.
Table 5. Total Degree of Impact
B Degree of Impact IDN JPN PHL GBR NZL SGP LKA IRL MLT MDG B1 Inclusiveness Index 0,50 0,50 0,50 0,50 0,75 0,75 0,50 0,75 0,50 0,50 B2 Income Fairness 0,30 0,45 0,30 0,30 0,30 0,30 0,30 0,30 0,45 0,30 B3 Economic Contribution 0,75 0,75 0,75 0,50 0,25 0,75 0,75 0,25 0,75 0,75 B4 Employment Rate 0,70 0,35 0,70 0,35 0,35 0,35 0,35 0,35 0,35 0,35 Total Degree Impact 2,25 2,05 2,25 1,65 1,65 2,15 1,90 1,65 2,05 1,90
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3.5. Relationship between Degree of Importance and Degree of Impact
The relationship between the Degree of Importance and Degree of Impact is how the level of importance possessed by a country will impact that country. The Ocean Capital of a country (its domain Degree of Importance) should have a good impact on the inclusiveness index, income fairness, economic contribution and employment rate, which are the domain of the Degree of Impact. This means that Ocean Capital has a positive impact as a driving force. Likewise, with enabling factors that also affect the Degree of Importance, where apart from Ocean Capital, there are also enabling factors that will become the driving force on the Degree of Impact.
In fact, it can be seen from the radar chart in Figure 6 that it is not certain that the Ocean Capital and enabling factors that are good for a country will also have a good impact. If the orange line is more outside the red line, there is a gap, namely the impact resulting from Ocean Capital and enabling factors that do not have a positive impact on the country. A solution is then needed so that the Degree of Impact is more felt than the Degree of Importance. From this radar chart, it can be seen that the Degree of Impact always has a position inside of the Degree of Importance, which means that the domain of the Degree of Impact is the influence of the Degree of Importance (Figure 6).
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IDN 3,00 MDG 2,50 JPN
2,00
1,50
MLT 1,00 PHL 0,50
-
IRL GBR (UK)
LKA NZL
SGP Total Degree impact Total Degree importance
Figure 6. Radar chart of total Degree of Importance
3.6. BEDI Score: Criteria and Eisenhower Matrix
The BEDI score is indicated by an aggregate score, which is the multiplication of the domain of Degree of Importance and domain of Degree of Impact. The aggregate score is divided into a rating scale, with a range of 1 to 2 being low criteria, 3 to 5 being medium criteria, and 6 to 9 being high criteria. Aggregate scores in the low range indicate that marine resources and the maritime sector are not currently the main focus of a country. Aggregate scores in the moderate range indicate that marine resources and the maritime sector are currently not yet the main focus of a country. This medium criterion shows three things: (a) Degree of Importance and Degree of Impact on medium criteria, (b) Degree of Importance on high criteria but Degree of Impact on medium criteria, and (c) Degree of Importance on low criteria but a Degree of Important Impact on high criteria. Aggregate scores in the high range indicate that marine resources and the maritime sector are currently the main focus of a country.
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However, the assessment range from 5 to 9 shows different levels of focus, even though the BEDI is in the high range. A score of 5 is certainly different from a score of 6 in the BEDI scores of each country. Therefore, BEDI scores in the high range must still pay attention to the value of each indicator in the domain of Degree of Importance and domain of Impact. If the indicators light blue, then it should be a concern (Table 6).
Table 6. Agregate Score and Criteria
Total Degree No Country Total Degree Impact Aggregate Score Criteria Importance 1 IDN 2.25 2.25 5.06 High 2 JPN 2.05 2.50 5.13 High 3 PHL 2.25 2.25 5.06 High 4 GBR 1.65 2.65 4.37 Medium 5 NZL 1.65 3.00 4.95 Medium 6 SGP 2.15 2.15 4.62 Medium 7 LKA 1.90 2.25 4.28 Medium 8 IRL 1.65 2.65 4.37 Medium 9 MLT 2.05 3.00 6.15 High 10 MDG 1.90 1.85 3.52 Medium
By conducting this multi-variate analysis, gaps in the sustainable development of the blue economy are highlighted. This can facilitate an adaptive form of management and policy formulation that enables individual nations to maximize the potential of the blue economy. Moreover, the comparison of AIS member nations during their ongoing development of the blue economy means cooperative engagement between AIS countries can be conducted in a more efficient manner. As the ocean is a highly interconnected landscape (Holthus, 2018), improving one nation’s use of ocean resources will invariably enhance blue economic outcomes for all AIS nations.
The Eisenhower Matrix (Figure 7) shows the BEDI position scores from each country. The Eisenhower Matrix shows diagonal shades of light blue and dark blue. The light blue color indicates the BEDI score is still low, while placement amid darker blue indicates a country has a higher BEDI score. In the Eisenhower Matrix, it can be seen the predominant scores are medium (range 3–5) and high (6–9).
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3,00 MLT NZL
GBR IRL
2,50 JPN
PHL LKA IDN SGP
2,00
MDG
Degree Importance of Degree
1,50
1,00 1,00 1,50 2,00 2,50 3,00 Degree of Impact
Figure 7. BEDI Eisenhower Matrix
The BEDI position of each country is shown in Figure 8, with a score range of 1 to 9. In Figure 8, it can be seen that Madagascar has a BEDI score of 3.52, which is the lowest position compared to the nine other countries, but the criteria for Madagascar are still in the medium range along with five other countries, namely the United Kingdom (GBR), New Zealand (NZL), Singapore (SGP), Sri Lanka (LKA) and Ireland (IRL). Malta has a BEDI score of 6.15, which is the highest position compared to the nine other countries, but Malta's criteria are included in the high range, along with three other countries: Indonesia (IDN), Japan (JPN) and the Philippines (PHL).
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Country
IDN
JPN
PHL
GBR
NZL
SGP
LKA
IRL
MLT
MDG
1 2 3 4 5 6 7 8 9 BEDI Score
Figure 8. BEDI Score
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4. CONCLUSION
From this preliminary report on the BEDI studies, we can conclude that:
1. BEDI can be used as an instrument for monitoring and evaluating the perfomances of ocean economic policy for the AIS with regards to measurement of the progress of the blue economy development of AIS. Furthermore, through BEDI the gaps of policy regarding to the ocean development also can be mapped and identified.
2. The availability of data to be entered in the BEDI algorithm varies for each country.
3. In the context of Sustainable Development Goals (SDGs), BEDI can be used also for measuring the contribution of AIS to SDG-14 (Life Below Waters) especially in the context of targets 14.7 (ocean economy) and 14.c. (international ocean diplomacy).
4. From the technical perspective, we recommend that the data used for BEDI be of the same data year, so that the BEDI measurement from each country has the same standard.
5. The data that is sufficiently complete to be entered in the BEDI algorithm is currently only 10 out of 40 AIS countries, so each AIS country needs to be able to complete the data required for the BEDI algorithm. If data is ready for updating, the BEDI Office can be contacted.
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World Ocean review. (2014). Methane hydrate – a new energy source? Retrieved from, https://worldoceanreview.com/en/wor- 3/methane%20hydrate/extraction/
Link of the data : http://www.fao.org/fishery/en http://www.oceanhealthindex.org http://www.stats.govt.nz, 2019 http://www3.weforum.org/docs/WEF_Forum_IncGrwth_2018.pdf https://cordioea.net/nmc/countries/madagascar/ https://data.worldbank.org/indicator/SI.POV.GINI https://knoema.com/atlas/ https://reader.elsevier.com/reader/sd/pii/S0308597X19307390?token=F0330D2EBB65BA245C060C296BD0B8AE9FA732FD15AF199 CEB12CAD7ACC17C289710375AFADDEDFC12E06D4EC9499982 https://tcdata360.worldbank.org/indicators/hf74f651d?country=BRA&indicator=741&viz=line_chart&years=2007,2017 https://www.maritimesgconnect.com/explore/industry-overview/overview https://www.nuigalway.ie/media/researchsites/semru/files/Online_Irelands-Ocean-Economy-Report_for-web_final.pdf https://www.stat.go.jp/english/data/handbook/pdf/2020all.pdf#page=1 https://www.statista.com/statistics/795284/employment-in-ireland/
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Appendices
Appendix 1. Countries by total area, ocean area and ocean area percentage
Country Code Total area (km2) Ocean area (km2) Ocean area as % of country Indonesia IDN 8,300,000 6,400,000 77.11 Japan JPN 4,856,975 4,479,000 92.22 Philippines PHL 3,179,800 2,879,800 90.57 United Kingdom GBR 3,468,430 3,224,820 92.98 New Zealand NZL 4,365,974 4,098,264 93.87 Singapore SGP 1,382 673 48.70 Sri Lanka LKA 601,463 535,853 89.09 Ireland IRL 495,626 425,346 85.82 Malta MLT 53,243 52,923 99.40 Madagascar MDG 1,782,130 1,200,330 67.35
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Appendix 2. Total Scores on Ecosystem Scale
Ocean area as % of Score Ecosystem Scale Country Code Weight country Indicator total score
Indonesia IDN 77.11 3 0.25 0.75 Japan JPN 92.22 3 0.25 0.75 Philippines PHL 90.57 3 0.25 0.75 United Kingdom GBR 92.98 3 0.25 0.75 New Zealand NZL 93.87 3 0.25 0.75 Singapore SGP 48.70 1 0.25 0.25 Sri Lanka LKA 89.09 3 0.25 0.75 Ireland IRL 85.82 3 0.25 0.75 Malta MLT 99.40 3 0.25 0.75 Madagascar MDG 67.35 2 0.25 0.50
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Appendix 3. Total Scores on Resources Quality Scale
Resources Quality total Country Code OHI Index Score Indicator Weight score Indonesia IDN 65.00 2 0.35 0.70 Japan JPN 66.00 2 0.35 0.70 Philippines PHL 71.00 2 0.35 0.70 United Kingdom GBR 74.00 2 0.35 0.70 New Zealand NZL 77.00 3 0.35 1.05 Singapore SGP 68.00 2 0.35 0.70 Sri Lanka LKA 60.00 2 0.35 0.70 Ireland IRL 67.00 2 0.35 0.70 Malta MLT 78.00 3 0.35 1.05 Madagascar MDG 54.00 2 0.35 0.70
Appendix 4. Total Scores on Governance Index
Country Code WGI Index Score Indicator Weight Governance Index total score
Indonesia IDN 0.18 2 0.15 0.30 Japan JPN 0.22 2 0.15 0.30 Philippines PHL 0.05 2 0.15 0.30 United Kingdom GBR 1.34 3 0.15 0.45 New Zealand NZL 1.67 3 0.15 0.45 Singapore SGP 2.23 3 0.15 0.45 Sri Lanka LKA -0.24 2 0.15 0.30 Ireland IRL 1.42 3 0.15 0.45 Malta MLT 0.97 3 0.15 0.45 Madagascar MDG -1.15 1 0.15 0.15
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Appendix 5. Total Scores on Technology Index
Score Total score Country Code TRI Index Weight Indikator Technology Index Indonesia IDN 3.86 2 0.25 0.50 Japan JPN 6.01 3 0.25 0.75 Philippines PHL 3.80 2 0.25 0.50 United Kingdom GBR 6.33 3 0.25 0.75 New Zealand NZL 5.40 3 0.25 0.75 Singapore SGP 6.09 3 0.25 0.75 Sri Lanka LKA 3.16 2 0.25 0.50 Ireland IRL 5.97 3 0.25 0.75 Malta MLT 5.89 3 0.25 0.75 Madagascar MDG 2.52 2 0.25 0.50
Appendix 6. Total Scores on Inclusiveness Index
Inclusiveness Index total Country Code IDI Index Score Indicator Weight score Indonesia IDN 3.95 2 0.25 0.50 Japan JPN 4.53 2 0.25 0.50 Philippines PHL 3.83 2 0.25 0.50 United Kingdom GBR 4.89 2 0.25 0.50 New Zealand NZL 5.25 3 0.25 0.75 Singapore SGP 5.40 3 0.25 0.75 Sri Lanka LKA 3.79 2 0.25 0.50 Ireland IRL 5.44 3 0.25 0.75 Malta MLT 4.80 2 0.25 0.50 Madagascar MDG 3.03 2 0.25 0.50
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Appendix 7. Total Scores on Gini Ratio
Gini Gini Ratio Country Code Score Indicator Weight Ratio total score Indonesia IDN 0.38 2 0.15 0.30 Japan JPN 0.30 3 0.15 0.45 Philippines PHL 0.44 2 0.15 0.30 United Kingdom GBR 0.35 1 0.15 0.15 New Zealand NZL 0.33 1 0.15 0.15 Singapore SGP 0.38 1 0.15 0.15 Sri Lanka LKA 0.40 1 0.15 0.15 Ireland IRL 0.33 1 0.15 0.15 Malta MLT 0.29 1 0.15 0.15 Madagascar MDG 0.43 1 0.15 0.15
Appendix 8. Total Score on Maritime Contribution to Economy
Maritime Maritime Contribution Country Code Score Indicator Weight Contribution total score Indonesia IDN 10.41 3 0.25 0.75 Japan JPN 28.00 3 0.25 0.75 Philippines PHL 21.00 3 0.25 0.75 United Kingdom GBR 6.10 2 0.25 0.50 New Zealand NZL 1.40 1 0.25 0.25 Singapore SGP 7.00 3 0.25 0.75 Sri Lanka LKA 40.00 3 0.25 0.75 Ireland IRL 2.00 1 0.25 0.25 Malta MLT 15.40 3 0.25 0.75 Madagascar MDG 15.00 3 0.25 0.75
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Appendix 9. Total Score on Employment Rate in Maritime Sector
Employment in Employment Rate Country Code Score Indicator Weight maritime sector (%) total score
Indonesia IDN 40.00 2 0.35 0.70 Japan JPN 17.00 1 0.35 0.35 Philippines FPN 41.30 2 0.35 0.70 United Kingdom GBR 2.70 1 0.35 0.35 New Zealand NZL 0.69 1 0.35 0.35 Singapore SGP 2.91 1 0.35 0.35 Sri Lanka LKA 28.10 1 0.35 0.35 Ireland IRL 1.51 1 0.35 0.35 Malta MLT 8.00 1 0.35 0.35 Madagascar MDG 2.06 1 0.35 0.35
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BLUE FINANCING STRATEGIC DOCUMENT
CASE STUDY: INDONESIA BLUE FINANCING STRATEGIC DOCUMENT TABLE OF CONTENTS
