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Business Times
2 days ago
- Business
- Business Times
Rising palm oil prices, policy ambitions may increase haze risk in Asean: think tank
[SINGAPORE] Higher agricultural commodity prices, rising deforestation and shifting government policies may increase the risk of severe transboundary haze in South-east Asia this year, said the think tank Singapore Institute of International Affairs (SIIA) in its annual Haze Outlook report on Monday (Jul 28). Following a 'green' rating indicating low risk of such an event in 2024, SIIA raised its rating this year to 'amber', indicating a medium risk. Such a haze event – which could affect Singapore, Malaysia and Indonesia – was last observed in 2019, with less intense episodes in 2023 and July this year. 'Early in the year, many weather assessments projected a relatively benign haze season,' said chairman of SIIA, Associate Professor Simon Tay. 'However, as the situation evolved, it has become clear that regional fire and haze risks are rising – not just from weather, but from global economic and policy changes. Peatland fires in Sumatra spewed haze into Indonesian and Malaysian skies last week, with two regions in West Sumatra declaring a state of emergency as hot spots spiked. The institute's haze outlook drew attention to a growing demand-supply imbalance in the agricultural commodities sector – particularly palm oil in Asean. While declines in global palm plantation expansion and related deforestation have offered environmental reprieve, the report said, analysts have expressed concern over its economic consequences. A NEWSLETTER FOR YOU Friday, 8.30 am Asean Business Business insights centering on South-east Asia's fast-growing economies. Sign Up Sign Up Palm oil is typically the cheapest among vegetable oils, but its price in Indonesia and Malaysia rose to more than that of soybean oil from Latin America for nine straight months in the previous year, noted the report. 'Agricultural commodity prices have been elevated since the Covid-19 pandemic and remain at high levels, particularly for palm oil where supply is not keeping pace with international demand,' said Khor Yu-Leng, associate director for sustainability at SIIA. Rising agricultural commodity prices have historically been followed by spikes in deforestation, as planters seek to expand plantation areas to meet rising global demand, Khor told reporters on Monday (Jul 28) at a briefing for the launch of the report. While she said that current high prices have yet to trigger a major rise in deforestation in the region, there had been a slight uptick in deforestations between 2023 and 2024, particularly in Sumatra. Additionally, major political ambitions in Indonesia may further elevate demand for domestic production, increasing the need for plantation expansion – possibly through illegal deforestation. Indonesian President Prabowo Subianto has sought to emphasise the country's palm oil sector as a major part of its economic strategy in a drive towards self-sufficiency, SIIA wrote. This has involved intensifying downstreaming efforts in the agricultural commodities sector, seeking to strengthen processing and refining of palm oil into food and chemical products. The Indonesian leader has also stepped up efforts to encourage the use of biofuels, mandating an increase in the blend of vegetable oil to diesel from 35 per cent to 40 per cent in early 2025, with further plans to increase the mix to 50 per cent. These moves, the institute wrote, are expected to significantly increase pressure on domestic palm oil demand, with Indonesia's agricultural sector balancing the weight of export revenue, food security and the country's energy needs on its shoulders. Additionally, the report noted that further uncertainty could hit the industry in the coming months, with a move by the European Union to restrict imports of products linked to deforestation scheduled to take effect in Dec 2025. 'Indonesia has called for further delay to the regulation to 2028, as some smallholder farmers are not fully prepared for the compliance requirements,' said Associate Professor Tay. 'But the implications on trade and markets remains unclear.' Still, Khor emphasised that the region's overall deforestation remained far below 2015 levels – in part due to the efforts of Prabowo's predecessor Joko Widodo. The former president's administration oversaw 1.6 million hectares of peatland restorations and harsher crackdowns on companies liable for fires. 'For now, the weather is relatively benign and fires can be kept under control unless the situation changes,' the report said, noting that the intense periods of drought that have drawn previous haze incidents remain unlikely in 2025, as meteorological data suggests. 'The longer-term risk is whether rising global demand and new policy directions will drive expansion in ways that undermine environmental safeguards,' said Khor. 'Even if the weather conditions are not extreme, these could push actors to expand land use in ways that heighten fire and haze risks,' she added. This should ideally be done through sustainable expansion on non-forest areas, conversion of other croplands, yield increases and replanting of ageing areas, the institute wrote. 'Much will depend on Indonesia's governance of its plantation and commodities industry,' said Associate Professor Tay.
