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6 September 2017, Gateway House

Innovation’s role in the Blue Economy

The new global emphasis on the Blue Economy is attracting the interest of governments, development agencies, and more recently, social impact investors. A marked change from previous years is the increased participation of developing and coastal economies, which are its very beneficiaries

Executive Director, Gateway House

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This speech originally titled ‘Innovation and Entrepreneurship in the Blue Economy’ was delivered at the ‘International Conference on Maritime Challenges and Market Opportunities: Facilitating Cooperation in the Asia-Pacific’ on 25 August 2017, held at Taipei, Taiwan.

The Blue Economy is an advanced, oceanic version of the Green Economy; it is an extension of it, but involving the ocean’s resources. Taiwan is already advanced in its engagement with it.[1]

To go from Green to Blue is a single leap for developed, industrialised economies like Taiwan, the United States and those in Europe, which have attentive governments and for whom conservation is now a priority. Even China, though single-minded about innovation and industry, is viewing conservation with a similar lens.

But for the developing countries, even the small island nation states whose survival depends on conservation, weak governments have them resorting to taking three leaps simultaneously: to develop industry and commerce along with being environmentally green on land and blue in the oceans and along the coast.

It is difficult despite the fact that they will benefit the most from this change. But as the subject of this session suggests, with some innovation and entrepreneurship, a commercial-green-blue economy can be achieved.

India is taking some steps forward in this direction. Two years ago, the government introduced the concept of Sagarmala[2] – a long overdue, $120-billion initiative to upgrade and further develop the country’s coastal and maritime infrastructure. This is being done with all the elements of the Blue Economy in mind–with port modernisation, connectivity, port-linked industrialisation and coastal community development.

However, years of neglect and indifferent governments mean that this task is massive, and will take decades to achieve. In the meantime, the communities in the region are caught between their old, low-income livelihoods and the potential of better ones.

This is the situation for most of the developing world. Aid agencies like the Asian Development Bank and Australia Aid, and even the European Union can, and have helped, but communities need sustainability and independence.

There is also the strategic imperative: with China becoming assertive in the Indian Ocean and in the Bay of Bengal, a strong ocean economy for India and Asian coastal nations, is vital.

India’s initiatives are of three kinds: private sector, public-private partnerships, and government.

The private investor interest is not typical. Not Alibaba or Goldman Sachs or SoftBank but the Social Impact investor. India has been a leader in social impact investing, and its models are spreading across the region. These investors look for projects with a three-fold outcome: projects which can help a community, which can absorb venture funding, and which offer a limited financial return as also a large socio-economic return.

Last week, for the very first time, a social impact investment was made, citing the Blue Economy in particular. It has Indian management, global funding and an Asian project. Aavishkar-Intellicap Group is an Indian-origin, Singapore-based social impact venture fund, and a global pioneer. It has been operational for over a decade – and stubbornly so, despite the business model of such venture investing never having existed before. It now has 46 investments, and has raised five funds of over $200 million. It has successfully shown that an entrepreneurial approach to development works.

So last week, Aavishkar made a $2 million investment in a fishing community in Sumbawa, lesser Sunda region, Indonesia. (It’s also a strategically important area, as Admiral Chen said earlier this morning.) These small-vessel fishermen provide a product of good quality, but work in a broken supply chain. Aavishkar funded North Atlantic Inc, a Canadian company that sources fish from Indonesia for the North American market, to build a standards-compliant cold storage facility in the same village for processing the high quality fish, which can be shipped immediately to the western market.

This new supply chain will eliminate waste by 50%, increase product value by up to 90%, and help the 26,000 fishermen in the community. It will enhance the community’s inter-generational skill, is environment-friendly, has a modern grading system and technology, eliminates middlemen, provides income and dignity, reduces migration, builds commercial connectivity – in short, this is a nice Blue Economy Cycle completed.

The success of such projects – international in endeavour, innovative in funding structures and entrepreneurial for the locals – will give the Blue Economy in developing countries, and especially in small island nations, a big boost.

The second successful funding option for entrepreneurs is the public-private partnership. For example, Sea6Energy, an oceanic energy and sea-based agri-business with patented technologies, is a Bangalore start-up which received support and $2 million in funding from India’s Centre for Cellular and Molecular Platforms. It started out with the goal of making India energy-independent by using seaweed as a source of oceanic energy too, and has found that its product has a commercial market in India. Mahindra Agribusiness, a big player in India, markets its seaweed product.[3]

Now Sea6Energy is looking for $10 million in funding for large-scale cultivation of seaweed for bio-fuel, and has roped in fishermen on India’s east coast to scientifically learn how to do so. It will likely get the funding – and perhaps more government support.