List of Figure ix 4. DIFFERENT FINANCIAL INSTRUMENTS 11 List of Table ix 4.1 Bond and Sukuk 12 List of Appendix ix 4.2 Badan Layanan Umum (BLU) 13 4.3 Trust Fund 14 1. INTRODUCTION 1 4.4 State-Owned Enterprise (SOE) 17 1.1. Concept and Definition 1 4.5 Banking Sector 18 1.2. Objective 2 4.6 Blended Financing 19 1.3. Target audience] 3 4.7 Impact Investment 20 4.8 Social & Development Impact Bond 22 2. SECTORS AND GRADING 3 4.9 Insurance 22 2.1. Sectors Selection 3 4.10 Crowdfunding 25 2.2. Sectors Grading 5 2.3. The Sub-Sector, Impact Measurement 7 5. SAFEGUARDING IN BLUE INVESTMENT 26 Indicator and Policy References 5.1 National Standard 26 2.4. Timeline 8 5.2 International Standard 28 6.CONCLUSION 29 3. FINANCIAL FRAMEWORK 9 REFERENCES 31 AND FINANCING GAP APPENDIX 36 3.1. Green and Blue Economy: The Gap 9 3.2. The Investment Gap 10
BLUE FINANCING STRATEGIC DOCUMENT TABLE OF CONTENTS
LIST OF FIGURE
Figure 1 Selected Sectors in Strategic Document of Blue Financial Mechanism 4
Figure 2 Green and Blue Framework Sectors 3
Figure 3 Financial Gap 9
LIST OF TABLE
Table 1 Grading Matrix of Blue Economic Sectors 6
Table 2 Example on Subsectors and Indicators of Selected Sectors 7
Table 3 Project scale and instrument types 12
Table 4 Blue Bond 12
Table 5 Trust fund and Badan Pengelola Dana (BPD) 14
Table 6 International trust fund case in blue sector 16
Table 7 Actors in Blended Finance 19
Table 8 Impact investing on blue sector 21
Table 9 Parametric insurance case 23
Table 10 Crowd funding in blue sector 25
Table 11 National safeguarding in blue sector 27
Table 12 International safeguarding in blue sector 28
LIST OF APPENDIX
Appendix Table 1 Grading Matrix of Blue Sectors 36
Appendix Table 2 Indicator and Policy References 37
Appendix Table 3 Eligible Projects and Time Line 40
Appendix Table 4 Potential overlaps and gaps between green and blue economic frameworks 43
BLUE FINANCING STRATEGIC DOCUMENT 1.
INTRODUCTION
02 AIS FORUM PROGRESS REPORT 2020 1. INTRODUCTION
1.1.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 exists the potential for Indonesia to develop and implement policies and strategies to drive the marine related blue economy. However, in 2018, the contribution of marine resources to Indonesia’s GDP was only around 6%, which is far below its true potential. Therefore, to accelerate Indonesia’s blue economy and to achieve its full potential by unlocking investments from a variety of stakeholders, an initiative to develop a strategic document for blue financial instruments has been developed. This document 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 vary in scope depending on the sectors included within definition. 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". Whereas, 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.
All these unique definitions from numerous organizations possess the same core attribute, which is 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 25 of the 1945 Constitution states that the Republic of Indonesia is an archipelagic country characterized by an archipelago with territories whose boundaries and rights are determined by law. The vision of the Long-Term Development 2005-2025 in Law No. 17 of 2007 is “Independent Indonesia, Advanced, Fair”. One of the key missions is to realize Indonesia as an independent, advanced, and strong nation that forms and enacts policy based on its national interests through initiatives such as the building of an integrated marine economy optimized for the sustainable use of marine resources.
BLUE FINANCING STRATEGIC DOCUMENT 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 concerning marine management that the development of marine resources be conducted under the principles of the blue economy. Article 14 provides the following conception of a 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 within this document.
The implementation of the blue economy as the sustainable management of marine resources, is in line with the Sustainable Development Goals (SDG) 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 document through Presidential Regulation No. 59 of 2017 on the Implementation of Achieving Sustainable Development Goals. Similarly, the current Technocratic Draft of National Midterm Development Plan (RPJMN) 2020-2024 that guides national development over the next five years incorporates marine development as a core objective, including: (1) building independence, (2) guaranteeing justice, and (3) maintaining sustainability to ensure the development of the marine economy as it moves towards becoming a strategic sector. Therefore, improving marine management is recognized as being critical to the strengthening of national economic growth, and can effectively be tracked using specific targets with several corresponding indicators. The document also highlights the need for marine management in natural resource management policies and strategies for national development 2020-2024.
1.2. Objective
The main objective of this strategic blue financial document is to unlock the economic potential of marine-based economic activities and open capital markets for investment in the blue economy. Specifically, this document aims to: (1) Provide the foundations for eligibility criteria for selecting a "Blue Project". (2) Define blue financial instruments that are relevant for public and private investment. The document also aims to achieve long-term benefits that combine environmental, economic and social perspectives based on the SDG principles adopted by the 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.
02 AISBLUE FORUM FINANCING PROGRESS STRATEGIC REPORT DOCUMENT 2020 1.3. Target audience
This document’s target audiences are: 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. Banking Sector: This document can be used by banks to assess a blue investment. Blue finance may provide banks several advantages over other financing options and may help to curate a sustainable project portfolio. 3. Philanthropy: This document provides 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 as an opportunity to encourage the long-term sustainability of the ocean environment or to establish guidelines for this process. The document may also be used to promote economic development through blue financing mechanisms. This strategic document is also of value and interest to a much wider audience that may be involved through associated projects.
BLUE FINANCING STRATEGIC DOCUMENT 2.
SECTORS AND GRADING
02 AIS FORUM PROGRESS REPORT 2020 1. SECTORS AND GRADING
2.1. Sectors selection
Both the central and regional 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 nonconventional resources or the natural resources that have not been used optimally. 2. The exploitation of marine resources or the enabling of the marine environment: marine industries, marine tourism, sea transportation, and sea building.
In addition to the article, the sector selection process also considered several important factors. First, the three components of sustainable development, which includes: (1) the environment, (2) the economy, and (3) social factors. Hence, sectors being selected must have balanced attributes from the three underlying elements of sustainable development. Second, the process of sector selection should include stakeholders’ views and the judgement of experts. Series of Focus Group Discussions (FGD) and interviews with relevant parties were conducted from February to September 2019 and were 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 chosen global criteria for sustainable development include the following points: a. The SDG Index and Dashboards Report: A report card for country performance on the historic Agenda 2030 and the SDGs. b. Gold Standard for the Global Goals: A unifying framework to quantify, maximise, and certify the sustainable development impacts of climate mitigation activities. c. SDG Selector for Business: A solution to identify which SDGs are relevant for businesses and the private sector. d. Initiative for Climate Action Transparency (ICAT) Sustainable Development Guidance: A modular guidance initiative for assessing the environmental, social, and economic impacts of policies and actions.
BLUE FINANCING STRATEGIC DOCUMENT of biodiversity and ecosystems; disaster management and risk reduction; marine biotechnology; tourism; and marine technology. How these selected sectors transitioned from the Article 14, Law No. 32/2014 is explained in the figure below.
Figure 1 Selected sectors in the Blue Financing Strategic Document
Definition Translated to Sectors
The utilization of Marine Resources: a. Fishery Sustainable Fishery, Marine restoration and b. Energy and mineral resources protection and of biodiversity and ecosystem, c. Coastal and small islands resources Renewable marine energy and Disaster d. Nonconventional resources management and risk reduction
The exploitation of marine resources of or the enabling of the marine environment: a. Marine Industry Waste management, Marine bio and b. Marine industry non-biotechnology. and Ecotourism c. Sea transportation d. Sea building
2.2. Sector grading
In addition to selecting the eight sectors, this document also provides guidelines to grade the sectors. The grading system focuses on the sectors impact on environmental, economic, and social factors. For this purpose, focus is placed on positive impacts as the net benefit is deducted by its potential negative impact. The impact of these selected sectors to these three factors can be categorized as:
a. Navy Blue (High Impact): Projects that have a high-level of urgency and have a broad or significant impact on the three grading factors. Under this category, the project needs to have a high impact on environment and high or medium impact on economic and social factors. b. Sapphire Blue (Medium Impact): Projects of mid-level urgency that generate tangible impacts with clear links to the three grading factors. Under this category the project needs to have a medium impact on the environment and high or medium impact on economic and social factors. c. Sky Blue (Low Impact): Projects of a low-level of urgency with an impact that is low in the three targeted factors. Under this category the project needs to have a low impact on the environment and high or medium impact on economic and social factors.
02 AISBLUE FORUM FINANCING PROGRESS STRATEGIC REPORT DOCUMENT 2020 Table 1 The grading matrix of the Blue Economic Sectors
Criteria Grading Environment impact Economic impact Social impact
High High High Navy Blue Medium Medium Medium (High Impact} Low Low Low
High High High Saphire Blue Medium Medium Medium (High Impact} Low Low Low
High High High Sky Blue Medium Medium Medium (Low Impact} Low Low Low
The grading system was implemented to assess the marine based sectors and is structured on the three-tiered rating scheme of navy blue, sapphire blue and sky blue. This system demonstrates the project importance level from a blue economy perspective, as each of the selected sectors are graded using a multi criteria analysis (MCA) approach. Two elements of the grading approach are the score and the weight. The three factors (environment, economic, and social) used in sector selection are weighted and scored based on their adherence to the principles of the blue economy. Therefore, the score reflects the impact of each marine based sector on environmental, economic, and social factors. Furthermore, each score is broken down into three categories which consist of 5 for high impact, 3 for medium impact and 1 for low impact. Each of the selected sectors’ impacts will be assessed and scored individually for each of the three factors being analysed.
As for the weight of importance, given the central focus of the blue economy principles are predicated on the long-term sustainability of marine resources the environmental factor is given priority ahead of economic and social factors. Hence, the environment is categorized as the main condition (first order condition) and is weighted 50% out of 100% of total scoring criterion. Conversely, the economic and social dimensions are sufficient, second-order conditions, so each is weighted equally at 25%.
BLUE FINANCING STRATEGIC DOCUMENT The score from each factor is multiplied by the factor weight to gain a total score. The grading process is explained in Illustration 1 and the sector grading score is shown in Appendix Table 1.
The total score will be used as the basis to construct final grading for each sector. The total score range under each impact category is: a. Navy Blue : total score of 3.7-5.0 or a highly recommended sector. b. Sapphire Blue: : total score of 2.3-3.6 or a moderately recommended sector. c. Sky Blue : total score of 1.0-2.3 or a modestly recommended sector.
2.3. The sub-sector, impact measurement indicator 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 and the 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 indicator selection referenced 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 proposed 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 2.
