Indonesia’s seaweed and shrimp farming sectors have been making headlines as booming industries that address food security, energy and climate concerns, but speakers at the Indonesia edition of Eco-Business’ annual flagship forum said there was a need for a reality check and better quality verification systems to assure wary financiers.
According to a national roadmap unveiled in 2023, Indonesia’s blue economy will be worth US$1.33-$1.36 trillion trillion and account for 15 per cent of the country’s gross domestic product (GDP) by 2045 – up from just 7 per cent of GDP in 2022. The sector is projected to overtake capture fisheries as the primary source of fish by 2030.
The archipelagic nation has also been bullish about blue financing, issuing the world’s first publicly-offered sovereign blue bond in 2023, which it says aims to finance the sustainable management of ocean and marine-based resources.
Yet businesses in the aquaculture sector in Indonesia have not been able to demonstrate that they can scale successfully, particularly as accessing financing is challenging. The case of agritech startup EFishery, which was alleged in January to have inflated revenue figures, has further undermined confidence in the market.
Speaking on a panel at UCFS, Fred Puckle Hobbs, co-founder of blue economy-focused communications consultancy Tathva, said there is considerable potential in Indonesia’s shrimp farming and seaweed sectors, but the Indonesians have not been able to communicate the benefits to potential investors.
For example, he shared that Indonesia-produced shrimps are not viewed as “competitive” against similar products from India, Vietnam and Ecuador, even though they are not deficient in quality; seaweed plays a valuable role in the blue economy, but it is unbankable, because “no one actually understands what growing seaweed at scale means in reality”.
“There is a lot of hype…but there is also a disconnect there that needs to be addressed,” he said.
Banks need to start taking responsibility for financing the sectors that keep us all alive.
Fred Puckle Hobbs, co-founder, Tathva
A “big missing link” is working capital finance from the banks, stressed Puckle Hobbs. “Banks are underperforming,” he said. “Most of [the aquaculture sector in Indonesia] is small practitioner-driven and these people do not have access to financing tools needed to build and scale their businesses.”
At the recently-concluded United Nations Oceans Conference in Nice, France, world leaders called for more blue financing to protect marine life and coasts. In a briefing published in early June, conservation organisation WWF said there are systemic exposures to nature-related risks in the ocean economy that central bankers and regulators need to act on. Hobbs also said very few banks have policies for lending into the blue economy and that this is shocking.
Funding activity in the blue economy has been limited in Indonesia. A report by Singapore-based advisory firm Mana Impact, found that there were about 350 unique funders who provided funding at least once in the blue economy sectors from 2019 to 2024, of which only 170 were repeated exercises, said Puckle Hobbs.
The report states that most “ocean funders” engaged in only one funding activity in the blue economy, reflecting opportunistic rather than targeted participation.
Puckle Hobbs said there was a need for more specialised financing vehicles for funding blue economy projects in Indonesia. “We need to see companies, funds, investment managers, and departments within banks take it upon themselves to learn more about blue economy businesses.”
“Banks need to start taking responsibility for financing the sectors that keeps us all alive,” he said.
Speaking to Eco-Business on the sidelines of the event, he said many seaweed farmers don’t have the basic records or registration information needed to fulfil even the basic requirements of most banks, let alone the assets to collateralise a loan, and require help with data capture and verification systems.
He added that better verification is needed to bring transparency to the sector. Indonesia’s official seaweed production volume for 2024 overstated industry estimates by almost seven times, according to a comparison of government and industry data by Hatch Innovation Services, an aquaculture consultancy.
At the Unlocking capital for sustainability forum in Jakarta, Guntur Mallarangeng, founder of Delos and Dewi Laut Aquaculture (second from right) said the government needs to provide more policy clarity for the aquaculture sector. From left: Dr Andreas Hutahaean, a coastal-marine environmentalist and principal consultant at Blue Carbon; Fred Puckle Hobbs, co-founder, Tathva; and Jessica Novia, co-founder and chief product officer, CarbonEthics. The session was moderated by Cindy Colondam from UNDP. Image: Eco-Business
Meanwhile, Indonesia’s shrimp trade, the country’s largest seafood sector and one of the world’s biggest, has been stagnant, despite a government target set in 2020 to boost shrimp export earnings by 250 per cent by 2024.
