Why Southeast Asia deals with pollution on the QT

Indonesian soldiers extinguish the fire on burned peatland and fields on October 2, 2015 in Palembang, South Sumatra, Indonesia.
Ulet Ifansasti | Getty Images

Countries have gone to war for less. Air pollution from forest fires in Indonesia has choked its neighbors for months, but politically, the regional response has been relatively benign.

And the Association of Southeast Asian Nations (ASEAN) can probably take the blame, or credit.

"The nature of engagement on this issue has very much been following the non-interference, non-confrontational norms of the organization," Helena Varkkey, a senior lecturer for the Department of International and Strategic Studies at the University of Malaya, told CNBC via email. "The nature of ASEAN also is that most sensitive issues are discussed off-the-record (corridor or coffee-break diplomacy)," she added.

"Under ASEAN norms, it would seem that it is more important to keep Indonesia 'on side' (not to offend or overtly pressure Indonesia), with resolving the problem more of a secondary concern," she said.

That may be a factor in the recurring, annual nature of the forest fires, which are deliberately set in Indonesia's rainforests to clear land, generally to produce palm oil and paper products.

Another factor is that ownership of the companies involved in the burning can cross borders.

"Commercial plantations, many of which have Malaysian and Singaporean links, have been found to be a major source of these fires," Varkkey said, adding it blurs the lines between "culprit and victim."

For example, Asia Pulp & Paper (APP) is controlled by Indonesian conglomerate Sinarmas Group, itself controlled by the Widjaja family, which also has Singapore-listed palm-oil player Golden Agri-Resources under its umbrella.

Under the Transboundary Haze Pollution Act, Singapore's government required APP to submit information about its Indonesian suppliers and fire-fighting efforts; APP has said it has a "no burning" policy, but conceded to the Straits Times last month that there have been fires on suppliers' land. That doesn't prove who started them, the company added.

This year, a lack of rain and an El Nino weather system has meant the air pollution caused by the fires, colloquially called "the haze," has been particularly severe and long-lived this year, covering Southeast Asia in air pollution. That's caused cancellations of flights in Thailand, Singapore, Malaysia and the Philippines, as well as forcing some schools to close. Singapore's air quality began to worsen in August and first entered unhealthy levels in September.

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The fires have covered around 2.1 million hectares from June 21-October 20, Indonesia's National Space and Aviation Agency calculated, according to a Nasional newspaper report. By comparison, Singapore itself is only about 70,000 hectares in size.

The Pollutant Standards Index, a global gauge of air quality, climbed over 400 in parts of Singapore over the September-to-October period, although so far in November, it's fallen to less-gritty levels, mostly hovering between 50 and 100, according to the National Environment Agency (NEA). A level between 100 and 200 indicates unhealthy air quality, while levels above 300 are considered hazardous. Where the fires have been burning in Indonesia, in Kalimantan and Sumatra, PSI has been over 2,000, according to reports.

The health impacts can be huge and immediate: a recent study in the U.S., focused on Salt Lake City, found that on days with poor air quality - defined as over 25 PSI - heart disease patients were about 15 percent more likely to have the most severe type of heart attack. Other effects can range from respiratory symptoms, such as coughing and asthma attacks, to fatigue and headaches.

There are some signs that the rest of the region is becoming less tolerant of Indonesia's foibles.

"We should expect less haze in the future. Because of (this year's intensity), so much pressure (has come from) both Singapore and Malaysia," said Euston Quah, the head of the economics division at the National University of Singapore.

"The most important factor is Indonesians themselves are suffering from the haze," he added, noting some estimates put the damage there at around $40 billion and that many there are "fed up."

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One Indonesian agency, the national disaster agency, Badan Nasional Penanggulangan Bencana (BNPB), hasn't minced words, with a spokesperson last month calling the fires "an extraordinary crime against humanity."

The country's security chief, Luhut Panjaitan, also said in late October that Indonesia's weather agency had failed to predict the severity of the El Nino impact, Reuters reported.