02 AISBLUE FORUM FINANCING PROGRESS STRATEGIC REPORT DOCUMENT 2020 Sector Sub-sector Examples of eligible Indicators projects
Navy Blue (High Impact}
Waste management • Marine debris/litter • Waste collection • Water pollution level Waste-to-Energy • Waste plastic for (MoEF) Wastewater treatment infrastructure material SDGs 14.1.1 index of coastal eutrophication and floating plastic debris density
Marine protection and Mangrove, seagrass and coral •Marine Protected Areas •GHG reduction (blue restoration of biodiversity reef, ecosystem conservation, (MPAs) expansion and carbon) high seas management (Mangrove and • Health index (Coral reefs, and ecosystems seagrass replantation) Coral seagrass, and mangroves) reef protection •SDGs 14.5.1 Coverage of • Coral reef rehabilitation protected areas in relation to Abrasion mitigation (Building marine areas with Nature) SDGs 14.3.1 Avg marine acidity (pH) measured at agreed suite of representative sampling stations
Sustainable fisheries Sustainable fishing, sustainable • Fish stock rebuilding actions • Fish population survey (MoMF) • SDGs 14.4.1 Proportion of fish aquaculture, food security, • Promotion of sustainable stocks within biologically practices for activities along food processing sustainable levels fishery value chain (e.g. fish • To find: relevant certification in processing equipment, fish Indonesia (e.g. MSC) feeds supply, packaging, • SDGs 14.7.1 Sustainable marketing, distribution) fisheries as a percentage of GDP • Investment in goods and Global Marine Commodities (GMC) for sustainable fisheries services to guarantee effective • To find: relevant certification in fisheries management Indonesia (e.g. MSC)
Marine renewable energy Clean energy for small • Wind, hydro, stream-based • GHG reduction powerplant developed in (coastal islands and coastal areas • Energy produced (Kwh) Transmission of energy / marine areas) • (Provision of solar lights into from renewable resources the coastal areas for consumptions, for ships)
BLUE FINANCING STRATEGIC DOCUMENT Sector Sub-sector Examples of eligible Indicators projects
Navy Blue (High Impact}
Disaster management Research • Disaster risk reduction • SDGs target 11.b: in line with the Sendai Framework for Disaster and risk reduction infrastructure for disaster Disaster mitigation programs Risk Reduction 2015 – 2030, risk reduction holistic disaster risk management at all levels • SDGs 11.b.1: Disaster Risk Reduction Strategies SDGs 11.b.2: Risk Reduction
Saphire Blue (High Impact}
Marine bio-technology Research and • R&D for health care, cosmetic, • 14.3.1Average marine acidity development (R&D) for enzyme, nutraceutical, and other (pH) measured at agreed suite of chemicals or industries representative sampling station
pharmaceuticals derived R&D for technology that sustains 14.a.1 Proportion of total research from marine life marine ecosystems (e.g. Biofuels budget allocated to research in the from marine algae) field of marine technology
Tourism Ecotourism in • Special designated • Sustainable tourism index (MoT) coastal/marine area coastal/marine area fir 14.1.1 index of coastal ecotourism development eutrophication and floating plastic • Eco-friendly hotel/homestays debris density and services in coastal/marine area
Sky Blue (low impact)
Sky Blue (low impact) R&D for technology that Relevant tools and equipment in 14.a.1 Proportion of total research sustains business activity business activities of the budget allocated to research in the of the maritime sector maritime sector (e.g. shipping, field of marine technology container, logistic, tanker, port)
02 AISBLUE FORUM FINANCING PROGRESS STRATEGIC REPORT DOCUMENT 2020 2.4. Timeline
A series of policy dialogue sessions and FGDs with the different stakeholders and relevant experts were the source of input for the selected sectors and the 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 indicator selection referenced 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 proposed 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 2. a. Short term: Projects that are needed immediately because of the urgency of the problem at hand, as the suspected impacts are to be significant to overcome, and the projected ability of the selected project to help mitigate the issue over the near-term. In the concept of time, short-term projects are between 1-5 years. 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. In the concept of time, medium-term refers to projects of 5-10 years. 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. In the concept of time, long-term refers to projects of more than 10 years.
BLUE FINANCING STRATEGIC DOCUMENT 3.
FINANCIAL FRAMEWORK AND FINANCING GAP
02 AIS FORUM PROGRESS REPORT 2020 3. FINANCIAL FRAMEWORK AND FINANCING GAP
3.1. Green and Blue Economy: The gap
In 2017, the GoI developed a framework to support the issuance of green sovereign bonds and sukuk. This framework, called the green bond/sukuk framework, aims to provide guidance on eligible projects to be funded by the proceeds of the green bonds. 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), and the Sustainable Development Goals (SDGs). The green bond/sukuk framework utilizes the climate change budget tagging system, which was initiated by the Ministry of Finance, as the basis for initial project selection.
The green framework sectors 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: sustainable fisheries, restoration of biodiversity and ecosystems, and marine biotechnology and marine technology. These blue sectors are outlined in Figure 2 below. The purpose of this document serves as an analytical tool to be utilized in a range of capacities by a variety of stakeholders. Additionally, measurement of project impacts across blue sectors found in this document incorporate multiple indicators that examine factors beyond emissions reduction.
Figure 2 Green and Blue Framework Sectors
Sustainable Transport Marine Renewable Marine Protection and Restoration of Biodiversity Sustainable Energy and Ecosystem Development Resources Dissaster Risk Management Sustainable Fisheries Green Building Sustainable Fisheries Eco-Tourism Marine Bio-Technology Marine Technology
Green Sukuk & Blue Financial Bond Framework Framework
BLUE FINANCING STRATEGIC DOCUMENT 3.2. The investment gap
The contribution of the marine sector to Indonesia’s GDP in 2018 was around 6%, with 3% stemming from the oil and gas sector. The second main contributor to the marine sector was the fisheries sector. Based on Indonesia Vision 2045, the GoI expects the contribution of the maritime sector to reach 12.5% of National GDP by 2045 (Bappenas, 2019), which is double the current marine sector contribution in 25 years. However, given the relatively small growth of this sector in Indonesia’s economy, at only 0.04% from 2014 to 2018, it will be impossible to achieve this target without additional investment. Growth might also be slower in the future due to increased damage to ocean ecosystems as a result of overfishing, pollution, and waste.
The remaining marine based industries outside of the marine oil and gas sector can be referred to as the blue sector. Simulations of the blue sector were conducted to calculate how much investment is required to achieve the national target of 6% of GDP by 2045. Three scenarios were created through the simulations. First, achieving the target with the assumption of no change in economic and environmental conditions. The second and the third scenarios assume no change in economic conditions while reaching the target, but a 5 and 10 percent gradual depletion of ocean resources occurs annually, respectively. For the second and third scenarios, additional investment is required to not only contribute to achieve the target but also to pay for environmental remediation costs.
The investment gap calculation was conducted through several steps and with a number of assumptions. The first step was to forecast the blue sector and GDP up to 2045 using the three simulation scenarios. The second stage simulated the GoI target using an input-output (IO) matrix. 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 shock occurs during the evaluation period. Second, the latest IO matrix produced by the Indonesian statistical bureau was undertaken in 2010. Therefore, even though the result adjusts for inflation, the overall number might underestimate the true investment needed. The amount of different investment required to achieve the target is explained in the figure below.
02 AISBLUE FORUM FINANCING PROGRESS STRATEGIC REPORT DOCUMENT 2020 Figure 3 The financial gap
With business as usual, the Blue Economic sector contribution Blue economic sector Target in 2045 to GDP remain stay around 3% and contribution to GDP 6-7 % its values only double from 2018 in 2018 (2% to 2045. However, with extre financing that cost on average 8-9 billion USD per yeae, it will increase its value to more than 8 times in 2045 compare to current one
Additional Financial Investment per year (Million USD) 9045
8450 8145
S1 S2 S3
BLUE FINANCING STRATEGIC DOCUMENT 4.
FINANCIAL FRAMEWORK AND FINANCING GAP
02I 4. DIFFERENT FINANCIAL INSTRUMENTS
Financial sectors in Indonesia primarily focus on business as usual practices, with little attention given to the environmental impacts of business activities. It has only been recently that there has been a growing interest in the green economy and rarely is attention 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 3.
Table 3 Project scale and instrument types
Scale of Investment Type Instruments/ Institutions
Small and medium projects BLU LPMUKP Insurance CSR Banking Crowdfunding Religious Funds
Medium and large projects Blue Bond/Sukuk BPDLH Trust Fund Impact Investing SIB & DIB Blended Financing
4.1 Bond and Sukuk
In response to the success of the issuance of the world’s first sovereign green sukuk, the GoI plans to issue another bond or sukuk instrument that will cover marine-focused sectors known as the blue bond or sukuk. Unlike the green sukuk that focuses on refinancing projects, the blue bond or sukuk will account for 100% of the financing for new projects. Additionally, prior to the issuance of green sukuk, the GoI performed climate change budget tagging as the basis for project selection through the identification of projects with contributions to reducing greenhouse gas emissions. However, there is
BLUE FINANCING STRATEGIC DOCUMENT no available tagging process for blue projects, which makes the sector grading proposed in this document a form of alternative selection criteria.
Currently, there have only been two blue bonds issued in the world: the Seychelles Blue Bond and Nordic-Baltic Blue Bond. Both blue bonds are summarized in the table below:
Table 4 Blue Bond
Name Objective Size/Duration Investors Key Terms
Seychelles Blue Bond Transition support to USD 15mn; 10 years World Bank; Private Loan provided by sustainable fisheries Placement: Calvert GEF reduced Impact Capital; interest rate for Nuveen, and government from Prudential 6.5% to 2.8%
Nordic-Baltic Blue Bond issuance focus USD 213mn; 5yrs Capital Market 0.375% coupon Bond on investments within water resource management and protection
Source: 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 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.
02 AISBLUE FORUM FINANCING PROGRESS STRATEGIC REPORT DOCUMENT 2020 4.2 Badan Layanan Umum (BLU)
Indonesia’s Public Service Agency, better known as BLU (that stands for Badan Layanan Umum), is an agency that was formed to provide service to Indonesian citizens through accessible goods and/or services in a not for profit-oriented manner that does not compromise productivity or efficiency. Thus, in order to provide a more plenary service to society, BLU agencies are given the flexibility to manage their finances with several discretions, such as being able to use their income directly without depositing it first-hand to the Treasury-Fund as well as the use income surplus from the previous fiscal year. Similarly, BLU agencies can manage human resources more broadly while still remaining based on sound business principles and practices. Currently, there is one BLU that provides financing for blue sectors, which is the LPMUKP.
Case 1 LPMUKP
BLU LPMUKP, a BLU that was established by the Ministry of Marine and Fisheries, was formed in 2017. The BLU is heavily influenced by a revolving fund that aims to increase market access and strengthen capital for small and medium enterprises in the marine sector. This allows the welfare of those working in marine based sectors to improve, especially fishers, fish cultivators, and micro and small-scale fishery business actors. In 2017, the agency managed to realize Rp32,9 Million for 18 Maritime and Fisheries Business Group (KUKP) or as much as 2.384 individuals.
This BLU is designed to assist in the strengthening of venture capital and is expected to have an impact on the creation of labour as well as to encourage economic growth in Indonesia’s marine and fisheries sector . However, although the facility was intended to deliver service across Indonesia, there is only one facility available with very limited manpower, which has hindered its ability to effectively operate and threatened the facilities NPLs (Non-Performing Loan). Therefore, the BLU LPMUKP moved to develop strategic partnerships with local banks, such as Bank BRI. With this arrangement, the BLU would be able to utilize the shared qualified manpower in the short-term and enable the facility to initiate preparations to become independent over the long run. This allows the BLU to utilize BRI’s human resources and massive outreach
BLUE FINANCING STRATEGIC DOCUMENT 4.3 Trust funds
Indonesia has several trust funds for green and blue economy related sectors already set up by government or CSOs (table…). In addition to trust funds that support the development of the blue economy, Indonesia could also establish the Indonesia Fund Management Agencies, known as Badan Pengelola Dana (BPD). Unlike the BLU, the BPD provides services and acts as a fund management body that channels 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 that relevant farmers capable of implementing the technicalities of the projects could access. Instead of having the government collecting tax just before exporting goods, the BPDPKS collects the tax from palm oil industries, and the money collected is then distributed and managed by the agency for industry wide improvements to enhance the sustainability of the palm oil industry.
