THE HAZE AND THE VALUATION OF ECONOMIC LOSSES IN SINGAPORE

Abstract

The haze is not unfamiliar to the people to this region. Before 1997, forest fires in Indonesia in 1991 and 1994 had also led to the outbreak of the haze that enveloped most of its neighbouring countries. Much attention was focused on the causes of the haze, its impact and remedies for it. So far, there are no studies done in assessing the damages caused by the haze. The purpose of this thesis is to estimate the magnitude of haze damage costs in Singapore. This thesis also hopes to provide at least a lower bound estimation of the damage cost, which in turn can assist the policy makers in allocating funds to help Indonesia to fight fires and to mitigate the haze damages. In addition, this thesis hopes to offer a methodology, which can be used to value the economic losses due to the haze. Especially with the scale and the duration of the haze is getting bigger and longer each time, the damages caused have to be taken seriously. From the study, the damage cost for Singapore, as a result of the haze, was estimated to be between S$242.8 million and S$425 million which was about 0.18 to 0.32 per cent of Singapore's 1996 gross domestic product. The figures might not looked alarming, but definitely unnecessary losses are incurred. The additional medical expenses incurred and the lost in tourist receipts constitute a very large portion of the total damage costs (75 per cent). And regression runs in this thesis have also shown that the haze has a significant relationship with increase in the number of haze-related ailments at polyclinics and the drop in the number of tourist arrivals in Singapore. Perhaps more should be done to mitigate the damage costs in these two components. Unfortunately, this thesis is unable to provide a detailed study and valuation due to the various constraints and problems involved. Still, many of the works presented here are highly indicative of the damage costs incurred. Lastly, the study of the haze damage costs has provided an interesting issue for further studies. The damage costs per person is approximated to be S$81 to S$142. The question is whether Singaporeans are willing to accept these amounts as compensation for having to suffer from the haze for three months? Alternatively, are Singaporeans willing to pay these amounts to avoid the haze for three months?