Sea-level rise should be seen as budget and finance issue

Low-lying urban areas such as Jakarta must allocate more funds for protecting against sea-level rises. Photo: Kompas / Hendra A Setyawan (HAS)

Key takeaways

• A former Indonesian finance minister says sea-level rise must be treated as a critical budget and finance issue, rather than an environmental risk. Major Asian hubs like Jakarta, Singapore, Bangkok and Manila must commit significant spending to protective infrastructure and mitigate economic stability risks.
• In addition, rapid Himalayan glacier melt threatens water supplies and hydropower capacity in many Asian countries. Preliminary analysis suggests the scale of recent disasters, such as flash floods in Sumatra, now causes more significant and protracted damage than historic events such as the 2004 tsunami.
• Successful climate adaptation for developing Asian countries requires addressing high indebtedness which  hinders their ability to secure necessary financing. Innovative approaches like applying debt swap agreements to fund adaptation projects and embedding climate mitigation into national development planning could help.

Sea-level rise should be treated as a budget and finance issue, rather than simply an “environmental risk”, said a former Indonesian finance minister.

In a speech given at the National University of Singapore’s Sustainable and Green Finance Institute summit, Bambang Brodjonegoro, dean and chief executive officer of the Asian Development Bank Institute, said that major metropolitan areas in Asia such as Singapore, Jakarta, Bangkok and Manila need to start setting aside more fiscal spending for protective infrastructure.

Rapidly melting glaciers in the Himalayas, where some of the world’s highest mountains holding the largest concentration of perennial ice outside of the polar regions are located, poses a threat not just to Asia’s water supply, but also to renewable energy capacity, said Bambang.

For instance, hydropower accounts for 14.5% of south and south-east Asia’s total electricity generation. The region’s hydropower is largely generated from the Ganges, Mekong, Yangtze and Yellow rivers, which all originate from the Himalayan glaciers.

In the short term, these rivers, which support around 1.9 billion people in Asia, are expected to flood more frequently, but could eventually run dry as glaciers shed their ice at a faster pace.

Any changes in river flow and water supply will also threaten agricultural production, contribute to sea-level rise and increase coastal flooding, which will in turn impact long-term development and economic stability, said Bambang.

“If you look at the hydro-meteorological disaster around the region, now the scale is much bigger than the impact from volcanic earthquakes or tsunamis, because it happens in different parts of the world, and the size and scale of the disaster itself has become more significant than before,” he said.

For example, preliminary analysis shows that the flash floods in Sumatra last year, unleashed by a rare equatorial cyclone, had more severe impacts than the 2004 tsunami that devastated the same region, said Bambang.

“The area that was impacted was so big [that] it made the recovery process much more difficult because you have to recover many lives, infrastructure and economies in different parts of northern Sumatra,” he said.

As such, coastal flooding is becoming a fiscal issue in Indonesia and the rest of Asia, given that more spending will need to go towards protecting infrastructure against damages that could lead to business interruption and productivity losses, as well as disaster response and recovery, said Banbang.

Indonesia, for instance, has plans to build a US$8bn seawall stretching over hundreds of kilometres along its northern coastline to protect its most populous island of Java from rising tides, as well as sinking infrastructure as a result of groundwater over-extraction.

Adopting the approach that Singapore has taken with Marina Barrage, a coastal defence system that also serves as a reservoir to expand the nation’s water supply, the megaproject will also involve investments into drinking water networks that will reduce the need for groundwater pumping.

However, while the government is fundraising from private investors and through innovative financing schemes, critics have warned that the giant sea wall – which costs over double what Indonesia would need to build a new capital city from scratch – could inadvertently add to its debt burden.

Tackling high indebtedness

Addressing high indebtedness in developing countries, which has been exacerbated by Covid-19, will be one of the key requirements for successful adaptation financing, said Bambang.

“In the current situation, it will be quite hard for them to get fresh loans or financing. So from the global perspective, there has to be an effort to solve the high indebtedness issue.”

The UN estimates that developing countries need $310bn a year by 2035 to implement adaptation measures. Yet, less than 5% of these annual investment needs have been met through financing from richer nations, multilateral development banks and international institutions to date.

Bambang suggested applying debt swap agreements, which Indonesia has previously signed with Germany to convert part of its debt to investments for public health expenditure, to climate adaptation projects.

In addition, there is a need to make climate adaptation and mitigation a core part of national development planning in Indonesia and the rest of the region where politicians might not see coastal flooding as a risk to credit and asset valuation.

“There are still a lot of people, especially politicians, who are in denial that Jakarta is really sinking and coastal flooding is [here to stay]. They still think all of this is just one time event that might not happen again in the future,” said Bambang. “There has to be a way for the government to convince people that this is a threat to everybody. This is not just environmental impact. This is a threat to economic development.”

Written by

Gabrielle See is an award-winning journalist based in Singapore who has written for Green Central Banking since 2025. She has covered the intersections of finance, geopolitics and energy transition in Asia over the past five years for regional and international publications, including CNBC, Eco-Business, Southeast Asia Globe and the Business Times.