April 24, 2014 12:00 am JST

Ill-equipped Indonesia struggles with droughts, floods

JEFFREY HUTTON, Contributing writer

A woman collects water for bathing from a well under an overpass in a Jakarta slum on March 13. © AP

JAKARTA -- When it comes to climate change, Indonesia stands to lose more than most. Poor infrastructure and living standards along with extreme weather have been known to shut down the capital for days, with losses to business and government running into the tens of millions of dollars.

     But unpredictable and extreme weather patterns in the last few months -- from drought to torrential rain in some parts of the sprawling archipelago -- have hit Indonesia's oil and gas sector as well as agriculture, and cut into commodities exports. Experts say worse is on the way.

     On Sumatra, haze from forest fires has resulted in nearly $1 billion in losses, as businesses and schools, not to mention the main airport and oil wells, shut down or scaled back operations. Oil and gas regulator SKK Migas said in April that hundreds of oil wells had been shut down amid deteriorating air quality. 

     On Sulawesi, one of Indonesia's largest islands, heavy rains have hit coffee production. Production of palm oil, which accounts for more than 10% of the country's exports, could slump as the possible El Nino weather phenomenon exacerbates drought in some parts of the country.

     With its reliance on commodities, widespread poverty and creaking infrastructure, Indonesia is particularly vulnerable to the ravages of climate change. Rising temperatures could disrupt the livelihoods of millions in a country where roughly 40% make less than $2 a day.

     "Farmers have been particularly hard hit by the erratic weather," said Steve Rhee, program officer for natural resources at the Ford Foundation in Jakarta. Agriculture accounts for roughly 15% of economic activity, and every 1-degree rise in global temperature can erase 10% from rice yields domestically, eroding incomes and driving up food prices.

     "The economic costs of climate change will continue to be significant," he said.

Fires and water

The fires on Riau, a province on the east coast of Sumatra, are a particular concern this year. So far, losses have totaled 10 trillion rupiah ($875 million). This is a stark reminder of 1997, when bad weather and drought due to El Nino contributed to raging forest fires and caused about $4.5 billion in damage.

     Even small changes in weather patterns can make life harder. In January 2013, torrential rains over nearly a week triggered a state of emergency that shut down Jakarta's financial and administrative districts and forced thousands of residents to evacuate. Economic losses were estimated at $150,000 an hour, as Jakarta and its satellite towns -- which together account for 28 million people -- shut down. The problems were made worse by drains blocked with garbage and dilapidated dams dating back to the Dutch colonial era.

     The dry weather has also hit Indonesia's lucrative palm oil production. In late February London Sumatra Indonesia, a major palm oil producer, said crude palm oil production fell 12% last year to less than 400,000 metric tons. As for coffee exports, overseas shipments may fall an annual 17% to about 375,000 tons in 2014, according to calculations by Bloomberg News.

     Most sobering is the finding by the Asian Development Bank that Indonesia, Thailand, the Philippines and Vietnam will be among Southeast Asia's worst weather-affected countries by the end of this century. Damage from climate change will sap an average 6.7% of combined gross domestic product annually of those economies by 2100. In response, Indonesian government spending to mitigate natural disasters ballooned from 0.6% of GDP in the mid-2000s to 1% in 2012.

     Alleviating poverty and investing in infrastructure are the only ways to make regional economies more resilient to climate change, according to Rob Daniel, a technical adviser at PricewaterhouseCoopers in Jakarta. "It's less to do with extreme weather and more to do with the subsistence level of people who are not able to withstand even minor changes," he said.