The third is strategic government investment. Ocean Thermal Energy Conservation (OTEC) is a major area of focus of India’s Blue Economy innovation, especially to power desalination plants in island territories. OTEC has the potential to develop 180 gigawatts across India’s vast coastline – 7,500 km of it. The government and the Indian Navy began work on its first OTEC plant in Kavaratti last year. (Kavaratti is the capital of the picturesque Indian islands of Lakshadweep in the Indian Ocean.) Though initiated by government, this has major potential for private players, who are interested in greenfield investments, backed by power purchase agreements to harness this advantage.

These initiatives, along with India’s new emphasis on oceanic defence and its climate change commitments, has elicited the interest of the chambers of commerce, which are now actively encouraging Indian business to responsibly commercialise the ocean’s resources for food security and defence. The first task force on this subject[4] published its report this summer, co-authored by Gateway House.

India has taken a diplomatic lead on the Blue Economy – with a bilateral working group being set up between India and Seychelles during Prime Minister Modi’s trip to the island nation in 2015. But multilaterally, it will help if regional institutions give the Blue Economy greater importance. In the last two years, the long moribund Indian Ocean Rim Association (IORA) has been revived – with a new Indian interest to back it. Many of the Blue Economy country initiatives, including with Australia, now include IORA. The Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) has also come on board to push and develop cooperation in the Bay of Bengal community. The ministerial meeting in Kathmandu last month gave a clear signal on this.

Also, the African Union[5] is promoting women’s entrepreneurship[6] in the maritime economy. Perhaps a little Indian-style venture funding in Africa could help make those dreams a reality.

More specifically, India and Taiwan can help each other in the following ways:

1. Taiwanese companies, with their vast expertise and technological know how, will find opportunities in upgrading technologies in fisheries, aquaculture, mineral exploration, energy generation, cruise tourism and port modernisation in India.

2. Taiwanese scholars and business leaders can connect better with their counterparts in India and with new entrepreneurs, like Aavishkar, to deepen mutual understanding and cooperation in the Blue Economy. This will be especially beneficial as there is little conversation between Taiwan and India on this issue – at a time when India-China ties are under unprecedented stress. Gateway House has led a task force report on this.

Manjeet Kripalani is Co-founder and Executive Director, Gateway House: Indian Council on Global Relations, and is the former India Bureau Chief of Businessweek magazine.

This speech was delivered at the ‘International Conference on Maritime Challenges and Market Opportunities: Facilitating Cooperation in the Asia-Pacific’ on 25 August, held at Taipei, Taiwan. The title of the speech was ‘Innovation and Entrepreneurship in the Blue Economy’. You can read the event details here.

You can read exclusive content from Gateway House: Indian Council on Global Relations, here.

For interview requests with the author, or for permission to republish, please contact outreach@gatewayhouse.in.

© Copyright 2017 Gateway House: Indian Council on Global Relations. All rights reserved. Any unauthorized copying or reproduction is strictly prohibited

References

[1] Bozzato, Fabrizio, ‘Why the blue economy is the new green in Taiwan’, Globalo, 6 March 2016, <http://www.globalo.com/why-the-blue-economy-is-the-new-green/>

[2] Ministry of Shipping, Government of India, Sagarmala, <http://sagarmala.gov.in/>

[3] Kulkarni, Mahesh, ‘Sea6 Energy looks to raise $10 million to fund research’, Business Standard, 15 May 2015, <http://www.business-standard.com/article/companies/sea6-energy-looks-to-raise-10-million-to-fund-research-115051501182_1.html>

[4] Bhatia, Rajiv, Blue Economy Vision 2025: Harnessing Business Potential for India Inc and International Partners (Mumbai: Gateway House, Indian Council on Global Relations).

[5] African Union, African Women’s Rights through the Blue Economy, (Addis Ababa: African Union, 2001).

[6] Dudman, Jane, ‘Blue economy: why women must ride the wave of Africa’s maritime sector’, The Guardian, 3 April 2015, < https://www.theguardian.com/global-development/2015/apr/03/blue-economy-women-africa-maritime-sector-nkosazana-dlamini-zuma>

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