OCEANS FOR PROSPERITY Oceans for Reforms for a Blue Economy in Indonesia Prosperity OCEANS MDTF 01 OCEANS FOR PROSPERITY OCEANS FOR PROSPERITY Table of Contents 04_ Foreword 09_ Acknowledgements 10_ Acronyms 12_ Executive Summary Disclaimer: This report is a product of the staff of the International Bank for Reconstruction and Development/The World Bank. The findings, interpretations, and conclusions 28_ 01. Introduction expressed in this paper do not necessarily reflect the views of the Executive Directors of the World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundar- 36_ 02. A Sustainable Fisheries Future ies, colors, denominations, and other information shown on any map in this work Indonesia can get more from its fisheries sector through improved management do not imply any judgment on the part of the World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. 44_ 03. Realizing Indonesia’s Tourism Potential Copyright Statement: To be a leading tourism destination, Indonesia must ensure that its marine and The material in this publication is copyrighted. Copying and/or transmitting coastal assets are managed sustainably portions or all of this work without permission may be a violation of applicable law. The International Bank for Reconstruction and Development/The World Bank encourages dissemination of its work and will normally grant permission to 50_ 04. Managing Coastal and Marine Assets reproduce portions of the work promptly. Protecting Indonesia’s marine and coastal assets is crucial to ensure continued benefits from ocean sectors 58_ For permission to photocopy or reprint any part of this work, please send a request with complete information to the Copyright Clearance Center, Inc., 222 05. Combating Plastics from Source to Sea Rosewood Drive, Danvers, MA 01923, USA, telephone 978-750-8400, Marine plastic debris represents a significant risk to Indonesia’s ocean sectors fax 978-750-4470, http://www.copyright.com/. All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank, 1818 H Street NW, 64_ 06. Conclusion: Integrated Policy for a Blue Economy Close ecological and economic links between ocean sectors means that reforms Washington, DC 20433, USA, fax 202-522-2422, e-mail pubrights@worldbank.org. can deliver broad benefits Suggested Citation: World Bank (2021). Oceans for Prosperity: Reforms for a Blue Economy in Indone- 72_ References sia. The World Bank, Washington, D.C. 02 03 OCEANS FOR PROSPERITY OCEANS FOR PROSPERITY Foreword Foreword B T uilding a sustainable ocean economy is one of the most important tasks for he ocean covers more than two-thirds of Indonesia’s area and connects the Indonesia. As an archipelagic country with high marine biodiversity, Indo- many islands of our archipelagic country. The ocean provides livelihoods to the nesia must ensure that its actions balance the needs of its people and its people of Indonesia, sustains social and economic activities, and ensures cultur- oceans. These needs align with current and upcoming challenges, including perfor- al richness. It is our duty to protect, restore, and sustain the diverse natural resources mance in seafood exports, threats from natural resources degradation, access to of our ocean for generations to come. and volatility of markets, climate change, and marine debris. Indonesia has based its development planning for the next five years on the Rencana A sustainable and prosperous oceans economy will contribute to higher revenues Pembangunan Jangka Menengah Nasional (RPJMN), which serves as the national guide- from marine-based activities, improved coastal communities’ livelihoods, and line and roadmap towards one important goal: transforming Indonesia into a devel- healthier oceans and coastal ecosystems that can generate services and products oped country. The first agenda item in the 2020–2024 RPJMN is to achieve economic and preserve unrivalled biodiversity. There are opportunities to implement this resilience for high quality, equitable growth. As a maritime country, Indonesia’s vast transformation through establishing an ecosystems approach within the Fisheries marine resources must be utilized to improve people’s welfare. We see “blue” sectors Management Area system (Wilayah Penangkapan Perikanan, WPP), and integrating in the future providing even greater support towards strengthening our national econ- WPP management with marine protected areas, spatial planning in marine and omy. However, Indonesia still faces challenges to fully achieve “blue” prosperity. coastal areas, reduced marine debris, and improved livelihoods to ensure long- term sustainable fisheries and marine tourism industries. The RPJMN acknowledges that improved management of blue sectors is key to achieving Indonesia’s development agenda. Additionally, it is one of our commitments I welcome this report, Oceans for Prosperity, and I am honored to provide this as global citizens towards the Sustainable Development Goals (SDGs). Based on these foreword. This concise report describes the opportunity for Indonesia to re-ener- responsibilities, marine and fisheries management strategies are designed to protect, gize a sustainable oceans economy or “blue economy,” to improve economic growth conserve, and utilize marine resources in a sustainable manner. and to optimize the value of natural resources. The Government of Indonesia has and continues to make efforts along this pathway, as part of our commitment to One of those strategies is spatially-based management, such as the establishment of economic growth, prosperity, and the sustainability of our oceans. the Fisheries Management Area (WPP) system, and Marine Protected Areas (MPAs), which can help ensure long-term sustainability of ocean resources. We need to I look forward to partnerships that help build oceans-related opportunities. The emphasize the importance of balancing conservation and economic growth to fully closeness of the ocean grants us the possibility of improving lives through innova- embody the concept of sustainability. tive and sustainable use of its resources. We will replace “doom and gloom” with a more optimistic vision. In collaboration with other nations that face similar chal- It is with great pleasure that I welcome this new publication by the World Bank, lenges, we will further diversify our economy and secure the goods and services Oceans for Prosperity: Reforms for a Blue Economy in Indonesia. I hope that this publi- provided by our oceans. cation will escalate efforts towards realizing blue prosperity in Indonesia. We would like to ensure that through these efforts we can strive consistently to support the government’s strategic plan to achieve our collective goal, the welfare of the Indone- sian people. Dr. Ir. Aryo Hanggono, DEA, In Memory Dr. Ir. Arifin Rudiyanto, MSc. Former Director General for Marine Spatial Management, Ministry of Marine Deputy of Maritime and Natural Resources, Ministry of National Development Affairs and Fisheries (MMAF) and Planning (Bappenas) 04 05 OCEANS FOR PROSPERITY OCEANS FOR PROSPERITY Foreword I ndonesia is an archipelagic country with enormous marine biodiversity and ocean resources, which are important sources of food security, livelihoods, carbon sequestration, and means of transportation. Ocean ecosystems and the economy they support must be preserved by overcoming current threats and chal- lenges, including coastal degradation, climate change, unsustainable aquaculture practices, over-exploitation, and marine pollution such as plastic debris and solid waste in waterways and seas. Gross Domestic Product (GDP) summarizes the size of an economy, representing the total value of certain goods and services produced. However, GDP leaves out important details of the ocean economy. How does the ocean affect local commu- nities and individuals? How does economic activity damage or improve the health of ocean ecosystems? These knowledge gaps limit our ability to make effective, inclusive decisions about how we use the ocean and build a sustainable ocean economy, or “blue” economy, that can deliver on the National Ocean Agenda, as well as the 2030 Agenda for Sustainable Development. An integrated and multi-sectoral blue economy strategy as described in this report, Oceans for Prosperity, is the key to improving marine and coastal activities, equal opportunities, and livelihoods. Fisheries and coastal tourism are the most significant sectors to develop and transform based on a foundation of healthy and productive marine and coastal ecosystems, including marine plastic pollution reduction and marine conservation. This is Indonesia’s commitment. Fundamen- tally, a blue economy strategy enables governments to monitor and manage three critical trends with respect to the ocean economy: 1. Changes in ocean wealth, including mangroves, seagrass, and coral reefs 2. The distribution of oceans-related income among different groups of people (including income from fisheries or tourism for local communities) 3. The contribution from oceans-based economic activities to national eco- nomic output The Coordinating Ministry for Maritime and Investment Affairs and other stake- holders look forward to increasing cooperation and collaboration to develop our blue economy with equal opportunities. We will continue the success of current initiatives, including the Oceans Multi-Donor Trust Fund1, and look forward to pos- itive global trends to position Indonesia’s ocean economy for sustainable growth, especially after the COVID-19 pandemic. Dr. Ir. Safri Burhanuddin, DEA. Deputy Coordinating Minister for Maritime Resources, Coordinating Ministry for Maritime and Investment Affairs (CMMIA) A swirling tornado of Barracuda in blue wa- ter above a warm, trop- ical coral reef. Photo: © 1 The Indonesia Oceans Multi-Donor Trust Fund was established in 2017 at the request of the Government shutterstock.com of Indonesia and with the support of the Governments of Denmark and Norway. It provides technical assis- 06 tance to implement oceans policy, reduce marine debris, and strengthen coastal resilience. 07 OCEANS FOR PROSPERITY OCEANS FOR PROSPERITY Acknowledgements T his report was prepared by a World Bank team led by David Kaczan (economist) and André de Aquino (se- nior natural resources management specialist), and comprising Andrew Harvey (fisheries consultant), Jia Jun Lee (environmental consultant), Bertine Kamphuis (senior private sector specialist), Nikola Kojucharov (senior economist), Anjali Acharya (senior environmental specialist), Andhyta F. Utami (environmental economist), Celine Lim (natural resources management specialist), John Perrottet (senior private sector specialist), Frank van Woerden (lead environmental engineer), Xavier Vincent (lead fisheries specialist), Katelijn van den Berg (senior environmental specialist), Yadranka Farita (natural resources management specialist), Abdul Halim (oceans con- sultant), Juan-Pablo Castaneda (environmental economist), Dias Natasasmita (oceans consultant), Kian Siong (senior environmental engineer), Geertrui Paula Uyttendaele (geo- spatial consultant), Desta Pratama (oceans consultant), Ina Pranoto (senior oceans consultant), and Taruc Siham (oceans consultant). The report builds on an article in the World Bank’s Indonesia Economic Quarterly (IEQ) entitled Oceans of Opportu- nity, published by the World Bank in June 2019. The team thanks Satu Kristiina Kahkonen (country director for The team thanks Bapak Arifin Rudiyanto (Deputy of Maritime Indonesia), Rodrigo A. Chaves (former country director for In- and Natural Resources, Ministry of National Development and donesia), Rolande Simone Pryce (former manager of operations Planning, Bappenas), Bapak Safri Burhanuddin (Deputy for for Indonesia), Karin Kemper (global director for environment, Maritime Resources, Coordinating Ministry of Maritime Affairs natural resources, and the blue economy), and Ann Jeannette and Investment, CMMAI), Ibu Nani Hendiarti (Deputy for Envi- Glauber (practice manager) for encouragement, guidance and ronment and Forestry Management, Coordinating Ministry for support. Dinesh Aryal (senior natural resources management Maritime Affairs and Investment, CMMAI) and their teams, for specialist) also provided support. valued input and reviews. The team also thanks Bapak Andreas A. Hutahaean (coordinator of the Oceans Multi-Donor Trust Constructive reviews of this report and the earlier IEQ ar- Fund, CMMAI) for his input and coordination support. Input ticle were received from Andrew Mason (lead economist), and reviews from staff at the Marine Spatial Management and Ergys Islamaj (senior economist), Francesca de Nicola (senior Capture Fisheries Directorates, Ministry of Marine Affairs and economist), Frederico Gil Sander (lead economist), Derek Fisheries, were also received with appreciation. Chen (senior economist), Jaffar Al-Rikabi (economist), Urvashi Narain (lead economist), Delphine Arri (senior environmental The team thanks the World Bank’s communications staff in engineer), Miguel Angel Jorge (senior fisheries specialist), and Jakarta, including Puni Anjungsari, Annemarie Sieraphin Min- Charlotte de Fontaubert (senior fisheries specialist). aesta, Reidinar Juliane Wardoyo, Irfan Tonnei Herlambang, and David Irianto, for production and dissemination. The manu- script was edited by Zubair Qamar. The report was funded by the Indonesia Oceans Multi-Donor Trust Fund, established in 2017 at the request of the Govern- ment of Indonesia with the support of the Governments of Norway and Denmark. The Oceans Multi-Donor Trust Fund provides technical assistance to implement oceans policy, reduce marine debris, and strengthen coastal resilience. The earlier IEQ article was funded by the Australian government under the Support for Enhanced Macroeconomic and Fiscal Policy Analysis (SEMEFPA) program. Any errors or omissions are the responsibility of the authors. Finally, the team would like to acknowledge the support and inspiration of Bapak Aryo Hanggono (former Director General for Marine Spatial Management, MMAF), who provided advice, technical input, and the report’s foreword, and passed away Mangrove trees. Photo: before publication. He is remembered as a champion of the © shutterstock.com oceans and a tireless public servant for Indonesia. 08 09 OCEANS FOR PROSPERITY OCEANS FOR PROSPERITY Acronyms APBD Anggaran Pendapatan dan Belanja Daerah (Regional Revenues and Expenditures Budget) APEC Asia-Pacific Economic Cooperation Bappenas Badan Perencanaan Pembangunan Nasional (Ministry of National Development Planning) CMMAI Coordinating Ministry of Maritime Affairs and Investment COREMAP Coral Reef Rehabilitation and Management Program COVID-19 Coronavirus Disease 2019 CTMPA Coral Triangle Marine Protected Area E-KKP3K Evaluasi Efektivitas Pengelolaan Kawasan Konservasi Perairan, Pesisir dan Pulau-pulau Kecil (Evaluation of the Effectiveness of Management of Marine, Coastal and Small Islands Conservation Areas) EPR Extended Producer Responsibility GDP Gross Domestic Product GoI Government of Indonesia GPS Global Program on Sustainability IDR Indonesian Rupiah ITMPs Integrated Tourism Master Plans IEQ Indonesia Economic Quarterly IUCN International Union for Conservation of Nature LCDI Low Carbon Development Initiative for Indonesia LIPI Lembaga Ilmu Pengetahuan Indonesia (Indonesian Institute of Sciences) LPP Lembaga Pengelola Perikanan (Fishery Management Council) MAC Marine and Coastal MCS Monitoring, Control, and Surveillance MOEF Ministry of Environment and Forestry MOF Ministry of Finance MMAF Ministry of Marine Affairs and Fisheries MPA Marine Protected Area NCA Natural Capital Accounting OECD Organisation for Economic Co-operation and Development PNBP Penerimaan Negara Bukan Pajak (Non-tax State Revenue) PTSP Pelayanan Terpadu Satu Pintu (One-Stop Integrated Services system) PUSDATIN Pusat Data Statistik dan Informasi (Center for Data, Statistics, and Information) REDD Reduced Emissions for Deforestation and Forest Degradation RPJMN Rencana Pembangunan Jangka Menengah Nasional (National Medium-Term Development Plan) P3TB Program Pembangunan Pariwisata Terintegrasi dan Berkelanjutan (Integrated and Sustainable Tourism Development Program) RPP Rencana Pengelolaan Perikanan (Fishery Management Plan) RTRW Rencana Tata Ruang Wilayah (Spatial Plan) RZ-KAW Rencana Zonasi Kawasan Antar Wilayah (Inter-regional Zoning Plan) RZ-KSN Rencana Zonasi Kawasan Strategis Nasional (National Strategic Area Zoning Plan) RZ-KSNT Rencana Zonasi Kawasan Nasional Tertentu (Zoning Plan for Specific National Strategic Areas) RZ-WP3K Rencana Zonasi Wilayah Perairan dan Pulau Pulau Kecil (Coastal and Small Islands Zoning Plan) SISNERLING Sistem Terintegrasi Neraca Lingkungan dan Ekonomi (Indonesian System of Environmental-Eco- nomic Accounts) STO Sustainable Tourism Observatory SDGs Sustainable Development Goals WPP Wilayah Pengelolaan Perikanan (Fishery Management Area) YoY Year-on-Year 010 011 OCEANS FOR PROSPERITY OCEANS FOR PROSPERITY A False clownfish (Amphiprion ocellaris) swims among the tentacles of its colorful host anemone on a coral reef in Raja Am- pat, Indonesia. Photo: © shutterstock.com Executive Summary Oceans for 012 Prosperity 013 OCEANS FOR PROSPERITY OCEANS FOR PROSPERITY Executive Summary Oceans are vital for Indonesia’s economy and Human impacts are damaging Meanwhile, around one-third of Indonesia’s coral reefs are in poor condition according to recent surveys by the Indonesian Institute of Sciences (Lembaga Ilmu Pengetahuan social welfare. coral reefs; this is exacerbated Indonesia, LIPI) (LIPI 2020). The contributing factors include destructive fishing and pollution, including agricultural and urban runoff and waste plastics. The damage is by climate further exacerbated by climate change. Studies show that more than 80 percent of Oceans are With more than 17,500 islands, 108,000 kilometers of coastline, and three-quarters change Indonesia’s reefs are expected to experience coral bleaching in five out of ten years central to of its territory at sea2, oceans are central to Indonesia’s prosperity through economic throughout the 2030s (Burke et al. 2012). Indonesia’s activities, including capture fisheries and aquaculture, coastal tourism, marine con- prosperity struction, and transportation. Indonesia has the world’s second largest fishery sector Coastal Mangroves are similarly showing substantial losses. Indonesia is home to the largest worth around US$27 billion to GDP and providing 7 million jobs and over 50 percent development extent of mangroves in the world (totaling 3.31 million hectares, around 20 percent of the country’s animal-based protein needs. Oceans are a key asset for the country’s threatens of the world’s total), yet has some of the fastest rates of loss in the world (between tourism industry worth around US$21 billion to GDP in 2019 (marine and non-marine) critical habitats 6,200 and 52,000 hectares per year, varying by year and classification technique (WTTC 2020). In 2016, 44 percent of foreign visitors undertook marine and coastal such as used) (Goldberg et al. 2020; Murdiyarso et al. 2015). Clearing for aquaculture accounts (MAC) tourism activities as part of their visit (Ministry of Tourism 2016). mangroves for nearly half of mangrove removal, while clearing for oil palm contributes a further 16 percent (Richardson et al. 2018). Over 50 percent of mangroves are in a degraded There are Yet there is substantial opportunity to grow the long-term value of these sectors fur- condition (MMAF 2019; MoEF 2019). opportunities ther. Research suggests that improvements to fisheries management could increase to increase this the long-term value of production by over US$3 billion per year, relative to returns Marine and Important MAC tourism sites are impacted by basic infrastructure and services value under a scenario in which current practices continue and fish stocks decline (Costello coastal tourism deficiencies for residents. For example, in 2015, prior to its prioritization for tourism et al. 2016). Sustainable aquaculture could be expanded, prioritizing low-trophic level sites are development, Lombok’s tourism areas were characterized by low average household species, including seaweed. While the global tourism outlook is currently bleak amidst threatened by access to piped water supply (45 percent of households had access), sanitation (48 the COVID-19 pandemic, tourism has rebounded following past crises (although recov- inadequate percent), and solid waste collection services (26 percent). The resulting environmen- ery times and profiles vary) (World Bank 2020a). There are future opportunities for infrastructure tal pressure is compounded by growing visitors’ and businesses’ needs. The impact carbon payments in coastal ecosystems, particularly mangroves and seagrasses. and increased of these deficiencies on tourists’ perceptions can be seen in online reviews: topics of visitor numbers dissatisfaction expressed on TripAdvisor by tourists along Lombok’s southern coast Realizing these These economic opportunities are built upon a foundation of natural assets: man- included the poor state of local sanitation and noticeable pollution (Horwath 2017). opportunities groves, coral reefs, and seagrasses, among other valuable ecosystems. A 2017 study Early signs of environmental degradation can be seen at Komodo National Park, where will require estimated that Indonesia’s coral