Developing the Blue Economy in Indonesia

Developing the Blue Economy in Indonesia

Canyon Keanu Can
Teguh Dartanto

Retrieved from: ERIA

Indonesia’s blue economy concept centers on leveraging over 18,000 islands and 3 million square kilometers of exclusive economic waters to drive sustainable growth and marine biodiversity conservation. This framework, valued at approximately $1,334 billion, aligns with national development plans to transform the country into a resilient maritime archipelago through inclusive and sustainable ocean management. Established sectors such as fisheries, shipping, and coastal tourism form the foundation of this economy, while emerging subsectors like marine biotechnology and offshore renewable energy represent the next phase of high-technology growth.

Transitioning to the blue economy requires a shift from unsustainable practices, such as habitat-degrading fishing and harmful tourism, toward a synergized, inter-sectoral approach. Central to this transition is the implementation of maritime spatial planning across provinces to manage the multidimensional challenges of ocean use. High-level political priority is facilitated by specialized coordinating ministries, ensuring that maritime resource use remains aligned with long-term national sustainability goals.

The institutional and regulatory landscape is anchored in legal frameworks that ratify the United Nations Convention on the Law of the Sea, establishing a basis for sovereignty and governance. Numerous regulations govern specific areas including fish resource conservation, environmental protection, and sea lane management to ensure safe and orderly maritime business processes. Implementation involves a complex network of government bodies, supported by international cooperation agreements that focus on green energy transitions and shared maritime transformation frameworks.

Strategic initiatives for a blue future involve a redesigned economic transformation focusing on industrialization, digital transformation, and agricultural modernization. A key component is the development of the Indonesia Blue Economy Index (IBEI), designed to monitor and evaluate progress across environmental, economic, and social pillars. These initiatives aim to strengthen domestic economic integration by building robust maritime hubs at local and national levels.

Sustainable management of fisheries and aquaculture is necessary to address the threat of overfishing and meet the rising demand for fishery products. Aquaculture serves as a critical alternative, having grown by over 100% in the last decade, while capture fisheries are managed through decentralized Fisheries Management Areas. These management systems involve industry and community stakeholders to ensure better marine spatial planning and the collection of sustainable resource fees.

The protection of marine biodiversity and conservation focuses on Indonesia’s status as home to 22.6% of the world’s mangroves and 18% of global coral reefs. Progress involves expanding Marine Protected Areas to a target of 30 million hectares by 2030, using scorecard systems to track management effectiveness. Community participation and national action plans on marine debris are also utilized to resolve land-use conflicts and mitigate the rise of pollution in these sensitive ecosystems.

Coastal and marine tourism provides significant revenue but faces challenges regarding environmental sustainability, particularly in areas like wastewater treatment and forest cover. The Integrated and Sustainable Tourism Development Program addresses these issues by combining infrastructure investment with community empowerment and cultural asset management. The goal is to shift toward nature-based and community-based tourism models that provide economic opportunities without compromising the health of marine resources.

Development in marine manufacturing and construction focuses on expanding renewable ocean technologies, including tidal energy which has a potential capacity of 18 gigawatts. As older oil rigs reach the end of their useful life, policy efforts are directed toward streamlining regulations to support decarbonized shipping and other low-emission technologies. Multilateral cooperation plays a vital role in funding and developing these advanced maritime infrastructures.

Inter-sectoral partnerships are essential for integrating various blue subsectors through public-private partnerships and industrial clusters. Systems for improved data collection and the monitoring of maritime activities facilitate these collaborations, ensuring that macroeconomic indicators are aligned across different government agencies. These partnerships address the environmental, economic, and social pillars of the blue economy to ensure that growth remains inclusive.

Innovative financing mechanisms provide the capital necessary for sector growth through instruments like blue sukuk, coral reef insurance, and outcome-based bonds. Specialized financing institutions work to promote financial sustainability and improve access to finance for small-scale operations. Attracting private sector cash flows allows the government to diversify funding sources beyond traditional state budgets.

Significant challenges and risks include the rapid degradation of mangroves and the inefficiency of current fisheries management, where an estimated 38% of capture fisheries are overfished. Marine plastic debris imposes economic costs exceeding $450 million annually and threatens human health and coastal activities. Furthermore, the complexity of managing a diverse network of stakeholders creates fragmented governance that can slow the implementation of sustainability measures.

Effective policy recommendations emphasize the need for more streamlined institutional foundations to bridge fragmentation in sea governance. Priorities include strengthening the enforcement of existing laws and utilizing the Blue Economy Index for better data-driven policy monitoring. Additionally, the government must provide incentives for underdeveloped subsectors like subsea construction while leveraging anti-poverty programs to ensure the welfare of coastal communities.

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