1Nota Keuangan II 2019
02 AISBLUE FORUM FINANCING PROGRESS STRATEGIC REPORT DOCUMENT 2020 Table 5 Trust fund and Badan Pengelola Dana (BPD)
Name Objective Activities Size/Duration Investors Category
Indonesia Climate Achieving Land-based In 2019, ICCTF have UNDP, GIZ, USAID, Green and Change Trust Fund Indonesia’s goals Mitigation: financial received dana GCF, GEF, GGGI, Blue (ICCTF) of a low carbon support for the dukungan Rupiah WorldBank, AFC programs of Murni APBN sebesar economy and reforestation / IDR 34,47 billion greater resilience rehabilitation of towards climate degraded lands. ICCTF have also change. Adaptation and received international funding from the Resilience: Danish Embassy as the dissemination of much as IDR 2.48 climate information, billion, from USAID as development and much as IDR 7.53 innovation of billion and from adaptation strategies, UKCCU as much as IDR use of technology and 24.96 billion. knowledge, and promote the In total, ICCTF has establishment of received as much as policies for adaptation IDR 69.45 Billion of funding in 2019 alone. Energy: financing the low carbon energy generation technologies and the implementation of conservation and energy efficiency
Marine: promoting sustainable use of marine resources and to conserve biodiversity in coastal and marine areas
BLUE FINANCING STRATEGIC DOCUMENT Name Objective Activities Size/Duration Investors Category
Blue Abadi Fund by A dedicated Empowering local USD 2,635,211 - Blue conservation conservation trust communities and International (CI) fund for the Bird’s agencies to sustainably manage Head Seascape in their marine resources Eastern Indonesia by 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.
The National Indonesia’s Fund collection It estimates that with - Green and Environmental commitment to the Government non-tax the combination from Blue Fund Management protection of revenue the State Budget and Revenue generation Pusat Pembiayaan Agency or better environmental from service provided Pembangunan Hutan known as BPD LH sustainability & investment (P3H), the total (Badan Pengelola Developing partners operational funds for Dana Lingkungan (multilateral, bilateral, BPD LH will reach Hidup) non-government) IDR 4,29 Trillion. Fund investment Fund channeling Grant Loan Subsidy Carbon trade Others
02 AISBLUE FORUM FINANCING PROGRESS STRATEGIC REPORT DOCUMENT 2020 Table 6 International trust fund case in blue sector
Name Objective Activities Size/Duration Investors Category
Mesoamerican Reef To drive regional The MAR Fund Since 2004, American Blue Fund (MAR Fund funding and operates as an Commission on partnerships for ecoregional planning Environment and and coordinating body conservation, which prioritizes Development restoration and projects and allocates (CCAD), Protected sustainable use of funding. Areas Conservation the Mesoamerican Trust (Belize), 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 is an Is a coordination The initiative focuses Since 2017 Gordon and Betty Blue umbrella group platform made up on channeling Moore Foundation, comprising five of four financing to: The David Lucile & Focus conservation Latin‐American environmental actions around a Packard Foundation, conservation trust funds? shared set of priorities The Leona M and funds Mitigate Key Threats Harry R Helmsley Which aims to be Fill gaps in the Charitable Trust, an innovative scientific data The Walton Family Facilitate the regional financing Foundation, Shark distribution of platform that information for Conservation Fund, seeks to ensure decision making WAITT foundation, the sustainable Oceans5, kfw management of the Eastern Tropical Pacific.
BLUE FINANCING STRATEGIC DOCUMENT Name Objective Activities Size/Duration Investors Category 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 The Phoenix Island PIPA is the world’s PIPA provides Since 2004, New England Blue implementation of selected projects. SDG Indonesia One is a platform which includes four types of pillars: protection for Protected Area in largest, truly deep Aquarium (funding 1) Development facilities, Kiribati water MPA, terrestrial habitats on support, biological each of its islands 2) De-risking facilities, encompassing safeguarding monitoring and legal PIPA Trust 408,250 square important nesting and technical 3) Financing facilities, and kilometers ground for seabirds advice). CI’s Global 4) Equity funds. (157,626 square and rare traditional Conservation Fund miles) plants that have (main donor), CI’s Through this platform, it is hoped that needs can be transformed into opportunities for numerous parties cultural and medicinal Pacific Islands so that they are able to participate in various infrastructure projects related to the achievement of the values in Kiribati. PIPA trust is a Programme SDGs non-for-profit The revenues from the (technical support non-governmental endowment will go to and policy advice). organization cover: established under The annual fixed and variable costs the laws of the associated with republic of Kiribati managing PIPA in whose primary accordance with the objective is to Management Plan provide long-term Payments to the Government of sustainable Kiribati for ensuring financing for the that exploitation of all conservation of of part of PIPA terrestrial and remains limited or marine biodiversity prohibited. in the phoenix Where the funds of the trust (PTEF) will be islands group. professionally managed by a private third party
4.4 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 change .
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
02 AISBLUE FORUM FINANCING PROGRESS STRATEGIC REPORT DOCUMENT 2020 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 types of 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
4.5 Banking sector
The current banking sector in Indonesia has already provided credit, loans, and capital for channeling into the marine sectors. Similarly, with the implementation of the new law on sustainable finance there is growing interest in investments across blue sectors from bank lending. The regulations that modulate banking activities that may be integrated into blue sectors are regulated in the POJK no 51 of 2017, which discusses the sustainable financial application of financial services, issuers, and public companies.
In addition to sustainable finance law, the Ministry of Maritime Affairs and Fisheries has been wanting to develop bank capital focused on micro fishers to increase bank lending activity towards fisheries and the marine ecosystem. This is one of the solutions 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 be a solution for implementing eco-friendly fish farming practices that support SDG Goal number 14 through the promotion of 4.4 State-owned enterprises (SOE) small-scale fishers’ access to productive resources, services, and markets. The banking sector also could establish a private blue bond or sukuk. One example of bonds in the private One of the State-owned enterprises (SOEs) that could potentially fund the blue economy sectors is PT sector in accordance with sustainable finance is associated with BRI. BRI has implemented the sustain- Sarana Multi Infrastructure (SMI). PT SMI is a state-owned enterprise that finances infrastructure projects able finance concept through its commitment to adhere to the underlying principles of sustainability. As initiated by the GoI through the Ministry of Finance. PT SMI also participates in non-public funding for the first mover in sustainable banking was OJK, PT Bank Rakyat Indonesia (Persero) Tbk issued the first optimizing the economic and social benefits provided to communities, supports the achievement of the Global Sustainability Bond in Indonesia for USD 500 million. The USD-denominated bond has a 5-year SDGs, and mitigates actions responsible for climate change . 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 PT SMI is also the implementing platform for SDG Indonesia One, an integrated platform which combines of Sustainability Bonds is an alternative source of BRI funding for the MSME segment, so this will public and private funds through blended financing schemes for channeling into infrastructure projects strengthen BRI's business in the MSME segment, which until December 2018 had experienced lending reaching 76.5% of BRI's total loans.
2ptsmi.co.id/pt-smi-at-glance/
BLUE FINANCING STRATEGIC DOCUMENT 4.6 Blended financing
Blended finance is another way by which governments and other public sector and philanthropic organisations 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. Therefore, this may lead religious funding to become one of the innovative financing mechanisms 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, which are known as sharia investment funds. Moreover, Indonesia is also one of the largest markets for Islamic finance. Thus, the coming era of Islamic finance contributions to Indonesia’s economy is also underway. In addition to Islamic funds, the diversity of religions in Indonesia makes religious funding even more promising, i.e. funding from Dharma Dana, Tzuchi, World Vision, and the Salvation Army Indonesia.
Type of actors Role
Public and Philanthropic • Providing grants for technical assistance Donors • De-risk projects using several de-risking instruments • Convene different stakeholders • Advocates the sustainable development agenda • Increase sustainable development impact of investments Private-philanthropic investors As they these types of actors tend to have a higher risk- (Founda�ons, non-profits, tolerance compared to other actors, they are be�er impact investors with sub- posi�oned to experiment in projects, sectors, and/or commercial return geographies with high poten�al developmental impact as expecta�ons, etc.) well as influence capital flow through demonstra�ons and by taking subordinate posi�ons
Mul�lateral Development • Signal the market about commerciality of certain Banks (MDBs) and investment opportuni�es through demonstra�ons Development Financial • Provide large �cket sizes (compared to other public Ins�tu�ons (DFIs) investors and private-philanthropic sources) • Mi�gate risks by taking risk layers, providing guarantees, etc. • Is a cri�cal intermediary to get ins�tu�onal investors on board as they can meet the �cket size and risk-return expecta�ons of ins�tu�onal investors and get them on board
AISBLUE FORUM FINANCING PROGRESS STRATEGIC REPORT DOCUMENT 2020 Private-commercial investors • Hold the necessary resources to bridge the funding gap (Funds/PEs/VCs, impact to achieve the SDGs investors with commercial • Can manage a large spectrum of investments, from return expecta�ons) small ventures to large size investments • Plays an important role in aggrega�on
Ins�tu�onal Investors • 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 proposi�ons • Focuses more on less risky sectors and countries due to low risk appe�te
Banks (especially those based • Aggrega�ng role at the na�onal level in emerging • O�en small-scale investments (or larger projects through scale syndicated loans) markets) • Focus on less risky sectors due to low risk appe�te. Guarantee mechanisms in combina�on with TA o�en effec�ve to demonstrate new business models
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 Seychelles. 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 as much as 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).
2ptsmi.co.id/pt-smi-at-glance/
BLUE FINANCING STRATEGIC DOCUMENT 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 capitalisation of SeyCCAT’s endowment.
The amount going to the last two because of the debt swap is estimated to be USD $13 million.
4.7 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 kilometres of our coastlines. One of the impact investments in Indonesia within the blue sector is the Meloy Fund. This fund received $5 million investment from FMO, the Dutch development bank. This brings the fund total of over $22 million. This fund will incentivize the development and adoption of sustainable fisheries by making debt and equity investments in fishing-related enterprises that 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 behaviour change to achieve enduring conservation results. `
02 AISBLUE FORUM FINANCING PROGRESS STRATEGIC REPORT DOCUMENT 2020 Table 8 Impact investing in blue sector
Name Objec�ve Ac�vi�es Size/Dura�on Investors Category
Encourage Inves�ng Clean Energy Green Capital for Finance and Blue sustaining Financial Inclusion global fisheries Environmental Markets Sustainable Infrastructure Sustainable Seafood Water
Althelia’s Providing USD 51 OEDF Blue Sustainable growth Billion Environmental Ocean Fund capital to Defense Fund (SOF) companies
that harness the Conserva�on ocean's Interna�onal natural capital
Circulate Protec�ng Circulate capital is In 2019, PepsiCo, Coca- Blue Capital South & an investment USAID Cola, Danone, Southeast management firm provided Dow, Procter Asia from dedicated to USD 35 & Gamble, plas�c financing Million, 50% Unilever waste innova�on, loan- companies and por�olio infrastructure that guarantee. prevent the flow of plas�c waste into the world’s ocean while advancing the circular economy
Iden�fy, incubate and invest opportuni�es by collec�ng, sor�ng, processing, and recycling waste in south and southeast Asian countries
BLUE FINANCING STRATEGIC DOCUMENT Other insurance for blue finance has been supported by OJK, who also signed a Joint Agreement between 4.8 Social and development impact bonds 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 A social and development impact bond is used to finance development programs with money from private the quality of marketing and financial management of fish farmers. In 2020, it is hoped that the investors who earn a return if the program is successful, which is paid by a third-party. The outcomes Coinsurance will also start to expand the marketing reach of insurance products not solely subsidized by measured are agreed upon at the outset and independently verified. With greater focus on outcomes the State Budget (APBN). Such an initiative can provide literacy and increase the inclusion of the farming instead of inputs, impact bonds create space for more innovation, local problem-solving, and adaptation. community by launching fisheries insurance products without state budget subsidies. Therefore, this The key component of this mechanism is pre-financing in blue sector programmes by the private sector. insurance may help farmers and investors avoid risks associated with the uncertainty of the market The difference between a social and a development impact bond is the involvement of donor agencies as without causing undue harm to Indonesia’s natural resources. 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 impact being focused on is the environmental impact, such as: ecotourism, recycling, sustainable fisheries, and others. 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 and has 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 2016. The bond was created with the intention to improve 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.
4.9 Insurance
The Government, through the Ministry of Maritime Affairs and Fisheries, is working to implement the 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 that is also 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 fisherfolk of up to Rp200 million if the fisher who holds the BPAN card dies while sailing. The Ministry of Maritime Affairs and Fisheries has also made the regulation about the technical guidelines for the assistance of the fishers’ insurance premium.
02 AISBLUE FORUM FINANCING PROGRESS STRATEGIC REPORT DOCUMENT 2020 Other insurance for blue finance has been supported by OJK, who also 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 farmers. In 2020, it is hoped that the 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 farming 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 compared 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 measure- ments, and not through a claim’s adjuster surveying the damage. It is this type of structure that makes it more 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 workers. 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 knowl- 4.9 Insurance edge and experience in developing climate-based risks and managing those risks in capital markets.
The Government, through the Ministry of Maritime Affairs and Fisheries, is working to implement the 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 that is also 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 fisherfolk of up to Rp200 million if the fisher who holds the BPAN card dies while sailing. The Ministry of Maritime Affairs and Fisheries has also made the regulation about the technical guidelines for the assistance of the fishers’ insurance premium.