reefs underpinned tourism revenues of around the proportion of tourists encountering marine plastic debris increased from around healthy marine US$3.1 billion per year through the recreation activities they supported (e.g., diving 10 percent in 2009 to over 50 percent in 2017 (Harvey et al. 2018). and coastal and snorkeling) (Spalding et al. 2017). Reefs further support fishery revenues of some ecosystems US$2.9 billion per year by providing critical fish habitat (UN Environment 2018). Plastics litter More broadly, marine plastic debris impacts ecosystems, human health, and ocean Coastal infrastructure also relies on these ecosystems: coral reefs help Indonesia oceans and economy sectors, particularly fisheries, coastal tourism, and commercial shipping. avoid an estimated US$0.6 billion in flood damages annually (Beck et al. 2018), a value impose costs Recent estimates of the economic damage of plastic pollution exceed US$10.8 billion that will grow as coastal areas become more developed and climate change impacts on fisheries, annually in the Asia Pacific Region alone, including over US$450 million per year for In- become more severe. tourism, and donesia (APEC 2020). These estimates are direct costs only. Costs of remediation and ecosystems indirect damage to ecosystems, if known, would increase this estimate substantially. However, there are challenges to the extent In 2020, World Bank modelling using local data estimated that Indonesia contributes between 0.20 and 0.55 million tonnes of plastic to the oceans each year.4 and integrity of Indonesia’s marine and coastal ecosystems that, if not managed well, could Compounding these long-term challenges are undermine the potential of Indonesia’s ocean more immediate pressures from the COVID-19 economy. pandemic. Fisheries In 2017, 38 percent of the nation’s marine capture fisheries were estimated to be The economy The World Bank estimates that Indonesia’s real GDP shrank by 2.2 percent in 2020, the management overfished (with a further 44 percent fully fished),3 reducing returns, export earn- entered the first recession in two decades, and a stark contrast to pre-COVID-19 predictions of 5.0 is not yet ings, government revenues, and the wellbeing of coastal communities. While foreign first recession percent growth (World Bank 2020c). Without social assistance measures to mitigate optimized incursion into Indonesian waters has been effectively controlled by the Government of in two the shock, the pandemic could have led to an estimated poverty rate increase of 3.0 Indonesia (GoI), management of the domestic fleet remains in need of strengthening. decades due to percentage points, equal to an additional 8.5 million Indonesians falling below the Indonesia’s fleet comprises over 600,000 vessels, more than 90 percent of which are COVID-19 poverty line (World Bank 2020c). Poverty is likely to rise even with the GoI’s substantial small vessels (under 10 gross tonnes) collectively responsible for over half the total assistance measures, as unemployment hit its highest rate (7.1 percent) since 2011. catch (CEA 2018). Many are unregistered and unmonitored. Implementation of the Fisheries Management Area (Wilayah Pengelolaan Perikanan, WPP) system, a critical Oceans sectors The impact will be felt in all sectors of the economy. The global Fish Price Index institution to strengthen the governance of Indonesia’s fisheries, remains unfinished, are affected showed an 8.3 percent decline year-on-year (YoY) between January and May 2020, and coordination across level of government requires clarification of responsibilities. in a variety of with prices for select species in Indonesia falling by as much as 60 percent.5 Between adverse ways January and October of 2020, foreign visitor arrivals to Indonesia were down 72 per- 2 Statistics from reference data by the Coordinating Ministry of Maritime Affairs and Investment (CMMAI). 4 Forthcoming publication. 14 3 Marine and Fisheries Ministerial Decree 50/Kepmen-Kp/2017. 5 Based on early survey data by Rare Indonesia. 15 OCEANS FOR PROSPERITY cent YoY.6 Beach clean-up events are collecting increased quantities of pandemic-re- (4) a national The GoI launched the National Action Plan on Marine Debris in June 2017, with the lated medical waste. Such waste was reported to amount to 16 per cent of the total action plan for goal of reducing marine debris by 70 percent by 2025. Efforts to meet the goal include cing and Marunda river estuaries in Jakarta Bay in March and garbage floating in Cilin­ marine debris moving waste management infrastructure away from waterways, as seen in the Gov- April 2020 (Yang 2020). ernment’s Citarum Harum Program along the Citarum River. Other actions include re- cent Extended Producer Responsibility (EPR) legislation on consumer goods manufac- The Government The GoI responded by revising the 2020 State Budget to include around IDR 695 turers, which obliges firms to reduce their total waste by 30 percent by 2029.8 Taxes has responded trillion (US$49 billion) in support measures across the economy (World Bank and bans on single-use plastics are being enacted by provincial and city governments forcefully but 2020c). Key priorities included strengthening healthcare, expanding social protec- to discourage plastics consumption, including in Jakarta and Bali. its capacity tion, and supporting businesses. However, like all countries, the ability of Indonesia faces limits to respond faces financial limits. Budget adjustments were needed, constraining (5) an In 2018, the GoI launched the Integrated and Sustainable Tourism Development some pre-existing programs. The 2020 budget of the Ministry of Marine Affairs and integrated and Program (Program Pembangunan Pariwisata Terintegrasi dan Berkelanjutan, P3TB) to Fisheries (MMAF) was cut by almost 20 percent. For tourism, already announced sustainable bring a more holistic and inclusive approach to tourism development. The program infrastructure development budgets for priority destinations were maintained in tourism incorporates planning functions, support to businesses, community empowerment, 2020. However, local government budgets suffered. development and environmental and cultural asset management, along with investment in tour- program ism-relevant basic infrastructure and skills. The program focuses on a selection of ten Both long and short-term challenges can be priority tourism destinations, starting with Lombok, Borobudur-Yogyakarta-Pramba- nan and Lake Toba, and will in 2021 include Komodo National Park and Labuan Bajo, addressed through a blue economy strategy; such Bromo-Tengger-Semeru, and Wakatobi. Key to the program are integrated tourism a strategy is being pursued by the GoI through a master plans (ITMPs), which aim to develop destinations while avoiding degradation of the natural and cultural assets that attract visitors (MPWH 2020).9 range of initiatives. A blue economy A blue economy generates economic and social benefits while ensuring oceans’ long- Developing a blue economy will require substantial is a sustainable term environmental sustainability (World Bank 2017a). In other words, a blue economy investments and policy reform that build on these ocean economy is a sustainable ocean economy. It requires policymaking based on science and data, inter-sectoral coordination, and participation of diverse stakeholders in decision-mak- initiatives. The recommendations outlined in this ing. Investments in skills, institutions, infrastructure, and services are needed. These report include: investments, in turn, require new mechanisms for financing, along with better use of existing funding streams. Policies for improved management of oceans and coastal areas: Indonesia’s Oceans-led development and a transition towards a blue economy is a priority for Operationalize Indonesia’s WPP system and its supporting institutions are the basis for fishery blue economy the GoI. Specific goals aligned with blue economy principles are seen in the National Indonesia’s management. While development of the system is recognized as a national priority, initiatives Medium-Term Development Plan (Rencana Pembangunan Jangka Menengah Nasional, Fisheries key elements are yet to be finalized. WPP councils (Lembaga Pengelola Perikanan, LPP) include: RPJMN), the 2017 Oceans Policy, and a wide range of initiatives underway. One exam- Management require budgets, human resources, and a strengthened legal mandate. LPPs’ primary (1) improved ple is seen in the strong stance taken by the GoI against foreign illegal, unregulated, Area (WPP) management tool—fishery management plans (Rencana Pengelolaan Perikanan, RPP)— fisheries and unreported (IUU) fishing. While controversial in some respects, these efforts have system are awaiting inclusion of evidence-based harvest strategies. Roles and responsibilities management reduced pressure on fish stocks from foreign sources, creating a near-term opportuni- for fisheries management across levels of government (national, provincial, district) ty to rebuild key fisheries (Cabral et al. 2018). and stakeholders (government, private sector, civil society, academia) require further clarification, with management measures linked to LPP advice and decisions. (2) development Both central and provincial governments are working to enhance integrated and and integration sustainable use of coastal and marine ecosystems through marine spatial planning, a Ensure Indonesia has an opportunity to be a world-leader in marine and coastal spatial plan- of spatial plans tool for resolving oceans and coastal land use conflicts by delineating zones for specific compliance with ning, building on recent spatial plan development and implementation efforts. Com- uses through a participatory process. Most provinces have developed marine spatial spatial plans pliance with spatial plans will need to be ensured through integration of plans with plans for their waters (Rencana Zonasi Wilayah Perairan dan Pulau Pulau Kecil, RZ-WP3K), business permitting systems, notably issuance of business licenses. Longer-term, a and will integrate these plans with Indonesia’s broader (terrestrial and marine) spatial marine and coastal cadastre (a spatial title registry, identifying property rights over planning framework (Rencana Tata Ruang Wilayah, RTRW) in the coming years. specific areas, including aquaculture sites and tourism facilities) will be needed to complement these systems and help manage conflicts in the face of increasing de- (3) expansion The GoI has similarly made substantial progress in expanding marine protected areas mand for marine and coastal areas. of marine (MPAs) to over 23 million hectares (meeting the Aichi target7 of 20 million hectares), protected areas with a further goal of reaching 30 million hectares by 2030. Improving management of these areas is now a priority. To monitor progress, MMAF has been implementing a scorecard system (Evaluasi Efektivitas Pengelolaan Kawasan Konservasi Perairan, Pesisir dan Pulau-pulau Kecil, E-KKP3K) across MPAs to provide a rigorous and consistent means of tracking management effectiveness, and has recently developed an upgraded version with increased focus on socio-economic and environmental outcomes. 8 Ministry of Environment and Forestry Regulation No.75 of 2019 regarding Roadmap for Reduction of 6 World Bank staff calculations based on BPS data. Waste from Producers. 7 Aichi Target 11, of the Convention on Biological Diversity, is a call for countries to effectively conserve at 9 MPWH (2020). Integrated and Sustainable Tourism Development Program (http://p3tb.pu.go.id/in/ 16 least 10 percent of coastal and marine areas by 2020. main/home). 17 OCEANS FOR PROSPERITY OCEANS FOR PROSPERITY Expand use of Rights-based fisheries management—which has found considerable success inter- Financing, incentives, and investments: rights-based nationally— has potential for expansion in Indonesia. Under such systems, govern- approach in ments grant fishing privileges to firms or communities to a quantity of catch (within Invest in waste Improved basic services and infrastructure are needed to manage pollution and waste management an overall harvest limit), to a defined area, or to apply a defined level of fishing effort. management generation across Indonesia. The required investment for urban areas alone is esti- These privileges can be linked to the existing license system and be based on inputs infrastructure mated to exceed US$5 billion. Investment could be targeted at high priority areas for (e.g., fishing days), outputs (fish caught), as well as spatial zones. Adat communities10 and cost- marine debris reduction, such as coastal and riverside cities, and MAC tourism sites. can currently receive such privileges for use of defined spatial areas. However, refined effective More immediately, coastal clean-ups can be used to address plastics build-up, partic- legal mechanisms are now required to extend this system more widely, for example to coastal clean- ularly in those coastal areas with sensitive ecosystem and tourism values, and to raise include traditional and local communities.11 While such mechanisms have faced legal ups awareness of the issue. These clean-ups can draw on community support by working challenges previously, legally robust mechanisms for rights-based approaches are in partnership with schools and community groups, which can also help reduce costs. feasible for Indonesia (Waddell 2012). Improve For MAC destinations at risk of overcrowding, measures to manage the flow of visitors Extend the The GoI has set a commendable target for mangrove restoration — 600,000 hectares management of would be beneficial. These include: (1) use of tiered pricing with higher access fees for primary forest to be restored by 2025. If reached, this would represent a dramatic acceleration of visitor flow more fragile areas; (2) “congestion pricing,” whereby above-average entrance fees are conversion restoration efforts, with MoEF reporting that around 50,000 hectares of mangroves charged for certain tourist sites during peak demand periods; (3) minimum expendi- moratorium were restored or replanted between 2010 and 2016, an average of 7,000 hectares per ture thresholds for tourists; (4) technologies to control crowd flows such as scheduling to mangroves year. Yet rehabilitation costs are high relative to conservation measures that could apps that allocate visitors to specific time slots at key attractions; and (5) the devel- and include reduce mangrove loss in the first place. Indonesia has a moratorium on land conver- opment of alternative tourism attractions to divert and re-distribute visitors away mangroves in sion for Indonesia’s primary forests. This could be extended to mangroves that have from popular but environmentally-fragile attractions. Measures affecting pricing could the national similarly high ecological, carbon-sequestration, and economic values (Murdiyarso et al. be tiered by income or origin to ensure fair access for local tourists. REDD+ 2015). When reviewing its Nationally Determined Contribution (NDC), Indonesia could framework consider including mangroves in its land use emissions baseline to allow mangroves to Incentivize Taxes and bans on plastics could be expanded to increase the transition to alterna- generate emissions reductions payments in carbon-based schemes such as REDD+. waste- tive or reusable products. The 2020 approval by parliament of a Ministry of Finance Greater clarity around institutional responsibility for conserving and restoring man- minimizing (MOF) proposal to include certain plastics as excisable goods12 was an important step groves would help facilitate these actions. behaviors forward. Financial incentives could also be introduced to reduce plastic waste from marine activities, such as fishing gear losses or discards. Programs can build on the Systems for improved data and monitoring: experience of pilots in Papua and Java that paid fishers to collect discarded nets. Improve quality, Fisheries management plans and operationalization of harvest strategies rely on Extend producer EPR regulation would benefit from institutional strengthening for monitoring and integration and area- and species-specific data. Multiple sources of such data are already available. responsibility enforcement and could be expanded over time to support a transition to a circular use of fisheries However, they are not yet fully integrated within key databases or fully informing and circular economy. The regulation, passed in late 2019 and under implementation, could be data management. Improvement of landing surveys, including expanded geographic and economy complemented by other measures such as deposit-refund systems, standards and species coverage and refined analysis (e.g., use of indicator species instead of aggre- policies technical guidelines for recyclable materials, and minimum recycled content require- gated species groups) would be beneficial, along with accelerated rollout of e-monitor- ments in select products where technically and economically feasible. International ing and reporting systems. Continued integration within MMAF’s Pusat Data Statistik coordination around these measures would help to create a sufficiently large market dan Informasi (PUSDATIN) system will contribute to these needs. for the private sector to invest. Options for public procurement that prioritizes recy- cled materials could also be explored. Improve Improved data will also benefit tourism. Environmental impact monitoring systems monitoring of could be expanded at MAC destinations to detect problems and inform mitigation “Build back While recovery from the impacts of the COVID-19 pandemic will be the priority of tourism impacts measures. The GoI has encouraged the establishment of Sustainable Tourism Obser- better” from all governments over the short- and medium-term, there are opportunities to align in hotspots vatories (STOs) in priority destinations to monitor risks to natural and cultural assets the COVID-19 recovery efforts with the long-term needs of oceans sectors. Key management and identify growing pressure points, which could be expanded across popular MAC pandemic systems—such as ITMPs, spatial plans, and harvest strategies for fisheries—could destinations. In the short term, STOs already established can take advantage of the be further developed, tested, and implemented in a context of low demand and low COVID-19 period to monitor ecosystems in the absence of large tourist numbers, development pressure. As the recovery progresses, these systems would gradually setting useful baselines to later benchmark tourism impacts. become binding. Recovery packages could be structured to promote livelihoods and jobs while strengthening long-term coastal ecosystem resilience. These could include Improve Remaining gaps in ecosystems monitoring continue to hinder management decisions. labor-intensive coastal and marine conservation and restoration activities in hard-hit monitoring of Information on the basic status and trends in seagrasses, for example, is extremely lim- tourism-dependent communities, and livelihood diversification programs in fishing ecosystems and ited. Agreement on consistent methods and data formats for measurement and harmo- communities to reduce pressure on overexploited stocks and support transitions to spatial plan nizing coastal ecosystem datasets would help alleviate such challenges. Such efforts are more productive sectors. implementation being promoted by LIPI’s mangrove and coral reef health indices and would benefit from further support. Transparency over the implementation of spatial plans would benefit from a scorecard system with progress indicators, akin to the MPA scorecard system. Scorecard systems are most valuable if they go beyond measuring inputs and processes (such as regulations, management plans, and budgets) to also include ecological and social-economic impacts such as the extent of mangroves or quality of corals. 10 Adat communities are primarily indigenous, outlying island communities that follow customary rules regarding the utilization of land and resources. Adat has some formal recognition in the law. 11 Communities in coastal and small island areas are designated as adat law communities, traditional communities, or local communities (Law No.27/2007, as amended by Law No.1/2014, on Coastal and Small 12 Draft Presidential Decree on Plastic Bag Excise. The Parliament has requested an expansion of this 18 Islands Management). excise to other plastic products. 