The Far-Reaching Economic Impact of Wildfires

Chief economist Fakhrul Fulvian of Trimegah Sekuritas Indonesia contends that the economic fallout from wildfires associated with intensifying El Nino conditions extends far beyond the immediate destruction of land and forests. The multiplier effect of such disasters may not be apparent at first, but can manifest in a cascade of health issues, work disruptions, school closures, and transportation problems, all of which weaken economic activity and livelihoods.

The haze from ongoing fires can lead to a rise in respiratory problems and strain public healthcare resources. As air quality deteriorates, school activities and worker productivity suffer, and even transportation, distribution of goods, local trade, and daily routines may be impacted.

In regions reliant on agriculture, prolonged dry spells can affect water availability and food production, potentially leading to soaring food prices and diminished community incomes. Fakhrul emphasizes that preventive measures are crucial to sustaining economic activity. He points out that when disasters are averted before they spread, economic activity remains undisturbed.

Effective warning systems enable communities to anticipate risks early, and having readily available logistics and equipment allows for swift responses without waiting for the situation to worsen. While the costs of disasters are often calculated after they occur, the losses averted through prevention are more difficult to quantify but can be substantial.

Fakhrul underscores that prevention is not only a social or health principle but also has strong economic logic. The government can allocate funds for disaster preparedness, but once a disaster strikes, the associated costs become significantly more challenging to manage. To address the growing disaster risks, he advocates for strengthening the National Disaster Management Agency (BNPB) budget capacity.

Key areas to prioritize include preparedness, risk monitoring, early warning systems, personnel, logistics, equipment maintenance, coordination with regional disaster agencies, and the ability to respond swiftly to emerging hotspots or disasters.

Fakhrul stresses that risk management is fundamentally about probability and potential losses. The greater the chance of an event occurring and the higher the possible losses, the more imperative it is to be prepared. He urges that when the risks of El Nino and wildfires escalate, disaster management capacities should not be diminished.

While it is hoped that this year's El Nino and forest fire risks will be successfully managed, preparedness must accompany these hopes, as the economic, health, and social costs of uncontrolled disasters far outweigh the relatively smaller costs of prevention.