Indonesia forest fires cost $5.2 bn in economic losses: World Bank

Indonesia suffered economic loss worth $5.2 billion due to the extensive manmade forest and land fires affecting at least eight provinces, the World Bank said in a report. The forest fires, releasing a thick haze, forced 12 national airports to halt the operations and hundreds of schools in Indonesia had to close down temporarily. The damage was equivalent to 0.5% of Gross Domestic Product (GDP), which relies on agriculture, transportation, trade, industry, and environmental sectors.

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According to the report, 620,201 hectares of forest and land burned in eight provinces between Jan-Sep 2019, which is more than double the average of areas burned throughout 2016-2018. It is also believed that the affected forest area would have increased in October and November. The prolonged dry season due to climate phenomena such as the El Niño has been considered as one of the reasons for the spike in forest and land fires. El Niño causes reduced rainfall roughly every four years, and a phase in the Indian Ocean Dipole leads to higher sea-surface temperatures.

“The forest and land fires, as well as the resulting haze, led to significant negative economic impacts, estimated at USD 157 million in direct damage to assets and USD 5.0 billion in losses from affected economic activities,” read the report. 

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Effect on Human capital not estimated

In Indonesia, the agricultural and environmental sectors make up over half of the estimated loss due to the destruction of valuable estate crops and high greenhouse gas emissions. The estimate does not include the long-term effects on human capital due to repeated exposure to harmful emissions. It can cause acute respiratory illnesses and reduced quality of education due to the deteriorating health of teachers and students. It has also affected trade relations in the palm oil sector, which provides direct and indirect jobs for at least 16.2 million Indonesians. 

“The negative impacts of forest and land fires are predicted to have consequences beyond this quarter, because production of affected commodities such as perennial crops and timber require at least 2-5 years to harvest,” the report said.

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