On the same panel discussion, shrimp farmer Guntur Mallarangeng, founder of Delos and Dewi Laut Aquaculture, described how hard it is to communicate science-based facts on aquaculture farming to the finance community.
“I’ve been in a room full of bankers trying to explain [concepts such as] salinity, temperature variance and the factors that contribute to the success of a shrimp farm operation, and had to listen to them tap away at their phones, not understanding anything. It is a painful process, but it does need to be done,” he said.
He said that although shrimp farming is one of Indonesia’s most scalable, resource-efficient industries, the sector has seen “no real growth”. “Shrimp farming [in Indonesia] is worth $2 billion today. It was also worth $2 billion five years ago. It was also worth US$2 billion 10 years ago,” he said.
Risky business
Only around 60 to 70 per cent of shrimp farm harvests in Indonesia are considered financially successful, which is typically why banks “do not want to touch the industry right now,” said Guntur.
Tariffs imposed on Indonesian goods by the United States have also hurt industry competitiveness, as 80 per cent of Indonesia’s total shrimp exports are shipped to the US. Mallarangeng noted that the government could be doing more to find alternative export markets for Indonesia’s stagnant shrimp market.
For now, banks are more likely to finance companies further down the shrimp supply chain, such as processing firms, where there is lower risk. “Their factories can be put up as collateral if the business fails,” he said, adding that there is a lack of policy clarity from the government.
Both Guntur and Puckle Hobbs suggested the importance of providing more technical assistance to the aquaculture sector to drive up harvest success rates. Guntur also said that to get financial backing, Indonesia needs to move away from business models like EFishery, while funding should go to companies that are already at a certain scale and “ready to accept the investment”.
“This will show the rest of the finance industry that the aquaculture sector is ready to grow,” he said.
To bridge the finance gap for smallholders, Puckle Hobbs suggested that banks use operational data such as readings from drainage pumps, or even environmental or social data, to get more accurate credit assessments of smallholder businesses.
“At the moment, there is no alignment between the way that banks should be financing the blue economy and the information and realities on the ground,” he said.
Can blue carbon credits fill the funding gap?
Where banks fall short, there is potential for the carbon markets to plug the finance gap in Indonesia’s blue economy.
Jessica Novia, co-founder and chief product officer of CarbonEthics, a Jakarta-based blue carbon project developer, projected that Indonesia’s blue carbon market could be worth US$1.4 billion once established.
Indonesia’s much-delayed carbon trading scheme is expected to come online later this year. Implementation details, such as how carbon projects are verified, are still unclear, Novia noted.
“Trading is only likely by next year, because there are many details that still need to be fixed,” she said.
In October, the Indonesian government signed a carbon market alliance with Japan, and in May, it made a mutual recognition agreement with Gold Standard, a leading carbon credit verifier, that will assess Indonesian blue carbon projects in line with international standards.
Indonesia has some of the richest blue carbon ecosystems in the world, including the largest mangrove forests, which span 3.4 million hectares.
In a keynote address, Gita Sabharwal, UN resident coordinator in Indonesia, shared that the UN is providing technical assistance to Indonesia and working with the government to profile the carbon absorption capacity of seagrass, seaweed and the oceans to better understand how these can serve as carbon stock. The aim is to include these information in the country’s second updated Nationally Determined Contributions (NDCs) that it is expected to submit to the UN by the end of the year.
Unlocking capital for the sustainable agenda in Indonesia will also require working with provincial governments to strengthen their capacity for issuing municipal bonds predicated on “very robust financial assessments”, she said.
“We believe this has the potential to unlock close to US$2 billion for accelerating the green and blue transformation,” she said.
Eco-Business’ flagship sustainable finance and business forum Unlocking capital for sustainability will next be in Kuala Lumpur, Malaysia. The event is held in partnership with UNEP Finance Initiative (UNEP FI) and Capital Markets Malaysia. Join us on 28 July.