19 OCEANS FOR PROSPERITY OCEANS FOR PROSPERITY “The oceans, the seas, the bays, and the straits are the future of our civilization” – President Joko Widodo’s speech at his inauguration, October 20, 2014 The beautiful islands and colors around Fam Island, Raja Ampats, West Papua, Indonesia. Photo: © shutterstock. com 20 21 OCEANS FOR PROSPERITY OCEANS FOR PROSPERITY Summary of Policy Recommendations Themes Priority 8. Fisheries data: Assess and enhance statistical Medium- and Level Key systems for cost-efficiency and accuracy, ex- long-term priority Recommendation Government panding their geographical and fleet coverage MMAF, BPS, Agencies and refining species information (notably indi- Provinces cator species instead of species aggregates), and optimize use of technology (e-monitoring; Coordination and Planning e-reporting). Consolidate the existing multiple information systems within MMAF, including 1. Cross-sectoral coordination for oceans: Short-term within Pusat Data Statistik dan Informasi. Ensure Medium-Term National Develop- priority ment Plan (RPJMN) goals across oceans CMMAI, MMAF, sectors are aligned with Indonesia’s Bappenas, Oceans Policy, and strengthen processes Provinces 9. Fishery value-chain development: Concentrate Medium- and for stakeholder engagement and input. public investment in essential services and long-term priority infrastructure that supports and facilitates pri- MMAF, Provinces vate-sector operations and investment. Where 2. Integrated Tourism Master Plans: Complete and Short-term priority appropriate, pursue opportunities for blended implement integrated development plans for Bappenas, MPWH, public-private sector investment in essential priority tourism areas. MoTCE, MoT, ATR/ services and infrastructure such as ports, cold BPN, MoEF, MoHA, storages, and logistics hubs. Investment should MoEMR, MoSOE, be based on a value chain strategy that deter- MoF, MoH, MoCSME, mines market demand and access, stock status, MoMAF, MoM, and human resources and support services MoVDDRT, BKPM, availability before construction. Provinces, Districts/ Cities* 10. Linkages between licenses and performance: Long-term 3. Spatial plans: Complete integration of marine Short- and medi- Establish criteria to link the allocation of fishing priority and terrestrial spatial plans, ensuring the um-term priority licenses to socio-economic and environmental per- MMAF, Provinces participation of agencies with responsibility over CMMAI, MMAF, formance. For example, award preferential access coastal and marine management (particularly MoEF, ATR/BPN, to vessels or firms with performance track records MMAF) to ensure detailed technical knowledge is Provinces that best contribute to the fishery’s socio-eco- incorporated, and ensure that spatial plan infor- nomic and environmental objectives. mation is readily accessible by stakeholders. Sustainable and Productive Fisheries 11. Rights-based fishery management: Develop Long-term a legal framework that can define marine priority 4. Public spending efficiency: Undertake a public Short-term resources privileges and responsibilities, rules CMMAI, MMAF, expenditure review of the fisheries sector to priority for allocating privileges, and define institutions Bappenas, strengthen MMAF annual funding requests MMAF, Provinces, to grant privileges and enforce responsibilities. Provinces and work plans, and to identify opportunities MoF, Bappenas Under the framework, cooperatives, commu- to improve the alignment of expenditures with nities, or companies would be provided fishing sustainability and/or productivity objectives. privileges for specific stocks and/or areas, in the form of fishing effort (e.g., days-at-sea), catch quotas, or area rights. Privileges would be 5. Fisheries management institutions: Identify Short-term durable and would be revoked if social or envi- and define the full suite of roles and respon- priority ronmental responsibilities are not met. sibilities across levels of governments needed CMMAI, MMAF, to operationalize WPP management; update Bappenas, regulations and fully resource public institu- Provinces Sustainable Tourism** tions (with human resources and operational budgets), including implementing agencies and decision-making and advisory bodies (such as 12. Tourism impact monitoring: Establish Short-term Lembaga Pengolaan Perikanan, LPP) that can Sustainable Tourism Observatories in priority priority foster consultation in management. tourism development sites with environmental MTCE impact data made publicly available at frequent intervals. Use data collection during the current downturn in foreign tourist numbers to set 6. Fisheries management plans and harvest strat- Short- and baselines against which ecological impacts of egies: Accelerate development and implemen- medium-term tourism can be determined subsequently. tation of harvest control rules (including clearly priority defined limit and target reference points and in- MMAF, Provinces put/output control mechanisms) based on best available data and define specific management objectives in consultation with stakeholders. 13. Visitor flow management: Implement measures Medium-term to limit or manage the flow of visitors in MAC priority destinations that are either at risk of over- Bappenas, crowding or already showing signs of environ- MPWH, Provinces, 7. Fishing license allocations: Create incentives Medium- and mental degradation, such as electronic ticketing Districts/Cities for allocation of fishing access within agreed long-term priority and pricing systems to manage visitor flow at limits. Condition any additional responsibility MMAF, Provinces priority sites, including tiered pricing, conges- for allocating fishing access to provinces on tion pricing, and scheduling apps, or minimum achievement of specific management objectives. expenditure thresholds at high value sites. Disclose licenses and registrations publicly. 22 23 OCEANS FOR PROSPERITY OCEANS FOR PROSPERITY 14. Services for residents near tourist sites: In- Medium- and 20. Ecosystems data collection: Establish and Medium-term crease investment in basic infrastructure and long-term priority systematize long-term monitoring with defined priority public services such as water, sanitation, and MPWH, MTCE, sampling protocols for coral reefs, mangroves, MMAF, MoEF, LIPI, solid waste collection to manage environmen- CMMAI, Provinces and seagrasses that continues beyond any one Provinces tal degradation and provide for residents’ basic individual monitoring project. Complement needs around tourist sites. physical measures with economic valuation of key coastal ecosystems and include valuation data within the Indonesian System of Environ- mental-Economic Accounts (SISNERLING). 15. Systems approach to conservation financing: Long-term Develop a provincial (pilot) or national-level sys- priority tem for collection of visitor fees in high-visitation MTCE, MMAF, areas, with transfer of a proportion of revenues MoEF, Provinces 21. Mangrove deforestation moratorium: Expand Medium- and to support conservation areas that are unable the scope of license issuance moratorium in pri- long-term priority to generate their own revenues, while allowing mary forest and peatlands to include mangroves MoEF, MMAF, the site management to keep a proportion of and include mangroves in the national REDD+ Bappenas, revenues to incentivize performance. Additional framework to attract carbon financing. Provinces public funding will be needed to underpin conser- vation and management efforts at both revenue and non-revenue sites more broadly. 22. Coastal livelihoods and business support: Medium- and Coastal Management Promote diversified livelihoods and business long-term priority growth in coastal communities through busi- MPWH, MMAF, ness skills-building, access to finance programs, MOF, Provinces 16. Adaptive and monitored spatial plan imple- Short-term and investment in infrastructure and services. mentation: Develop a scorecard to monitor and priority Training and business promotion in activities evaluate spatial plan implementation (akin to MMAF, Provinces outside of fishing could support efforts to the MPA management effectiveness score- reduce pressure on marine or coastal resources. card, E-KKP3K) that moves beyond output Use existing social programs’ delivery systems and process indicators to also consider social, where possible for efficient rollout. economic, and environmental outcomes. Es- tablish a regular process for benchmarking plan implementation, adapting plans where needed, and incentivising accelerated implementation by sub-national governments. 23. Marine and coastal cadastre: Develop a cadas- Long-term tre, a spatial title registry identifying property priority rights over specific areas, including aquaculture MMAF, ATR/BPN, sites and tourism facilities, over marine and Provinces coastal areas, to support spatial planning. 17. Marine protected area (MPA) management: Short-term Invest in MPA management effectiveness, priority including human resource capacity; monitor- Marine plastics MMAF, MoEF, ing, control, and surveillance capacity; small Provinces infrastructure; and community engagement to accelerate progress against the E-KKP3K 24. Waste management services for priority areas: Short- and scorecard and, where appropriate, obtain certi- Invest in basic waste management systems medium-term fication and accreditation against international and services with an initial focus on those priority standards (e.g., IUCN Green List). areas identified as waste hotspots and tourism MPWH, CMMAI, areas, including locations close to major rivers Provinces and critical coastlines. Investments should be complemented through increased waste 18. Labor-intensive coastal works programs: Ex- Short-term management funding schemes (retribution) pand labor-intensive coastal and marine resto- priority for waste collection and disposal. This will ration activities, including mangrove restoration MPWH, MMAF, require strengthened technical guidance to city and coastal cleanups, to provide short-term MoEF, MOF, and district levels of government for design employment during the recession and long-term Provinces and implementation of funding mechanisms. resilience benefits. Retribution should support recycling and waste collection and disposal aimed at ensuring suffi- cient collected clean plastics for recycling and developing markets and supply-chains that use recycled materials. 19. National endowment fund for MPAs: Building on Medium-term experience at local and regional levels (such as that priority in the Bird’s Head Seascape, West Papua), facili- MMAF, MoEF, tate the establishment of a national conservation Bappenas, MOF, endowment fund to provide a sustainable flow of Provinces 25. Beach and shallow sea plastic clean-ups: Pilot Short- and financing for MPA management funded through and invest in cost-effective clean-ups of pollut- medium-term philanthropy, development assistance, private ed and priority beaches and shallow sea areas, priority sector contributions (domestic and international), with appropriate disposal of collected waste. CMMAI, MMAF, and public budget allocation. Support on-going community-organized clean- MoT, Provinces, up events. Citizen science and monitoring, or Districts/Cities data from STOs, can be used to help target clean-up activities and identify plastic products that are most polluting waterways and coasts. 24 25 OCEANS FOR PROSPERITY OCEANS FOR PROSPERITY 26. Sea-sourced waste reduction: Invest in harbor Short- and and port reception facilities that receive solid medium-term waste from ships, with a focus on fishing gear, priority complemented by a reporting, monitoring, and MPWH, CMMAI, incentive system to encourage collection, reuse, MMAF, MoT, MoEF, and recycling. Provinces 27. Single-use plastics: Introduce and scale Short- and cost-effective bans, excises, and other policies medium-term on single-use plastics (such as bags, food priority packaging, straws) on items for which alter- MoEF, CMMAI, MOF, natives are readily available and affordable in Provinces, Cities the short-term, and for other products in the medium term, supported by a transition plan for impacted sectors. 28. Extended Producer Responsibility (EPR): Short- and Support the implementation through institu- medium-term tional strengthening for monitoring and en- priority forcement of the 2019 EPR regulation, which MoEF, CMMAI, MoI, requires manufacturers to reduce waste Provinces produced and to manage post-consumer waste through reuse or recycling. Assess the suitability of additional incentive instruments under EPR, notably deposit-refund schemes and packaging fees. 29. Behavioral change campaigns: Use community Short- and activities to build support for policies and pro- medium-term grams that reduce plastics use, increase individ- priority ual behavior and awareness (e.g., recycling), and MoEF, CMMAI, reduce waste build-up in prominent locations. MPWH, Provinces, Districts/Cities 30. Design for circularity: Develop technical Medium- and standards to improve the quality of recycled long-term priority plastic, specifically food-grade plastics, and MPWH, CMMAI, reduce dependence on virgin material, with MoI, Provinces accompanying incentives. Assess the suitabil- ity of measures to support long-term shifts towards a circular economy, such as recycled material standards, minimum recycled con- tent requirements, and prioritizing recycled material in public procurement. Notes: MoEF = Ministry of Environment and Forestry, CMMAI = Coordinating Ministry of Maritime Affairs and Investment, MoI = Ministry of Industry, MPWH = Ministry of Public Works and Public Housing, MoT = Ministry of Tranport, MTCE = Ministry of Tourism and Creative Economy, Bappenas = Ministry of National Development and Planning, LIPI = Indonesian Institute of Sciences, ATR/BPN = Ministry of Agrarian Affairs and Spatial Planning/National Land Agency, BPS = National Statistics Agency, MoF = Ministry of Finance, MMAF = Ministry of Marine Affairs and Fisheries, MoHA = Ministry of Home Affairs, MoEMR = Ministry of Energy and Mineral Resources, MoSOE = Ministry of State-Owned Enterprises, MoVDDRT = Ministry of Villages, Development of Disadvantaged Regions, and Transmigration, MoH = Ministry of Health, MoCSME = Ministry of Cooperatives and Small and Medium-sized Enterprises, MoM = Ministry of Manpower, BKPM = Investment Coordinating Board. * This is based on the Bappenas decree on the National Coordination Team for Integrated and Sustainable Tourism (Surat Keputusan No. Kep.183/M.PPN/ HK/09/2019), dated September 25, 2019. This may change depending on the specific needs of the selected destinations. ** Sustainable tourism also requires skill development, firm support programs, community engagement, and cultural heritage management and protection, among other governance elements. However, this summary is limited to recommendations specific to MAC tourism sites. For more details, see P3TB (p3tb. pu.go.id/in/main/home). 26 27 OCEANS FOR PROSPERITY OCEANS FOR PROSPERITY Home and boats on the water. Photo: © Curt Carnemark/ World Bank 01. Introduction Oceans for 28 Prosperity 29 OCEANS FOR PROSPERITY OCEANS FOR PROSPERITY 01. Introduction This report This report begins with a discussion of the potential economic opportunities within details the two key ocean sectors—fisheries and marine and coastal tourism. The report then status of, and turns to the foundation of these sectors—healthy and productive marine and coastal rationale for, a ecosystems—and describes measures that can ensure their long-term vitality. An blue economy in-depth look at marine plastics pollution, a growing and severe threat to the devel- transition in opment of both sectors, is presented next with a description of key elements of an Indonesia… integrated blue economy strategy to conclude. Throughout, this report presents some of the latest data on Indonesia’s ocean sectors, opportunities for their development, and a synthesis of threats to their sustainability and productivity. …along with In doing so, the report aims to provide a policy pathway forward for a blue economy policy recom- transition in Indonesia. It does so within the context of the COVID-19 pandemic in which mendations that economic pressures on marine and coastal stakeholders have increased substantially. would support The report deliberately focuses on fisheries and marine and coastal tourism from among such a tran- the larger suite of oceans related activities. While other sectors make important con- sition within tributions to the blue economy (such as maritime transport and coastal construction), select sectors fisheries and marine and coastal tourism are among those most closely linked to the vitality of Indonesia’s ocean ecosystems and their sustainable management. Local fishermen Indo- Blue economy The pandemic crisis has impacted almost every aspect of the economy. The World nesia. Photo: © André Rodrigues Aquino sectors are Bank estimated that Indonesia’s real GDP shrank by 2.2 percent in 2020, the first re- threatened cession in two decades, and a stark turnaround compared to pre-COVID-19 estimates in the short of five percent growth (World Bank 2020c). May and June rounds of the World Bank term by the HiFy survey16 showed that 24 percent of respondents had stopped working. Of those Oceans are a critical part of Indonesia’s COVID-19 still working, income losses were widespread, with 84 percent of those in the trade, immediate and long-term response to the crisis… hotel, and restaurant sectors reporting lower incomes since the start of the crisis. While conditions improved later in the year, 5.1 million people became unemployed or COVID-19 crisis. exited the labor market in 2020. Without social assistance measures, the pandemic would have led to an estimated poverty rate increase of 3.0 percentage points, equal Oceans are vital With more than 17,500 islands, 108,000 kilometers of coastline, and three-quarters to an additional 8.5 million Indonesians falling below the poverty line (World Bank for Indonesia’s of its territory at sea,13 oceans are central to Indonesia’s prosperity. Indonesia’s oceans 2020c). Poverty is likely to rise even with substantial assistance measures. Even with economy and confer an unparalleled source of economic advantage that are estimated to support social assistance measures, substantial poverty impacts are being felt, with unem- welfare more than US$180 billion of economic activity annually (PENSEA 2018).14 Yet, the ployment hitting its highest rate (7.1 percent) since 2011. These impacts compound evidence presented in this report shows that Indonesia’s oceans have more to offer already elevated levels of poverty in coastal, oceans-dependent communities.17 when managed sustainably. Realizing this potential will deliver increased growth, jobs, food security, and reductions in the current account deficit; protect ecosystems for A reduction Lockdowns and recession have reduced demand for seafood and disrupted global present and future generations; and further Indonesia’s ambition of becoming a global in demand for supply chains (FAO 2020). Landing port facilities were closed in the initial months, “maritime nexus.” seafood leading to stockpiling of fish in cold storage. Exports to key markets (including China, USA, Europe) declined by as much as 70 percent, and high-value segments of the fresh Indonesia has A ‘blue economy’ strategy is a pathway towards these outcomes. A blue economy market (such as tuna) were affected by reductions in available air transportation. The committed to a is a sustainable oceans economy that generates economic and social benefits while global Fish Price Index declined by 8.3 percent year-on-year (YoY) between January ‘blue economy,’ ensuring long-term environmental sustainability (the very source of these benefits) and May 2020, while prices for select species in Indonesia fell by as much as 60 requiring policy (World Bank 2017a).15 A blue economy requires policymaking based on science and percent.18 While this improved affordability for consumers, large job losses and income reform and data, coordination across ocean sectors such as fisheries, tourism, and transporta- losses were reported on the supply side. The number of active fishers and fish traders investment tion, and participation of diverse stakeholders in decision-making. Investments in in South Sulawesi, for example, declined by more than 60 percent in the initial months skills and infrastructure are needed to add value to ocean resources. These invest- of the pandemic (Campbell et al. 2020). The fragmented nature of the small-scale ments and policies, in turn, require more efficient use of existing funding streams, and fisheries sector means that the full scale of impacts is not yet known. in some cases, new financing mechanisms. Indonesia has shown commitment to a blue economy strategy through its Oceans Policy of 2017, the Medium-Term National Development Plan (RPJMN), and other high-level commitments. 13 Statistics from reference data by the Coordinating Ministry of Maritime Affairs and Investment (CMMAI). 14 Based on 2015 data. Sectors comprising this total include fisheries, marine and coastal tourism, sea- based transport, energy and minerals, marine manufacturing (e.g., shipbuilding, salt production), marine and nearshore construction, and government oceans-related expenditure. 16 The World Bank is administering high-frequency (HiFy) monitoring of the socio-economic impacts of 15 The Blue Economy concept refers to the sustainable use of oceans resources for economic growth and COVID-19 on households. The HiFy is a telephone interview survey of about 4,000 panel households 27 improved livelihoods. It encompasses sectors such as fisheries and aquaculture, coastal and marine tourism, provinces every 3-8 weeks. and maritime transportation. The concept emphasizes the interconnection across sectoral activities given 17 The poverty rate in coastal villages is 1.3 times higher than in non-coastal villages, with average fisher their impact on oceans resources and calls for integrated management approaches, including marine spatial income below the minimum wage. See Cahagi and Gurning (2018). planning to manage trade-offs across sectors, multi-stakeholder consultations and improved data, natural 18 Based on early survey data by Rare Indonesia (unpublished). capital accounting to determine and communicate the value of natural resources, and ‘blue financing,’ public 19 Findings from the World Bank COVID-19 Business Pulse Survey in Indonesia. Round 1 (May-June 2020) 30 and private financing aimed to promote sustainable use of the oceans. and Round 2 (October 2020). 