The Star
2 days ago
- Business
- The Star
'Medium risk' of severe haze as higher agricultural prices drive deforestation: Singapore researchers
SINGAPORE: There is a 'medium risk' of severe haze affecting Singapore, Malaysia and Indonesia for the rest of 2025, a local think-tank has assessed in its yearly haze outlook. But the assessment by the Singapore Institute of International Affairs (SIIA), released on July 28, noted that in the event of a haze, it should not be prolonged. In 2024, the SIIA had said there was a 'low risk' of transboundary haze. This was assessed based on developments in three areas: markets, weather and policies. The SIIA noted in its report, now in its seventh year, that agricultural commodity prices have been elevated. Agricultural commodities in the region include palm oil and pulp and paper. 'Prices this year are elevated, and estimates show some uptick in deforestation in Indonesia from 2023 to 2024,' the report said. Deforestation by slash-and-burn techniques can cause forest fires that belch out smoke haze. Elevated agricultural prices could be due to rising global and regional demand amid lagging supply, according to the report. Dry weather, and new food and energy projects announced by Indonesia, could also drive forest fires, the report noted. The SIIA assesses transboundary haze risk on a three-level scale of green, amber and red. Green refers to a low risk, and red denotes a high risk. The report said that the medium risk of transboundary haze in 2025 – up from the low risk assessment the year before – is a concerning shift. 'Early in the year, many weather assessments projected a relatively benign haze season,' said Associate Professor Simon Tay, chairman of the SIIA. 'However, as the situation evolved, it has become clear that regional fire and haze risks are rising — not just from weather, but from global economic and policy changes,' he said. 'If this had been assessed a month ago, we might have issued a green rating. But the fires and market conditions warrant caution,' Prof Tay added. The release of SIIA's annual haze outlook comes amid reports of an escalation in hot spots and smoke haze in parts of Sumatra in Indonesia in mid-July. Transboundary haze was observed to have drifted from central Sumatra into parts of Peninsular Malaysia, although Singapore has not been affected due to favourable wind direction. According to Indonesia's Meteorology, Climatology and Geophysics Agency, the number of hot spots – places with intense heat suggesting forest fires – in Sumatra has soared from 94 to more than 1,000 in 10 days in July. Haze pollution in the area has spread to Malaysia, which recorded unhealthy air pollution index readings in four locations on July 22. According to the National Environment Agency (NEA)'s website, dry conditions are forecast to persist over the southern Asean region over the next few days, except for some showers expected over parts of central and southern Sumatra, Java and the north-eastern parts of Borneo. The drier conditions, especially over Borneo, may result in an increase in hotspots and smoke haze, with a chance of transboundary smoke haze, according to NEA. As at July 28, the air quality in different parts of Singapore ranges from good to moderate. Other than commodity prices, the SIIA also assesses haze risk based on weather and governmental policies. Forest fires and the spread of haze can be made worse by dry weather, changes in wind direction, and low rainfall. For example, the last time the SIIA assessed haze risk as being 'red' was in 2023, mainly due to hotter and drier weather expected that year with the onset of El Nino conditions. El Nino is a climate phenomenon that drives warmer weather in South-east Asia. But even without El Nino conditions, South-East Asia typically experiences dry weather between May and September. The SIIA report noted that while there have been a spike in fires in Sumatra, Indonesia in mid-July, the remaining period of the dry season is expected to be milder and shorter than most dry seasons in the past. It added that the peak of the dry season is expected to be in August. 'For now, the weather is relatively benign, and fires can be kept under control unless the situation changes,' the report said. Indonesia's economic policies could also be a driver of smoke haze in the region. Former Indonesian president Joko 'Jokowi' Widodo had during his administration from 2014 to 2024 rolled out numerous policies to prevent forest fires, noted Prof Tay. For example, following the 2015 haze incident, the Indonesian government said that companies involved in burning would have their permits revoked and prosecutions of corporations liable for fires increased significantly, said the report. 