Indonesia's marine load capacity curve: The role of economic growth and financial development in overfishing

This study examines the relationship between economic growth and marine sustainability in Indonesia by testing the Fishing Grounds Load Capacity Curve hypothesis. Using annual data for the period 1980–2022, the analysis employs the Fourier Augmented Autoregressive Distributed Lag approach, which accounts for structural breaks and nonlinear dynamics. The empirical model is specified by linking the fishing grounds' load capacity factor to economic growth (including its squared term), financial development, and trade openness. The findings reveal a U-shaped relationship between economic growth and the fishing grounds load capacity factor, thereby confirming the validity of the Fishing Grounds Load Capacity Curve hypothesis. In addition, financial development has a statistically significant negative effect on marine sustainability, whereas trade openness does not exhibit a significant long-run impact. These results indicate that economic growth initially increases ecological pressure on marine ecosystems but contributes to improvements in ecological capacity at later stages of development. Given Indonesia's vast marine areas, its strong economic dependence on the fisheries sector, and the substantial increase in income levels over the past four decades, the findings provide important implications for other developing island economies. From a policy perspective, restructuring the financial system in line with green finance instruments and sustainable investment criteria, restricting credit channels that finance environmentally harmful activities, and strengthening ecosystem-based fisheries management and monitoring mechanisms are of critical importance.