031 OCEANS FOR PROSPERITY OCEANS FOR PROSPERITY A dramatic Tourism has been one of the most heavily impacted sectors. Indonesia reported a 72 BOX 1 decline in percent YoY decrease in foreign arrivals for the between January and October 2020 coastal tourism (BPS 2020). A business pulse survey conducted by the World Bank in June 2020 found that 82 percent of Indonesian tourism firms faced a sales drop, with an average High-return Options for Blue Economic Stimulus drop in YoY monthly sales of 57 percent. Compared to June 2020, tourism firms’ financial situation in October 2020 was slightly better, but 71 percent of firms were T still experiencing a drop in sales.19 Considerably more tourism firms were receiving as- he global High-Level Panel for Sustainable Oceans (Northrop et al. 2020) proposed five high-priority areas for sistance from government programs in October (46 percent) than in June (6 percent). blue stimulus spending in response to the COVID-19 crisis based on quantified costs and benefits of each op- The COVID-19 crisis has had a significant impact on all tourism destinations, including tion. While the recommendations are based on global data, and thus need to be confirmed and substantially coastal locations such as Bali, Lombok, Labuan Bajo and Komodo National Park, Raja calibrated with data on Indonesia’s circumstances, they provide indications of investment areas where high social, Ampat National Park, and Wakatobi National Park, where residents and local business environmental, and economic returns are being found globally: rely heavily on tourism. Stimulus Priority Expected Impacts Supporting Government Actions Uptake in Evidence from around the world and Indonesia point to a significant increase in the plastics use, use of plastics during the pandemic, notably of personal protective equipment (Peszko and… 2020). Beach clean-up events have collected increased quantities of masks, gloves, Restoration and preservation of coastal Short- and medium-term job stimulus; ongoing Public funding for restoration projects, policy, and and plastic gowns, with medical waste reported to amount to 16 percent of the total and marine ecosystems flood and storm protection, water quality, carbon regulatory reform to ensure protection of existing sequestration, fisheries sustainability, productivity. ecosystems. garbage in the Cilincing and Marunda river estuaries of the Jakarta Bay in March and April of 2020 (Yang 2020). The surge of online purchases during the pandemic has further contributed to increased waste, with large amounts of plastic packaging used Wastewater and sewerage infrastructure Short- and medium-term job stimulus; ongoing Public funding for infrastructure development and for coastal communities water-borne disease prevention, water security, repairs, investments in systems and institutions for in shipped products, along with consumption of take-out food. These add to an already coastal water pollution control, amenity for tourism. ongoing maintenance and management. significant flow of plastics into Indonesia’s oceans, explored in detail in Chapter 5. Sustainable marine aquaculture (maricul- Medium-term jobs; diversified economic produc- Funding for feasibility studies, financing (grants and Oceans There is also a risk that oceans management and investment outcomes could be ture) focused on low trophic-level species tion (including seafood, poultry grit, industrial micro-loans), extension services. management compromised by pandemic-related cuts in government budgets. The MMAF budget e.g., shellfish and seaweed farming with feedstocks, and biofuels), food security, carbon curtailed for 2020 was reduced by almost 20 percent in 2020. While the Ministry has worked minimal external feed needs sequestration, water quality improvements. by budget to maintain core functions, including monitoring and enforcement to deter illegal constraints fishing (Gokkon 2020), broader oceans activities such as data collection and invest- Zero and low-emission marine transport Medium- and long-term jobs; ongoing health Upgrading or replacing of vessels, public investment ment in management systems could face constraints. There have been some reports benefits for people living near ports and on vessels, in facilitating ports infrastructure. carbon emission reductions. of increased illegal fishing in response to expectations of reduced enforcement, as well as economic pressures. Bomb fishing, for example, has been reported in Raja Ampat regency, West Papua, during the crisis, risking damage to one of the world’s Ocean-based renewable energy Medium- and long-term jobs; energy security, car- Mapping potential, simplifying permitting, aligning bon emission reductions. with spatial plans, setting of national targets, most valued reef ecosystems (Suryana 2020). The extent of the problem remains financing to stimulate private sector investment. uncertain. Local government expenditure on tourism-related services fell in line with budget shortfalls, although GoI infrastructure development budgets for priority des- tinations were maintained. Regardless of the investment areas chosen, stimulus and longer-term measures will require substantial public financing, which comes in the context of a challenging fiscal environment. In 2020, the GoI undertook revenue, expenditure, and financ- The Government The GoI has responded with measures to protect fishers’ health (including promoting ing measures in response to the COVID-19 crisis amounting to IDR 695 trillion (US$49 billion) (World Bank 2020c). Govern- acted quickly protective health measures in ports, processing plants, and on vessels), increased cash ment estimates show the deficit increasing by more than three-fold to 6.3 percent of GDP in 2020 before narrowing over to address transfers to fishers and to aquaculture and salt producers, intervened directly in the subsequent years as revenues recover and stimulus spending is withdrawn. immediate market by buying, stocking, and distributing seafood to maintain prices, promoted COVID-19 e-trade platforms to stimulate market demand, and worked with the private sector to In the medium to long term, widening the revenue base in a sustainable and inclusive manner will be an important part of impacts, and increase cold storage capacity. More broadly, the GoI provided a IDR 695 trillion (US$49 fiscal recovery, and necessary for making sustained public investment in critical sectors. Even prior to the crisis, government can enhance billion) relief package concentrated on strengthening health care, expanding social pro- revenue collection in Indonesia as a proportion of GDP was among the lowest of East Asian economies. More progressive recovery tection, and supporting businesses. Building on these short-term responses, long-term taxation of income, a broader tax base, and improved tax compliance, along with further reform of the remaining regressive through three measures for recovery could consider prioritizing three areas: (1) strengthening marine energy subsidies, will be needed. These measures could be supported by green taxes such as an adjustable fuel excise, a sin- priorities and coastal planning and management; (2) incentivizing “blue” businesses and jobs for gle-use plastic excise, and potential taxes on virgin plastics, with simultaneous benefits for the environment (see Chapter 5). growth and to reduce pressure on natural resources; and (3) supporting labor-intensive coastal and marine resources conservation and restoration activities. Source: World Bank. 32 33 OCEANS FOR PROSPERITY OCEANS FOR PROSPERITY (1) Improve The economic slowdown induced by the pandemic provides “breathing space” for development Indonesia to strengthen implementation of its Integrated Tourism Master Plans (ITMPs) planning and (explored in Chapter 3) and spatial planning system (explored in Chapter 4). Systems management can be developed, tested, and strengthened while demand for coastal development is of coastal lower than usual. Similarly, mechanisms to guide future fishing effort, including harvest and marine strategies, can be implemented with relatively limited impact on fishing activities, which resources are currently reduced. As effort levels increase after the pandemic in line with strength- ening demand, these systems will increasingly become binding. Currently depressed development and natural resources pressures thus provide an opportunity to accelerate management strengthening without immediately imposing on stakeholders. (2) Promote a Recovery packages could promote diversified livelihoods in coastal communities and do ‘blue’ recovery so in ways that improve sustainability (“bluing the recovery”). There are opportunities for business and to support transitions away from marginal fishing livelihoods towards activities with jobs greater added value and lower resource dependency. Facilitating the move towards live- lihood diversification will include skills-building, increasing access to finance, improving infrastructure and services, and efforts to address market barriers. Skill-building can increase employability as the recovery progresses, making beneficiaries more resilient to shocks in the long term. Expanded use of conditional cash transfers and training in ac- tivities outside of fishing could support efforts to reduce pressure on marine or coastal resources. These efforts could use the delivery systems of existing programs such as the Village Fund Program or Program Keluarga Harapan for relatively efficient rollout. (3) Support Conservation and restoration of degraded coastal areas using techniques sensitive to labor-intensive local ecology and other tourism-relevant basic infrastructure development can gen- coastal erate income to local communities while strengthening the resilience of coastal areas. and marine This principle has been recently applied in South Sumatra with a mangrove planting restoration works program implemented in three villages to support economic recovery from the pandemic (Rosana 2020). Similar benefits have been demonstrated elsewhere with earlier pilots in northern Java reporting income generation and reduced coastal erosion through restoration of areas earlier converted to shrimp ponds. These activities could be substantially scaled up in line with the Government’s mangrove restoration targets. Another opportunity is the promotion of coastal and estuary clean-up actions in places with high plastic build-up. While valuable, these are relatively short-term interventions. Long-term support via management improvements (i.e., mangrove conservation and marine debris reduction at the source) should be used to complement these efforts. Policy Looking beyond COVID-19 and the immediate recovery period, the transition to a blue coordination, economy will require investments and concerted reforms over the years to come. efficient Overarching needs include strengthened coordination between ministries, levels of financing, and a government, and stakeholders to avoid policy and investment incoherence. Making more sound evidence- efficient and impactful use of existing government funding, and potentially raising new base support sources of capital (blue finance), will be increasingly important. The transition will also both COVID-19 require quality and timely data as the basis for effective and adaptative marine and recovery and coastal management, and investments in research and development. While recovery long-term from the impacts of COVID-19 will be the priority of all governments over the short to reform needs medium term, efforts in these areas are aligned with both the recovery and the long- term needs of oceans sectors. These long-term needs, and associated recommenda- tions, are the focus of the remainder of this report. 34 35 OCEANS FOR PROSPERITY OCEANS FOR PROSPERITY Daily catch of fish. Indonesia. Photo: © Curt Carnemark/ World Bank 02. A Sustainable Oceans for 36 Fisheries Future Prosperity 37 OCEANS FOR PROSPERITY OCEANS FOR PROSPERITY 02. A Sustainable Fisheries Future Indonesia can gain more from its marine capture highly dependent on fisheries, and often experience a rise in conflict and an erosion of food security and incomes when impacted by overfishing (Pomeroy et al. 2007; fisheries sector through improved management. Muawanah et al. 2012). These problems compound already elevated levels of poverty found within the small-scale fishery sector with the national average fisher income below the minimum wage (Cahagi and Gurning 2018). As the world’s Indonesia is second only to China as the world’s largest fishing nation with an annual second largest harvest of more than 6.1 million tonnes of marine fish (Figure 1). Marine capture fish- This reduces Avoidance of overfishing is also critical to ensure returns on value-chain investments fish producer, eries and aquaculture together are a crucial source of employment, providing around return on by both governments and business, and to ensure confidence among private sector fisheries play 7 million jobs.20 Fish contribute 52 percent of all animal-based protein in the national investment investors. A range of important fisheries investments are underway in Indonesia, a critical role diet, well above the global average of 16 percent. In 2018, the sector contributed and business including development of new traceability systems, cold storage facilities, and ports.22 for Indonesia’s over US$26.9 billion to the national economy (around 2.6 percent of GDP), a larger confidence These facilities have the potential to increase returns to fishers by improving market economy proportion than that seen in regional peers (Figure 2). In 2018, fisheries contributed access and reducing waste, and will help increase the number of skilled jobs along the export earnings worth over US$4.8 billion, supplying 3 percent of the global market value chain. However, it is only with long-term stock sustainability that financial re- for exported seafood (BPS 2019). turns to these value-chain investments can be ensured. In the absence of steady and effective resources management, capital outlays risk underuse in the face of dimin- Despite current Yet, there are risks facing the long-term social and economic value of Indonesia’s cap- ished raw fish supply with investor confidence undermined. high production, ture fisheries. Fisheries are natural assets that, if managed well, provide a steady flow long-term of economic returns. Harvesting above biological limits undermines long-term returns Indonesia’s Past overfishing has occurred both due to activities of foreign vessels and challenges growth is not by shrinking the size of fish stocks and reducing their yield, lowering the benefits—food, stance on illegal of managing Indonesia’s large and varied domestic fleet. The GoI has taken action to assured jobs, or income—derived across generations. This pattern is seen in many countries: fishing by address the former challenge, with MMAF seizing, destroying, or repurposing over 530 capture fisheries production globally has plateaued and is now likely in decline and foreign vessels illegal vessels between 2014 and 2019 as part of a high-profile deterrence campaign. economic returns are well below optimal (FAO 2018b; Pauly and Zeller 2016; World Bank has shown While controversial, analysis suggests that these efforts led to a 25-40 percent 2017). While Indonesia’s annual harvest continues to rise slowly, management practices success reduction in the total pressure on fish stocks within Indonesia’s waters (Cabral et al. are not yet in place for the best long-term returns. Earlier published analysis suggests 2018). This has reduced economic losses from illegal fishing and created a near-term that improvements to capture fisheries management could increase the long-term value opportunity to rebuild key fisheries. of production by over US$3 billion per year, relative to a scenario in which current prac- tices continue and fishery stocks and returns decline (Costello et al. 2016). Yet challenges Yet, management of the domestic fleet remains immensely challenging. Indonesia’s remain for fleet comprises over 600,000 vessels, with small vessels (less than 10 gross tonnes), Figure 1: Indonesia is the world’s second largest marine Figure 2: Indonesia Derives a Larger Proportion of GDP from management of accounting for more than 90 percent of the fleet and around half the total catch (CEA capture fish producing nation Fisheries than Other Countries in the Region the domestic 2018).23 The gears used and the species caught vary widely. Fish stocks and vessels 2015-18 avg. annual production, million metric tonnes Fisheries sector as a percent of total GDP fleet cross jurisdictions, and different classes of vessels fall under the responsibility of different levels of government. Small vessels are exempt from licensing and often go unregistered and unmonitored. While under the jurisdiction of provinces, they some- times operate beyond provincial waters. Coordination across provinces and between levels of governments will require clarification of responsibilities, and robust harvest strategies and control rules are still needed for most fisheries. As a result of these issues and others, Indonesia in 2017 was ranked 22nd out of the largest 28 marine fishing nations for fisheries management effectiveness – the degree to which manage- ment objectives are achieved via research, management systems, and enforcement.24 Domestic Improving management of the domestic fleet would help lock in the benefits of Indo- reforms would nesia’s eviction of foreign fishing vessels from their waters. The alternative could be a complement potentially costly loss of value, as experienced in other countries. The United States Indonesia’s brought foreign fishing to a halt in 1976 through the Magnuson–Stevens Act. Yet, subse- efforts to deter quent increases in domestic fleet capacity undermined these gains, necessitating painful foreign fishing restrictions that continue to inflict hardship to this day (Pew 2011). Closer to home, the Source: FAO 2019 Sources and note: China, Indonesia, and Thailand (2016) from CIEC 2019; Philippines experienced increasing domestic fishing pressure over 70 years from 20,000 Philippines and Malaysia (2015) from SEAFDEC 2019. small-scale vessels in 1948 to over 250,000 in 2018. The catch per unit of effort declined dramatically, undermining returns. For example, by 2003, the Lingayen Gulf (a major fish- Many of Realizing this value will require fisheries management that maintain stocks at their ing ground) had a catch rate just one fifth of that 15 years prior (Green 2003). Improved Indonesia’s optimum levels. In 2017, data from the National Commission on Stock Assessments domestic fleet management—maintaining harvests within safe limits—is necessary to fish stocks are showed that 38 percent of the nation’s capture fisheries were overfished, indicating avoid such outcomes, and to lock in the benefits for Indonesia. depleted due that biomass had been depleted and current and future yields undermined. A further to historical 44 percent of stocks were fully fished.21 Depleted stocks imply lower returns for the and ongoing commercial sector, along with reduced export earnings and government revenues. overfishing Depletion further risks the wellbeing of Indonesia’s coastal communities, which are 22 Policy initiatives include incentives for private sector investment in refrigeration facilities, establishment of decentralized export hubs, and continued growth in the marine protected area network. The GoI is pro- moting exports by investing to improve product quality, marketing, and supply chain management. 20 Wild-capture fisheries and aquaculture sectors employ approximately 2.7 million and 3.3 million workers, 23 Law 7/2016 on the Protection and Empowerment of Fishermen, Fish Raisers and Salt Farmers defines respectively, in addition to over 1 million workers in the processing and marketing of fisheries products. See small-scale fishers as those who catch fish for daily needs, without or with vessels smaller than 10 gross CEA (2018). tonnes. 21 Marine and Fisheries Ministerial Decree 50/Kepmen-Kp/2017 reports on estimates of the potential, total 24 These 28 countries together account for 80 percent of the total global catch. See Melnychuk et al. 38 allowable catch, and level of utilization by fisheries management area. (2016). 