Site icon Conservation news

Indonesia fires cost nation $5 billion this year: World Bank

Peat fire in Indonesia. Photo by Rhett A. Butler.

  • Land and forest fires in Indonesia cost the country $5.2 billion in damage and economic losses this year, equivalent to 0.5% of its economy, according to a new analysis from the World Bank.
  • Half of the estimated economic loss came from the agriculture and environmental sectors, as fires damaged valuable estate crops and released significant greenhouse gas emissions to the atmosphere, estimated at 708 million tons of carbon dioxide equivalent (CO2e).
  • The actual economic loss could be higher as the World Bank hasn’t taken into account the impacts of the fires on the public health and on the image of Indonesia’s palm oil industry.

JAKARTA — Land and forest fires in Indonesia cost the country $5.2 billion in damage and economic losses this year, equivalent to 0.5% of its economy, according to a new analysis from the World Bank.

The World Bank calculated the figure based on the fires’ impacts on the nation’s agriculture, transportation, trade, industry and environmental sectors.

The fires burn annually across Indonesia’s vast peat swamp zones, which have been widely drained and dried for planting. They produce a toxic haze that blankets parts of Indonesia as well as neighboring countries. This year’s fires had burned nearly 10,000 km2 (3,861 mi2) of land as of October, according to the environment ministry.

This year’s fires and haze, the report said, “led to significant negative economic impacts, estimated at $157 million in direct damage to assets and $5 billion in losses from affected economic activities.”

Half of the estimated economic loss came from the agriculture and environmental sectors, as fires damaged valuable estate crops and released significant greenhouse gas emissions to the atmosphere, estimated at 708 million tons of carbon dioxide equivalent (CO2e).

The World Bank predicts the economic impacts to be long lasting because production of affected commodities such as perennial crops and timber require at least two to five years to harvest.

“Hence, the economic growth in 2019 and 2020 is predicted to be lower by 0.09 and 0.05 percentage points, respectively,” the report said.

In 2015, the disastrous fires that razed 26,000 km2 (10,038 mi2) of lands and forests, were estimated to cost Indonesia at least $16.1 billion, equivalent to 1.9 percent of 2015 GDP.

The World Bank estimates that the economic toll would be more severe at the provincial level, with a decline of up to 1.5 percentage points in affected provinces’ GDP growth in 2019.

Central and West Kalimantan were the worst-affected provinces the most, with losses estimated at 7.9% and 6.1% of their respective GDPs.

An analysis by the University of Riau estimates that Sumatra’s Riau province could suffer from 50 trillion rupiah’s ($3.5 billion) worth of economic loss due to this year’s fires.

“The loss comes from disruption in trade, service, culinary, agriculture activities as well as delay in flights,” Suwondo, the university’s environmental study center coordinator, said as quoted by Tempo.

Doni Monardo, the head of the national disaster mitigation agency, the BNPB, said the government was well aware of the economic impacts of the annual fires.

“The president has said that if fires have broken out, they’re difficult to be extinguished,” he told Mongabay. “The losses are from various aspects, such as health, aviation and security, schools closing down and people not working. They are very harmful.”

Doni added that the agency would use the World Bank’s 2019 report for future reference.

“The BNPB doesn’t have experts [to calculate these figures],” he said. “The expert is the World Bank. So just use one data [from the World Bank] as a standard. The 2015 data [of economic loss] is also from the World Bank. We need to have a standard.”

A group of locals in West Kalimantan participates in a flag-raising ceremony amid toxic haze from nearby peat fires. Image by Aseanty Pahlevi/Mongabay Indonesia.

Health impact

The World Bank said it did not take into account the long-term effects of repeated exposure to haze on human capital, such as acute respiratory illnesses and reduced quality of education due to affected health of teachers and students.

As of September 2019, over 900,000 people had reported respiratory health diseases and hundreds of schools in Indonesia, Malaysia, and Singapore had to temporarily close.

