Southeast Asia in a Haze

Indonesia's fires and Thailand's financial woes should bring change

For the past few months many Southeast Asians have been preoccupied with two key indices - the Air Pollutant Index and the stock market. One measures the health of the environment, the other the health of the economy. Both are in unstable condition.

Forest fires on Sumatra and Kalimantan, the Indonesian half of Borneo, have created vast areas of blinding, health-threatening smog. These fires have been caused in part by land-clearing operations for agricultural development. Normally the northeast monsoon, which starts in mid-October, would lessen the effects of the pollution (known as "the haze") as winds shift and rains douse the fires. However, the weather phenomenon called "El Nino" has delayed the onset of the monsoon and severe air pollution has persisted.

Consequently, the thick, choking smoke from the fires in Indonesia have blanketed Malaysia and Singapore, while reaching as far north as the Philippines and Thailand.

These forest fires are an environmental emergency that will seriously affect the health of millions of Southeast Asians. The Indonesian government has declared that the haze threatens the health of more than 20 million Indonesians. In Kuching, the state capital of Sarawak, Malaysia, the Air Pollutant Index was 839 in late September - well beyond the "hazardous" 500-point level. A day's exposure to pollutant levels of 300 or more is equivalent to smoking a pack of cigarettes a day.

Face masks are in short supply. Many of these masks are not effective as they do not adequately filter pollutant particles. Masks that filter out hazardous pollutants are expensive and beyond the means of many in the region.

The possible ecological effects of the haze on plants, animals, surface and ground water, and soils have not yet been quantified. It is believed that fires are raging across 750,000 hectares of forest. Indonesia is at a loss how to extinguish the blazes because much of the area is peat land and ground that contains coal.

At the same time fires in Indonesia began polluting the region's air, a financial crisis developed in Thailand that has generated market tremors in neighboring countries. Thailand's economic downturn was the combination of at least three factors: overreliance on credit, changing trends in the regional economy, and the haphazard policies of two weak governments that were widely viewed as condoning corruption and injecting politics into economic management.

In August, Thailand received an economic bailout, led by the International Monetary Fund, of more than $17 billion. After a decade of economic growth averaging 8 percent a year, Thailand will be fortunate to reach its forecast of 2.5 percent in 1997. Some doomsayers predict zero or negative growth next year.

Since Thailand floated its currency (the baht) in July, it has lost 44 percent of its value. This devaluation has had a contagious effect on other currencies in the region. In the past three months, the values of the Indonesia rupiah, the Malaysian ringgit, and the Philippine peso have all dropped by approximately 30 percent.

Some influential people in Southeast Asia, most notably Malaysian Prime Minister Mahathir Mohammed, have blamed the region's current economic woes on a conspiracy headed by "Western elites" eager to see Southeast Asian countries stop trying to catch up with more developed nations and "know their place."

Such comments fail to address the large and growing current account deficits and the failed policy responses to these deficits. Thailand's financial crisis should encourage close scrutiny of national policies by neighboring countries. As Southeast Asian countries kept mum about Thailand's financial policies, a crisis of confidence emerged in the region because of this lack of vigilance regarding weak economic and financial management policies.

For the past 30 years, the members of the Association of Southeast Asian Nations (ASEAN) have had a policy of noninterference in each other's internal affairs. Yet economic globalization and the environment are issues that transcend national boundaries, and noninterference is no longer feasible in matters such as these. ASEAN governments need to be more direct with each other. Singapore and Malaysia are paying a heavy price for Indonesia's weak environmental safeguards. Conversely, Indonesia is paying a price for remaining quiet about Thailand's weak economic management.

Despite the current difficulties, the fundamentals of most ASEAN economies (Burma being the exception) are strong. For the region to rebound and develop sustainable economic growth, these countries will need to build institutions to meet the demands of the marketplace. It is important for these institutions to be transparent and predicated on the rule of law. Anything less will not allow ASEAN governments to deliver the prosperous, civil society their increasing numbers of middle-class citizens demand.

* John J. Brandon is a Southeast Asia specialist with The Asia Foundation. The views expressed here are his own.

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