39 OCEANS FOR PROSPERITY OCEANS FOR PROSPERITY Four areas Four broad categories of reforms are key. The first and most fundamental is completing (3) Use fishing Third, Indonesia could further explore options for rights-based fisheries management, of reform Indonesia’s fisheries management structure. Recognizing the challenges of coordination rights to an approach that underpins many of the most successful fisheries internationally. can prevent across provincial boundaries, in 2014 the GoI launched the system of Wilayah Pengelolaan strengthen For small vessels and in-shore areas, this could take the form of area-based fishing overfishing Perikanan (WPP) or Fisheries Management Areas.25 Each WPP contains multiple provin- management privileges. Local communities would receive a permit defining privileged resource use and increase cial governments, plus industry and community stakeholders. These groups are repre- and access, and, in return, would undertake long-term sustainable management in returns: sented at a WPP council (Lembaga Pengelola Perikanan, LPP), responsible for advising de- accordance with the permit’s conditions. The privilege allows the community to control (1) cision-making within that WPP. While the system is recognized as a national priority, the access for long enough to realize the benefits from improve management and must be operationalize LPPs do not yet have a dedicated budget for their operation and in most cases lack staff, legally recognized and defensible. Rights-based approaches could also be used for larger Fisheries offices, and equipment. In addition, each fishery requires definition of its management vessels off-shore through the granting of a permit to companies or fishing associations Management objectives, as well as the measures to achieve the objectives agreed. These might include for a specific quantity of harvest within an overall harvest limit for the fishery, or for Areas (WPPs) … allocation of rights (explored further below), technical measures such as gear design a permitted quantity of fishing effort units such as number of vessels or days spent and use, spatial, seasonal and species restrictions, and enforcement and adjustment fishing.27 To operationalize rights-based management, legal clarification is required to protocols. These would be codified in the councils’ primary management tool – fisheries define privileges in a way which avoids legal challenges28 and mandates a responsible management plans (Rencana Pengelolaan Perikanan, or RPPs) which have not yet been institution for defining and granting those privileges. drafted for all managed stocks and remain short of actual management measures. …and (4) align Fourth, the fisheries sector benefits from public financing for infrastructure construc- Figure 3: Indonesia’s Fishery Management Area System Comprises Eleven Zones financial tion, support services, rural development grants, fuel subsidies, vessel provision, and Based on Approximate Ecological Areas incentives with monitoring, control, and surveillance (MCS) activities. While public investment and Marked cities indicate fishery management council office locations Blue Economy support for the sector is undoubtedly vital, not all forms of support are equal. In 2018, goals…. capacity-enhancing transfers to the fisheries sector included an estimated US$140 million in fuel subsidies and US$66.7 million for boat construction and renovation (Su- maila et al. 2019). In the absence of strong management, such forms of support elevate pressure on stocks and increase competition between vessels, contributing to long- term cost increases and reduced returns. Other elements of public expenditure clearly support sustainability and productivity, including investments in MPAs (US$41 million), management activities (US$210 million), and fisheries research (US$56 million). … through Redirection of some capacity-enhancing transfers could allow increased expenditure efficient public on these priorities, as well as allow for increased livelihoods support measures. OECD expenditure and analysis suggests that payments that support efficient business operations and skills policy design development deliver higher benefits to fishers relative to financial assistance for fishing inputs (OECD 2019). A public expenditure review could be used to inform better alignment of expenditures with sustainability and productivity objectives. Additionally, incentives that run counter to blue economy goals lie hidden in some regulations. Un- derreporting of harvests, for example, is encouraged by the taxation of catch volumes, while size-based licensing encourages vessel-size underreporting. Linking future rights Source: World Bank using MMAF data. allocation to track record (e.g., reported catch, fishing days, or size of vessel) could help disincentivize such misreporting. Such incentive measures would be complemented by (2) improve Second, increased investment in research, monitoring, and reporting would help to in- public disclosure of rigorously monitored performance and subsequent allocations. quality, form fisheries management through area-specific and species-specific stock assess- integration and ments and definition of target reference points for the harvest strategies. Indonesia Strategic public Indonesia’s fishery sector could benefit from further value-chain investments, such as use of fisheries has strong fishery research and monitoring capacity and multiple sources of data are and private docks, cold-storage, processing facilities, and equipment. Such investments increase data for already available – including those from industry logbooks, onboard observers, vessel value-chain prices received and thus the financial margins for fishers and fish-workers. A recent evidence-based monitoring systems, and MMAF’s port sampling efforts. However, these data are not investment systematic review of experience globally found that investments of these types led to management yet fully integrated and informing management. While MMAF is making progress on can improve increases in fish product price by 24-48 percent on average. The optimal role of govern- integration of the varied sources of data through Pusat Data Statistik dan Informasi margins… ment in value-chain investments should be selective and strategic, focused on providing (PUSDATIN),26 the system does not yet contain the detailed data that is required essential services and infrastructure that in turn supports and facilitates private-sector for stock assessments, even though some of this data is already being collected by investment. At times, this could include blended public-private sector investment in es- MMAF’s Research Directorate. Improvements in landing surveys, including expanded sential services and infrastructure such as ports, cold storage, and logistics hubs. In all geographic and species coverage, and refined analysis (for example, use of indicator cases, public investment should be based on analysis that determines market demand species instead of aggregated species groups) would be beneficial. Other areas ready and access, stock status, human resources, and the availability of supporting services for expansion include technologies for e-monitoring, e-reporting, and e-catch docu- as a starting point, and proceeds when there is a clear business case. mentation. These are being pursued by MMAF including through the e-logbook pro- 27 These are output and input-based rights respectively. Output-based rights regulate catch directly, while gram — an app-based real-time self-reporting data collection system for both large input-based rights regulate fishing capacity (e.g., number and size of vessels or number of gears) or effort and small vessels. Upscaled rollout coordinated with data integration efforts would (e.g., fishing days). 28 Within existing regulations, the granting of such a privilege is only possible to the adat community, and support these data and analytics needs. only providing that their adat practices have been registered and acknowledged by the head of the district or city government. Following a 2011 Constitutional Court challenge, there is not an established legal basis 25 Marine and Fisheries Ministerial Decree 18/PERMEN-KP/2014 defines the structure of and for the granting of fishing privileges to traditional and local communities. A revised legal mechanism – that roles within the fisheries management area system. (http://jdih.kkp.go.id/peraturan/18-per- maintains a higher degree of government control, protects existing rights of communities, and works for a men-kp-2014-ttg-wilayah-pengelolaan-perikanan-negara-republik-indonesia.pdf) broader public good benefit – is required and while not simple, is in principle feasible. See Waddell (2012). 26 This “One data” initiative aims to harmonize data, designate collection responsibilities, and increase public 40 access to information (https://kkp.go.id/setjen/satudata). 41 OCEANS FOR PROSPERITY … but must be Improved management is a critical complement to these value-chain investments. BOX 2 complemented A stable regulatory environment—including clearly defined fishery objectives and by management reforms management plans—is necessary to facilitate private-sector investment and business confidence. More directly, management measures are required to ensure long-term Aquaculture: A Key Driver of the Blue Economy returns to value-chain investments. In their absence, the margin increases caused I by value-chain investments risk incentivizing greater fishing effort, placing pressure ndonesia’s aquaculture sector is amongst the fastest there is potential for further aquaculture growth. The on stocks, and eventually diminishing harvests. Revenue derived from the initial growing in the world. While marine capture fisheries GoI has set ambitious targets for aquaculture expan- investment in these circumstances is undermined by the investments’ own success, production grew by 34 percent over the last decade, sion. However, much of the area suitable for aquaculture leaving fishers no better off and the returns on capital dissipated (Figure 4). By cor- from 5.0 million tonnes in 2010 to around 6.7 million contains ecologically sensitive mangrove and coral reef ollary, management measures can lock in the benefits of value-chain investments by in 2018, Indonesia’s aquaculture production more than habitats. With these habitats having high biodiversity ensuring that there is a steady supply of fish to benefit from the improved margins. doubled (>+100 percent) over the same period, from 2.4 value, contributing to climate change resilience, and pro- This complementarity may also help alleviate some of the transition costs of manage- million to 5.4 million tonnes, with around 3.3 million viding critical ecosystem services that underpin fishery, ment. In cases where overfishing is occurring and thus effort must be reduced, income people directly employed. Of the total aquaculture pro- tourism, and other economic sectors (see Chapter 5), support measures are required to compensate affected fishers and firms. Well-timed duction, around 43 percent is from the rapidly growing aquaculture expansion must be based on sound spatial value-chain investments can provide some of this support, along with direct transfers. marine aquaculture sector, worth over US$6 billion per planning. year. The growth of Indonesia’s seaweed cultivation is Figure 4: Management Measures and Value-Chain Investments are Highly Complementary even more dramatic, increasing from less than 4 million The environmental impacts of aquaculture (such as Stylized depiction of interactions between management measures (green) and value-chain investments (red) tonnes in 2010 to 9.3 million in 2018 (>+130 percent), those caused by inappropriate use of feed and antibi- and accounting for nearly 30 percent of global produc- otics, deforestation, introduction of exotic species, and tion (FAO 2020b). By value, the most important aquacul- biohazards) must also be anticipated and managed. ture product is shrimp, which contributed US$1.7 billion Low-trophic marine species (i.e., those less reliant on to export earnings in 2018. external feeds, including shellfish and seaweed) offer strong potential for economic returns and have relative- With strong demand for fish products expected to con- ly lower environmental impacts. tinue, and in the face of declining wild capture globally, Sources: Qualitative findings based on research by World Bank, University of California Santa Barbara, University of Hawaii, and MMAF. Notes: Ongoing analysis aims to quantify the size of these impacts for major Indonesian fisheries. …and underpin A well-managed fisheries sector can also contribute more to long-term public rev- efforts to enues. The sector currently contributes non-tax state revenue (Penerimaan Negara increase Bukan Pajak, PNBP) in the form of commercial levies. Fisheries’ PNBP contribution is fisheries’ fiscal small relative to other resources sectors such as forestry and mining, representing contribution only 0.17 percent of total PNPB in 2017. Tax revenue is similarly low: US$80.2 million was collected in 2017 from around 4,000 listed taxpayers. Between 2011 and 2016, the fisheries sector’s ratio of tax-to-GDP contribution of 0.26 percent was well below the national cross-sector average of 11 percent (CEA 2018). Adjustments to taxation arrangements could increase revenues. Importantly, targeting revenue formulas towards value-addition and output, rather than fishing inputs, could help incentivize value instead of fishing effort – benefiting stocks and yields long term. Well-managed fisheries with healthy stocks and high yields are integral to an increased fiscal contri- bution, as they are for broader social and economic returns for Indonesia. 29 Ongoing research by University of California Santa Barbara, University of Hawaii, and World Bank staff. 30 Non-tax state revenue includes commercial fisheries charges (Pungutan Pengusahaan Perikanan) based on vessel licenses and the type of fishing gear used, and fishery levies (Pungutan Hasil Perikanan), which are more like royalties, calculated as a function of production, boat size, and fish price. 31 This is the subject of work underway by the Fiscal Policy Agency of the Ministry of Finance in partnership 42 with the World Bank. 43 OCEANS FOR PROSPERITY OCEANS FOR PROSPERITY Turquoise water beach from top view at Nusa Penida island, Indonesia. Photo: © shutterstock.com 03. Realizing Indonesia’s Oceans for 44 Ocean Tourism Potential Prosperity 45 OCEANS FOR PROSPERITY OCEANS FOR PROSPERITY 03. Realizing Indonesia’s Ocean Tourism Potential To be a leading tourism destination, Indonesia degradation of MAC assets development), Lombok’s tourist areas were characterized by low household access to piped water supply (45 percent of households had access), sanitation (48 percent), must ensure that its marine and coastal assets and solid waste collection services (26 percent). In most of Lombok’s key tourism are managed sustainably. areas, 95 percent of projected basic infrastructure gaps were linked to household needs, with the remainder covering growing visitor and business needs (Horwath 2017).36 The impact of these deficiencies on tourist perception can be seen in online reviews: Topics of dissatisfaction expressed on TripAdvisor by users of beaches along Globally, marine Marine and coastal (MAC) tourism32 represented around 26 percent of ocean-related Lombok’s southern coast included the poor state of local sanitation and noticeable and coastal value-added globally according to OECD in 2016 (OECD 2016). Up until the COVID-19 marine and coastal pollution.37 These pressures—and the potential for visitor dissat- tourism was a outbreak, tourism demand was booming globally, especially from China, creating isfaction—are likely to grow as tourist arrivals increase (Figure 5). fast-growing significant opportunities for destinations in Southeast Asia. International tourism ar- segment of rivals (overnight visitors) grew with an annual average of 5 percent between 2009 and If not managed, More visitors adds more pressure on fragile on-shore and off-shore ecosystems, in- the ocean 2019 to around 1.5 billion arrivals worldwide in 2019. Amidst the COVID-19 pandemic, rapid MAC creased consumption of energy and water, and increased waste production (Box 3). If economy prior however, global tourism has come to a standstill. While the World Tourism Organiza- tourism growth not well-managed, this visitor traffic and associated pollution will strain local infra- to the COVID-19 tion expects international tourism to rebound in the second half of 2021, with domes- will exacerbate structure and public services, contribute to increased waste, nutrient, and sediment pandemic. tic tourism expected to resume first, the timing, scale, and nature of the recovery is environmental runoff into coastal and marine ecosystems, and lead to land use change and loss of uncertain. It is estimated that a return to 2019 levels in terms of international arrivals pressures natural amenity. could take 2½ to 4 years (UNWTO 2020). MAC tourism is Following recovery, Indonesia will be well-positioned to capture a large share of this BOX 3 already a key growth. With more than 17,000 islands, one of the world’s longest coastlines, the driver of visitor growth world’s highest coral diversity, and spectacular seascapes, Indonesia’s MAC tourism potential is promising. MAC tourism is already a substantial proportion of the overall Komodo National Park tourism sector with around 44 percent of foreign visitors undertaking at least some K marine tourism activities during their visit (MoT 2016). Out of all overnight stays of omodo National Park’s (KNP) universal values are its damage and marine debris grew from less than 10 percent international, cruise, and domestic visitors in Indonesia, an estimated 29 percent are superlative land- and seascapes and its biodiversity, in 2009 to over 50 percent in 2017 (Figure 6) (Harvey et in coastal, non-urban destinations (Spalding et al. 2017). especially the Komodo dragon (UNESCO 2013). This al. 2018). In 2020, the UNESCO World Heritage Centre attraction, a UNESCO World Heritage Site, is well preserved expressed concerns regarding infrastructure development The GoI has This potential is well-recognized. Out of the ten tourism destinations chosen for (IUCN 2017) and drawing more international visitors from within the boundary of the KNP World Heritage property identified priority development by the GoI in the RPJMN 2020-2024, seven are key MAC 32,000 in 2009 to over 170,000 in 2018. However, the which could potentially impact the Outstanding Universal MAC tourism sites.33 Increased coastal tourism is envisioned to be a key driver of growth, albeit site’s seascape is facing emerging negative impacts and Value (OUV) of the property. Improvements to management as a driver of less so from cruise ship activity in the context of COVID-19, which has brought threats to its marine species from population growth and strategies can help protect KNP’s OUV and reduce the pos- national tourism this industry to a standstill and clouded its long-term outlook. In recent years, unsustainable resource use. The increasing levels of visi- sibility of these threats deterring visitors in the future. development the GoI has simplified regulations related to yachting, cruise, and recreational tation within and around the park may have added further pressure. The proportion of visitors encountering reef Source: World Bank. fishing.34 It has also organized professional surfing competitions, yacht rallies, and free-diving competitions with the aim of promoting Indonesia as a MAC tourism destination.35 The development of certified diving products and training of local Figure 5: Bali and Lombok Receive Around Half of Figure 6: The Proportion of Visitors Encountering dive guides is also a priority. Indonesia’s Foreign Visitors Reef Damage or Marine Debris at Komodo National Number of international arrivals (bars, left), propor- Park has Increased MAC tourism However, long-term growth is not assured. The natural assets that attract MAC tion of international arrivals, percent (lines, right) Proportion of visitors encountering impacts is vulnerable to tourism, such as coral reefs, coastlines, and beaches, are at risk of degradation from climate change intensifying weather and climate extremes, rising sea levels, and oceanic acidification and environmen- (the focus of Chapter 4). The accumulation of marine debris is another acute threat tal pressures (Chapter 5). Gaps in basic Indonesia’s MAC assets are also impacted by insufficient basic infrastructure and infrastructure services for local residents, adding to environmental pressure and undermining and services health, hygiene, and the destinations’ attractiveness for tourists. For example, in contribute to 2015, prior to its prioritization for tourism development (including infrastructure 32 Marine and coastal tourism are distinct but related concepts that encompass a wide range of activities, assets, and income-earning opportunities. Marine tourism refers to activities occurring on, or connected to, the sea, including cruises and sailing, nautical sports, and water-based activities such as scuba diving and whale watching. Coastal tourism refers to on-shore activities for which the water-based elements are the predominant attraction—swimming, sunbathing, coastal walks, etc.—and encompasses tourism in resorts and vacation homes located near a coastline. 33 These sites are Lombok-Mandalika, West Nusa Tenggara; Labuan Bajo, East Nusa Tenggara; Wakatobi, South Sulawesi; Tanjung Kelayang Beach, Bangka Belitung; Morotai Island, North Maluku; Raja Ampat, West Papua; and Manado-Likupang, North Sulawesi. Non-MAC sites include Borobudur-Yogyakarta-Prambanan, Central Java and Source: Left: World Bank staff calculations based on BPS data. Lombok data includes all of Nusa Tenggara Special Region of Yogyakarta; Lake Toba, North Sumatra; and Mount-Tengger-Semeru, East Java. Barat province, of which Lombok accounts for around 98 percent of visitors. Right: Harvey et al. (2018). 