BLUE FINANCING STRATEGIC DOCUMENT Table 9 Parametric insurance case
Name Objec�ve Ac�vi�es Size/Dura�on Investors Category
Crop and The Offers macro- Launched in - Green Livestock document level crop and 2003 Disaster was launched livestock
Insurance in with the aim catastrophe Mexico to provide insurance CADENA Crop (CADE basic programs Insurance catastrophe policies are protec�on for issued by the Small-scale, the most public vulnerable vulnerable parastatal farmers are the farmers in reinsurer intended Mexico Agroasemex beneficiaries and three
private 1)The Pays to all insurance Catastrophe framers in the companies. Agricultural group if the
Insurance policy is (SAC) triggered The state programs for government is farmers, normally the livestock Insured under producers, CADENA aquaculture coverage and farmers and is responsible fisherman for distribu�ng payments to 2)In States beneficiaries in where SAC is the case of a not provided, triggered the con�nues payout. direct support (Apoyo Directo) In 2011: compensa�on insured 8 payments to million farmers for hectares of clima�c crops, 4.2 disasters million head of livestock owned by subsistence small holders farming 16.5 million hectares
02 AISBLUE FORUM FINANCING PROGRESS STRATEGIC REPORT DOCUMENT 2020 Drought ARC Replica Provides index Since 2014, Burkina Green Table 9 Parametric insurance case Insurance in brings insurance against ARC has paid Faso, Africa humanitarian droughts to out more than Senegal, (African actors into African union 34 million USD Niger, the Risk ARC’s member states. to four Gambia, Capacity) government drought- Mali and
led risk affected Mauretania management ARC provides countries: took out approach. liquidity and Mauritania, insurance effec�vely Niger, Senegal from ARC> mi�gates the and Malawi. detrimental impacts of disasters on the poor and vulnerable.
Currently, ARC is developing two new insurance products against floods and tropical cyclones.
ENSO Is an Currently the Green & Catastrophe agricultural SAC is focused Blue Insurance in protec�on in 8 regions of Peru scheme to the country’s deal with the highlands damages (apurimac, caused by Ayacucho, catastrophic Cajamarca, events, Cusco, mainly in the Huancavelica, strata of poor Huánuco, producers. Pasco, and Puno) and on
the following This is not a crops: Papa, tradi�onal Alfalfa, insurance and Amiláceo Corn, does not Quinoa, cover Wheat, Grain produc�on Barley, Bean, costs Pea, Forage Oats, Corn.
With a total of 550,296 hectares of insured area throughout
BLUE FINANCING STRATEGIC DOCUMENT 4.10 Crowdfunding One of the types of existing financing platforms with either a medium or high relevance to the blue economy are crowdfunding platforms. 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 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. The platform being discussed is a scope of donation-based crowdfunding platform that can be streamed to blue projects, and if utilized can be an alternative way to harness the potential of innovative funding for sectors engaged in the blue economy. Another 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. Table 10 Crowd funding in the blue sector
Name Objec�ve Ac�vi�es Size/Dura�on Investors Category
Crowd The Installed a solar 25,000 euros - Green funding for crowdfunding system to make were raised Marine campaign energy supply of to cover the Protected was used to the island costs Area finance the independent from management installa�on of fossil fuels. in Seychelles a modern,
stand-alone 5 kw Reduced 15 tonnes photovoltaic of CO2 per year in system on the process. Cousin Island Special Reserve.
My Fiji Shark Is a The revenues 200 UNDP Blue conserva�on generated will be individually Pacific ini�a�ve with used to support named sharks Office in the mission exis�ng shark Fiji, Beqa to protect conserva�on Adventure and conserve measures, find Divers all of Fiji’s research, purchase (BAD) shark species research material, and their create new shark natural conserva�on and habitats inshore fisheries through management ecotourism, programs, and build research, an independent advocacy, shark lab to and conduct in-country educa�on. shark conserva�on research.
02 AISBLUE FORUM FINANCING PROGRESS STRATEGIC REPORT DOCUMENT 2020 5.
SAFEGUARDING BLUE INVESTMENT
BLUE FINANCING STRATEGIC DOCUMENT 5. SAFEGUARDING BLUE INVESTMENT
Billions of people depend on oceans 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 of ocean resources at all scales. This makes the safeguards found in this guideline essential to ensuring environmental and social risks can be effectively minimized. According to the BNC+ Framework (2019), several steps need to be conducted to effectively minimize the risks: • Screening for the exclusion of harmful activities and sectors, • Evaluation to enable in-depth analysis of key Environmental & Social Risks (E&S) issues, • Development of 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 provide an overview of national standards and international benchmarks that are recommended by the BNC+ Framework (2019).
5.1 National standards
In Europe since the issuance of the 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 programme 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.
02 AISBLUE FORUM FINANCING PROGRESS STRATEGIC REPORT DOCUMENT 2020 Table 9 Parametric insurance case
Blue Investment The state valuable investment for non-bank POJK No. 1 of 2016 financial service ins�tu�on. The second amendment to regula�on of the Regula�on of the Minister of minister of industry number 29, which is regarding Industry no 106/M-IND/PER/10 the list of machinery and its produc�on materials in of 2012 the state of industry development or development in the framework of investment. According to this law, what is meant by investment Law number 25 of 2007 is all forms of ac�vi�es carried out in the context of investment. The investors referred to here can be domes�c or foreign investors.
Preserva�on of Marine and sea Biota Regarding the management of coastal areas and Law number 27 of 2007 small islands in Indonesia. Pertaining to marine areas of Indonesia. Law number 32 of 2014 Covering various issues regarding the Law Number 45 of 2009 development, management and conserva�on of concerning Amendment to Law fisheries, including: management and conserva�on Number 31 of 2004 concerning of fish resources; fishing gear and fishing methods; Fisheries aquaculture; fishing vessels and fishing ports; provisions to favor minor fishermen and minor fish cul�vators; control and law enforcement in the handling of criminal acts in the fishery field; applica�on of sanc�ons; etc.
Presiden�al Regula�on 56 of Na�onal Ac�on Plan Integrated Management of 2019 Na�onal Parks and Na�onal Water Conserva�on Areas 2018 - 2025. About Sea Waste Management Presiden�al Regula�on 83 of 2018 Regula�on of the Minister of About business of sea capture in regional area of Mari�me Affairs and Fisheries Republic of Indonesia Number 57 no 2014 About the business in fishing of sea capture in Regula�on of the Minister of Indonesia Mari�me Affairs and Fisheries Number 12/2012
BLUE FINANCING STRATEGIC DOCUMENT 5.1 National standards
In Europe since the issuance of the 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 programme 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.
5.2 International standards
Within a project that involves large-scale infrastructure, it is crucial to have a safeguard that can help avoid potential risks and failures throughout the project. Some of these safeguard standards are in line with both blue finance and the established national standard, yet additional international standards might also be important to consider as further material to strengthen the program.
Table 9 Parametric insurance case
Guidelines for the preserva�on of the sea habitats
Policies about the conserva�on of natural habitats, like World Bank Opera�on Manual on Natural Habitats OP/BP 4.04 other measures that protect and enhance the environment, are essen�al for long-term sustainable
development. Therefore, the Bank supports the protec�on, maintenance, and rehabilita�on of natural habitats and their func�ons in its economic and sectoral work, project financing and policy dialogue. The Bank supports borrowers and expects them to apply a precau�onary approach to natural resource management to enable opportuni�es for environmentally sustainable development.
The objec�ve of this policy is to assist borrowers to Forests OP/BP 4.36 (World Bank) harness the poten�al of forests to reduce poverty in a sustainable manner, integrate forests effec�vely 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 CBD Voluntary guidelines for financing mechanisms are taken into account when safeguards in biodiversity Financing selec�ng, designing, and implemen�ng biodiversity Mechanisms financing mechanisms and when developing instrument specific safeguards.
Voluntary Guidelines for Securing The first interna�onally agreed instrument dedicated Sustainable Small-Scale Fisheries en�rely to the small-scale fisheries sector. (FAO 2015)
To promote secure tenure rights and equitable access Voluntary Guidelines on the to land, fisheries, and forests as a means of eradica�ng Responsible Governance of Tenure hunger and poverty as well as suppor�ng sustainable of Land, Fisheries and Forests in the development and enhancing the environment. Context of Na�onal Food Security (FAO 1995)
02 AISBLUE FORUM FINANCING PROGRESS STRATEGIC REPORT DOCUMENT 2020 To promote secure tenure rights and equitable access Voluntary Guidelines on the to land, fisheries, and forests as a means of eradica�ng Responsible Governance of Tenure hunger and poverty as well as suppor�ng sustainable of Land, Fisheries and Forests in the development and enhancing the environment. Context of Na�onal Food Security (FAO 1995)
Natural Capital Protocol (NCC 2016) The Protocol is a framework designed to help generate trusted, credible, and ac�onable informa�on 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 Gender Equality Seal 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 por�olio.
These Guiding Principles are grounded in a recogni�on UN Guiding Principles on Business of: (a) States’ exis�ng obliga�ons to respect, protect and Human Rights; and fulfil human rights and fundamental freedoms; (b) The role of business enterprises as specialized organs of society performing specialized func�ons, required to comply with all applicable laws and to respect human rights; (c) The need for rights and obliga�ons to be matched to appropriate and effec�ve remedies when breached.
Recognizes that the pursuit of economic growth ILO Core Labour Standards (which through employment crea�on and income genera�on are factored into IFC Performance should be accompanied by the protec�on of the Standard 2) fundamental rights of workers. For any business, the workforce is a valuable asset, and a sound worker- management rela�onship is a key ingredient in the sustainability of a company. Failure to establish and foster a sound worker-management rela�onship can undermine worker commitment and reten�on and can jeopardize a project.
To set interna�onal standards of behaviour for Code of Conduct for Responsible responsible prac�ces with a view of ensuring the Fisheries (FAO 2015) effec�ve conserva�on, management, and development of living aqua�c resources with due respect for the ecosystem and biodiversity.
BLUE FINANCING STRATEGIC DOCUMENT 6.
CONCLUSION
02 AIS FORUM PROGRESS REPORT 2020 6. CONCLUSION
Indonesia as the largest archipelagic country in the world, it has significant potential to develop the blue economy. The GoI has set a target and initiated plans to double the economic contribution of blue sector by 2045. Efforts to achieve this target requires strong financial strategies. At the same time, environmental damage can be incurred if a society over utilizes marine resources. To balance economic, social, and environmental needs, the UNDP Indonesia has formulated the Blue Financing Strategic Document, which aims to open capital markets for investment in the blue economy in a sustainable and innovative way. The document provides guidance on the recommended blue sectors, along with the examples of projects, impact measurements, and different options of financial mechanisms. This document endeavors to involve more stakeholders to invest in sustainable blue sectors.
