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Globalisation, Asia's 1997 Financial Crisis, and Environmental Change

Peter Dauvergne

Panel on Domestic Environmental Impacts of International Processes

International Studies Association
41st Annual Convention
Los Angeles, CA
March 14-18, 2000


1. Introduction 1

Over the last three decades most of Asia experienced rapid economic growth. Many countries reduced poverty, improved education, and saw substantial increases in life expectancy. As a result the region has steadily emerged as a key pillar of the global economy. Yet these accomplishments involved severe environmental costs, which according to the President of the Philippine Institute for Development Studies left Asia 'the most polluted and environmentally degraded region in the world' (Intal and Medalla 1998: 1). Asia's integration into the world economy also left the region highly vulnerable to currency speculators, market crashes, and capital flight, especially in countries where political and financial reforms lagged behind economic growth. Few observers, however, foresaw how swiftly and forcefully the 1997 financial crisis would hit the region, and many were left sheepishly hiding their articles and books extolling Asia's economic miracle. Not surprisingly few government or corporate leaders were prepared for the economic consequences of the crisis. Even fewer were prepared for the environmental ones.

The implications of the crisis demonstrate the difficulty of managing environmental resources in the context of economic globalisation — where complexities are increasing as the links among actors, institutions, and economies intensify, as internal structures within countries react unpredictably to external events, and as new technologies speed up the overall process of change. 2 Within this context of globalisation this paper examines the environmental implications of the crisis for agriculture, fishing, conservation, air and water pollution, and forests in Southeast Asia and Melanesia, covering the period from the start of the crisis in mid-1997 until mid-1999 when it appeared largely over. It pays particular attention to the importance of changes to employment, income, global and regional trade, migration patterns, and global budgets and priorities. Overall the analysis shows that the crisis — both in the short and long-terms — exacerbated many existing environmental problems, as well as created additional ones. This occurred as a result of both direct consequences as well as indirect implications of adjustments and policy reforms. The paper concludes with recommendations of how the development community can best react to the implications of the crisis in the context of globalisation. The environmental changes set in motion by the crisis will continue well past the end of the crisis and strong domestic and international measures to support environmental protection and conservation in the Asia-Pacific are clearly more urgent than ever before. Otherwise, a second crisis — one that centres on environmental collapse — could well be on the horizon. To begin, the next section provides a sketch of the crisis.


2. Asia's Financial Crisis

The environments of the Asia-Pacific were already highly vulnerable when Asian currencies began to crash in mid-1997, triggering financial crises throughout the region. Loggers had degraded much of the old-growth tropical forests in the Asia-Pacific, contributing to widespread deforestation (Dauvergne 1998b). Forest fires had already burned huge areas, even before the 1997 fires in Kalimantan and Sumatra that spread a choking haze across Southeast Asia. Vehicle lead emissions in Asia were well above World Health Organisation standards. Lead in Manila, for example, had affected some children's IQ scores by 4 or more points (World Bank 1999: 4; Cubol 1998). Urban air and water pollution was at times overwhelming, especially in the megacities of Manila, Jakarta, and Bangkok. Many of the poor in Southeast Asia and the South Pacific did not have access to clean drinking water or adequate sewage systems. Companies had disposed of substantial quantities of hazardous wastes improperly. Meanwhile, steady population increases were adding to these environmental problems. The population in Asian megacities was 126 million in 1995, with trends showing that this would more than triple by 2025, reaching 382 million (Asian Development Bank: www).

Within a year a large number of studies had been done on the causes of the financial crisis (see Krugman www; Roubini www; Griffith-Jones 1998; Bello 1998; Gates 1998). These studies show that the specific causes of the economic downturns varied considerably across and within countries. At the most general level an interlinked mix of factors sparked the crisis. These included excessive economic expansion backed in large part by private debt; inadequate regulation of, and weaknesses within, financial institutions; collusion, corruption, monopolies, and inappropriate government-business relations; and external economic pressures and domestic political instability (World Bank 1999: 2). The initial response to the crisis, both domestic and international, also seemed to exacerbate the crisis.

