How about a blue bond to develop our blue economy?
Bangladesh needs long-term finance for the development of its blue economy. Given our resource constraints, the blue bond can play a vital role in accelerating the development of the blue economy
With increasing populations and scarce resources, countries are always looking for new sources of natural resources. Moreover, with trade becoming as crucial as it is now, controls over a large maritime area can always come in handy and can contribute significantly to increasing their Gross Domestic Product (GDP). This is also why countries often spend a lot of time and resources in locating, planning and exploring ways to exploit maritime resources, and Bangladesh is no exception.
The blue economy is one of the most promising sectors that can take Bangladesh's economic development to the next level. However, to truly exploit the resources under the Bay of Bengal, we may need long-term financing.
Blue economy refers to a sustainable ocean-based economic model where coastal and marine ecosystem resources are explored to increase food security, alleviate poverty, create jobs, and lift the trade and industrial profile, whilst conserving biodiversity and ensuring the welfare of the coastal communities.
The Bay Of Bengal is rich in fisheries and has immense unexplored potential in terms of shipping and coastal tourism, offshore gas exploration, salt production and offshore renewable energy. The Government of Bangladesh, as a signatory of the 2030 Agenda for Sustainable Development, has been engaged in implementing the Sustainable Development Goals (SDGs, 2030), including SDG-14 (Life below water i.e.conserve and sustainable use the oceans, seas and marine resources for Sustainable Development) for the last six years.
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Bangladesh needs long-term finance for the development of its blue economy. However, given how resource-constrained Bangladesh usually is, a blue bond can play a vital role in accelerating the development of the blue economy.
Blue bond has been heralded as the next wave of sustainable financing instruments. It can be used to raise capital for projects relevant to the development of the blue economy. Like green bonds, blue bonds operate similarly to any other debt instrument, by providing capital to issuers who repay the debt with interest over time.
The main difference is that blue bonds dedicate the use of proceeds to marine projects, such as promoting biodiversity and supporting economies reliant on healthy and sustainable fisheries.
The difference between a sustainable bond and a regular bond is the specific use of the funds raised to support the financing of specific projects. Bangladesh has secured a vast maritime area from India and Myanmar and has exclusive economic rights over the said region under the International Tribunal of the Laws of the Seas (ITLOS).
As per the verdict of ITLOS, Bangladesh was awarded 111,631 sq. km of sea area with Myanmar in 2012. The tribunal awarded Bangladesh a full 12 nm territorial sea around St. Martin Island and sustained Bangladesh's claim to a full 200nm exclusive economic zone following the concave nature of Bangladesh's coast.
In 2014, Bangladesh scored another victory in its maritime domain with India, where Bangladesh got 19,467 square km of sea area from the same Tribunal. That is, Bangladesh now has an extended sea boundary which not only increases its naval power, but also opens a new window of opportunity to explore and exploit huge hydrocarbon reserves and other precious minerals.
We must conduct research and exploration efforts in our coastal regions and continental shelf in the Bay of Bengal to potentially harness and manage its huge resources scientifically.
Recently the Asian Development Bank (ADB) and the International Finance Corporation (IFC) have expressed interest in investing at least $10 billion through bonds over the next ten years in Bangladesh to tap into the vast resources of the Bay of Bengal.
By investing in private sector bonds, the IFC is providing capital to companies that may not have access to traditional bank loans or other financing sources, and helping them grow and expand their operations.
Apart from the IFC and ADB, various international organisations, including the World Bank and UNDP, are cooperating in launching the new securities. Blue bonds' expansion as specific instruments to promote the ocean economy will depend on the fulfilment of several prerequisites, such as a pipeline of acceptable large projects, growing awareness of market actors, adequate monitoring and verification procedures, adequate impact management procedures, research and proper feasibility study etc.
We hope that blue bond will be a sustainable finance instrument for the development of our blue economy. It will help us extract our ocean resources easily and scientifically and rapidly accelerate our GDP and economic growth.
Md Muzibur Rahman writes on different issues in the news media, and can be reached at [email protected]
Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.
