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Transformative approach of investment from traditional to blue

Transformative approach of investment from traditional to blue

At present, mankind is in an era of major development as well as profound transformation and change. The trend toward multi-polarity and economic globalization is surging. IT application in social development and cultural diversity are making continued progress. A new round of scientific and industrial revolution is in the making Interconnection and interdependence between countries are crucial for human survival so, outweigh factors causing war, and the trend of Investment, development, cooperation and win-win outcomes has gained stronger momentum.

Our Earth is a blue planet, where ocean covers 70% of the Earth’s surface and connects all humanity. Mankind obtains resources from the ocean, exchanges commodities, and spreads culture through navigation. The blue planet inhabited by humans is not divided into individual islands but connected by the ocean as a maritime community with a shared future so, in the context of global megatrends, such as direction of Investment, population growth, climate change, concerns for food security and energy demand, our relationship with the ocean has become more close and complex.

Beside this marine ecosystems confronts various issues ranging from community-level concerns to broad environmental and economic issues such as overfishing, coastal hypoxia, and ocean acidification so, investments are needed to catalyze blue growth in the form of new public and private financing. Such investments could deliver net socioeconomic benefits exceeding US$1 trillion per year.

The private sector represents an important source of investment capital, while donor and government have the capacity to catalyze private sector investment in the blue economy. It is well established that there is no shortage of private capital available. Investors seek opportunities to diversify and find growth in new asset classes with appropriate returns on capital, if risks (real and perceived) can be appropriately managed by the state. However, experience from different parts of the world indicates a number of continuing challenges and constraints to investment in the blue economy. First and foremost is the time and effort it takes to establish a new asset class with the appropriate levels of risk and return. According to The Global Impact Investing Network’s 2018 Annual Impact Investor Survey, the most commonly cited challenges by investors include:

To address some of these challenges, international organizations are experimenting with a number of different approaches for attracting investments. Approaches include investing patient capital, developing a project pipeline for other investors, launching incubators and accelerators, creating seed and early-stage investment vehicles, conducting advocacy for improved access to finance, launching funds targeting social and environmental impact, and investing in under-banked markets. International organizations can function as intermediaries, providing technical assistance to investees and project developers, supporting investing for social and environmental impact through:

These intermediaries can help to address the “missing middle” of enterprises and investments requiring technical assistance and capacity development while helping to transition development-oriented projects to become investment-ready for more traditional investors. Pakistan has about 990 km long coastline, an Exclusive Economic Zone of 240 000 sq. km, and an additional continental shelf area of about 50,000 sq. km, making Pakistan an important coastal state. The exclusive geostrategic position of Pakistan lends its ports a unique significance concerning maritime trade. Furthermore, the construction of Gwadar as a transit and transshipment port under CPEC has further augmented Pakistan’s maritime potential as a key player in Indian Ocean Region.

Blue economy of Pakistan offers a wide range of maritime sectors peculiar to the geostrategic and economic realities of the country. It includes conventional maritime industries, namely fisheries, coastal tourism, maritime transport, etc. and newly emerging areas of aquaculture and marine biotechnology, deep sea-bed mining, resource extraction, oceanic renewable energy, and maritime tourism. The construction and operationalization of Gwadar Port have enhanced the scope of maritime transport in Pakistan.

Noteworthy, maritime transport industries that offer great opportunities for investment in Pakistan are port development and coastal urbanization, tourism, shipbuilding, ship-breaking/recycling, and transshipment companies. Being the 5th most populous economy globally with a population growth rate of nearly 2 percent, Pakistan might face precarious food security challenges in the future. The inadequacy of tax revenues and the balance of payment situation add to the economic woes of Pakistan. The extreme vulnerability to climate change needs new forms of decision making, such as investing more into blue  economy because Pakistan might face food security problems related to the limited land and water resources.

In a post-COVID-19 world, diversifying the economy beyond land-based avenues of investment remains difficult due to lack of capital but paradoxically remains a significant option to spur economic growth in Pakistan. Thus, Pakistan’s ocean and oceanic resources hold great potential to be leveraged, keeping up with the international practices of inclusive growth and community development.

Although, the government is giving attention to the shipping sector up to some extent, after decades of neglect. After announcing the year 2020 to be the year of Blue Economy, the government did the right thing by amending the Merchant Marine Policy, 2001. The amended policy provides a range of incentives to private investors like reduction in gross tonnage tax, first berthing right to flag carriers, acceptance of freight charges in Pakistani rupees along with US dollars, long term finance facility, and other fiscal incentives. The provision of these incentives is highly laudable and will increase the size of the sector.

Ministry of Maritime Affairs has sought a phased policy to transform and leverage the sector’s real potential. However, several measures are yet to be taken to improve the performance of the sector. Another significant factor is the competitiveness and capacity of the government bureaucracy to implement the policies. The lack of investment in training and infrastructure with lengthy processes makes the whole system slow and unattractive for investment despite these right policies so, there is a strong need to frame a new comprehensive marine policy that must include each and every sector of the blue economy to ensure optimal use of ocean resources, rather than sticking to few ordinances and regulations. This will require all stakeholders input; the stakeholders having the responsibility of governance is of core importance to kick start blue economy development.

“The World Is Blue: How Our Fate and the Oceans Are One ”

It is recommended that,

Pakistan has a unique geostrategic location that offers opportunities and challenges as well. Geographical location, investment, and timely implemented policies are important in sea trade and ports development. For instance, the Middle Eastern countries incorporate about 3 percent of world GDP and handle about 20 percent of seaborne trade. Further, transshipment accounts for 53 percent.

Pakistan can serve as a viable and most effective economic transit route to land-locked Central Asia and neighboring countries. China Pakistan Economic Corridor (CPEC) can spur economic activity in Pakistan and regional countries through roads and railway networks, whereas ports at the Arabian Sea will provide global connectivity. The Marine economy is one of the main pillars of economic structure, which needs a proper regulatory authority to monitor and evaluate it. It will play a critical Role in the economic growth of Pakistan. This sector is facing numerous challenges like lack of institutional capacity, poor governance, and investment. The sector needs well-thought-out actions from the government including ease of business processes. The revenue from the sea routes transport system can be improved.

The government has to play an important role to enhance ships fleet and increase the share of GDP. In addition, maritime tourism can generate $1-2 billion annually through domestic/international tourism and employ coastal community people and through such transformative approach we are able to strengthen private investments in the blue economy to address the long-term sustainability of oceans and coastal economies so, it’s right time to invest in blue gold that ensure economic prosperity of Pakistan through blue growth.

“Even if you never have the chance to see or touch the ocean, the ocean touches you with every breath you take, every drop of water you drink, every bite you consume. Everyone, everywhere is inextricably connected to and utterly dependent upon the existence of the sea.”

(Sylvia A. Earle)

The author is in Faculty Department of H&SS-Bahria University Karachi

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