The crisis started in Thailand and then spread to South Korea, Indonesia, and finally the rest of Asia. Even countries like Vietnam, Laos, and Cambodia — with nonconvertable currencies, no stock exchanges, and largely rural and agrarian populations — were gradually dragged into the crisis as foreign investment, tourism, and exports linked to Asia fell (Lamb 1998).

Indonesia suffered the greatest economic turmoil. The economy shrank in 1998 by 13.7 per cent. In 1997 and 1998 the Indonesian rupiah depreciated, at times fluctuating wildly. In July 1997 it was around Rp2,450 to the US dollar; by September 1998, it was around Rp11,000 to the US dollar. Prices for essential goods soared while real wages fell by roughly 30 per cent (Feridhanusetyawan 1999: 51). Many people in the sprawling slums of Jakarta faced food and nutrition shortages in 1998. Women appear to have been disproportionately affected by the hardships of the crisis (Baillie 1998).

These changes will affect ordinary Indonesians well into the future. UNICEF estimated in October 1998 that the crisis had pushed at least half of all Indonesian children under two into malnourishment, while 65 per cent of children under three had become anaemic. Coupled with the rapid rise in school drop-outs and falling health standards, according to UNICEF, the intellectual ability of an entire generation is now under threat (Williams 1998: 1).

The next section reviews some of the social implications of the crisis, paying particular attention to the impact on environmental management in Indonesia, where the crisis had the greatest impact.


3. Poverty, Incomes, Unemployment, and Migration: Changing Patterns

Poverty, lower incomes, and unemployment are inescapably intertwined with environmental change. Many examples exist of poor people managing resources effectively, particularly when local institutions and social interaction create supportive conditions. Yet greater poverty and people's search for income — especially when this arises unexpectedly — frequently intensifies pressure on surrounding resources like forests and water. In Indonesia, for example, the Director General of Forest Conservation and Protection noted in August 1998 that increasing numbers of people were pillaging forests to survive (Sunderlin 1998).

After mid-1997 unemployment increased while real wages fell in cities and towns throughout Asia. In Indonesia and Thailand this apparently stemmed the flow of rural migrants to urban areas. It also pushed some people back to the countryside, although the exact numbers are uncertain. This had immediate impacts on rural environmental resources. For example, by January 1999 unemployed workers from Bangkok who had returned to their home villages were starting to occupy state forests to obtain land (Tangprasert and Ratchasima 1999). The Indonesian government actively encouraged migration back to the countryside by, for example, making it relatively cheap for over three million urban workers to return home for the 1997-98 Ramadan holiday while not providing support for the return journey. One indication of the apparent trend 'back to the countryside' is an Indonesian Central Bureau of Statistics survey that found agricultural employment in Indonesia increased by 5.6 million between February 1997 and February 1998.

This increase in agricultural employment in Indonesia alleviated some of the social and environmental pressures on cities and towns during the crisis. But it has simultaneously intensified pressure on rural agricultural land and water, especially since many of the migrants do not have a deep knowledge of sustainable agricultural practices. Marginal lands and forests are especially vulnerable as migrants and farmers stake out new areas.


4. Agricultural Expansion

Sunderlin (1998: 2) points to five main reasons why expanding and supporting agriculture has been an attractive response to the economic and social effects of Asia's financial crisis. First, the agricultural sector is less dependent on foreign currency inputs; therefore, the crisis affected this sector less. Second, adequate food supplies are essential for social and political stability; therefore, governments had strong incentives to support this sector, especially when facing strong social pressures, as in Indonesia. Third, this sector is critical for absorbing unemployed urban workers who have migrated back to the countryside in search of work as well as rural youth who no longer leave in search of urban employment. In this way agricultural employment was a crucial 'social safety valve' during the crisis. Fourth, increasing domestic agricultural output reduces the costs of expensive, yet essential, agricultural imports such as rice, soy, and wheat. Finally, and in Sunderlin's view most importantly, the depreciation of the local currency allows countries like Indonesia to sell agricultural goods on the international market much cheaper in terms of US dollars — this is also the case for timber, mineral, and fish exports. Moreover, the costs of agricultural production are primarily in the local currency (except for fertiliser and chemicals), while the profits are often in US dollars.

