Chairman’s Note

Private and Confidential
For SIIA Corporate Members and Advisors
July 2023

Haze Outlook Report

In the past weeks, the SIIA has been addressing the prospects that Singapore and our region will again experience severe haze pollution. This is a recurring problem, arising from fires in Indonesia and, to a lesser degree, Malaysia, often on lands and peatlands associated with plantations for palm oil and pulp & paper. In this note, I wish to briefly recap some of the key points on this issue, drawing from the Haze Outlook, which the SIIA released publicly last week.

Additionally, I wish to share some of the political implications that can arise. These latter points are shared with you as our member and friend (and go beyond what the SIIA and I are currently prepared to say publicly). I, therefore, ask that you keep those latter points confidential.

First, allow me to summarize what is in the public domain about the risk of a severe haze.

1. Singapore Dialogue on Sustainable World Resources (SWR) Dialogue: On 9 June, the SIIA convened the 10th SWR immediately after the ASEAN Official meeting on the haze. Our meeting included a number of key officials from Indonesia. There was an emphasis on the prospects of investment and funding for conservation, the creation of carbon credits, and the use of biomass for a greener form of energy. Earlier that week, Indonesian Coordinating Investment Minister Luhut Pandjaitan claimed the haze was not an issue anymore, with Indonesian prepared to deal with hotter, drier weather.

2. Haze Outlook 2023: Our Haze Outlook report released on 21 June assesses that there is a high risk of a severe haze this year. This was our first “Red” alarm in five years (we use a Green, Amber and Red system to signal the outlook). This assessment concurs with warnings and actions undertaken by the Indonesia, Malaysia and also Singapore governments. We concur with the Singapore government authorities that individuals, companies and suppliers should stock up on masks and review protocols for personal safety as well as business continuity.

3. The Weather Factor: In the report and all communication, we emphasize the driving factor to be the weather. Almost all experts predict an El Nino event, with longer and more severe periods of hot and dry weather. In contrast, the weather of the last three years was wetter than normal. How bad the haze will be remains uncertain, but there is a basis, considering the haze of 2019.

4. Other Factors: Some risk also arises from the high palm oil prices and upcoming elections in Indonesia. The former can drive more small companies to clear land cheaply and quickly with fire. The latter for some local officials not to enforce laws strictly. Our report notes these factors but credits Indonesia for steps taken in these past years to improve the situation and, more broadly, to address deforestation. These are touted as a legacy of the Jokowi administration.

There are additional concerns that we have not voiced publicly. These arise in the event there is a severe haze and can be summarized as follows:

5. Indonesian Expectations and Sensitivity:  The Jokowi government has actively been seeking investment in conservation projects and in carbon credits. Much of this is based on its record in slowing deforestation. In this context, a severe haze occurrence would undermine these efforts. The fires could imply that Indonesian pledges on conservation and carbon credits are not guaranteed (much of the sector is already accused of “greenwashing”) and could put off potential investors.

6. Europeans Against Deforestation: Consider too new European Union rules against products linked to deforestation. The rules require that due diligence on imports (such as palm oil) where there is a risk that the product is linked to deforestation. Neither Indonesia nor Malaysia was named, but their officials are vocal in their opposition towards the EU policy. This shows the sensitivity of these issues.

7. Fires and ASEAN Frictions: A severe haze occurrence can result in political factions and finger-pointing amongst the governments. This was the case during the last severe haze episodes. Since then, much has improved in Indonesia-Singapore cooperation, with many long-standing issues settled and the prospect of increased investment flows. The Jokowi administration sees Singapore as a key partner in mobilizing investment for the new Nusantara capital, a legacy project for the President. Progress on this partnership can be at risk if there is severe haze.

8. Political Factions: Frictions can also arise in Indonesia and the Jokowi cabinet itself. The minister for Environment and Forestry Ibu Siti Nurbaya will be a key person if fires and haze result. She is from a different political party — the NasDem that has openly supported Anies as a presidential candidate. There are also notable policy differences between her and Investment Minister Luhut on carbon credits.  With the elections coming up, a severe haze could be used against the claims by Jokowi of a legacy and attack his credibility. Conversely, if efforts are made to enforce laws directed against smaller companies and small-scale farmers, this could be seen as being adverse to their livelihoods and used as a populist cause.

The SIIA and I will be working from the Haze Outlook to engage the governments and other stakeholders to nudge for prompt and proactive efforts. There remains every need for keen attention and quick preventive actions, especially in the coming months as the weather turns drier.

Yours sincerely,

Simon Tay
Chairman