34 Examples include: Presidential Regulation No. 105/2015 on Foreign Yacht Visits to Indonesia; and the Regulation of The Minister of Transportation No. 123/2016 Regarding an Amendment to the Regulation 36 World Bank staff calculations. of The Minister of Transportation No. 171/2015 Regarding Procedures for Services for Foreign Yachts in 37 An analysis of user-generated reviews in all available languages of three beach attractions along the Indonesia at 19 Entry/Exit Points. southern coast of Lombok on the travel website TripAdvisor (October 31, 2016) indicated the lack of cleanli- 46 35 For example, the Sabang International Freediving Competition of 2018. See also World Surf League (2018). ness and raw sewage as reasons for dissatisfaction. 47 OCEANS FOR PROSPERITY OCEANS FOR PROSPERITY The In recent years, environmental pollution and damage from tourism growth has forced Monetization The monetization of MAC sites and assets by designating them as protected areas environmental several world-renowned destinations elsewhere in Southeast Asia to close. Maya Beach, of MAC sites and charging visitor access fees is one approach to financing their protection. Private impacts Kho Phi Phi, Thailand, was closed for over two years starting in 2018 in an attempt to can provide initiatives are seen in Papua New Guinea Dive and Surf Associations and in Fiji’s associated heal the damage caused by up to 5,000 visitors and 200 boats per day (Ellis-Petersen additional Mamanuca Environment Society, where revenues collected from visitors are shared with over- 2018). Litter, boat pollution, and potentially sunscreen is estimated to have damaged resources to with resource owners and channeled to programs to protect reefs. In Indonesia, visi- tourism impose 80 percent of the bay’s coral. The cost of the shutdown was high, given the revenue support the tors to Raja Ampat’s five marine protected areas pay an “ecosystem services” fee of economic costs of around US$12.6 million that the bay’s visitors generate each year. Boracay Island, preservation of US$30-50 administered by a Regional Public Service Agency.38 In 2018, these visitor Philippines, a destination which attracts more than 1.7 million visitors per year, was sim- MAC assets fees generated revenues exceeding US$2 million, covering the minimum estimated ilarly closed for six months in 2018 due to deteriorating environmental conditions. One annual MPA management costs of US$1 million even after deduction of a 30 percent estimate placed the cost of this closure at US$37.6 million (de Vera 2018). contribution to the local government in support of community development initia- tives (Figure 7). Comprehensive conservation and rehabilitation efforts would require Sustainable Effective environmental impact monitoring systems are needed at MAC destinations more than double this amount but is also within reach. MAC tourism to detect problems early and inform mitigation responses. Recognizing these threats, will require the GoI has encouraged the establishment of Sustainable Tourism Observatories A systems-wide However, protection cannot be solely dependent on the ability of a given asset to gen- monitoring and (STOs) in priority destinations to monitor risks to natural and cultural assets and approach to erate income. Many MAC sites are effectively “open to all,” making it difficult to collect prevention of identify growing pressure points. These observatories, supported by the Ministry of visitor fees is revenues and manage access, while others do not receive sufficient visitor numbers for environmental Tourism and Creative Economy, are tasked to monitor selected indicators of ‘sustain- needed meaningful revenue raising. A system-wide approach to financing may be more ap- impacts, … able tourism’ in key tourism areas (UNWTO 2004). Over time, such STOs or other sim- propriate in which visitor fee revenue is collected in high-visitation areas, and revenue ilar institutions for environmental impact monitoring could become standard practice transfers are used for supporting other areas which are unable to generate their own in popular MAC destinations. In the short term, STOs already established can take sufficient revenues. A proportion of revenues should be retained by the original site to advantage of the COVID-19 period to monitor ecosystems in the absence of tourism, incentivize their performance. Additional public funding will be needed to underpin con- setting useful baselines to later benchmark tourism impacts. Improved monitoring servation and management efforts at both revenue and non-revenue sites more broadly, can support enhanced protection with obligations on developers established in the particularly given the potential for visitor number fluctuations over time. environmental assessment process. The Integrated and Sustainable Tourism Develop- ment Program is currently taking a monitoring role in the destinations it supports. Figure 7: Revenue Collection from Visitors to Raja Ampat Cov- ers MPA Management Costs … management For MAC destinations that are either at risk of overcrowding or already showing signs Number of visitors (bars, LHS), income generated (line, RHS) of visitor flow, … of environmental degradation, measures to limit or better manage the flow of visitors are required. These could include: (1) use of tiered pricing with higher access fees for more fragile areas (for example, as applied in the more fragile upper areas of the Annapurna Conservation Area in Nepal); (2) “congestion pricing,” whereby above-av- erage entrance fees are charged for certain tourist sites during peak demand periods; (3) setting minimum expenditure thresholds for tourists (for example, as is practiced in Bhutan); (4) the use of new technologies to control crowd flows such as scheduling apps that allocate visitors to specific time slots at key attractions; and (5) the devel- opment of alternative tourism attractions to divert and re-distribute visitors away from popular but environmentally-fragile attractions. … adaptive “Carrying capacity” management strategies—restricting the number of visitors to management an absolute limit—are one approach towards these goals. However, they have limita- strategies, … tions. The impact of tourism depends not only on the absolute numbers of visitors, but also on visitor behavior, infrastructure, and management. Local residents also create potentially negative impacts and use resources. Instead, employing adaptive management strategies based on “limits of acceptable change” can help ensure that the destination values that attract tourists are identified, monitored, and maintained over time. Results from monitoring can then be used to adapt strategies to maintain Source: Papua Barat Tourism data ecological conditions (Twining-Ward et al. 2018). … and Public investment in basic services infrastructure and systems should be increased investment to help manage pollution and waste generation in MAC sites, which is predominantly in basic a result of basic infrastructure gaps for residents, but also exacerbated by tourism services and activity. The Ministry of Public Works and Housing, as part of the government’s tour- infrastructure ism development program, has active investment programs to expand and accelerate for residents basic services quality and coverage to MAC destinations that are part of the list of and tourists priority tourism destinations. Going forward, these investments can be targeted and scaled up in those key tourism areas (including MAC tourism areas) that receive high visitor traffic. The GoI is currently taking an integrated tourism master planning approach for priority development of selected destinations, which aims to mobilize central, provincial, and local government funds, as well as private resources, towards a common objective in each of the destinations (MPWH 2020). 38 Regent Regulation No. 18 Year 2014 on the Environmental Service Fee by the Marine Protected Area 48 Technical Management Authority under the Raja Ampat Marine and Fisheries Agency. 49 OCEANS FOR PROSPERITY OCEANS FOR PROSPERITY Some boats on a blue ocean parking near an island in Belitung, Indonesia. Photo: © shutterstock.com 04. Managing Indonesia’s Oceans for 50 Coastal and Marine Assets Prosperity 51 OCEANS FOR PROSPERITY 04. Managing Indonesia’s Coastal and Marine Assets Sustainable management of marine and coastal Yet these assets are threatened However, Indonesia’s coastal ecosystems are degrading in quality and extent, undermin- ing their ability to provide these basic services. Recent surveys by the Indonesian Insti- assets is crucial for a prosperous ocean economy. by coastal development, tute of Sciences (Lembaga Ilmu Pengetahuan Indonesia, LIPI) show that around one-third of Indonesia’s reefs are in poor condition (LIPI 2020). Factors driving this degradation Indonesia’s Indonesia has extensive natural marine and coastal assets—mangroves, coral reefs, destructive include climate change, which is causing increasingly severe coral bleaching. More than marine and and seagrasses, among other critical ecosystems—that underpin its ocean economy. fishing, and 80 percent of Indonesia’s reefs are expected to experience bleaching five years out of coastal assets The country’s mangrove area is the largest and most biodiverse in the world, with 3.31 pollution ten by the 2030s (Burke et al. 2012). Other factors include destructive fishing practic- are some of the million hectares accounting for more than 20 percent of the global total (MoEF 2019). es, agricultural and urban runoff, and marine plastic pollution (the focus of Chapter 5). richest in the Indonesia’s reefs span a combined area of over 2.4 million hectares39 and as home to Estimates suggest that as much as 40 percent of Indonesia’s original seagrass cover world over 2,100 fish species and 590 coral species, showcase the greatest reef biodiversity may have been lost (Unsworth et al. 2018). Mangroves have similarly suffered substan- of any country globally (Hutomo and Moosa 2005). While scientific understanding of tial losses,42 and around 1.82 million of the country’s 3.31 million hectares are currently seagrasses is limited, these ecosystems too are considered the most species-rich and in degraded condition (Figure 9) (MoEF (2019).43 Mangrove loss is driven by coastal extensive examples of their kind worldwide (Unsworth et al. 2018). Across a range of development with clearing for aquaculture accounting for nearly half of its removal ecosystem types (Figure 8), Indonesia is a global hotspot of natural ocean wealth. (concentrated in Kalimantan and Sulawesi), and clearing for oil palm contributing a further 16 percent (concentrated in Sumatra) (Richardson et al. 2018). These These ecosystems provide services necessary to maintain livelihoods in oceans-re- ecosystems lated economic sectors. Mangroves and seagrasses play a crucial role in the feeding …causing In addition to reducing the value of coastal ecosystem services for fisheries and provide valuable and breeding cycles of many fish species important for Indonesia’s commercial catch economic losses tourism, degradation hinders another crucial economic function: community services to the and food security. Among villages in South East Sulawesi, for example, catches of exacerbated by protection. Reefs and mangroves lessen the devastation from storm surge and economy seagrass-supported fish supply more than half of the region’s daily protein intake.40 climate change tsunamis. Less dramatically but more frequently, they moderate wind-waves and Mangroves are also natural filtration systems, removing pollutants from runoff, while swells, reducing chronic shoreline erosion (Guannel et al. 2016).44 Recent studies seagrasses remove disease-causing pathogens and pollutants from the water, a bio- indicate that Indonesia’s coral reefs protect coastal areas from flood damage cidal function that reduces coral and fish diseases in adjacent reefs (Lamb et al. 2017). worth at least US$639 million annually (Figure 10) (Beck et al. 2018). These values These reefs, in turn, are major economic drivers, underpinning tourism revenues esti- are especially high for reefs near major cities like Jakarta and Surabaya, which are mated at over US$3.1 billion per year, and fishery revenues of US$2.9 billion per year particularly vulnerable. This value is likely to grow as coastal areas become more (UN Environment 2018). Marine and coastal ecosystems are also important stores of developed and as climate change becomes more severe. By 2050, rising sea levels carbon, with the potential to help Indonesia meet greenhouse gas mitigation targets.41 and resulting coastal flooding is expected to affect 23 million Indonesians annual- Seagrasses and mangroves together hold around 3.4 billion tonnes of carbon, five ly (Kulp and Strauss 2019). times more per area than tropical land-based forests (Alongi et al. 2016). Figure 9: Indonesia has One of the Fastest Rates of Mangrove Loss Globally Figure 8: Indonesia’s Coastal Ecosystems Cover a Larger Area Mangroves, mangrove loss (between 1990 and 2018), and mangrove degradation (between than Those of Any Other Country 1990 and 2018). Areas of loss, degradation, and remaining stands are typically co-located, Major areas of key coastal ecosystems (mangroves, seagrass, meaning some smaller areas of change are not apparent at a national scale map. and coral reef) and designated marine protected areas. Source: World Bank using data from MoEF 2019. Sources: World Bank staff maps produced using seagrass data from the Geospatial Information Agency (GIA), Indonesian Institute of Sciences (LIPI), The Nature Conservancy (TNC), Coral reef data from LIPI (2007) and GIA (2009), mangrove from MoEF (2018) and marine protected area extents from MMAF, with support from the Global Program on Sustainability (GPS). 42 Estimates of loss rates vary from 6,200 to 52,000 hectares per year, with variation due to the time period of 39 World Bank staff calculations based on LIPI data, with support from the Global Program on Sustainability (GPS). measurement and classification technique used. See Goldberg et al. (2020) and Murdiyarso et al. (2015). 40 Prominent species associated with seagrass include Parupeneus barberinus (goatfish), Siganus canaliculatus and Siganus fuscenscens 43 Based on the 2015-2018 average. (rabbitfishes), and Lethrinis harak (emperor fish). See Unsworth, et al. (2014). 44 Mangroves, seagrass, and reefs provide protection most effectively as intact systems rather than as single 52 41 Indonesia’s nationally determined commitment is to reduce carbon emissions by 29-41 percent from business as usual by 2030. habitat types due to their complementary characteristics. Integrated management is thus important. 53 OCEANS FOR PROSPERITY OCEANS FOR PROSPERITY Figure 10: Coral Reefs Provide Infrastructure and Communities with Pro- (2) effective The GoI’s commitment to a growing expanse of MPA area would be well-complemented tection from Flooding MPA by improvements in management systems. Challenges include a lack of budget and Color dots indicate the expected annual benefits from coral reefs for flood management… human capacity to implement basic management measures such as patrols and en- protection ($US million (M)). The value is calculated as the difference in ex- forcement, overlapping mandates between district, province, and central authorities, pected damages to infrastructure with and without the top one meter of reef. and limited benefits for local communities who bear the cost of access restrictions to coastal and marine resources. Investment in capacity and greater collaboration with local communities are necessary for MPAs to make progress on management effective- ness and provide the protection that critical marine and coastal ecosystems require. (3) coastal The GoI target for mangrove restoration—600,000 hectares restored by 2025—is ecosystem similarly commendable. It is also ambitious in the context of past efforts, with Min- rehabilitation, istry of Environment and Forestry (MoEF) reporting that around 50,000 hectares of and… mangroves were rehabilitated between 2010 and 2016, an average of around 7,000 hectares per year. Past progress faced technical difficulties, with specific ecological conditions required for mangrove seedlings to survive (Rahmania et al. 2020). Chosen species have experienced low survival rates in some cases, and rehabilitation costs, of between US$1,450-4,500 per hectare (MMAF 2019), are high relative to mangrove conservation costs. Greater community involvement in the management of planted sites could help survival rates, along with close consideration of site characteristics. Assisted natural regeneration could be preferentially utilized relative to direct seedling planting, given the lower costs and greater success rates seen under this approach in Indonesia and around the world. Yet, while mangrove restoration is laudable, greater emphasis could be placed on reducing mangrove loss in the first place. Indonesia has a moratorium on land conversion for Indonesia’s primary forests but there is no equiva- lent protection for mangroves. Source: World Bank using data from Beck et al. (2018) BOX 4 Indonesia is Recognizing these values, central and provincial governments are working to enhance responding to these threats to protection of coastal and marine ecosystems. A step of fundamental importance has been the introduction of spatial plans, a system for resolving land use conflicts A Cost Benefit Comparison of Conserving Versus its marine and and balancing environmental and economic considerations by delineating zones for Restoring Mangroves Globally coastal assets specific uses. The GoI and provinces have developed a range of marine-focused plans at national and sub-national levels, including coastal and small islands marine spatial I plans (RZWP3K) within provincial waters. These will next be integrated within the n 2019, the global High-Level Panel for Sustainable benefit for restoring one hectare of mangrove were esti- broader spatial planning framework (Rencana Tata Ruang Wilayah, RTRW). The GoI has Oceans commissioned research (Konar and Ding 2019) mated at US$30,080 and for conservation US$79,980 similarly made substantial progress in expanding MPAs to over 23 million hectares into the economic feasibility of major investment cate- over a 30-year period. A key reason for this difference in (meeting its Aichi target45 of 20 million hectares), with a goal of reaching 30 million gories in support of a global blue economy. As one of their benefits between conservation and restoration is that the hectares by 2030. Improving management is also a priority: The World Bank and top five options, they considered the costs and benefits of benefits of restoration take several years to materialize GEF-supported Coral Reef Rehabilitation and Management Program (COREMAP), for mangrove conservation and restoration. (an average of five years growth time was factored into example, is investing around US$7 million in training, community-outreach, and small these calculations). infrastructure in the Savu Sea and Raja Ampat MPAs.46 To monitor progress, MMAF Drawing systematically on studies globally, they found has implemented a scorecard system (E-KKP3K) across MPAs to provide a consistent the global median cost per hectare of new mangrove to Resulting benefit to cost ratio per hectare were estimated means of tracking management effectiveness and outcomes. be US$9,449 per hectare and opportunity cost (based on to be 2:1 for restoration and 48:1 for conservation. These an alternative land use of shrimp farming) to be a further ratios are skewed by the relatively high costs of resto- Indonesia faces While the GoI’s establishment of spatial plans and new MPAs provides an ambitious US$1,873. Total restoration costs, including establish- ration in industrialized economies such as Australia, and challenges in: framework for oceans governance, achieving impact on the ground requires address- ment or regeneration costs and opportunity costs, were the US. Restoration costs in Indonesia are typically sig- (1) the ing implementation challenges. Some spatial plans conflict with existing regulations, much higher than conservation costs, which include the nificantly lower (MMAF reports costs of US$1,450-4,500 implementation while budgets and human capacity for their enforcement are lacking. The mandate opportunity cost and monitoring and protection costs per hectare, which all else equal would give a much higher of spatial plans of provincial governments over coastal zone management was adjusted in 2014 with only. These numbers are indicative of global experience. benefit to cost ratio, but still lower than the conservation for marine and responsibility for waters between the shore and four nautical miles shifting from dis- For a given location, the actual costs might be lower or benefit to cost ratio). While restoration has a critical role coastal zones… trict to provincial governments. Most management capacity previously resided in the higher depending on local conditions. to play given losses already incurred, global experience districts, and many provinces are yet to either devolve authority back to the district suggests that conservation is more cost efficient on (where the capacity resides) or developed their own capacity for this expanded role. They compared these costs to the value of benefits typ- a per-hectare basis. World Bank research is currently As a result, many provincial governments are still building the capacity required to ically seen from mangroves, specifically carbon seques- underway to quantify costs and benefits of mangrove implement spatial plans. tration, fisheries productivity, and coastal protection. The activities for specific Indonesian locations. 