In October 1998, Indonesia's Forestry and Plantation Minister reiterated the government view that agribusiness was an important engine to help pull Indonesia out of the economic downturn (Antara 1998b). Expanding plantations will generate great environmental pressures, however, especially the development of palm oil estates (examined later in the paper). Moves to expand the production of cocoa, coffee, shrimp, rubber, and pepper will add to these pressures.

Many Southeast Asian commodities fared well on world markets in the first year and a half of the crisis. For example, from mid-1997 to January 1998, the producer price of cocoa in Indonesia increased six-fold. From October 1998 to September 1999 Indonesia produced 336,000 tons of cocoa, a 6 per cent jump from the previous marketing year. The Indonesian Cocoa Association expects that Indonesia will be producing 500,000 tons of cocoa by 2005 (Sunderlin 1999: 13). This expansion will have a particularly great impact on South Sulawesi where most of Indonesia's cocoa is grown. Like cocoa, Indonesian coffee exports boomed in the first year of the crisis. By mid-1998 Indonesia had surpassed Vietnam as Asia's largest producer. While some coffee families prospered, this boom hampered government efforts to reclaim conservation forests as high coffee prices encouraged some families relocated from conservation forests to return and again grow coffee.


5. Fishing and Conservation

Fishing policies in the Asia-Pacific are often ineffective or distortionary. Low user fees undermine government revenues and encourage over-fishing. Monitoring and enforcement are weak, including in environmentally sensitive areas. This has led to 'substantial over-harvesting of aquatic resources' in the region (World Bank 1999: 15).

As with agricultural exports, promoting fish exports is a logical response to the currency devaluations. Former Indonesian Agriculture Minister Soleh Solahudin saw great potential in fish exports. In October 1998 he declared that 'Indonesia has a good chance of becoming the world's biggest fishery commodity exporter' (Antara 1998a). He pointed to one firm with profits in 1998 equal to its previous twelve years of operations. He estimated that revenue from exports of sea fishery commodities in 2003 would reach US$2.64 billion, while exports of coastal fishery commodities would hit US$7.36 billion. Shrimp breeding ponds in coastal areas were, in his view, especially important. To support these efforts, Soleh Solahudin announced in 1998 that the government was working on a scheme to provide fishers with low-interest credit, similar to the credit that some rice farmers now receive (Antara 1998a).

The financial crisis also contributed to some changes in fishing practices, including illegal activities. At this point no one has systematically documented these changes. Some anecdotal evidence exists, however. In Indonesia, despite severe damage to coral reefs, the use of dynamite to sweep fish from a specific area appeared to increase during the crisis. The use of cyanide to capture large fish for display tanks in places like Hong Kong and Singapore also appeared to become more common, even though this practice often kills the smaller fish in the area (Wall Street Journal 1998).

The number of smaller, owner-operated fishing boats in Indonesia also appeared to rise. More fishers also seemed to become involved in poaching. Some appeared to be selling from their boats at sea (perhaps to Japanese buyers), rather than going through regulated markets on land. Higher diesel fuel prices also seemed to encourage some fishers to stay closer to shore or move to new locations, to some extent altering their type of catch.

Urban to rural migration also appeared to put more pressure on local fish supplies. Rising prices in local currency terms for animals and eggs appeared to reinforce this trend by pushing up local consumption of fish products (although lower real incomes and unemployment simultaneously pushed down overall consumption). Further research is necessary to determine the potentially positive and negative implications of all of these changes for biodiversity and fish stocks.

Finally, the financial crisis increased the pressures on endangered animals and national parks. In Indonesia, local wildlife has become an increasingly important food source. Rare wildlife, some from the remotest areas of the country, are now available at local markets. Some wildlife, such as endangered macaques, have been sold to foreign fishers for food. Biologist Rob Lee laments: 'What's so sad is the rarest animals fetch little more than the most common wild-pig meat' (quoted in Wall Street Journal 1998).


6. Air Pollution

The air of many Southeast Asian cities is severely polluted. In the mid-1990s the United Nations Environment Program ranked Bangkok as the second most polluted city in the world, after Mexico city. Jakarta was third (Jakarta Post 1996).