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UNEP. 2015. Blue Economy: Sharing Success Stories to Inspire Change. Organisation www.unep.org/greeneconomy
BLUE FINANCING STRATEGIC DOCUMENT Secretariat of the Convention on Biological Diversity. 2018. CBD/COP/DEC/14/15 Safeguards in UNHRC. 2011. Guiding principles on business and human rights: Implementing the United Nations biodiversity financing mechanisms. Egypt. Retrieved from "Protect, Respect and Remedy" framework. Organisation URL? https://www.cbd.int/doc/decisions/cop-14/cop-14-dec-15-en.pdf United Nation Environment Program (UNEP). 2013. Blue Economy Concept paper. Retrieved from Sophie H. 2018. Mexican coral reef and beach get unique insurance policy against hurricane damage. https://sustainabledevelopment.un.org/content/documents/2978BEconcept.pdf Retrieved from https://www.reuters.com/article/us-mexico-environment-reefs/mexican-coral-reef-and-beach-get-unique Wenhai L., Cusack L, Baker M., Tao W, Minbao C, Paige K, Xiofan Z, Levin L, Ecoba E, Amon D, Yue Y, Reitz -insurance-policy-against-hurricane-damage-idUSKCN1GK384. A, Neves AAS, O’Rourke E, Mannarini G, Pearlman J, Tinker J, Horburg KJ, Lahodey P, Poilquen S, Dale T, Peng Z, Yufeng Y. 2019. Succesful Blue Economy Examples with an Emphasis on International Swiss Re. 2019. Designing a new type of insurance to protect the coral reefs, economies and the planet. Perspectives. Front. Mar. Sci. 6: 261, pp: 1-14. Retrieved from https://www.swissre.com/our-business/public-sector-solutions/thought-leadership/new-type-of-insuranc WHO. 2017. Contingency Fund for Emergencies. Report of the WHO Health Emergencies Programme. e-to-protect-coral-reefs-economies.html. Organisation Retrieved from who.int/emergencies/funding/contingency-fund/CFE_Impact_2017.pdf?ua=1
The Meloy Fund. 2018. FMO Investment Propels Meloy Fund Past $22 Million for Sustainable Coastal World Bank. 2001. OP/BP 4.04 Natural Habitats. Operational Manual. Washington DC: World Bank. Fisheries. Retrieved from Retrieved from https://policies.worldbank.org/sites/ppf3/PPFDocuments/090224b0822f74ac.pdf https://www.meloyfund.com/news/2018/9/17/fmo-investment-propels-meloy-fund-past-22-million-for-s ustainable-coastal-fisheries World Bank. 2002. OP/BP 4.36 Forests. Operational Manual. Washington DC: World Bank. Retrieved from https://policies.worldbank.org/sites/ppf3/PPFDocuments/090224b0822f8a50.pdf Undang-Undang Republik Indonesia Nomor 17 Tahun 2007 tentang Rencana Pembangunan Jangka Panjang Nasional Tahun 2005-2025. Jakarta. World Bank. 2017. What is the Blue Economy? Retrieved from https://www.worldbank.org/en/news/infographic/2017/06/06/blue-economy Undang-Undang Republik Indonesia Nomor 25 Tahun 2007 tentang Penanaman Modal. Jakarta. World Bank. 2018. Developing Parametric Insurance for Weather Related Risks for Indonesia. Retrieved Undang-Undang Republik Indonesia Nomor 27 Tahun 2007 tentang Pengelolaan Wilayah Pesisir dan from http://documents.worldbank.org/curated/en/704171524632990898/pdf/Technical-Note.pdf Pulau-Pulau Kecil. Jakarta. World Bank and UN DESA. 2017. The Potential of the Blue Economy: Increasing Long-term Benefits of the Undang-Undang Republik Indonesia Nomor 32 Tahun 2014 tentang Kelautan. Jakarta. Sustainable Use of Marine Resources for Small Island Developing States and Coastal Least Developed Countries. World Bank, Washington DC. Undang-Undang Republik Indonesia Nomor 45 Tahun 2009 tentang Perubahan Atas Undang-Undang Republik Indonesia Nomor 31 Tahun 2004 Tentang Perikanan. Jakarta. World Economic Forum. 2019. Public action and support can attract private investment by improving the risk-reward calculus. Retrieved from UNEP, FAO, UNDP, IUCN, GRID-Arendal. 2012. Green Economy in a Blue Word. ISBN: 978-82-7701-7 http://reports.weforum.org/green-investing-2013/reducing-the-risk-of-investing/?doing_wp_cron=15717 United Nation Economic Commission for Africa (UNECA). 2016. The Blue Economy. Retrieved form 56463.3634920120239257812500. www.uneca.org
UNDP. 2016. [Blog] 8 facts about Indonesia’s ocean. organisation? Retrieved from https://www.id.undp.org/content/indonesia/en/home/presscenter/articles/2016/06/08/8-facts-about-ind onesia-s-ocean.html. UNDP. 2018. The BIOFIN Workbook 2018: Finance for Nature. The Biodiversity Finance Initiative. UNDP, New York.
UNEP. 2015. Blue Economy: Sharing Success Stories to Inspire Change. Organisation www.unep.org/greeneconomy
BLUE FINANCING STRATEGIC DOCUMENT APPENDIX
Appendix Table 1 Grading matrix of the blue sectors
Impact level Status Sector Environment Economic So cial Total score Weight of each criteria 5 0% 25% 25 % 1.Waste management 5 3 5 4.5 Navy Bl ue 2. Marine protec�on 5 3 3 4.0 Navy Bl ue and restora�on of biodiversity and ecosystems 3 Sustainable fisheries 5 5 3 4.5 Navy Bl ue 4. Marine renewable 5 5 3 4.5 Navy Bl ue energy 5. Disaster 5 3 5 4.5 Navy Bl ue management and risk reduc�on 6. Marine bio- 3 3 3 3 Sapphire Blue technology 6. Marine ecotourism 1 5 3 2.5 Sapphire Blue 8. Marine technology 1 3 3 2 Sky Blue
02 AISBLUE FORUM FINANCING PROGRESS STRATEGIC REPORT DOCUMENT 2020 Appendix Table 2 Indicators and policy references
Sector Defini�on Indicators Reference
Navy Blue (high impact) Appendix Table 1 Grading matrix of the blue sectors Waste Waste management • Water • RAN AKSI SDG management that reduces seas pollu�on level • Document SDG from waste ac�vi�es, (MoEF) whether sourced • UNEP SDGs 14.1.1 index from land (domes�c) of coastal • or sea (mining, Government eutrophica�on shipping, fisheries) regula�ons No. and floa�ng 19/1999 plas�c debris • density Presiden�al decree 83/2018 plas�c waste The decision of the minister of environment No. 51/2004 ju the decision of the minister of environment NO. 147/2004
Marine protec�on Ac�vi�es related to • GHG • presiden�al decree and restora�on of the protec�ve reduc�on No. 61/2011 (RAN biodiversity and management and (blue carbon) carbon emission) ecosystems restora�on of coastal • Health index • presiden�al decree No and marine natural (Coral Reefs, 59/2017 (RAN SDG) assets. These Seagrass, and ac�vi�es may also be • DID KKPD concept Mangrove) connected to carbon • NAP Adapta�on to sequestra�on from • SDGs 14.5.1 Climate Change mangrove forests, Coverage of seagrass meadows or protected inter�dal areas in saltmarshes (blue rela�on to carbon). marine areas SDGs 14.3.1 Avg marine acidity (pH) measured at agreed suite of representa�ve sampling sta�ons
BLUE FINANCING STRATEGIC DOCUMENT Appendix Table 2 Indicators and policy references
Sector Defini�on Indicators Reference
Navy Blue (high impact)
Waste Waste management • Water • RAN AKSI SDG management that reduces seas pollu�on level • Document SDG from waste ac�vi�es, (MoEF) whether sourced • UNEP SDGs 14.1.1 index from land (domes�c) of coastal • or sea (mining, Government eutrophica�on shipping, fisheries) regula�ons No. and floa�ng 19/1999 plas�c debris • density Presiden�al decree 83/2018 plas�c waste The decision of the minister of environment No. 51/2004 Ju the decision of the minister of environment NO. 147/2004
Marine protec�on Ac�vi�es related to • GHG • presiden�al decree and restora�on of the protec�ve reduc�on No. 61/2011 (RAN biodiversity and management and (blue carbon) carbon emission) ecosystems restora�on of coastal • Health index • presiden�al decree No and marine natural (Coral Reefs, 59/2017 (RAN SDG) assets. These Seagrass, and ac�vi�es may also be • DID KKPD concept Mangrove) connected to carbon • NAP Adapta�on to sequestra�on from • SDGs 14.5.1 Climate Change mangrove forests, Coverage of seagrass meadows or protected inter�dal areas in saltmarshes (blue rela�on to carbon). marine areas SDGs 14.3.1 Avg marine acidity (pH) measured at agreed suite of representa�ve sampling sta�ons
BLUE FINANCING STRATEGIC DOCUMENT Appendix Table 2 Indicators and policy references
Sector Defini�on Indicators Reference
Navy Blue (high impact)
Sustainable fisheries Effec�ve fisheries • Fish popula�on • RPP Sustainable fisheries management or survey (MoMF) • RAN harvest • Document SDG cer�fied fisheries • SDGs 14.4.1 strategy must adopt or abide Propor�on of fish • SDG • UNEP to state-of-the-art stocks within • EAA Document cer�fica�on and biologically • • HCCPGovernment business prac�ces. sustainable levels • SHTI regula�ons No. Opera�ons must lead • To find: relevant • CPIB19/1999 to sustainable fish cer�fica�on in • CBIB • stocks or fishing must Indonesia (e.g. MSC) • Presiden�alPresiden�al decreedecree be at a level that • SDGs 14.7.1 no8 43/20163/2018 plas�c waste ensures it can Sustainable fisheries Th•e Coordina�ng decision of t he con�nue indefinitely as a percentage of mMinisterialinister of e nRegulavironm- ent and the fish popula- GDP Global Marine N�ono. 51 no/2 05/201804 ju the �on can remain Commodi�es (GMC) de•c Ministerialision of the minister of produc�ve and for sustainable enRegula�onvironmen tno NO . healthy. fisheries 1418/20137/2004 Effec�ve aquaculture • To find: relevant • Licensing regula- must comply adopt or cer�fica�on in �ons abide to Indonesia (e.g. MSC) • LBPI state-of-the-art Food quality cer�fica�on and assurance. business prac�ces.
Disaster Ac�vi�es and • SDGs target • Law No. 24/2007 management and programs that 11.b: in line • Government risk reduc�on promote and help to with the Sendai Regula�ons No. plan the reduc�on of Framework for 21/2008 disaster risks, since Disaster Risk Indonesia is very Reduc�on 2015 Government Regula�ons prone to many – 2030, holis�c No. 64/2010 disasters caused by disaster risk manmade and nature management at that is worsened by all levels climate change. E.g. • SDGs 11.b.1: Flood, drought, Disaster Risk earthquakes, etc Reduc�on (since we are also Strategies located in the “ring of fire”). SDGs 11.b.2: Risk Reduc�on
BLUE FINANCING STRATEGIC DOCUMENT Sector Defini�on Indicators Reference
Navy Blue (high impact)
Sustainable fisheries Small island states • GHG reduc�on • Presiden�al decree Marine have the poten�al to • Energy produced No 5/2006 renewable energy • Document SDG rapidly transi�on (Kwh) • Clean energy their energy systems • Presiden�al decree • UNEP to renewable energy No 59/2017 (RAN • SDGGovernment Presiden�al decree regula�ons No. Energy19/1 9No.99 2/2004 • Presiden�al decree Sapphire Blue (medium impact) 83/2018 plas�c waste
Marine bio- Research and • 14.3.1Average The decision of the technology investment that marine acidity minister of environment produce product and (pH) measured No. 51/2004 jTuh teh dee cision
process innova�on to at agreed suite odfe cthiseio mn ionfi sttheer mofi nister of support sustainable of environment NO. marine value chains representa�ve 147/2004 (ini�a�ve) sampling sta�on (innova�ve 14.a.1 Propor�on products/technology) of total research budget allocated to research in the field of marine technology
Tourism Coastal and ocean- • Sustainable Ministry of Tourism No. related tourism tourism index 14/2016 comes in many forms (MoT) and includes dive 14.1.1 index of tourism, mari�me coastal archaeology, surfing, eutrophica�on cruises, ecotourism, and floa�ng and recrea�onal plas�c debris fishing opera�ons. density This promotes conserva�on and sustainable use of marine environments and species, generate income for local communi�es, and maintain and respect local
BLUE FINANCING STRATEGIC DOCUMENT Sky Blue (low impact)
Marine Technology Research and 14.a.1 Propor�on Minister of Research, investment that of total research Technology and Higher address the impacts budget allocated Educa�on regula�ons No. of the shipping and to research in the 20/2018 port industries to be field of marine more sustainable to technology minimize adverse impacts.