'This is no coincidence that we have seen less of this haze problem over this last decade,' said Tay. He said that the current administration under Indonesian President Prabowo Subianto has promised to continue the previous administration's forest management policies. However, there are pressures from overall growth ambitions, Prof Tay said. Indonesia faces a triple challenge in meeting food security, energy and export imperatives, said the report. The growing conflict between using crops for food versus for fuel is rising, especially as the country plans to expand its biodiesel and bioethanol mandates, it added. Biodiesel and bioethanol mandates in Indonesia are government policies that require blending a certain percentage of biofuels into transportation fuels. Currently, Indonesia has a mandatory 35 per cent blend of palm oil-based fuel in biodiesel and is seeking to ramp up to biodiesel containing 40 per cent palm oil to cut its energy imports. This could lead to an increased demand for palm oil. The report added that the Prabowo administration has indicated that agricultural commodities production - and in particular palm oil - will remain a major part of Indonesia's economic strategy. Indonesia is the world's largest palm oil producer. It also noted that Indonesia's food and energy projects could result in more clearing of forests and peatlands, citing NGOs and environmental media organisations. 'Care is needed to ensure that efforts to create new plantations are sustainable, and to increase the efficiency of existing plantations,' it added. Since 2019, there have been no severe transboundary haze events impacting Indonesia, Malaysia, and Singapore, although milder episodes occurred in 2023 and more recently in July 2025, said the report. Singapore last experienced severe haze in September 2019, with air quality entering unhealthy levels on some days then. - The Straits Times/ANN
CNA
09-07-2025
- Business
- CNA
Singapore businesses bracing for ripple effects as Trump's new tariffs target Asia: Observers
SINGAPORE: Companies in Singapore are bracing for more uncertainty after United States President Donald Trump announced new import tariffs of up to 40 per cent on certain countries. Letters sent to 14 countries, mainly in Asia, on Monday (Jul 7) outlined that tariffs will take effect on Aug 1 unless deals are struck with the US beforehand. Singapore is not among the 14 nations that were issued these letters. But observers believe that Singapore - the only country in Southeast Asia with which the US has a trade surplus - will continue to face the 10 per cent baseline tariff imposed in April. UNLEVEL PLAYING FIELDS 'America enjoys a surplus with us, so we shouldn't even be getting 10 per cent,' said Associate Professor Simon Tay, chairman of the Singapore Institute of International Affairs. 'Even if we are spared anything more than 10 per cent ourselves, the ripple effect of what happens to the countries around us, our major trading partners, is going to have an impact on Singapore.' Some of the nations targeted by the proposed new tariffs are in Asia. Key US allies Japan and South Korea would be hit with 25 per cent tariffs. Southeast Asian countries including Indonesia, Laos, Malaysia, Myanmar, and Thailand face duties ranging from 25 to 40 per cent. 'It's a real damage in the sense that we, as a hub in ASEAN (Association of Southeast Asian Nations), really want the region to integrate. It makes a lot of economic logic, especially the neighbours nearest to us,' said Assoc Prof Tay. 'So this tariff differentiation tends to create unlevel playing fields and a bit of gaming.' Mr Chris Humphrey, executive director of the EU-ASEAN Business Council, touched on the potential economic reactions of Southeast Asian countries, saying: 'I don't think you are going to see countries … doing tit-for-tat increases with the United States. 'They can't afford it. The economies aren't quite big enough and strong enough.' The US accounts for about 10 per cent of Singapore's total goods exports, pointed out Singapore Business Federation (SBF) chief executive Kok Ping Soon. 'This means there's a big 90 per cent of the goods exports that are not destined for the US, and there's a lot of potential there,' he noted. 'Many of these opportunities are really in our immediate neighbourhoods, hence the importance of ASEAN integration.' GLOBAL TRADE UNCERTAINTY Mr Kok said firms here are cautious and taking a wait-and-see approach. 'It's that uncertainty that's really driving business interest because it sends a chilling effect on their ability to think ahead,' he added. 'The problem for businesses is that Trump operates on a very short cycle every few days, but businesses operate in a much longer cycle.' This persistent extreme uncertainty is hurting businesses more than the tariff itself, said Mr Kok. On how Singapore businesses need to operate, he said it's 'almost a prerequisite' for them to be resilient. 'Because if companies get a calculus wrong, it may likely suffer,' he added. Mr Kok stressed the importance of trade compliance and reconfiguring supply chains, noting that businesses, particularly smaller ones, often require external support. While larger firms may have the capacity to manage these changes on their own, smaller ones are likely to need some form of support to navigate these challenges, he added.
CNA
08-07-2025
- Business
- CNA
Singapore companies bracing for more uncertainty amid Trump's tariff letters
Singapore companies are bracing for greater uncertainty after US President Donald Trump sent letters announcing new tariffs as high as 40 per cent for some countries. The Singapore Business Federation (SBF) says firms are once again taking a "wait and see" approach. SBF's CEO Kok Ping Soon and Associate Professor Simon Tay, Chairman of the Singapore Institute of International Affairs, talk about what it means for Singapore to not be issued the letters by President Trump. They also discuss what it means for Singapore businesses to be operating in a neighbourhood with so many different tariff rates.