Particulates and lead pose two of the greatest threats to human health in Asia. Motorcycles, diesel trucks and buses, industrial plants (especially small and medium ones) and kerosene are the main sources of particulate emissions. Leaded petrol is the main source of lead. Lower incomes and industrial output during the financial crisis appeared to reduce air and lead pollution as fewer vehicles and industries operated, although this still needs to be statistically verified.

For example, under the assumption that Indonesia would not suddenly recover to previous levels of industrial output the World Bank (1998a: 105) predicted that by the year 2000 the crisis would lower particulate emissions in Indonesia by 17 per cent and lead by 20 per cent compared to previously projected levels. Any positive environmental impact on air pollution in Indonesia is unlikely to last long, however, as new investment — which frequently brings cleaner technologies — stagnates. Moreover, remaining industries now have less capital to invest in environmental technologies. In this context firms are also more likely to sidestep environmental, health, and safety standards to reduce costs. Finally, the immediate and longer term effects of the crisis have undermined the ability and willingness of governments to enforce stricter standards on vehicles, a crucial step towards reducing urban air pollution. As a result of all of these changes, the World Bank (1998a: 105) predicted that 'the medium-term impact of the crisis ... will ... increase the average emissions per unit of GDP by 5 to 10 per cent in 2005.'

At the same time, fewer government subsidies for fuel — such as the ones in Indonesia on diesel to support public transportation and kerosene to help poor households with cooking and lighting — could partially offset these more negative changes by raising prices, lowering consumption, and fostering greater efficiency. Fully removing fuel subsidies may well be impractical, however, since it has potentially explosive political and social repercussions, as the riots in Indonesia following the fuel price hikes on 5 May 1998 demonstrated. The Indonesian government abandoned these measures within a week.

A similar scenario of greater air pollution in the long-term appears likely in the Philippines and Thailand, although no conclusive data are yet available. One indication of the potential for a long-term increase in air pollution, however, was the decision by the Thai government in 1998 to delay introducing the 'Euro 2000 standards for diesel buses due to a backlog of unsold vehicles' (Asia Environmental Trading 1998a: 2).


7. Water Pollution and Sewage

Unlike particulates and lead, in some cases the financial crisis worsened water pollution in the short-term. This has had an especially great impact on the lives of poor people. Even before the crisis the World Bank (1998a: 105) estimated that dirty water and inadequate sanitation was lowering the average life expectancy of people in the Asia-Pacific by almost two years.

Irrigation systems in Southeast Asia are unreliable and urban water supplies are often filthy, in part because of poor sanitation facilities. The Asian Development Bank (1997: 30) estimated that 'Despite rapid and steady growth in income and wealth, at least one in three Asians still has no access to safe drinking water, and at least one in two has no access to sanitation services. Only in Africa is the situation worse.'

The amount of suspended solids in water sources provides a general measure of water pollution. Shakeb Afsah, senior policy advisor to US-Asia Environmental Partnership, estimated that the financial crisis lowered monthly output of industrial plants in Indonesia by 18 per cent in the second half of 1997. Yet over this time the amount of organic waste per unit of industrial effluent jumped by over 15 per cent, apparently because more factories simply dumped untreated waste. As Afsah (1998: 1) notes, 'This finding contradicts the simple view that slower, lower or negative economic growth will reduce industrial pollution. On the contrary, pollution may increase because factories adjust their abatement effort in response to the lower regulatory inspection and enforcement, and higher pollution control costs.'

Afsah's work supports the argument that water pollution in some locations has increased since the crisis began as firms have exploited weaker government efforts to monitor and enforce regulations. It further points to the strong possibility that illegal dumping of toxic wastes has also increased. Clapp (1998: 25) examines Afsah's study and concludes her analysis of hazardous waste in Indonesia and the Philippines: 'It is likely that similar results would hold for most hazardous waste generating industries.' This poses a serious health threat. Already, from 1975-88 toxic waste releases had increased in Thailand by 1,200 per cent and in the Philippines by 800 per cent (Salim 1998).

Aggregate figures do not of course reveal shifts in the specific location of water pollution. Even if the amount of water pollution increased overall, some communities will have benefited from the closure of an environmentally-destructive firm, such as when the textile plant in Lagadar village in Indonesia, with a reputation for dumping waste into the nearby river, closed in mid-1998 (Yamin 1998).