45 Aichi Target 11 of the Convention on Biological Diversity is a call for countries to effectively conserve at least 10 percent of coastal and marine areas by 2020. 46 Sawu Sea MPA is located in the Lesser Sunda Sea, adjacent East Nusa Tenggara province. It is Indo- nesia’s largest MPA (3.5 million hectares) and an important habitat for migrating whales. Raja Ampat is located at the northwestern tip of Papua and comprises a network of MPAs encompassing over 1.1 million 54 hectares. It is a biodiversity and tourism hotspot, and home to the first shark sanctuary in Indonesia. 55 OCEANS FOR PROSPERITY (4) accurate These actions, among others, would benefit from up-to-date, high-quality data orga- sustainable financing for management, and contribute to coastal community incomes and frequent nized wherever possible in a standardized framework. Indonesia has made substantial will thus be needed. There is also a need to ensure MPA zones and boundaries are inte- monitoring investments in data capacity,47 yet remaining gaps continue to hinder strategic and grated into spatial plans to ensure alignment of these complementary systems. Mean- ground-level management decisions. One example can be seen in the lack of information while, benchmarking of the scorecard against global and regional standards, such as the over the basic extent of seagrasses: a recent pilot analysis by the World Bank, drawing on IUCN Green List of Protected and Conserved Areas and Coral Triangle Marine Protected LIPI data, found seagrasses covering 735,000 hectares nationwide. However, this finding Areas (CTMPAs), will add further credibility to Indonesia’s marine biodiversity achieve- relied on a rough patchwork of satellite data and ground observations spread over mul- ments and international commitments. tiple years. Data are conflicting and year-to-year trends are not available. Consequently, published estimates vary wildly (Sjafrie et al. 2018). Agreement on consistent methods (4) Investment If implemented, these planning, management, and restoration efforts would improve the for measurement and harmonizing coastal ecosystem datasets is needed to alleviate in nature- health of coastal ecosystems and consequently their capacity to protect coastal com- such challenges, a task that LIPI is now undertaking through development of mangrove, based solutions munities from disasters. This complements infrastructure investment for disaster risk seagrass, and coral reef health indices (LIPI 2020). Likewise, MoEF formalized a geospa- for coastal mitigation. Traditionally, “grey” infrastructure—engineering projects that use materials tial mapping process for mangroves through the “One Map” program in 2015 although protection such as concrete and steel—have dominated these efforts. An alternative is to use hybrid data gaps remain. “nature-based solutions,” which combine elements of “green” infrastructure—such as strategically placed mangrove forests—with conventional “grey” structures for cheaper These There is a need to accelerate completion of the spatial planning process for marine and and more effective outcomes (Browder, et al. 2019). The Building with Nature Project in challenges can coastal areas. For provinces that earlier completed provincial-level marine spatial plans Demak, northern Central Java, is one such example led by MMAF and community partners be addressed (RZWP-3K), the focus is now turning to implementation and integration of these within (Building with Nature 2018). The project is installing a semi-permeable dam made from through: the broader spatial planning framework (RTRW). Monitoring systems and permitting concrete, bamboo, and gelam wood, mimicking the function of mangrove roots to trap (1) accelerated capacities must be strengthened (and in some cases, established) within provincial sediment and protect the coast from waves (van Wesenbeeck et al. 2018). Complement- implementation governments. A national spatial plan scorecard system with indicators and targets akin ed by mangrove rehabilitation and sustainable aquaculture, the approach is expected to of spatial to the E-KKP3K scorecard system for MPAs could support these efforts. This score- reduce erosion, lower costs, and boost economic benefits such as shrimp production, and planning in card would be most effective if it goes beyond measuring inputs and processes (such as can be scaled across areas affected by coastal abrasion such as north Java. marine and regulations, management plans, and budgets) to also include ecological and social-eco- coastal areas nomic impacts (such as ecosystem quality and extent). Business permits issuance should (5) Improvement Underpinning these recommendations is a crucial common thread: the need for accurate, properly consider limitations posed by spatial plans. More broadly, effective coordination of data and integrated, and frequently updated data that can be used to track progress, prioritize of spatial plan implementation across sectors needs to be ensured by the highest-level of valuation tools actions, and communicate the value of Indonesia’s coastal ecosystems. The development decision makers. In provinces, this could be the Governor’s office. Longer-term, a marine of reef, mangrove, and seagrass health indices by LIPI is an important contribution. Much and coastal cadastre (a spatial title registry, identifying property rights over specific attention is rightly being focused on reaching consensus across government and partners areas including aquaculture sites and tourism facilities) will be needed to complement on the validity of data and the methods used. Additional efforts are required to extend these systems and help manage conflicts. physical measurements of ecosystems to economic estimations of the value of those eco- systems. Natural Capital Accounting (NCA) based on international standards such as the (2) Including A strong complement to the GoI’s mangrove restoration targets would be an extension System of Environmental Economic Accounting is one well-established approach for more mangroves of the conversion moratorium of primary forests and peatlands to coastal ecosystems. efficient statistics production that can drive better policy outcomes (Box 5). under the land While MPAs tend to cover coral reef and seagrass habitats, mangroves are often located conversion outside of conservation areas and thus need alternative mechanisms for protection.48 BOX 5 moratorium Extending the moratorium to mangroves is attractive in the context of relatively high and REDD+ framework costs of mangrove restoration efforts. Even with this expenditure, rehabilitation will not reverse overall degradation given current rates of loss. An extension of the moratorium Using Natural Capital Accounts to Inform Marine and would significantly reduce mangrove destruction and complement rehabilitation efforts. When reviewing its Nationally Determined Contribution (NDC), Indonesia could also con- Coastal Ecosystems Policy sider including mangroves in its land use emissions baseline to allow mangroves to gen- H erate emissions reductions payments in existing and future carbon-based schemes, such istorically, marine and coastal policymaking has sessment. Similary, NCA data can be used to measure the as REDD+. Greater clarity around institutional responsibility for conserving and restoring not adequately accounted for the value of ecosys- return on new investments in MPA management or other mangroves would help facilitate these actions and more effective management broadly. tems, leading to a prioritization of development ecosystems potection efforts. over protection. The resulting damage to the natural as- (3) Improved Further investments are needed to improve MPA management effectiveness, including set base of the ocean economy has undermined long-term Indonesia has begun building NCA through the Indonesian management of ranger training, increased patrols and enforcement, community engagement, and small economic returns. Sustainable development requires System of Environmental-Economic Accounts (SISNER- MPAs, including infrastructure. Indonesia’s scorecard system—E-KKP3K (which has been recently up- policies that preserve natural assets or convert assets LING), developed with support of the World Bank’s Wealth the promotion graded)—provides a roadmap for these investments. While the majority of national MPAs without net loss. Accounting and the Valuation of Ecosystem Services of partnerships are close to or have achieved the E-KKP3K “blue” status, most provincial-level MPAs Global Partnership. SISNERLING provided data for the remain at significantly lower stages (“red” or “green”). Notably, the scorecard requires an Natural capital accounting supports such policies by Low Carbon Development Initiative for Indonesia (LCDI), MPA to demonstrate that “management activities are carried out as part of a sustainable providing standardized data on the status and economic which led to greenhouse gas emissions reduction targets financing system that engages stakeholders” to reach the highest “gold” status. Further values of natural assets and how these asssets are being being incorporated into the RPJMN 2020-2025. Extend- activities that strengthen MPA partnerships with businesses and communities, secure affected by human activity. This allows for consistent and ing SISNERLING to incorporate coastal assets supports rigorous assessment of the economic viability of coastal similarly important coastal policy priorities. For example, 47 The Government’s COREMAP program, for example, has upgraded research stations, developed data-col- development projects. NCA provides the data to account accounts could underpin the inclusion of coastal carbon lection protocols, trained scientists, and monitored ecosystems with the aim of upgrading Indonesia’s for the economic gains and losses of coastal ecosystems towards Indonesia’s climate commitments. monitoring and thus management capacity, and represent an investment of over US$100 million since in cost benefit analysis, ensuring holistic economic as- 2014 with financing from the Asian Development Bank and World Bank. Source: World Bank. 48 In the province of Sulawesi, for example, less than 12 percent of mangroves are located within MPAs. 56 Based on MoEF (2019). 57 OCEANS FOR PROSPERITY OCEANS FOR PROSPERITY Fishing sailboats, Indonesia. Photo: © Curt Carnemark/ World Bank 05. Combating Plastics Oceans for 58 from Source to Sea Prosperity 59 OCEANS FOR PROSPERITY OCEANS FOR PROSPERITY 05. Combating Plastics from Source to Sea Marine plastic debris represents a significant risk … seafood quality and Marine plastic debris also affects the fisheries sector through threats to seafood safety and quality. Large pieces of plastic disintegrate under the influence of sunlight and wave action to Indonesia’s ocean sectors. safety, …. to form microplastics (pieces less than 5 millimeters in size) that are mistaken for food by fish and subsequently enter the food-chain. A 2015 study found microplastics in 28 per- cent of fish and 55 percent of all species sampled in fish markets in Makassar (Rochman et Marine debris Realizing the potential of ocean economies worldwide will require addressing the global chal- al. 2015). While little is known about the long-term health impacts of plastics, they contain causes economic lenge of marine plastic debris. Modelling suggests that between 4.8 and 12.7 million tonnes of chemicals known to cause toxicological impacts in humans, including reproductive and costs in excess plastic debris flow into the world’s oceans each year (Jambeck et al. 2015), and the rate of this development abnormalities, increased rates of cardiovascular disease, and type-2 diabetes of US$10 billion “leakage” is increasing (Hoornweg, Bhada-Tata, and Kennedy 2013). It impacts ecosystems, (Swan 2008; Swan et al. 2005; Lang et al. 2008). With over half of the animal protein con- annually in the human health, and maritime economies, particularly fisheries, coastal tourism, and commercial sumed in Indonesia provided by fish and seafood, growing per-capita fish consumption, and Asia Pacific shipping. Recent estimates of the damage of plastics to ocean economies exceed US$10.8 Indonesia’s position as a major exporter of seafood to global markets, plastic debris poses a region billion annually in the Asia Pacific Region alone. The cost to Indonesia is estimated at over potential public-health risk. US$450 million per year (APEC 2020). These estimates are direct costs only: Costs of remedia- tion and indirect damage to ecosystems, if known, would increase this estimate substantially. … shipping, …. Marine debris is also a threat to navigation, affecting recreational, cargo, and fishing vessels. Larger pieces of debris causes damage by blocking cooling systems or becoming Indonesia is a Indonesia’s extensive coastline, large population, and high proportion of mismanaged waste entangled in propellers (Hall 2000), with the most severe impacts on the small vessels with large producer are the key factors behind the country’s substantial flow of plastics into the oceans. A 2020 outboard motors that are in widespread use amongst Indonesia’s small-scale coastal fish- of marine World Bank study drawing on local data estimated that Indonesia generates 7.8 million eries (McIlgorm, Campbell, and Rule 2009). The cost of marine debris damage to shipping plastics, up to tonnes of plastic waste each year, of which 4.9 million tonnes is classified as mismanaged.49 and fishery sectors based on insurance claims alone (Takehama 1989) is around US$280 0.55 million World Bank modelling indicates that between 0.20 and 0.55 million tonnes of that plastic million per year for countries in the APEC region (McIlgorm, Campbell, and Rule 2009). tonnes every makes its way into oceans each year.50 Green procurement refers to mandates or targets While little is known about the cost of marine debris on shipping in Indonesia, its impact is year within public sector organizations to procure recycled and repurposed plastic in their pro- likely to increase as Indonesia develops its shipping lanes in the face of growing traffic. curement contracts. There is considerable heterogeneity in the sources and types of this leakage (Figure 11 and Figure 12) with a 2018 World Bank analysis of 15 cities finding rates of … and marine Tourism is clearly also vulnerable to marine debris impacts, suffering both direct costs mismanagement varying from 7 to 50 percent (Shuker and Cadman 2018). tourism of cleanup and indirect costs from lost visitor revenue. Just as iconic tourism sites in the Figure 11: Rates of Waste Mismanagement Vary Considerably Figure 12: Composition of Waste Found in Waterways in 15 development Philippines and Thailand were closed by pollution impacts (as discussed in Chapter 3), in between Indonesia’s Cities Indonesian Cities goals 2017 Bali declared a “garbage emergency” as popular beaches such as Jimbaran, Kuta, and (tonnes/day) (percent) Seminyak became overwhelmed by plastic waste. At the peak of the subsequent clean up, workers were removing as much as 100 tonnes of waste per day (Oliphant 2017). A study by the Making Oceans Plastic Free Initiative estimated that plastic bag pollution causes revenue losses of US$140 million annually to Indonesia’s tourism sector, with US$55 mil- lion from Bali alone (Making Oceans Plastic Free Initiative 2017). These costs There is a strong economic rationale for investment in waste management to avoid these and exceed the other costs. Based on estimates for five countries (China, Indonesia, Philippines, Thailand, estimated costs and Vietnam), the economic cost of each tonne of mixed household waste that is burned in of mitigating backyards, dumped, or discharged in waterways is around US$375 (McKinsey Center for marine plastic Business and Environment 2016). By comparison, the World Bank estimates the cost of uni- debris versal (full coverage) waste collection and adequate treatment or disposal to eliminate waste leakages to waterways at between US$50-100 per tonne in middle income countries. Indonesia’s As a result of recognition of these challenges, management of marine debris is high on the Source: Shuker and Cadman (2018) National Action national agenda. Launched in June 2017, the National Action Plan on Marine Debris has an Marine plastic Marine plastic debris imposes substantial economic costs on the fisheries sector. Pub- Plan targets ambitious goal of reducing marine debris by 70 percent by 2025. Achieving this will require debris poses lished estimates suggest plastics are responsible for global revenue losses of around a 70 percent concerted efforts from national policymakers and local governments across five reform a risk to $2.2 billion per year through lost income from reduced and contaminated catches, reduction in areas: (1) incentivizing behavioral change; (2) reducing land-based leakage; (3) reducing sea- Indonesia’s damage to fishing gear, and associated lost time (Trucost 2016). A very rough Indo- marine debris by based leakage; (4) reducing plastic production and use; and (5) enhancing funding, policy fisheries, … nesia-specific estimate (based on extrapolation from studies elsewhere) places the 2025 via … reforms, and law enforcement. domestic loss at around US$147 million per year (APEC 2020). A particularly perni- cious component of this damage comes from abandoned, lost, or otherwise discarded Incentivizing Behavior change strategies such as the recent Clean Indonesia campaign (“Gerakan Indo- fishing gear (ALDFG). ALDFG has long-lasting impacts with “ghost” gear continuing to behavioral nesia Bersih”) and the Love for the Seas Movement (“Gerakan Cinta Laut”) are promoting ensnare fish for years following their loss or improper disposal, compromising yields, change, ... reduced plastics usage (especially single-use plastics), along with increased recycling and and damaging ecosystems. Recent research based on interviews of Indonesian fishers proper disposal practices. A successful example of change is seen in Malang, where recy- in the Arafura Sea found that one-third of trawl fishers and 12 percent of gillnet fish- cling rates of more than 50 percent have been achieved through locally grounded public ers discarded damaged, unrepairable nets overboard.51 outreach campaigns. Other initiatives such as community waste banks (“bank sampah”) have contributed to waste reductions and increased incomes, albeit on a small scale.52 49 Unmanaged municipal plastic waste is that which is not collected, recycled, or disposed of in sanitary landfill, controlled landfill, or Community-led clean-ups have also shown success, with slogans such as “bersih itu sehat” other official dumpsites, as defined by the Indonesian Ministry of Public Works and Housing. 50 Forthcoming publication. 51 Causes of damage to nets were snagging on obstructions (78 percent) and conflicts and entangling with other fishing gear (19 percent). These incidents are themselves reported to be linked to over-allocation of fishing licenses and unregulated fishing pressures, leading to over- 52 Waste banks are community-based recycling schemes where waste deposits are sold for recycling, pro- crowding, overcapacity, increased competition, and risk-taking by skippers and crews. Long-term solutions to ghost gear will be best served by viding cash returns for members after covering operating costs. Waste banks have been shown to promote 60 addressing the full chain of events that lead to gear loss (many of which are explored in Chapter 2). See Richardson, et al. (2018). waste segregation, reduce inorganic waste, and encourage composting. See Halimatussadiah et al. (2016). 