Businesses Take Heat From Haze in Indonesia

The economic cost of the fires will likely run into billions of dollars
BEN OTTO Wall Street Journal 3 Nov 15;

JAKARTA, Indonesia—Producers of palm oil, rubber and paper are bracing for a financial hit from months of fires and choking haze smothering Indonesia.

The biggest outbreak of fires since 1997 has devastated 3 million hectares of land and polluted the air, damaging agricultural regions that supply companies from palm-oil producer Cargill Inc. to paper giant Asia Pulp & Paper Co.

Indonesia’s monthslong forest fires have destroyed agricultural lands in the country and spread a hazardous smoke over the Asia-Pacific region. WSJ’s Ben Otto reports on the haze’s widespread impact.

The fires, an annual hazard, are often set illegally by farmers on Sumatra and Borneo islands to clear land. The haze—extending across Malaysia and Singapore and as far as the Philippines and Vietnam—can lower crop yields and complicate logistics for companies, besides damaging the health of workers and residents.

This year the fires are worse than usual, exacerbated by the El Niño weather effect that has extended the country’s dry season. The economic cost of the fires will likely run into billions of dollars, according to the Indonesia-based Center for International Forestry Research.

Cargill said oil palms on its plantations are already showing signs of damage from poor sunlight and drought that presage smaller crops yields in one-to-two years.

“Historically, El Niño events have an impact of anywhere between 4% to 20%” on crop yields, said John Hartmann, chief executive of Cargill Tropical Palm Holdings Pte. Ltd.

Indonesia’s rubber association told Antara state-news agency on Sunday that the haze would cut output by up to 300,000 metric tons from September through February, a decline of more than 20%.

Trees for pulp and paper, one of the main industries in Southeast Asia’s most populous country, are less sensitive to drought conditions, but companies expect to be hit by the fires.

Aida Greenbury of Asia Pulp & Paper, one of the world’s biggest paper companies, said she expects its pulp production to be hurt by a shortage of pulpwood supply.

Asia Pacific Resources International Holdings Ltd., Indonesia’s second-largest paper company, has redeployed 750 employees to tackle the fires and support communities in the area, likely lowering productivity, according to a company spokesman.

In Papua province, fire and smoke set off alarms at BP’s Tangguh liquefied-natural-gas facility, leading to a temporary stoppage that lost production of about 15,000 barrels of oil equivalent a day, said Indonesia’s upstream oil-and-gas regulator SKK Migas.

BP country head Dharmawan Samsu confirmed work had stopped for three days to replace air filters, but said its LNG shipping schedule wasn’t affected.

Rain in Sumatra and Borneo in recent days has brought temporary relief, but the national weather agency has forecast the dry season will last until December.

—Deden Sudrajat and I Made Sentana contributed to this article.


Blame Western companies for Southeast Asia’s toxic haze
Global demand for palm oil has led to massive fires in Indonesia and air pollution throughout the region
Heidi Pilloud Aljazeera 3 Nov 15;

I arrived in Singapore two weeks ago, landing in a cloud of haze. For the last two months, my business school classmates in Southeast Asia’s leading financial center have not seen the blue sky and have been warned not to spend time outside, as the haze can get so heavy that breathing becomes dangerous. When they do go outside, they wear masks. The same haze hangs over Indonesia, Malaysia, the Philippines and an ever-growing swath of the region — and it has been happening annually. This year, it has reached record levels of pollution because of El Niño and the resulting delay in the rainy season.

This crisis has received too little attention in the Western media. How could something that has been affecting the health and well-being of such a large portion of the world’s population every year not have made international news until just this week? Especially given that this is an environmental catastrophe to which Western companies have contributed?

Palm oil lies at the root of the problem. Palm oil is in so many products we consume and use that it is nearly unavoidable. Western companies such as Cargill, Archer Daniels Midland and Unilever are part of a supply chain of producers growing, harvesting and processing palm oil into toiletries, food products and fuel used daily in the United States and other countries. This palm oil comes primarily from Indonesia, where over half the world’s oil palm fruit is grown.

Plantations in Indonesia use controversial slash-and-burn techniques to clear land to grow palm for oil. The forest being cleared, however, is not typical forestland with underbrush. Plantations are setting fire to Indonesian peatlands, creating fires that grow out of control and release so much carbon dioxide into the atmosphere that on some days, Indonesia exceeds the U.S. in its output of greenhouse gases.

Senior officials in Jakarta have reacted to the haze with surprising indifference. In response to complaints from Singapore, Indonesia’s vice president has been quoted as saying, “For 11 months, they enjoyed nice air from Indonesia and they never thanked us.” Meanwhile, the Indonesian government has initiated investigations into companies responsible for the slash-and-burn practices, suspending four Indonesian companies, but remains tight lipped about the identities of the other companies being investigated. President Joko Widodo cut short his visit to the U.S. last week to deal with the increasingly disastrous effects of the haze. But for the most part, Indonesia has ceded power to companies to do as they please in the peatlands.

This unprecedented release of carbon dioxide isn’t just dangerously contributing to climate change. The toxic gases released as the peatlands burn cause immediate and long-term health problems for those living under the haze, including permanent scarring of lung tissue, conjunctivitis, bronchitis, asthma and cardiovascular disease, not to mention stunted lung development in children. The immediate effects of the haze have caused 19 deaths in Indonesia as of the end of October. The Indonesian government has had to arrange for military ships to evacuate children from villages in some of the worst-affected areas because of the major health hazard.