8. Tropical Timber:

Short-term Implications of the Collapse in Demand

Japan and South Korea are the main tropical timber importers for Southeast Asia and Melanesia. Recessions and a slowdown in construction in Japan and South Korea drove down demand and prices for tropical timber in 1997 and 1998. In 1997 Japan's tropical log imports totalled 5.9 million cubic metres, 5 per cent lower than the previous year. In 1998 imports sank to less than 4 million cubic metres (ITTO 1999: 28). South Korean tropical log imports fell to around 1.1 million cubic metres in 1997, a 12 per cent fall from the previous year. South Korean tropical log imports dropped below 1 million cubic metres in 1998.

Largely because of the economic downturns in South Korea and Japan total natural forest production in the Solomon Islands only reached 637,000 cubic metres in 1997 and about 650,000 cubic metres in 1998, far lower than a few years earlier when production exceeded 800,000 cubic metres. The International Tropical Timber Organisation estimates that commercial log production in Indonesia fell from over 31 million cubic metres in 1996 to below 29 million cubic metres in 1997 and under 27 million cubic metres in 1998. Coupled with the loss of power of Solomon Islands Prime Minister Solomon Mamaloni in August 1997 and President Suharto in May 1998 the drop in demand for tropical timber helped to create greater opportunities in both countries to reform timber management. Solomon Islands Forestry Minister Hilda Kari even went as far as claiming in late October 1998 that the Asian financial crisis may have been a blessing, ending the 'looming environmental destruction' (Agence-France Presse 1998).

Yet these respite will not last long; meanwhile, serious problems remain. Total log production in the Solomon Islands in 1997 and 1998 was still well over the theoretically sustainable level of about 250,000 cubic metres. In Indonesia illegal cutting may now exceed legal harvests (Tickell 1999), pushing production far over sustainable levels (about 22 million cubic metres). Moreover, many companies simply stockpiled logs or left logs lying in the forest. By the end of 1997 log stockpiles in the Solomon Islands had reached 300,000 cubic metres, while as much as one million cubic metres of uncollected logs remained in the forests (Central Bank of Solomon Islands 1998: 18). In Indonesia almost 6 million cubic metres of uncollected logs lay in the forests in early 1998. Kari's comment that the crisis was a 'blessing' also seems overly simplistic, or at least highly optimistic, especially considering that the crisis has left the government of the Solomon Islands — which relied on log exports for about half of total export earnings — on the verge of financial collapse as the total value of log exports in 1998 only reached $US36 million, a 47 per cent drop from 1997.

Nevertheless important policy and administrative changes are now occurring to forest management in the Solomon Islands and Indonesia. The Solomon Islands government has placed a moratorium on new licences. With support from the Australian Agency for International Development (AusAID), the Ministry of Forests, Environment and Conservation has reviewed and consolidated forest legislation, including the Forest Resources and Timber Utilisation Act, the Environment and Conservation Bill, and the Wildlife Bill. The government passed new forestry legislation in mid-1999. The Forests Bill 1999 tackles some tough issues. It attempts to improve the process of determining customary forest rights and reaching agreements for timber sales. It proposes measures to ensure that harvest areas are suitable. It gives greater powers to the government to monitor log shipments. And it introduces a mandatory Code of Practice as well as performance bonds to require reforestation.

In Indonesia the government, under pressure from the International Monetary Fund to eliminate cartels and sever some of the collusive links among state and business officials, ended Apkindo's (the Indonesian Wood Panel Association) formal monopoly of the plywood industry, effective 30th March 1998. (Apkindo, under the control of President Suharto's crony Bob Hasan, dominated Indonesia's timber industry over the last decade.) The government has also announced plans for numerous reforms to forest policies, including limiting the size of concessions, transferring licences obtained through corruption or nepotism to cooperatives, forbidding new forest concessions, auctioning revoked concession licences, and putting greater emphasis on community forestry. The government has announced plans to review the use of the Reforestation Fund, little of which has actually supported reforestation.