BLUE FINANCING STRATEGIC DOCUMENT Appendix Table 3 Eligible projects and timeline
Se ctor Subse ctor Eligible Pro ject Time Frame
Short Medium Long Term Term Term
Navy Blue (High Impact)
1. Waste • Marine Waste collec�on V management Debris/Li�er Waste plas�c for V Waste-to-Energy infrastructure material Wastewater trea tment
2. Marine Mangrove, Marine Protected V protec�on seagrass and Areas (MPAs) and coral reef, expansion and restora�on ecosystem management of conserva�on, (Mangrove and biodiversity high seas seagrass replanta�on) and coral reef protec�on e cosystems Coral reef V rehabilita�on
Abrasion mi�ga�on V Building with Nature
Navy Blue (High Impact)
3. Sustainable Fish stock rebuilding V Sustainable fishing, actions fi sheries sustainable Promotion of V aquaculture, food sustainable practices security, food for activities along proc essing fishery value chain (e.g. fish processing equipment, fish feeds supply, packaging, marketing, distribution)
Investment in goods V and services to guarantee effective fisheries managemen t
BLUE FINANCING STRATEGIC DOCUMENT Navy Blue (High Impact) Clean energy for 4. Marine Wind, hydro, stream - V V small islands and renewable based powerplant coastal area ener gy developed in (coastal / Transmission of marin e areas) energy from renewable (Provision of solar V V reso urces lights into the coastal areas for consump�ons, for ships)
5. Disaster Research Disaster risk reduc�on V management Infrastructure for and risk disaster risk Disaster mi�ga�on V reduc�on reduc�on programs
Sapphire Blue (Medium Impact)
6.Marine Research and R&D for health care, V V bio- development cosme�c, enzyme, (R&D) for technolog y nutraceu�cal, and chemicals or other industr ies pharmaceuticals derived from R&D for technology V V marine life that sustains marine ecosystems (e.g. Biofuels from marine algae)
7.Tourism Research and Special designated V V development coastal/marine area fir (R&D) for eco-tourism chemicals or developm ent pharmaceuticals derived from Eco-friendly V V marine life hotel/homestays and services in coastal/marine area
Sky Blue (Low Impact)
8.Marine R&D for Relevant tools and V V technology that Technology equipment in business sustains business activities of the
BLUE FINANCING STRATEGIC DOCUMENT Appendix Table 4 Potential overlaps and gaps between green and blue economic frameworks
Eligible Eligible project: Blue project: Green Sec tor Eligible project No tes economy sukuk and pla�orm bond pla�orm
1. Marine Wind, hydro, stream- V + Part of renewable based powerplant genera�ng en ergy developed in (coastal energy from / marine areas) renewable energy (Provision of solar V + pro ject lights into the
coastal areas for consump�ons, for ships)
2. Disaster Disaster risk V + Addi�on to management reduc�on disaster risk and risk reduc�on reduc�on sector
Disaster mi�ga�on V + Part of flood programs mi�ga�on pr oject
3. Waste Marine waste V + Part of Management collec�on improving waste Marine plas�c V + management mana gement p roject
4.Marine a . Marine V + Part of protec�on Protected Areas habitat and and (MPAs) biodiversity restora�on expansion and conserva�on of management program biodiversity (Mangrove and and seagrass ecosystem s replanta�on) Coral reef protec�on
BLUE FINANCING STRATEGIC DOCUMENT 5.Marine Special area for V + Part of new tourism marine ecotourism green development tourism project
Eco friendly V + Part of new hotel/homestay and green service for marine tourism or eco tourism tourism and resilience again climate change project
6. a . Fish stock V + Part of Sustainable rebuilding ac�ons sustainable fisheries management b. Promo�on of V + of fisheries sustainable project prac�ces
c . Investment in V + goods and services to guarantee effec�ve fisheries management (rep hrase)
d. Fish processing V + equipment, packaging, marke�ng, distribu�on that minimize environmental impact
e . Fish seeds supply V (Secondary fisheries sector)
R&D for health care, V cosme�c, enzyme, Notes : + = overlapped with green project
BLUE FINANCING STRATEGIC DOCUMENT BLUE FINANCING STRATEGIC DOCUMENT
Blue Bonds and Sukuk Framework
November 2020
Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. DBS Bank Ltd. accepts no liability whatsoever with respect to the use of this document or its contents. Delivering sustainable solutions to power a better world Our Credentials in Sustainable Finance Our Strong Track Record in Sustainability Bonds
First thematic “blue” bond in offshore markets First university in Asia to launch green bond
Oct 2020 Sep 2020 Jul 2020 Jun 2020 Jul 2020 Jun 2020 May 2020 Apr 2020 Feb 2020
Asia Infrastructure Bank of China, Star Energy Geothermal Bank of China, China Construction Bank, Investment Bank Swire Properties Korea Housing Finance National University of New Development Bank Macau Branch Salak-Darajat Macau Branch Hong Kong branch Corporation Singapore (NUS) CNY 3b Sustainable HKD 380m 2.450% CNY 5b Social Bonds HKD 2b Social Bonds Development Bonds USD 320 million due 2029 CNH 3b 3.15% Senior USD 500m due 2023 Due 2028 SGD 300m 1.565% due 2023 due 2022 due 2023 EUR 500m Social USD 790 million due 2038 Unsecured due 2022 USD 700m due 2025 Covered Bonds due 2025 due 2030
Feb 2020 Jan 2020 Dec 2019 Oct 2019 Jul 2019 Jun 2019 May 2019 April 2019
Impact Investments Bank of China, China General Nuclear Korea Housing Finance State Development & Industrial and Korea Housing Finance Exchange: Women’s Macau Branch Power Corp International Corporation Investment Corp Commercial Bank of Vena Energy Corporation Livelihood Bond 2 China, Singapore CNH 2b Senior Unsecured USD 600m Senior EUR 500m USD 500m Senior USD 1.5b due 2022 & 2024 EUR 325m 3.133% notes EUR 1b Social USD 10.5m 4.00% Green Bonds Unsecured Green Bonds Social Covered Bonds Unsecured Green Bonds CNH 1b due 2022 Bonds due 2025 Covered Bonds due 2025 Fixed Rate Notes due 2024 due 2021 due 2024 due 2024 due 2024
Nov 2018 Oct 2018 Sep 2018 Apr 2018 Nov 2017 Jul 2017 Jul 2017 Apr 2017
New World China Land Korea Housing Finance Star Energy Geothermal Manulife Financial DBS Group Holdings Ltd Impact Investments CDL Properties Ltd Corporation State Bank of India (Wayang Windu) Limited Corporation Exchange: Women’s USD 310m 4.750% SGD 500m Tier 2 USD 500m Senior Livelihood Bonds SGD 100m Secured Senior Unsecured EUR 500m USD 650m Inaugural USD 580m Senior Secured Subordinated Green Bonds Unsecured Inaugural Green USD 8m 5.65% Inaugural Green Bonds Green Bonds due 2023 Social Covered Bonds Senior Unsecured Green Inaugural Green Bonds due due 2029 Bonds due 2022 Fixed Rate Notes due 2021 due 2019 due 2023 Bonds due 2023 2033 (First Callable in 2024)
First Singapore green bond offered to international debt market First Singapore company to issue green bond
Green Bond Social Bond Sustainability Advisor
Accurate as of 31 October 2020 3 We will assist and guide your team in establishing a robust Structuring Sustainability Bonds framework based on well-recognised standards/principles
Sustainability Bond Framework
PILLAR 1 PILLAR 2 PILLAR 3 PILLAR 4 Use of Proceeds Process for Evaluation & Management of Proceeds Reporting Selection of Project Clear disclosure of eligible Description of how net Periodic disclosure of project categories that can be Description of internal process proceeds will be managed, allocation of proceeds (by Internal financed by the sustainability- and governance that will be disbursed, and tracked eligible asset categories, Policy themed bonds (including any used to determine and select throughout the life of the issued amount undisbursed…) qualitative and quantitative the projects that fit within the bonds to ensure proceeds are Where possible, describe and rd criteria or any 3 party eligible categories identified used for the intended purpose quantify environmental and accreditation used) social benefits generated by the financed projects + Consultant Review Certification Verification Rating
External Second Party Opinion on the Certification of compliance of to Confirmation of adherence to For a particular issuance Review robustness of Sustainability certain technical standard (e.g. the stated Management of (Moody’s / S&P green rating) Bond Framework and its Climate Bond Initiative) for a Proceeds commitment, or the issuer on overall (optional but compliance with the selected particular green bond issuance usually by an auditing firm on recommended) standards an annual basis
4 Structuring Sustainability Bonds Pillar 1: Use of Proceeds (Proposed Blue Categories)
Waste Management in Marine Areas Marine Renewable Energy • Marine debris/litter • Energy for small islands and coastal area • Waste-to-energy • Generation and transmission of energy from • Wastewater treatment marine-related sources
Marine Biodiversity Protection and Tourism Restoration • Eco-tourism in designated conversation • Preservation of seagrass and coral reef coastal/marine area • Marine life conservation in high seas Proposed Categories* for Sustainable Fisheries Blue Bond and Sukuk Disaster Management and Risk • Food security Reduction • Food processing industry • Research Infrastructure for Disaster Risk • Sustainable aquaculture Reduction
Marine Biotechnology Maritime Technology • Research and development for chemicals and • Research and development for technologies pharmaceutical ingredients/products derived that sustain activities in maritime sector from marine life (e.g. ports, shipping, container)
* The categories proposed above are still preliminary, and subject to changes upon further discussion. 5 Structuring Sustainability Bonds Pillar 2: Process for Evaluation & Selection of Project
Option 1: Expand the tagging by including a “blue” label for already-established “Climate Budget Tagging” mechanism used by the government of Republic of Indonesia (ROI)
This mechanism by ROI is to identify government expenditures that deliver specified climate change benefits in accordance with ROI government’s climate objectives
Source: Green Bond and Green Sukuk Framework (Republic of Indonesia, 2017) 6 Structuring Sustainability Bonds Pillar 2: Process for Evaluation & Selection of Projects
Option 2: A standalone mechanism to identify, nominate and approve blue projects and activities
Example of Project Evaluation and Selection Process Total Assets Portfolio The Framework should Other considerations: describe the decision making process. Projects nominated by Line Ministries: • Existing or new projects – Would 1. Ministry of Maritime Affairs and re-financing of existing projects be ✓ Process used and any Fisheries included or just new investments? criteria to determine if 2. Ministry of Energy and Mineral the potential projects are Resources 3. Ministry of Environment and • Any other ESG / Responsible in line with the issuer’s Forestry Eligible Criteria per Financing criteria employed for Blue Bond Framework 4. Ministry of Tourism and Creative Pillar 1 Use of Economy Proceeds asset origination 5. Ministry of Transportation ✓ Responsibility for 6. Ministry of Public Works and • Residual tenor of selected assets proposal, assessment, Public Housing 7. Investment Coordinating Board given the bond tenor and likelihood selection and approval of asset replacement of the projects – Ideally there should be at least • Diversity of selected assets 2 tiers for proposal and across region, categories, or if for approval, to Final approval by MOF & BAPPENAS the bond issuance would be demonstrate impartiality Portfolio of Eligible projects dedicated to a particular category
7 Structuring Sustainability Bonds Pillar 3: Management of Proceeds
2 options for Tracking of proceeds To demonstrate to investors the traceability of the proceeds, the 1 Segregate / ring-fence related ✓ Robust and high credibility to investors Framework should describe: cashflows (deployment, ✓ Easier to achieve Climate Bond Initiative ✓ How the Issuer intends to deploy the interests…) via a sub-account certification net proceeds towards the selected Very inflexible for issuers projects: timeline, deployment mechanism (sub-account, common pool of assets…) ✓ How the Issuer will monitor the use 2 Tracking of principal outstanding ✓ Flexible for issuers of proceeds and status of allocation via a simple “register/ledger” ✓ For issuers with multiple eligible asset categories on an ongoing basis (given that assets Slightly less robust but still within market may prepay early, for e.g.) acceptance ✓ Policy on temporary deployment of unallocated proceeds
“The proceeds of each Green Bond or Green Sukuk will be managed within the Government’s general account in accordance with sound and prudent treasury management policy. Upon request from the Line Ministries, the Green Bond and Green Sukuk proceeds will be credited to a designated account of the relevant ministries for funding exclusively projects as defined in the Framework. Pending application to Eligible Green Project proceeds will be held in cash in the Government’s general account at Bank Indonesia.
Note: The categories proposed above are still preliminary, and subject to further changes. 8 Structuring Sustainability Bonds Pillar 3: Management of Proceeds
Using a stand-alone bond ledger to keep track of eligible “blue” activities (Example of a green bond ledger illustrated here)
Simple ledger with proceeds tracked quarterly Detailed ledger with proceeds tracked quarterly, with breakdown in flow of funds for each category/project
Source: Green Bonds Proceeds Management and Reporting (World Bank, 2020). 9 Structuring Sustainability Bonds Pillar 4: Reporting
Reporting commitment is relatively light, Allocation of Proceeds focusing on Allocation of Proceeds and Impact Reporting (optional but encouraged) • Allocation of Proceeds – typically disclosure includes: - Amount of proceeds “disbursed” to green/social projects and amount undisbursed - Breakdown by eligible categories • Impact Reporting - For Green projects: kWh electricity
generated, CO2 avoided… - For Social projects: number of beneficiaries, jobs generated… Impact Reporting Reporting usually done on an annual basis. The disclosure can be published as a standalone section on the website or part of annual report.
(Examples of reporting disclosure are illustrated this page, with references taken from the green bond and sukuk reporting from ROI)
Source: Green Sukuk Issuance: Allocation and Impact Report (Republic of Indonesia, 2019) 10 Blue Bonds Around the World
People’s Republic of China In September 2020, Bank of China Limited has issued its first Blue Bonds in the offshore market to Nordic Region fund new and existing marine-related green projects with environmental impacts. In January 2019, Nordic Investment Bank traded its first SEK 2 billion Nordic-Baltic Blue bond, with focus on investments within water resource management and protection.
More details in “Case Studies” section Seychelles In October 2018, the government of Republic of Seychelles has launched the world’s first sovereign blue bond totalling USD 15 million to support sustainable marine and fisheries project.
