Indonesian fires could cost US$6 billion, experts say

Indonesian fires could cost US$6 billion, experts say

SINGAPORE (Reuters): Indonesia's forest fires could cost Southeast Asia US$5-6 billion, experts said yesterday.

"The losses are enormous," said David Glover, director of the Economy and Environment Program for Southeast Asia (EEPSEA).

The bill would be equivalent to 2.5 percent of the combined total annual gross domestic product (GDP) of Indonesia, Malaysia and Singapore in actual and indirect costs.

It could mean a loss of at least half a percentage point in economic growth for those three countries in 1998, analysts said.

The $5-6 billion figure would represent the total bill for 1997 and for 1998 based on estimates of damage if the fires continue until the last quarter of 1998. About half the bill is for damage from the smog and the rest for damage to the environment.

EEPSEA, a research group funded by Western governments, and the World Wide Fund for Nature (WWF) in Indonesia have just completed a study of the cost of the damage from the Indonesian forest fires which began in earnest in August 1997.

Many of the fires were started by farmers and logging firms to clear ground. But due to severe drought, they are now mostly raging out of control, destroying vast tracts of priceless virgin forest and agricultural land in East Kalimantan and on Sumatra island.

Smoke is already building up into a gray pall that threatens to lay a thick blanket of choking smog over much of the region, as it did between September and November last year.

If the winds follow normal seasonal patterns, the result would be higher medical bills, fewer tourists and a plunge in manufacturing output, experts say.

EEPSEA put the bill for short-term health-care and losses in industrial production, tourism, air travel and fishing in Indonesia, Malaysia and Singapore in 1997 alone at about $1.4 billion.

But this excludes damage to the environment and long-term health-care problems, such as cancer treatment.

"The loss for timber, plantations and bio-diversity would be worth at least as much again as from the pollution. It could be another $2 billion," said Glover.

The scientists are basing their predictions on the last major Indonesian drought, which occurred in 1982/83 and brought widespread forest fires.

That drought was also partly caused by the El Nio weather phenomenon, a warming of the eastern Pacific Ocean which has shifted winds and rain patterns over the last year.

In 1982/83, the forest fires began in the first year but flared up again in the second in much the same way as they are doing this year, Glover said.

"There were fires at that time which burned more than 3.5 million hectares (8.75 million acres). In 1982/83 the most severe fires took place in the second year because you had a lot of destruction already and underground peat and coal fires were already smoldering."

Togu Manurung, policy adviser at the WWF in Jakarta, said some 47 million Indonesians were affected by the smog in 1997.

"This year, it could easily be that the drought could last until October or November," he said.

Economists say the financial impact on the tourist industry would be difficult to calculate. Figures from Singapore already show a decline of more than 15 percent in tourist arrivals for December and January year-on-year.

The state tourist board has predicted that factors including the Asian financial crisis and last year's smog -- which has hit long-haul tourism -- would mean 8-10 percent fewer tourists in 1998 than in 1997.

But that estimate did not take into account a return of the smog this year.