Southeast Asia has emerged as the world's fourth-largest economic bloc in 2024, driven majorly by the region's blue economy, according to a new report.
However, this ocean-based economy is under increasing pressure from environmental degradation and a severe lack of investment, the Organisation for Economic Co-operation and Development (OECD) warned in its analysis.
The factors threaten both the marine ecosystem and livelihoods of people in Brunei, Cambodia, Indonesia, Lao People's Democratic Republic, Malaysia, Myanmar, the Philippines, Singapore, Thailand, Timor-Leste and Vietnam, according to the report Financing Southeast Asia's Blue Economy.
These places have sections of populations dependent on economic activities linked to coastal, marine and freshwater resources such as fisheries, aquaculture, shipping, tourism and marine conservation.
Overfishing, habitat destruction and pollution are eroding the health of oceans and coastal areas, directly affecting sectors such as fisheries, aquaculture and marine tourism, while also weakening natural coastal protection that supports ports and shipping, OECD noted in the report.
Climate change is further worsening these challenges, the organisation observed. Rising sea levels, stronger storms and warming ocean temperatures are damaging critical ecosystems such as mangroves, coral reefs and seagrass beds, it added. These habitats not only support biodiversity but also protect coastlines from erosion and storm surges.
To tackle this, OECD stressed, stronger investment, better coastal planning and ecosystem-based adaptation are essential.
Despite the importance of the ocean economy, investment remained far below what is needed, according to the analysis. Between 2010 and 2023, only 34 per cent of ocean-related Official Development Assistance (ODA) directed to Southeast Asia supported activities promoting a sustainable ocean economy, the researchers found. Much of the available funding has focused on traditional marine sectors rather than projects that improve ecosystem health, strengthen climate resilience or promote sustainable resource management, they wrote.
Southeast Asia faces a financing gap of nearly $2.1 trillion by 2030, making it difficult to achieve sustainable ocean management while supporting economic growth and adapting to climate change, according to the report. Public funding alone cannot meet this enormous requirement, and many countries continue to struggle to attract long-term private investment for blue economy projects, the authors warned.
At its highest level, only $128.4 million in private finance ODA was mobilised for ocean and coastal activities in Southeast Asia, with investments concentrated in a limited number of countries and sectors.
To bridge the financing gap, OECD recommended expanding blended finance, which combines public and private investment to reduce risks for investors. It also highlighted the potential of innovative financing mechanisms such as blue bonds, debt-for-nature swaps, blue carbon markets, sustainability-linked loans, guarantee mechanisms and parametric insurance. However, these tools require strong governance, sound policies and robust institutional capacity to succeed, the authors added.