Note: Please click the respective boxes to access the website links for more information. 11 Selected detailed track records in sustainable finance Case Studies First investment grade green project bond from the private sector in Indonesia Star Energy Geothermal: Green Bond
SUMMARY OF OFFERING TERMS DEAL STATISTICS Co-Issuers Star Energy Geothermal Salak, Ltd and Star Energy Geothermal Darajat II Limited (“Star Energy”) (US$790m 18-year tranche) Parent Guarantor Star Energy Geothermal (Salak – Darajat) B.V. Final orderbook c. USD 2.8 billion from Other Guarantors Star Energy Geothermal Salak Pratama, Ltd., Star Energy Geothermal Darajat I, Limited and the Co-Issuers in respect of the obligations of each other Co-Issuer 106 accounts Issue Ratings Baa3 (Moody's) / BBB- (Fitch) Geographical Breakdown Format 144A / Reg S Issue Date 14 Oct 2020 Tenor 8.5NC3.5 18NC9 Size USD320 million USD790 million 19% Maturity 14 April 2029 14 Oct 2038 Re-Offer Price / Yield 100.00/3.250% 100.00/4.850% 42% Distribution Pre-Placed Public Offer • Limitations on Debt Incurrence (1.60x forward looking DSCR) Covenants • Limitations on Equity Distributions (1.15x backward looking DSCR) DSA 12 mths of principal and interest for the Notes plus P+ I due on next payment date for other ratio debt and Permitted Pari Passu Indebtedness 39% 1/3 of the total sum of Major Drilling Costs, the Major Maintenance Costs and the Binary Costs (all as defined in the Preliminary Offering Memorandum) for the MMRA next 3 consecutive 12-month periods Green labelled offering governed by the Salak & Darajat Green Bond Framework (aligned with ICMA Green Bond Principles and ASEAN Green Bond Standards), Green Bond with pre-issuance Second Party Opinion from Carbon Trust Assurance Limited US Asia EMEA To be used mainly for repayment of existing senior debt facilities and associated repayment expenses, funding of DSRA and MMRA, and general corporate Use of Proceeds purposes relating to the geothermal operations Investor Breakdown Terms SGX Listing, US$200k/1k Denoms, New York Law DBS Role Joint Global Coordinator, Joint Bookrunner and Joint Green Structuring Advisor 2% ORDERBOOK PROGRESSION 8% TRANSACTION HIGHLIGHTS 8% ✓ Unique 2-asset Green project financing bond structure (US$790m 18-year tranche) ✓ Rarity of structure - Resulting in “Greenium” achieved, i.e. premium that investors were willing to pay for green bonds over >USD2.6 bn >USD2.8 bn conventional bonds. In particular, the marketed 18YNC9Y tranche achieved a final pricing that is c.45bps inside of its nearest comparable bond, Paiton Energy (an Indonesian coal-fired power plant) ✓ First ever investment grade rated Green project bond out of Indonesia ✓ Largest non-sovereign deal and longest dated (18Y) Green bond from Indonesia >USD1 bn 82% ▪ SUMMARY: DBS successfully priced a dual-tranche USD green project bond of a total size of USD1.11bn for Star Energy. The US$320m 8.5 year tranche was strategically pre-placed while the US$790m 18 year tranche was launched to the market for public offer. This was a highly anticipated offering as the first ever IG rated green project bond out of Indonesia AMs IPG ~1:01pm SGT Update #2 FPG Final Orderbook Insurance/Pension ▪ MARKETING: With benign market conditions on 29 Sept, the Issuer announced for a deal roadshow, and completed 4 days of Announcement ~7:26pm SGT marketing from 30 Sept to 5 Oct. Despite the golden week lull in Hong Kong and China, a strong investor turnout was received with ~10:30am SGT HFs c. 104 accounts covered. Investor meetings were favourably received, turning around strong indications of orderbook interest PBs
13 Well-received by investors, book peak at CNH 5.5 billion Bank of China Limited, Macau Branch: Blue Bond
Summary of Terms of Offering Issuer Bank of China Limited, Macau Branch Issuer Ratings (M/S/F) A1 (stable)/A (stable)/A (stable) Expected Issue Ratings (M/S/F) A1/A/A Status Senior unsecured blue bonds, drawdown under USD40 billion MTN Programme Format Bank of China Limited, Macau Branch Reg S , Category 2, Registered Size CNH 3 billion CNH 3 billion 3.15% due 2022 Tenor & Type 2-year Fixed Senior Unsecured Fixed Rate Blue Bonds Coupon 3.15% , S/A, Act/365 Reoffer Price / Yield 100.00%/3.15% Settlement Date Sep 21, 2020 (T+5) September 2020 Maturity Date Sep 21, 2022 Joint Global Coordinator Terms Hong Kong Stock Exchange Listing, CNY1,000,000/10,000 Denominated, English Law To finance and/or refinance marine related eligible green projects as defined in Bank of China Limited Sustainability Joint Lead Manager Use of Proceeds Series Bonds Management Statement Joint Bookrunner Clearing Euroclear / Clearstream
Final Allocation Key Highlights
Geographical Breakdown Investor Breakdown ▪ Summary: DBS as Joint Global Coordinator, Joint Lead Manager and Joint Bookrunner successfully priced CNH 3 billion 2-year Senior unsecured Blue Bonds issuance for Bank of China, Macau Branch (the “Company” or “Issuer”, Moody’s: A1, S&P: A, Fitch: A, all stable outlook) at 3.15% on Monday, 14 September. The bonds are expected to be rated A1 by Moody’s, A by S&P and A by Fitch and are to finance and/or refinance marine related eligible green projects as defined in Bank of China Limited CNH 2Y: Orderbook >CNH 4.5b across 58 accounts Sustainability Series Bonds Management Statement. Insurance/Others ▪ The Blue Bonds issuance falls under the umbrella of Green Bonds, protecting marine ecological environment and exploring offshore wind energy, which is aligned to the Green Offshore US 8% Bond Principles, and verified by EY via its Pre-issuance Attestation Report. Europe 3% Private Banks Key highlights: 1% 19% ✓ This deal stands out. Blue bonds are still new globally, with only three previously sold around the world. This makes BOC’s transaction the first blue bond in Asia — as well as the first to be sold by a commercial bank or to be denominated in CNH. Bank/FI ✓ BOC is the first commercial bank to issue Blue Bonds, demonstrating its leadership to promote a sustainable blue economy and protection of water resources. Proceeds 46% from this issuance will be for financing (and/or refinancing) of projects in offshore renewable energy and wastewater treatment categories, contributing to various SDGs. ✓ This transaction marked as the largest single tranche size of CNH-denominated bonds offering from a non-sovereign issuer year-to-date in Asia. ✓ Amidst a busy Monday with 6 issuers coming out for bookbuilding in Asia, the transaction still managed to capture good attention from the market and was well-received Asia among investors with a book peak at CNH 5.5 billion. 96% Asset ▪ Bookbuilding and Pricing: The issuer came to market on one of the busiest Mondays to announce the mandate and launched the transaction with an IPG at 3.50% area in managers Asia morning. The orderbook was covered shortly and continued to grow steadily throughout the day. Strong bookbuilding momentum saw the orderbook size standing in 27% excess of CNH 4.3 billion as of Asia noon and further climbing to over CNH 5.5 billion at its peak, which provided great confidence to the issuer to tighten by 35bps and set the FPG level at a very tight level of 3.15% (#). The bonds were eventually priced at 3.15%, with a final issue size of CNH 3 billion.
14 Women’s Livelihood Bond: Social Bond
Summary of Terms of Offering Issuer WLB Asset Pte. Ltd. Parent Impact Investments Exchange (IIX) Guarantor USAID (50% limited guarantee on loan principals), IIX (Provide USD 500k first-loss capital) Issue Ratings Unrated Format Reg S, Reg D Women’s Livelihood Bonds Issue Type Senior, unsecured USD8,000,000 5.65% Issue Size USD 8 million Fixed Rate Notes dues 2021 Tenor 4 years Issue Date 6 July 2017 Maturity Date 6 July 2021 Coupon 5.65% p.a. (SA, 30/360) July 2017 Details SGX-ST Listing, USD200k/1k Denoms, English law Primary Use of Proceeds Extend loans in the form of promissory notes to selected microfinance institutions and impact enterprises. Placement Agent Social Monitoring& Evaluation Manager IIX Foundation
Primary Themes Key Highlights ▪ Summary: DBS successfully priced a landmark social sustainability bond on a pro-bono basis that impacts over 385,000 women across Vietnam, Cambodia and the Philippines. This is the world’s first multi-country and multi gender-lens investing instrument that pools together a group of entities and magnifies social impact. ▪ Borrowers: ▪ Sakami Microheranvatho SAMIC (Cambodia) – Founded in 1994, a mid-sized microfinance institution serving the indigent market in Cambodia. On top of providing microfinance, it has the objective of addressing public health issues in rural areas. As of 2016 it has network of 19 branches in 9 Cambodian provinces serving approximately 17,000 borrowers. ▪ Negros Women for Tomorrow Foundation, Inc. NWTF (Philippines) – Founded in 1984, it is a foundation providing Grameen-type group loans to indigent urban and rural borrowers. It focuses on supporting small businesses providing retail, food, agriculture and fishing. As of 2016, it has served Access To Capital And Credit Access To Essential Goods & Services over 300,000 borrowers. Provide affordable credit and access to Equip women with value-adding tools to: ▪ Viet Phu Services Support Corp, VietPhu (Vietnam) – Founded in 2007, it operates a retail platform finance to enable women to: • Improve mobility to higher-return under the brand iCare, for registered members to gain access to essential products and services. These • Scale their business sectors or higher value functions products are distributed predominately to factory workers, providing them with necessities. Over • Purchase income generating assets • Access employee benefits to integrate 980,000 workers are registered under the iCare services as of 2016. • Fund capacity building/ skills into the formal workforce development • Access healthcare and medical services Impact on Women: like vaccinations ▪ Partners & Stakeholders: • Improved Financial Security Impact on Women: • Reduced Gender-Based Income • Improved Quality of Life and Wellbeing ▪ Social Value: For every USD 1 invested, USD 2.41 of social value is created. Inequality • Increased Multi-Generational Impact ▪ Allocation: Books covered by Institutional investors and private banks from Asia (60%), Europe and US (40%). ▪ DBS Franchise: DBS’ provided and anchor order of the bonds through its sales channels.
15 Women’s Livelihood Bond: Social Bond
Bonds Trustee Corporate Services Portfolio Manager Issuer (Wholly owned by the Portfolio Manager, IIX) Issues USD 8m of Placement Agents 1 1 Bank of New York Provider Impact Investment Bonds to Bondholders DBS & ANZ Mellon Vistra Exchange (IIX) 2 2 Issue Proceeds to be lent to Borrowers and to cover other costs 6 5 4 USAID provides a pari passu limited guarantee of 50% of the principal 3a3a 9 amount of the Loans 8 IIX provides US$500,000 Subordinated Debt, serving as first-loss capital Issuer 3b3b Bondholders to the Bonds WLB Asset Pte Ltd. Impact Investment 3b IIX to manage payment collection and monitoring of compliance to 1 4 4 Exchange (IIX) First Loss Capital obligations USD 500k Guarantor 3a USAID Vistra to provide an independent board, serve as corporate secretary, 2 5 5 provide record keeping, administration and accounting services to the issuer.
The Bonds Trustee will hold the Issuer’s covenant to pay principal and interest on the Bonds on trust for the Bondholders and will act on behalf of 6 6 SAIMC NWTF Viet Phu the Bondholders in certain situations.
IIX Foundation will monitor the performance of the Borrowers and create 7 7 periodic impact reports.
Bondholders are paid a semi-annual coupon and are repaid the principal 8 7 8 at maturity of the Bonds.
Social Impact Bondholders and Portfolio Manager split Surplus Funds at maturity of the 9 Capital Flow Monitoring 9 Bonds. Work Flow IIX Foundation
16 Disclaimer
The information herein is published by DBS Bank Ltd (the "Company"). It is based on information obtained from sources believed to be reliable, but the Company does not make any representation or warranty, express or implied, as to its accuracy, completeness, timeliness or correctness for any particular purpose. Opinions expressed are subject to change without notice. Any recommendation contained herein does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. The information herein is published for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate legal or financial advice. The Company, or any of its related companies or any individuals connected with the group accepts no liability for any direct, special, indirect, consequential, incidental damages or any other loss or damages of any kind arising from any use of the information herein (including any error, omission or misstatement herein, negligent or otherwise) or further communication thereof, even if the Company or any other person has been advised of the possibility thereof. The information herein is not to be construed as an offer or a solicitation of an offer to buy or sell any securities, futures, options or other financial instruments or to provide any investment advice or services. The Company and its associates, their directors, officers and/or employees may have positions or other interests in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking or financial services for these companies. The information herein is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation.
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