Blue Economy
Coasts and oceans are some of the most productive ecosystems on the planet, providing an array of services that directly and indirectly support economic activity and growth. Services including protection from natural hazards; weather regulation; shoreline stabilization; carbon sequestration; wild-catch fisheries; energy from wind, waves and offshore oil; sea bound trade; tourism; and many others all provide the foundation for an estimated 3 to 5 trillion dollars of annual global ocean economic activity. In some East Asian countries, the ocean economy can account for 15-20% of total GDP.
The concept of "blue economy" has emerged as an important approach to driving sustainable development of coasts and oceans, and a number of international organizations like the United Nations and Asia-Pacific Economic Cooperation (APEC), along with several East Asian economies, have taken up the call for developing blue economy in the region. Ministers from ten East Asian countries signed the Changwon Declaration in 2012, affirming their commitment to developing blue economy.
The private sector plays a critical role in building a blue economy. Across the entire economy, the top 100 environmental externalities for business are estimated to cost around $4.7 trillion a year. Companies increasingly recognize the value inherent in managing environmental and social issues, which could be as high as 25%-70% of earnings before interest, taxes, depreciation and amortization (EBITDA). More than 50 studies now demonstrate that companies leading on environmental and social performance financially outperform their less sustainable peers.
INDUSTRIES IN THE BLUE ECONOMY
Companies in a number of industries in East Asia are well positioned to capitalize on regional efforts to build a blue economy, partnering with government to develop investments and ensure the sustainability of their coastal and marine operations.
Eight of the top fifteen fish producing countries in the world are in East Asia, with exports valued at $136 billion. Asia accounts for 84 percent of all people employed in the fisheries and aquaculture sector worldwide and 68 percent of the global fishing fleet. By 2030 Asia could consume 70% of fish globally.
Ninety percent of all goods in the world are transported via shipping. Five out of the top six shipping economies in the world are located in East Asia, along with nine of the top ten busiest container ports (by volume).
Travel and tourism generates US$7.6 trillion annually—9.8% of total world GDP—and support 1 in every 11 jobs. Eighty percent of all tourism takes place in coastal areas, with beaches and coral reefs amongst the most popular destinations. International tourism in Asia-Pacific has shown stronger growth than other parts of the world.
Asia’s demand for energy is expected to increase 40 percent by 2022, and China will become the world’s top consumer of oil. Globally, offshore fields could account for 34% of worldwide crude oil production by 2025. Asia will be the primary global buyer of liquefied natural gas (LNG) in the coming decade, requiring substantial coastal infrastructure.
Asia accounts for nearly half of all global manufacturing output, half of this from China. The ASEAN region accounts for 7% of global exports, making it the fourth-largest exporting region in the world, from auto-parts in Thailand to apparel and textiles in Vietnam. The top 5 shipbuilding countries in the world are all in East Asia.
Demand for metals continues to increase, but known reserves of certain resources are dwindling. The ocean floor contains economically valuable mineral deposits including gold, copper, cobalt, nickel and rare-earth minerals. Some deep sea deposits contain ores with up to 10 times the proportion of metal compared to deposits found on land.
Technically exploitable marine-based renewable sources hold the potential to more than meet all current global energy needs. Asia Pacific is expected to reach 1.5GW of new wind energy capacity by 2020, and governments in the region are actively seeking ways to develop marine energy resources including wave, tidal, thermal gradient and biomass.
The marine environment offers a new frontier of biological resources for developing a range of products from pharmaceuticals and chemicals to personal care products. The demand for pharmaceuticals from marine species is anticipated to grow to $8.6 billion by 2016. China, Korea, Japan, Malaysia and the Philippines all consider marine biotechnology in their investment strategies and growth plans.
A significant market need exists for companies providing marine technology and environmental services including oil spill response, environmental consulting, marine scientific services and IT and data solutions, among others. For instance, wastewater treatment technology and services are needed to address the 65% of all sewage in Asia that's dumped into the ocean without any treatment. IT-enabled solutions are needed for combating illegal, unreported and unregulated (IUU) fishing, an issue costing an estimated $23.5 billion annually.
Blue Economy for Business in East Asia:
Sustainable development has become a strategic consideration for companies and investors looking to position themselves competitively amidst disruptive forces in the coastal and marine environment, such as a growing population, technological advances, climate change, loss of coastlines, marine pollution, overfishing and other pressures on resources. Companies are exposed to a number of operational, regulatory, reputational, market and financial risks related to proper management of these ecosystems, where business value could be as high as 25 to 70 percent of earnings. “Blue economy" has gained popularity as a potential driver of sustainable economic growth in the region, but the concepts has remained unclear, particularly for business. The report explores development of blue economy and its particular importance in the East Asian region, offering a practical definition and framework for business. Including surveys of companies operating in the region, 9 key blue economy industries are examined, with examples of important trends, risks and opportunities in each industry, along with governance, investment and other importance considerations for growing a blue economy in East Asia.
Coastal ecosystems face increasing threats that diminish the ecological health, environmental resilience and socioeconomic potential of these rich areas. The United Nations Development Programme (UNDP) reports that impacts from overfishing, marine pollution, invasive aquatic species, coastal habitat loss and ocean acidification cost the global economy an estimated US$350 to US$940 billion every year. Overall, available funds devoted to protecting ecosystems and biodiversity remain small in comparison to the cost of protecting, restoring and maintaining these important resources. By some estimates, the financing gap exceeds at least US$300 billion per year and may reach into the US$ trillions. More investment is needed to protect and enhance critical coastal and marine ecosystems while contributing to sustainable development. The report explores the current financial funding flows of an estimated US$10 billion to integrated coastal management (ICM)-related sectors across the grants and investment capital spectrum in 8 countries in East Asia. Regional and country-level trends in ICM funding are identified from bilateral and multilateral donors, foundations, development finance institutions, corporations, impact investments and commercial investors across 10 related coastal and marine sectors, along with recommendations for increasing investments in these sectors.
