Regional business loss estimated at $14 billion as palm oil, tourism suffers
Regional business loss estimated at $14 billion as palm oil, tourism suffers
18 November 2015
published by http://asia.nikkei.com
Indonesia– A widespread haze arising from illegal forest fires in Indonesia that blanketed vast swathes of Malaysia with hazardous thick smog is expected to lead to damages worth billions of dollars across businesses such as plantation and aviation.
Preliminary estimates peg the region’s financial loss to around $14 billion from this year’s haze crisis, including damages to the environment and health, said Herry Purnomo, a researcher at Indonesia’s Center for International Forestry Research.
That dwarfs the $9 billion estimated damage throughout the region during the last most-serious bout of haze in 1997 when El Nino was also particularly strong.
Scientists have warned that this year’s El Nino could produce one of the hottest weathers since records began in 1950. El Nino is the unusual warming of the Pacific Ocean that causes a shift of moist of winds away from their more typical patterns, resulting in lesser rains.
Malaysia’s tourism sector, one of the country’s top foreign exchange earners, has felt the heat. Malaysia Airports Holdings, which operates more than three dozen airports in the country, said passenger traffic suffered during the height of the haze crisis in October.
The company said overall passenger movements, including at the country’s main gateway Kuala Lumpur International Airport fell 5.3% year-on-year in October due to runway closures and cancellations of more than a thousand flights.
“There’s direct impact in terms of loss of tourism, business and cost of health,” said Euston Quah, head of Singapore’s Nanyang Technological University’s economics department. “Indirectly, it would also mean loss of productivity.”
Haze is an annual menace in Southeast Asia. Many planters in the Indonesia’s Borneo and Sumatra islands deliberately set fires to clear land for plantation estates, the cheapest way to do so. This year’s unusually dry weather however, has in-part worsened the fires that spew thick fumes, which the wind carry across the ocean to shroud Singapore and large parts of Malaysia.
The dry weather spells, combined with the haze that cut out sunlight needed for photosynthesis and result in lower yields of oil palm fruits through the months ahead. That risks lower production of palm oil, one of the top exports of Malaysia and Indonesia, which together control a total 85% of global palm oil output.
“I expect the drought to last something like 18 months” that will result in loss of fresh fruits, said Sime Darby’s chief sustainability officer Simon Lord.
Furthermore, haze could drive away insects that usually pollinate oil palm, which could, in turn, shrink the fruit production cycle, he added.
Earlier, smaller rival planter IOI Corp flagged that its output could fall by about 10% this year due to the haze and cautioned that production growth could also decelerate between 3.0% and 5.0% next year.
However, a decline in output could help firm prices of pam oil that had touched six-year lows in August. Robust demand from India, the biggest importer, ahead of the Hindu festival of light, has helped perk up prices despite a record stockpile in October. On Wednesday, crude palm oil futures contract on Bursa Malaysia Derivatives in Kuala Lumpur rose 1% to 2,247 ringgit.