These changes, however, will not automatically translate into less pressure on Indonesia's forests. Many timber companies are moving into palm oil, rubber, and pulp and paper plantations, the expansion of which has already contributed to extensive environmental damage. Some reforms will have mixed environmental effects, such as removing restrictions on foreign direct investment in the palm oil industry and efforts to liberalise the timber trade. Some reforms may partly be illusionary, as informal rules and connections continue despite formal changes (as appears to be partly the case for Apkindo). Moreover, government commitment to implement reforms is inconsistent. By late 1998 the World Bank had become so frustrated with the lack of progress by the Indonesian government to reform forest management that it suspended payment of a US$400 million loan.

Long-term environmental effects on forests

The long-term impact of the crisis on effective forest management is even less optimistic. Several trends could increase economic and social pressures.

The tropical timber industry in Southeast Asia and Melanesia has already started to rebound. In Indonesia, for example, demand for plywood began surging in April 1998 after a new Chinese government policy to reduce logging by 60 per cent. By mid-1998 Malaysia's decision to restrict timber exports further stimulated demand for Indonesian plywood from other Asian countries. Meanwhile, demand from the US, Europe, and the Middle East remained reasonably strong. Firms began to hire mill workers back. And, although total plywood exports for 1998 fell somewhat, the forest industry as a whole came close to meeting its export target of US$8.3 billion, partly on the strength of the pulp and paper industry (Sunderlin 1998: 3; Akella 1999: 79). Moreover, new migrants to rural areas, governments, and firms have strong financial incentives to clear land and forests. The economic and social effects of the crisis have also made it far more difficult for governments to monitor and enforce environmental policies as well as control illegal logging.

A pessimistic analysis of the long-term environmental effects of emerging trade patterns in Asia is consistent with previous studies of the links between currency devaluations and deforestation. For example, one study of Indonesia from 1981-85 estimated that on average each one per cent fall in the exchange rate was tied to a 1.4 per cent jump in the deforestation rate (Capistrano and Kiker 1995, summarised in World Bank 1999: 12).

Finally, some of the greatest future pressures on the remaining forests of the Asia-Pacific will come from the rapid expansion of plantations.


9. Plantations

The after-effects of the financial crisis have created strong incentives to develop more large-scale plantations, especially as capital starts to flow back into the region. Some of the most ambitious efforts are seen in Indonesia. Forest plantations covered around 3.8 million hectares of Indonesia in 1994. This area had more than doubled by the end of 1998 (Yoga 1998). The future will see even more plantations. The government aims to make Indonesia one of the world's top pulp and paper producers. The government has a similar goal to overtake Malaysia as the largest producer of palm oil (used to make margarine, cooking oil, and soap). This is an ambitious goal considering that Malaysia (especially Sarawak) is also aggressively expanding palm oil exports, a highly profitable enterprise for some firms in the early stages of the crisis. For example, Malaysia's largest palm oil company — Golden Hope Plantations — recorded a 30 per cent increase in net profits during the second half of 1997. Malaysia produced 9 million tons of crude palm oil in 1999 and expects to increase this to 14 million tons by the year 2010 (Jakarta Post 1999).

Indonesia is, however, already a formidable challenger to Malaysian palm oil exporters. Indonesia exported more than US$1 billion worth of palm oil and palm oil products in 1996. Over the last ten years, palm oil plantations grew from 600,000 hectares to over 2 million hectares. In September 1998 the transmigration minister even suggested shifting the massive transmigration project in central Kalimantan towards oil palm instead of food production (Down to Earth 1998). By 2005, the Indonesian government hopes to increase the area for palm oil production to 5.5 million hectares (CIFOR News 1998: 9).

The push in Indonesia to build a massive palm oil industry started well before the financial crisis (Potter and Lee 1998). From 1967 to 1997 crude palm oil production grew on average 12 per cent per year (Casson 1999). While the total area planted continued to grow during the crisis, the rate of expansion slowed slightly in 1998 and considerably in 1999. Production of crude palm oil also fell slightly in 1998 to around 5 million tons, the first decline since 1990.

A combination of factors explains this slowdown. Production costs were high while the global price of palm oil products dropped. Foreign investors remained wary of the political instability. There were problems with distribution, marketing, and credit. The 1997-98 fires and drought damaged production. And finally, the government's 40-60 per cent export tax on oil palm products — imposed from April 1998 to January 1999 to maintain domestic supplies of cooking oil — undercut incentives for exporters (Casson 1999).