An analysis by Madani, an environmental NGO, found that this year’s fires choked at least 45 districts and cities around Indonesia with high levels of PM2.5, a fine particulate matter small enough to penetrate deep into the lungs and cross into the bloodstream.

According to the World Health Organization, PM2.5 causes acute respiratory issues such as asthma and is increasingly linked to death from heart and lung disease.

In Riau, Madani found that the haze emitted from fires in the province was linked to various diseases, with upper respiratory infection being the most common illness.

In 2018, 31.4 percent of pneumonia cases on children under the age of five was in Riau.

Madani executive director Teguh Surya said sometimes the health impacts from the fires and toxic haze weren’t detected until the fires were gone.

“This year’s fires might be over now as rain starts to fall, but the disaster doesn’t end,” he said. “There are long-lasting impacts that could last for years. The impacts aren’t just today, but have to be calculated for the next 20 years.”

According to a recent study published in GeoHealth, exposure to air pollution from Indonesian fires will cause some 36,000 premature deaths per year on average across Indonesia, Singapore and Malaysia over the next few decades if current trends continue – that is, if no comprehensive land management strategies, such as peatland restoration, are undertaken.

Therefore, Teguh called on the government to consider the long-term impacts of the recurring haze and fire episode when tackling fires.

“This is a threat to our generation,” he said. “How can the young generation lead the country if they’re sick, or even dead?”

A peat swamp in Sumatra smolders during the 2015 haze crisis. The drainage canals were dug in order to prepare the land for planting with oil palm, but the practice renders the land vulnerable to catching fire. Photo by Rhett A. Butler/Mongabay.

Unaccounted impacts

The World Bank figure also didn’t take into account how the recent fires might damage the image of Indonesia’s palm oil sector, thus affecting trade. Indonesia’s peat swamps are often drained by oil palm planters.

The report said the annual fires had exacerbated the negative global perception of Indonesian palm oil, driving down demand from European countries, and factoring into the European Union’s (EU) plan to phase out palm-oil based biofuel by 2030.

“This year’s spike in fire activities are unlikely to help Indonesia’s bilateral negotiations with the EU through the World Trade Organization,” the report said.

The BNPB’s Doni said the bad image of the country’s palm oil had resulted in some products being labelled with “no palm oil” in some countries.

“We are currently being punished by the international world,” he said during a recent government meeting on the preparation for 2020 fire season. “Biscuits in some countries are labelled with ‘no palm oil’. If this is copied in other major countries that have been utilizing Indonesia’s palm oil, [our market] will keep dwindling.”

Isna Fatimah, a researcher at the Indonesian Center for Environmental Law (ICEL), said the government could start considering these unaccounted impacts when they’re trying to hold companies responsible for fires on their concessions.

So far this year, the Environment and Forestry Ministry has prosecuted 17 companies linked to fires. Nine of them have received their verdicts and ordered to pay a total of 3.15 trillion rupiah ($225 million) in fines.

Isna said the amount of money that the companies had to pay still fall short of what’s deemed to be fair because the damages calculated by the government were usually limited to environmental degradation.

Meanwhile, the money spent by the government on tackling the fires, including outbreaks on company lands, isn’t taken into account when the government sues these companies, according to her.

This year, the BNPB alone spent up to 3 trillion rupiah ($213 million) to extinguish fires, triple the amount it usually spends, while other state bodies like the environment ministry also have their own budget to fight fires.

“The government should start thinking about this so that these costs can be reimbursed [when suing companies],” Isna told Mongabay. “It means that the money spent by the state to mitigate the loss from fires isn’t limited to health and environmental impacts. This might include declining investment in the palm oil industry because it has a bad image. These things should be considered.”


Banner image: Peat fire in Indonesia. Image by Rhett A. Butler/Mongabay.


FEEDBACK: Use this form to send a message to the author of this post. If you want to post a public comment, you can do that at the bottom of the page.