Indonesia's government didn't immediately respond to an email from CNBC requesting comment.

Quah's study of the 1997 haze, at the time the worst-ever, lasting around three months with PSI levels topping out around 226, found that the pollution cost Singapore tourism alone as much as $200 million. That would be around $300 million in inflation-adjusted 2015 dollars.

Most years, the haze only lasts a few weeks, helping to dampen the total price tag. But Quah expects the costs this time will be higher than in 1997.

Analysts point to Singapore's Transboundary Haze Pollution Act, passed in 2014 after 2013's particularly bad bout of haze, as a key change. The act allows the country to pursue companies that cause unhealthy levels of pollution in the city-state, even if the fires are outside its borders. Malaysia is considering a similar law, according to local media reports.

Varkkey also points to signs of change, including the new law.

"When Singapore reached its highest PSI of 400 in 2013, it began to take a more direct and confrontational tone towards Indonesia over this problem," she said.

Singapore's official statements also appear to be more direct.

"This is a deliberate, man-made tragedy, vandalism against society, against the environment, and ultimately, against ourselves. It has impaired the health of millions of people, compromised the safety of aircraft and damaged our regional economy," Vivian Balakrishnan, Singapore's minister of foreign affairs, told the Responsible Business Forum on Sustainable Development earlier in November, according to Singapore media reports.

He called for increased pressure on "errant" companies. The Ministry of Foreign Affairs declined to comment.

The Singaporean Government has served notice on at least six Indonesian companies under the act so far this year, including APP. If a company is convicted after the court examines the data, it can be fined up to 100,000 Singapore dollars ($70,359) a day for every day there is haze in Singapore, with additional fines if the company doesn't comply with a preventive measures notice.

"This could be a turning point for the nature of engagement," Varkkey said, adding that focus was starting to shift from a "reactive" effort to extinguish fires toward prevention.

But while the 2013 act marked a change of political tone, it's not clear how much pressure it actually brings to bear on haze-causing companies or Indonesia itself.

For one, some complain that the 2 million Singapore dollar cap ($1.4 million) on damages limits the Transboundary Haze Act's bite, although civil suits are also allowed under the act.

Additionally, it's a tough to enforce: Figuring out who owns the land being set alight is no easy task in Indonesia. In the World Bank's annual Ease of Doing Business survey, Indonesia ranks 131 out of 189 countries when it comes to registering property. By comparison, China ranks at 43.

There are, however, other signs of increased pressure over the haze this year.

Singapore's largest retailer, the government-linked NTUC Fairprice supermarket and convenience-store chain, which has nearly 300 outlets in total, announced early in October that it would strip all paper products supplied by APP from its shelves.

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The move follwed the Singapore Environment Council saying it temporarily wouldn't let the paper-products company use a "green label" certification. Local media also reported that Singapore-listed Sheng Siong supermarkets and Cold Storage supermarkets, which falls under the Jardine Matheson umbrella, also joined the boycott.

At the time, APP said that it had invited Singapore officials to visit its Indonesia operations to demonstrate its no-burning policy, adding that "thus far no supplier has been proven to be involved," according to Channel News Asia. APP didn't immediately return an emailed request for comment.

A product boycott of this scale may be unprecedented in usually quiet Singapore. But there's always the possiblity that the focus on changing the approach to the annual fires will fade.

"Because of the seasonal nature of the haze, people tend to forget about it once it is cleared up (out of sight out of mind)," Varkkey noted.

Air quality in Singapore has notably improved in November, although this may be due to the beginning of the regional rainy season.

APP also noted an improvement in its firefighting efforts.

"The rainy season has started in parts of Sumatra, Kalimantan and Java this week, which has helped to significantly reduce the number of hotspots," APP said in a press statement last week.

Aida Greenbury, APP's managing director of sustainability, said in the statement that the company was working on prevention efforts for next year, such as blocking canals to raise plantation water levels, as dry El Nino conditions are set to persist well into 2016.

—By CNBC.Com's Leslie Shaffer; Follow her on Twitter @LeslieShaffer1