The economic cost of the haze

The smog that is once again polluting the Indonesian atmosphere has lead to fears for the South East Asian economy, which is already battered by a currency and banking crisis.

The smoky haze - caused by forest fires, drought and wind - has already cost South East Asia up to $6bn over the last year, according to the Worldwide Fund for Nature (WWF).

The costs are both direct, such as from lost agricultural output, and indirect, through medical bills and a decrease in tourism.

A spokesman said the bill would be equivalent to 2.5% of the combined annual production of Indonesia, Malaysia and Singapore.

The worst affected country, Indonesia, is in a perilous position. The WWF has said the country could lose another 2 million hectares to the fires this year - a frightening prospect given the poor state of it economy.

Steve Howard, forestry expert at the Fund, says: "How are they going to cope with this sort of scale of burning when they couldn't cope last year, when their economy was more buoyant?"

And to make matters worse, the economic crisis has exacerbated the fires.

The Indonesian Environment Minister says poor people have begun cutting down trees for fire wood and to sell, and plantation companies are trying to recoup their losses by clearing more land.

If the smog returns on a similar scale to last year, when over 70 million people were affected, industrial production is likely to be badly hit.

In 1997, output fell as employees became ill or spent time fighting the fires, or workplaces were forced to shut.

Transportation was also disrupted. There were collisions on the roads and at sea, and a number of air disasters were blamed on poor visibility caused by the smoke. Airports and shipping lanes were closed as it became almost impossible to travel in the worst hit areas.

The renewed fires have raised serious fears about the environment. Some experts say it is unlikely to recover from last year's fires, which accounted for 2 million hectares - harming the economy through lost timber, lost rattan and lost food.

The devastation was so complete in some areas that animals were forced to flee to search for food. The World Wide Fund for Nature also pointed out that large numbers of small animals and the young of larger creatures died in the fires.

Tourism is also at risk from the smoky atmosphere.

Last year the region suffered a dramatic fall in the number of visitors.

In November, official figures said tourism was down 26% in Indonesia, where it is the third largest source of foreign currency.

The drop affected all parts of the country, including the island of Bali, a popular holiday destination.

In Malaysia, where tourism is the second largest foreign exchange earner, the sharp drop in the number of visitors caused the authorities to order university academics to stop making public statements about the haze for fear of creating an alarmist attitude.