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3 Steps to Realize a Marine & Coastal Natural Capital Accounting System for a Sustainable Marine Economy in Indonesia

Indonesia is home to the largest mangrove area in the world and coral reefs that are estimated to make up 18 percent of the world's coral reefs. Indonesia also has the highest Gross Domestic Product (GDP) in Southeast Asia. In 2019, Indonesia's GDP exceeded IDR15.8 thousand trillion.

Calculating the total output of a country, GDP is commonly used to measure economic growth. It needs to be noted however that GDP does not measure social welfare. For example, GDP does not take into account factors such as citizens’ health and education. In the environmental context, GDP does not factor in environmental degradation or natural resource depletion, such as ​​mangrove forest decline.

Economic activities in Indonesia itself have not been fully aligned with environmental conservation efforts. Take a look at coastal ecosystems. More than 600 thousand hectares of mangroves are currently in critical condition, driven by mangrove conversion for ponds, agriculture and plantations as well as coastal development. Add to this coral reefs degradation. A 2019 report by the Indonesian Institute of Sciences (LIPI) states that 33 percent of Indonesia's coral reefs are categorized as bad and only 6 percent are categorized as good. Destructive fishing such as by bombing, coastal area development and land waste potentially threaten up to 85 percent of Indonesia’s coral reefs. In relation to development, mining permits on small islands as well as reclamation for port infrastructure in Indonesia may also lead to coastal natural resources loss or depletion.

Considering the limitations of GDP in reflecting the interrelation between economic activity and environmental condition, the Natural Capital Accounting was developed as a framework to measure natural capital assets, values and changes, including marine and coastal resources. In the marine and coastal context, the application of Marine & Coastal Natural Capital Accounting may encourage better policy making by facilitating the monitoring of marine and coastal ecosystem trends over time, supporting the evaluation and planning of economic and spatial policies that are sensitive to marine and coastal conditions and potentially serving as a benchmark for coastal land use conversion compensation.

The development of Marine & Coastal Natural Capital Accounting is among the priority actions under Indonesia’s commitment, along with 13 other countries, to sustainable national marine economy transformation. The absence of a Marine & Coastal Natural Capital Accounting system in Indonesia can be seen as an opportunity for relevant stakeholders to develop such system. There are at least 3 steps needed to encourage the development and implementation of Marine & Coastal Natural Capital Accounting in Indonesia.

First, data consolidation among stakeholders. The Decree of the Chairman of the Geospatial Information Agency 27/2019 stipulates that Thematic Geospatial Information (TGI) related to marine and coastal ecosystems is spread across various trustee institutions. For example, mangrove data is managed by the Ministry of Environment and Forestry (MOEF), seagrass beds and coral reefs data is managed by LIPI and fish resources data is managed by the Ministry of Marine Affairs and Fisheries (MMAF). Meanwhile, the monetary valuation of marine and fishery natural resource services involves different agencies, including the Ministry of Finance (MOF) and MMAF.

In that light, the involvement of and coordination among MOEF, MMAF, MOF and LIPI are key to realizing a comprehensive Marine & Coastal Natural Capital Accounting. Such coordination needs to include two more agencies in addition to the four. The first is the Central Statistics Agency (BPS). BPS has a Natural Capital Accounting development mandate under the Integrated Environmental and Economic Accounting System (Sisnerling), which currently covers wood, land, minerals and energy. The second is the Geospatial Information Agency (GIA), which has the authority to integrate various TGI data, including for Natural Capital Accounting.

Second, accounting standardization. An internationally recognized measurement format such as the one for GDP is needed for Natural Capital Accounting. This would result in at least two things: 1) consistent organization of data over time and 2) accounting alignment among countries to allow accurate comparison of natural capital management performances.

To that end, the System of Environmental Economic Accounting (SEEA) framework can be used in the development of Indonesia’s Marine & Coastal Natural Capital Accounting system. The SEEA framework has been used as the standard in the development of Sisnerling by BPS. For marine and coastal areas, Indonesia may partner with such institutions as the United Nations Economic and Social Commission for Asia and the Pacific and the Global Ocean Accounts Partnership, which facilitates capacity building and accounting standardization in several countries.

Third, mainstreaming the accounting system into the policy process. The Low Carbon Development Initiative (LCDI), for example, is proof that Indonesia can take natural capital into account in pushing for an environmentally friendly economic development initiative.

To ensure that value and impact on coastal sustainability are taken into account in development and economic policy-making processes, evidence of the vital economic value of marine and coastal natural capital is needed in addition to basic information on the natural capital assets and changes. Monetary valuation may be applied to the environmental services of such natural capital. Monetary valuation needs to be carried out carefully by taking into account such factors as the potential distortion effect from the use of market price in the valuation on the actual value of natural capital assets.

A monetary valuation would also make it possible for the Marine & Coastal Natural Capital Accounting to be integrated into Green GDP – in which natural capital assets depreciation can be a monetary deduction factor of the GDP. Thus, the impact of coastal ecosystem improvement or decline on the national economy or income can be calculated. However, Green GDP is not currently implemented in Indonesia. Having studied Green GDP before, the Ministry of National Development Planning (Bappenas) could play a role in its development.

With optimal implementation, Marine & Coastal Natural Capital Accounting has the potential to play a key role in strengthening marine and coastal ecosystems protection as well as ensuring a sustainable marine-based economic growth in Indonesia.

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