Haze like the trans-boundary haze in 2015 impacted Indonesia as well as countries in South East Asia (SEA) such as, Singapore, economically. These economic impacts are estimated as it is hard to exact the degree or significance of haze on a country’s economy. However, government of these countries confirmed that the haze did indeed impact economies of countries in the region.
Above is the breakdown of the estimated total economic cost (US $16 billion) of the fires in 2015 in Indonesia alone. This is more than double the damage and losses from the 2004 tsunami (which affected provinces in Indonesia and other countries), and equal to about 1.8% of Indonesia’s Gross Domestic Product (GDP). As shown above, the economic cost is due to losses to agriculture, forestry, transport, trade, industry, tourism, and other sectors. Some of these costs are direct damage and losses to crops, forests, houses and infrastructure, as well as the cost of responding to the fires. Many of the economic losses result from the disruption of air, land and sea travel due to the haze. These damages and losses are expected to have seriously impacted the economic growth rate of affected provinces and the government’s efforts to reduce poverty in the hardest-hit regions, such as Central Kalimantan. Early estimates by Indonesia had indicated that a haze crisis could set Indonesia back by up to 475 trillion rupiah (S$48.4 billion).
Chua Hak Bin, an economist at Bank of America Merrill Lynch in Singapore estimated the impact on Singapore could range from 0.1 per cent to 0.4 per cent of gross domestic product, depending on whether the haze lasts for one month or three.
Haze also affected the economy of other countries in the South East Asian (SEA) region such as Singapore and Thailand. The degree of impact on these economies are questionable as there is no exact way to measure the impact of haze.
Dr Ng said that it has not been the Government’s priority to discover the economic impact of the haze as it was a “short” episode which occurred over two days and a weekend. “I would say that the impact hasn’t been as large as compared to Sars, for example. Singaporeans basically got on with their lives, and I think we need to do that, not only for the economic impact, but because it shows our resilience,” he said.
Despite, haze being incomparable to epidemics like Sars, the haze has shaped Singapore’s economy and behaviour, using an example of how the Ministry of Social and Family Development had rolled out a S$2.5 million fund to help childcare centres and kindergartens purchase air-conditioners or retrofit their centres.
The haze also greatly affects Singapore’s tourism industry.
The worst haze in 1997 cost Singapore $300 million, while a milder event in 2013 led to about $50 million of losses to retailers, hotels, tourism and the economy overall, according to research by Euston Quah, a professor and head of the economics division at Nanyang Technological University.
Singapore is highly dependent on her tourism to boost her economy. Tourist in Singapore spend a lot on retail, tourist attractions and hotels. With the large loss in tourist during the haze period, revenue from the tourism industry decreased greatly as governments declared that it is unsafe for travel when PSI readings are over the healthy limit. Flights packed with tourists delayed or diverted due to unsafe conditions is unavoidable during the haze season. Hence, haze impacted Singapore’s economy greatly.
Not only was Singapore’s tourism affected, Thailand’s tourism industry was greatly affected as well. Popular tourist spots like, Phuket and Surat Thani, had dust levels within acceptable margins, but close enough to the limit resulting in many tourist cancelling their trips as tourists try to avoid the haze-affected tourism destinations in Southeast Asia. As a result, the tourism industry is starting to feel the impact of the prolonged haze.
Besides that, haze affects productivity and economies of scale.
A protracted and severe haze may delay construction projects and slow factory output, according to Weiwen Ng, a Singapore-based economist at Australia & New Zealand Banking Group Ltd.
Many projects and constructions are disrupted due to haze and hence reducing the productivity of countries.