61 OCEANS FOR PROSPERITY OCEANS FOR PROSPERITY (to be clean is to be healthy) gaining attention. In Bali, the “garbage emergency” of 2017 BOX 7 sparked “Bali’s Biggest Clean-up,” which took place in some 115 locations around the island and mobilized over 15,000 people (Taylor 2018). The World Bank and GoI have developed a “Communications Playbook” based on lessons from these and other events, aiming to inform Single-use Plastic Bans and Taxes the design of outreach activities to improve community awareness around plastics.53 I n December 2018, Bali Governor Wayan Koster intro- markets, supermarkets, and convenience stores. There are … reducing land- Given that around 80 percent of marine plastics originate from the mismanagement duced an all-encompassing ban against single-use plastic, currently 38 cities/regencies and two provinces with some based leakage of waste on land, Indonesia could achieve a large proportion of the targeted 70 percent including plastic bags, Styrofoam, and straws. The ban has form of plastic bag reduction regulation. by targeting reduction by capturing municipal solid waste that is not currently collected, and by an ambitious target of reducing Bali’s contribution to marine coastal and riv- halting leakages from transfer points, treatment facilities, and disposal sites. The GoI has plastic debris by 70 percent within the year. In February 2020, Indonesia’s Parliament approved a MOF erside cities, … developed a platform to assist cities to improve solid waste management using national proposal to include plastics on the list of excisable goods, budget (APBN) and international donor funding. However, international experience (for That regulation followed in the footsteps of decrees issued in including plastic bags, plastic bottles, and sachet packages. example, within EU accession countries) shows that achieving universal waste collection Banjarmasin and Balikpapan, Kalimantan, as well as in Bogor, This excise is expected to discourage use by up to 50 percent, takes many years to achieve, even with such support programs. The total investment West Java, that banned the use of plastic bags. A similar as well as raise around US$113 million in revenue annually needed in Indonesia’s urban areas alone is likely to exceed US$5 billion. Indonesia can regulation was introduced in Jakarta, which accounts for (Diela 2020). make efficient progress towards its 70 percent goal by focusing investments in basic approximately 20-30 percent of Indonesia’s plastic waste in waste management systems and services in hotspots such as coastal and riverside Source: World Bank. July 2020, banning single-use plastic bags in malls, traditional cities, and by moving waste management infrastructure away from waterways (Box 6). A good example is the World Bank-supported Citarum Harum Program that is applying this approach to cities along the Citarum River. …extended Extended Producer Responsibility (EPR) regulations oblige manufacturers and importers producer re- to take responsibility for the management of plastics from their products throughout BOX 6 sponsibility and their lifecycle, reducing plastic waste upstream and promoting circularity. Recycling circular econo- rates in Indonesia are low at around 10 percent (World Economic Forum 2020). In late Targeted Approaches for Reducing Leakage and my policies, … 2019, the GoI passed an EPR regulation on manufacturers, retailers, and the food and beverage industry,54 requiring them to reduce waste by including a higher proportion Increasing Circularity of recyclable or degradable material in their products and to manage post-consumer waste for reuse or recycling, with the goal to reduce their total waste by 30 percent by C ost-effective and targeted actions can reduce plastic Research that targets key elements of circular economy de- 2029. Implementation is now underway. There are opportunities to support institutional pollution in the short term while larger investments in velopment will also be valuable. While sufficient research al- strengthening for monitoring and enforcement of these regulations, and for further EPR support of a circular economy are put in place for the ready exists to act, analysis of institutional strengthening for measures such as deposit-refund systems and packaging fees. More broadly, technical long term. Analysis to identify priority plastics (those repre- monitoring and enforcement would support implementation guidelines could help improve the quality of recycled plastics, specifically food-grade senting a disproportionately high component of marine plas- of Extended Producer Responsibility (EPR) regulations, taxes, plastics, and reduce dependence on virgin material, with accompanying incentives. tic debris) and priority rivers (those carrying large amounts and single-use plastics bans. Research can further assess There is a need for assessment of measures that can support long-term shifts towards a of plastic debris) will be important for the GoI’s prioritizing appropriate standards for recycled plastics and support local circular economy and support deeper development of the recycling market. These include of policies and investments. For example, a plastics tracking governments in developing more efficient waste collection standards for recycled material, minimum recycled content requirements, and prioritiz- study by LIPI, supported by the World Bank, found that on (and financing) systems. ing recycled material in public procurement (“green procurement”).55 average, about 65 percent of plastic originating from the Cisadane, Musi, and Bengawan Solo rivers spent some time Source: World Bank. … implementa- Implementation support for waste measures by local governments, cities, and kabupaten as stranded beach debris not far from the river’s mouth. This tion support, … are also needed. Thus far, the track record of investments in the waste sector support- provides an option for cost-effective beach clean-ups that ed by the national budget has been mixed. World Bank analysis found that more than can remove stranded debris before it enters the ocean. 70 percent of local disposal cells and treatment facilities built with central government financing were functioning poorly within a few years of commissioning. Reasons included a lack of capacity, poor integration of community-level collection systems and city-level …reducing sea- Measures to reduce plastic waste discharges from maritime activities and ALDFG include transport, treatment, and disposal systems, and limited repercussions for poor waste based leakage, … a gear monitoring and loss reporting system, repair facilities at or near ports to extend the management performance. An important contributing factor is the local operational life of fishing gear, incentive systems for the retrieval and disposal of end-of-life and ALDFG budget allocation for waste management, which varies widely across Indonesia (0.5-6.7 gear, and port reception facilities for disposal of solid waste from vessels. Collaboration with percent of Anggaran Pendapatan dan Belanja Daerah (APBD)). Based on the experience of fishers, ports, and the recycling industry (potentially via public-private partnerships) is key Indonesian cities with adequate waste services, four percent of APBD appears to be a for such measures to be successful. A refund system for end-of-life fishing nets was piloted good benchmark to ensure that operations can be sustained. in Papua province, where ten tonnes of discarded nets were collected by fishers for recycling in return for direct cash payments, and in Java where fishing cooperatives have been engaged … and enhanced Such support will require robust sources of financing. Given that waste management fees in net loss prevention and buy-back schemes for used nets. funding mecha- (retribution) are a critical source of financing at the local level, fee collection rates and nisms the mechanisms for funds flow should be a high priority for reform. The Ministry of Home …reducing plas- Bans and excises on plastic products, particularly targeting single-use and the most polluting Affairs is finalizing guidelines for cities on retribution, including a calculator to determine tic production applications, and accompanied by a transition plan for impacted sectors, can reduce con- minimum percentage fees. Such technical guidance is urgently needed by cities and re- and use, with sumption, raise revenue, and incentivize innovation In 2016, the Ministry of Environment and gencies to adopt these mechanisms and standards and to enforce collection. Monitoring economic incen- Forestry, with the collaboration of the Indonesian Retailers Association, piloted an IDR 200 systems of both funds and outcomes (including towards the 70 percent marine debris tives, … (approx. US$0.01) charge on plastic bags in 27 cities. Despite just three months of imple- reduction target) will strengthen prospects for progress. mentation, the charge resulted in an estimated reduction in plastic waste of 55 percent. The initiative was not continued due to disagreements with some retailers. However, other initiatives have commenced, with several cities putting in place bans and taxes targeting single-use plastics (Box 7). 54 Ministry of Environment and Forestry Regulation No.75 of 2019 Regarding a Roadmap for Reduction of Waste from Producers. 55 Green procurement refers to mandates or targets within public sector organizations to procure recycled and 62 53 CMMAI (2020). Behavior Change Strategy and Playbook (https://maritim.go.id/playbook-penanganan-sampah-english-version/). repurposed plastic in their procurement contracts. 63 OCEANS FOR PROSPERITY OCEANS FOR PROSPERITY Stylophora Coral. Photo: © shutterstock. com 06. Conclusion: Integrated Oceans for 64 Policy for a Blue Economy Prosperity 65 OCEANS FOR PROSPERITY OCEANS FOR PROSPERITY 06. Conclusion: Integrated Policy for a Blue Economy Close ecological and economic links between BOX 8 ocean sectors means that reforms can deliver Improving Coordination for Blue Economy Development broad benefits. M arine and coastal management faces pressures in 2014 as one of four coordinating ministries in Indone- Realizing the This report lays out the rationale for, and steps towards, a blue economy for Indonesia. and demands from diverse stakeholders, and sia. Its role is to coordinate formulation and implemen- full potential Fisheries management improvements—through upgraded science and data, decision-mak- implementation of policies in this area requires tation of policies related to oceans across government, of Indonesia’s ing structures, and harvest control measures—have the potential to increase fisheries’ actions by multiple levels of government and ministries/ specifically across eight government bodies (Figure 13). ocean economy social and economic contributions. Protecting MAC assets as part of tourism development agencies. Given these complexities, decisions across Critical ministries in this space include MMAF, which will require will help ensure that visitor growth is sustainable and that ‘brand Indonesia’—the country’s government entities in Indonesia have not always been has the most expansive implementation mandate on cross-sector reputation as a desirable destination—is maintained. Importantly, the benefits of reforms well-aligned. oceans issues among central ministries, and Bappenas, reforms … extend across and beyond these sectors. For example, conservation measures that protect which ensures implementation of all programs in line coral reefs support productive fisheries, physical protection of coastal communities, and To address this challenge, the Coordinating Ministry of with the RJPMN. tourism opportunities. Initiatives that reduce the threat of marine debris reduce costs to Maritime Affairs and Investment (CMMAI) was formed fisheries, tourism, public health, and shipping. Cross-sectoral investment and planning decisions—sensitive to multiple-objectives—will be critical given this interdependence of Figure 13: Key Stakeholders and Decision-makers in the Oceans Policy Space ocean-related sectors. … and To achieve this, there is a need to strengthen coordination between ministries (those in strengthened charge of fisheries, tourism, transport, environment, and public works), levels of government coordination (national, provincial, and district), and other stakeholders (academia, private sector, and across civil society) (Box 8). The establishment of a high-level Sustainable Oceans Platform could government support this goal by serving as an advisory and monitoring body on issues related to the blue economy. An Oceans Platform could draw on Indonesia’s successful experience with the Tourism Coordination Platform that is supporting development of new tourism destinations with coordination arrangements established at the national, province and district level. There is a range There are numerous opportunities for financing the investments required. For example, of financing the economic value of Indonesia’s reefs for tourism, estimated at around US$3.1 billion per opportunities year, can support visitor fees to help finance conservation. Previously published studies both within and show that revenue potential at many key MAC sites, as determined by visitors’ willingness across these to pay, is higher than is currently collected (Pascoe et al. 2014). Such revenues can contrib- sectors ute to tourism-related waste management, while tax revenues raised on a growing tourism industry, or as part of incentive mechanisms to lower plastics use, can help finance clean- ups in tourist hotspots. more efficient Yet, raising new sources of finance will not be enough: There is also a need for more use of existing efficient and impactful use of existing government funding. For example, strengthened government sustainability criteria in funding allocation decisions made by MMAF’s Fisheries Business funds and Capital Management Institute (Lembaga Pengelola Modal Usaha Kelautan dan Perikanan, securing new LPMUKP) could help improve sustainability outcomes. Productive use of public funds re- An example of an issue with a strong need for cross-sectoral Coordination could be furthered by a Sustainable Oceans sources of quires close tracking of expenditure and its results. A public expenditure review for oceans coordination is marine plastic debris management. CMMAI Platform, a multi-stakeholder group, including representation financing, and… related sectors could be used to identify underperforming areas—for instance, subsidies and MoEF co-chair a National Coordination Team responsible from a range of oceans-related ministries, as well as non-gov- that are not having their desired impact or that are undermining long-term sustainability for a National Plan of Action (NPoA) on this issue (Rencana ernment actors (academia, civil society, and industry). Mem- goals—and to find opportunities to redeploy those funds towards more productive uses. Aksi Nasional Penanganan Sampah Laut, 2018-2025). The bers would form a committee of senior decision-makers for Meanwhile, instruments such as blue bonds (World Bank 2018) and growing private sector NPoA describes strategies, programs, and activities to meet policy coordination, an implementation team of officials for interest in sustainability-orientated investments could increase overall finance and human the GoI’s plastic pollution reduction targets over this period technical coordination, and expert working groups to provide resources available (Box 9). involving 16 ministries, agencies, and other stakeholders advice. Building on the success of similar bodies elsewhere (from industry, civil society, and academia). across the GoI, the platform would be a forum for: Greater data, As emphasized throughout this report, quality and timely data is the basis for effective and • Coordination of planning, implementation, and the activ- analysis, and adaptative management, particularly in a context of increasing uncertainty under climate More broadly, a tool under development for oceans coor- ities of donors and financing partners transparency change. Improved measurement of ecosystem services such as carbon storage, biodiversi- dination is seen in the Indonesian Ocean Policy (Kebijakan • Deliberation, progress monitoring, and identification and ty habitat, and storm surge protection will help Indonesia access potential future pay- Kelautan Indonesia). While non-binding, this policy provides alleviation of bottlenecks ments for these services (such as payments for ‘blue carbon’), and, more fundamentally, to guidance for governments to plan, implement, monitor, and • Co-generation of knowledge via the exchange of experi- inform investment and management decisions. As explored in Chapter 4, some of Indone- evaluate development in the maritime sector. It elaborates ence and best practices sia’s coastal ecosystems— notably seagrasses—are barely quantified in their extent, quali- on the RJPMN by providing finer resolution ocean develop- • Relationship-building between decision-makers, aca- ty, and trends, and not at all in terms of economic valuation. The GoI has made progress on ment objectives along with a NPoA (under preparation) for demia, the private sector, and civil society data collection and public accessibility and should continue to build on these efforts. their achievement. Source: World Bank 66 67 OCEANS FOR PROSPERITY OCEANS FOR PROSPERITY A blue economy Interdependence is at the heart of a blue economy strategy where the development of Figure 14: An Integrated Approach to Sustainable Coastal Development Relies on Mutually Reinforcing Policy Elements strategy ocean sectors is governed through cross-sectoral means. A central example—in which can help Indonesia has the potential to be a world leader—is marine spatial planning. Indone- achieve policy sia’s integrated tourism master planning is another such integrated policy instrument integration for crucial for ocean sector outcomes (MPWH 2020). These instruments can be developed sustainable in ways that allow for the future integration of additional activities within existing development policy and strategic frameworks. These include offshore energy, bioprospecting, and desalination, among others yet to be developed in Indonesia, but could well be part of the country’s ocean future. BOX 9 Financing the Blue Transition “B lue finance” is the capital required to restore and In addition, some governments are borrowing explicitly protect oceans and support sustainable devel- for activities with clear links to the sustainable devel- opment of oceans resources. Private sources are opment goals (SDGs). Bond issuance linked to SDG goals increasingly providing such capital as environmental, social, has risen significantly in recent years. Indonesia has and governance (ESG) considerations enter the mainstream experience with such bonds through its ‘green sukuk’ of global finance, including in emerging markets. In the past initiative (MoF 2018), which raised US$1.25 billion in decade, there has been strong increased private demand 2018 for climate-related investments and could provide for ‘purposeful development’ investment opportunities — a basis for similar “blue” bonds. The GoI is currently projects with explicit environmental and social goals, with preparing a Blue Finance Roadmap to mobilize financing assets under active management using ESG principles from the private and public sectors. Scaling up blue fi- estimated at US$3 trillion in 2020 (Morgan 2020). nance will require de-risking investment opportunities, ensuring data are available to show the environmental Public and philanthropic sources are also important. and social returns to purposeful development, and Public financing can be used to de-risk private invest- developing natural resource management policies that ment opportunities, thus leveraging private finance. provide investor certainty, among other actions. Public funds are also required to finance activities which do not have private returns in the short term Blue financing should also be considered in terms of such as MPA management and research. Public funds risk mitigation and cost of borrowing. The rise of ESG can often unlock other streams of financing by increas- considerations means many investors are increasingly ing donor confidence, signaling government intent, and reluctant to invest in countries that do not adopt sound providing structures for fund flow management. For environmental policies and management metrics. The example, Indonesia could develop a national conserva- status of oceans resources will increasingly be tracked tion endowment fund to leverage and manage multiple not only by NGOs and international organizations, but streams of financing (including philanthropic, private also by global financial markets. A more diverse range sector, and international development assistance) of investors—and more attractive borrowing terms for for MPA management and related activities with high both private firms and governments—will be interested public value. This would build on experience at local and in Indonesia in the context of sound oceans policy. regional levels (such as that in the Bird’s Head Sea- scape, West Papua). Examples of Consistent with this integrated vision, the policy recommendations made in this such integrated report are mutually reinforcing across sector goals. A growing and sustainable oceans approaches are economy will require resilient communities, fisheries, and ecosystems (Figure 14). For Source: World Bank underway example, growth in MAC tourism requires basic infrastructure development, as well as policies for sustainable ecosystems. Those ecosystems support fisheries while With these Through these measures and others, the GoI has shown strong commitment to in- also providing physical protection to communities and infrastructure. Transitioning steps, tegrated development in its efforts to realize a blue economy. The challenges remain fisheries to sustainable levels of exploitation requires supporting fishers and their Indonesia’s substantial: Both upscaling of existing efforts and implementation of new ideas is communities through skills development, access to finance, and alternative livelihoods, oceans economy required, and the effects of the COVID-19 crisis will be felt for many years. However, or, more directly, through cash transfer programs, which in some cases will facilitate an has a promising the success of recent initiatives, and the foundations laid through systems such as the exit from the fishery sector. 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