Theme 1. Managing Smoke

Papers on Managing Smoke

Assessing the Damage Cost of the Indonesian Forest Fire and Transboundary Haze on Neighboring Malaysia: The Case of Health Impacts

by Mohd. Shahwahid H.O.¹ and Jamal O.²

The 1997 forest fire in Indonesia has contributed to a transboundary pollution problem to neighboring countries in South East Asia. Haze which is the accumulation of fine particles in the air, has enveloped Malaysia beginning August until October. The haze has raised the incidences of aggravated respiratory diseases, declines in agricultural and fishing yields, disruptions on transport services, manufacturing and tourism industry, and raised averting expenditures. This paper reports on the findings of the economic cost of the haze-related health impacts to Malaysia.^*** Two dose response functions were computed one linking air pollution index with number of outpatient treatments and another with number of hospitalized cases for Sarawak, the state hardest hit by haze pollution in 1997. Sarawak is treated as a 'research site' in the context of 'benefit transfer' terminology, and these functions were then transferred to the other states in the country to serve as the 'policy sites'. With the physical quantity of outpatient treatments and hospitalized cases, the haze-related medical cost, productivity losses, and cost of inconveniences suffered were estimated for the whole country. It is estimated that the adjusted cost of illness arising from the 1997 haze during the period August to October was RM21.02 million". The per capita damage cost was estimated at RM104.72 which accounted about 1.3% of per capita income. Although in terms of income this is a small, but repetitive occurrences of such inconveniences has to be avoided. Regional cooperation is needed to address this transboundary pollution issue by identifying win-win or win-no-lose situation. The land clearings has contributed to the forest fires, including by large plantation firms (a few owned by Malaysians) for conversion to oil palm, a commodity vital to both Indonesia and Malaysia. Competing vegetable oil producers may regard the unsustainable land clearing practice as an 'environmental subsidy 'for oil palm production.

Footnote_______________

¹ Faculty of Economics and Management, Universiti Putra Malaysia, 43400 UPM, Serdang, Selangor D.E., Malaysia

² Faculty of Economics, National University of Malaysia, 43600 UKM Bang19 Selangor D.E., Malaysia

^*** These findings form part of a three-country study of damages from the 1997 haze, sponsored by the Economy and Environment Program for Southeast Asia (EEPSEA) and the World Wide Fund for Nature-Indonesia. The work was carried out between October 1997 and February 1998. One USD = RM2.5 in August 1997