The after-effects of the crisis, however, have laid a foundation for further expansion. Reforms imposed by the IMF have eliminated constraints on foreign direct investment in palm oil plantations. Equally important, the depreciation of the Rupiah has created a potential for even greater profits. With lower export taxes, lower domestic interest rates, more land available as a result of the 1997-98 fires, and growing global demand for crude palm oil the sector looks set to take off at an even faster rate, especially if Malaysia and Indonesia collaborate to control world crude palm oil prices (Sunderlin 1999: 12). Indonesia is now ambitiously aiming to increase crude palm oil production to 15 million tons by 2010 (Jakarta Post 1999).

The development of palm oil, rubber, and industrial wood plantations can severely damage the surrounding environment. In Sabah, Malaysia, for example, the Kampung Sukau village security and development committee chair explained: 'The people in the plantations use tonnes of chemicals for the oil palm trees and they eventually flow into ditches and end up in the river. Our river is becoming severely polluted' (Star [The] 1998). So far, however, the greatest environmental impact of plantation companies has been their direct role in lighting the forest fires of 1997 and 1998 that swept Indonesia's outer islands. Klaus Topfer, executive director of the United Nations Environment Programme, remarked in April 1998 that Indonesia's 'forest fires may turn out to be one of the greatest ecological disasters of the millennium' (for details, see Dauvergne 1998a).


10. Conclusions and Recommendations

Globalisation is a complex process with diverse, multifaceted, and uneven implications for environmental management. As part of this process environmental ideas and the rhetoric of sustainable development have spread worldwide, reaching even the remotest parts of the Asia-Pacific. All states in the Asia-Pacific now have environmental agencies and environmental sections within government departments. States have signed numerous international environmental agreements. Nongovernmental organisations like Greenpeace and the World Wide Fund for Nature as well as international lenders like the World Bank now place even greater pressure on governments to address environmental problems. Even corporations have felt forced to develop strategies to cope with the globalisation of environmental ideas and pressures. This globalisation of environmentalism has been critical for the efforts to reform forest management now underway in Indonesia and the Solomon Islands.

Yet, at the same time economic globalisation has left states and firms in the Asia-Pacific more vulnerable to currency speculators, rapid capital flight, and market crashes. This has profound environmental implications. A sudden economic downturn, such as the 1997 financial crisis, has the obvious implication of disrupting even the best environmental plans. Yet such a sharp downturn has the equally important effect of altering the underlying processes and incentives that drive environmental change. Recognising these changes and then shifting development strategies to integrate these new conditions as well as possibly take advantage of new opportunities for reform are essential for better long-term sustainable management.

In the case of the Asian financial crisis simple calculations cannot determine the costs and opportunities for environmental management. Instead, costs, benefits, and opportunities have occurred simultaneously. Some economic costs of the crisis contributed to worse environmental conditions; but some changes had positive or neutral environmental effects. Moreover, different segments of the population absorbed economic, environmental, and social costs to varying degrees. An environmental benefit for one group sometimes entailed severe economic, social, or even environmental costs for another group. It is essential to recognise that as the lens and levels of analysis move, and as the underlying prioritisation of concerns shifts, the conclusions regarding the net costs will naturally vary. Recognising these complexities means accepting that both effects and interventions will have multiple interrelated repercussions. It further means that careful qualifications must accompany broad conclusions and generalisations. While highlighting these generalisations, the final section outlines some important policy implications that arise from the analysis of the environmental implications of the Asian financial crisis in the context of globalisation.



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Note 1:  This paper has been prepared for Peter Newell, Shirin Rai, Andrew Scott, eds., Development and the Challenge of Globalisation (forthcoming). It draws on Peter Dauvergne, The Environment in Crisis: Asia and Donors After the 1997 Financial Crisis (Canberra: The Australian Agency for International Development of the Department of Foreign Affairs and Trade (AusAID), 1999). Back.

Note 2:  For a range of useful definitions of globalisation, see Giddens (1990); Holm and Sørensen (1995); and Hirst and Thompson (1996). For a discussion of the globalisation of environmentalism, see Dauvergne (1998). Back.