This paper lays out three options to deal with the problem of recurrent fires and haze in Indonesia. Further, it presents a preliminary analysis of these options on a set of evaluation parameters.

1. Vikas Sharma, PMP®
Principal Consultant, Frost & Sullivan July 2013
P a g e | 1
Policy Options to Tackle Recurrent Fires in Indonesia
Executive Summary
This paper serves as a draft policy proposal aimed at reducing the number of recurrent fires in
Indonesia. These fires have become a serious and pervasive issue for the country, causing damage on
numerous fronts – Economic, Health, Environmental and Diplomatic. Root causes include – 1)
Burning for land clearance by smallholders and plantations 2) Revenge acts directed against large
plantations 3) Predatory land-acquisition tactics employed by plantations 4) Human error.
Status quo is eliminated as a viable option due to continued worsening of the problem under the
current arrangement. Three policy options are proposed to address the problem at hand.
The three options are analyzed on comprehensive framework of criteria including – Effectiveness,
Outlay, Administrative Capability, and Stakeholder Support. A long list of possible stakeholders are
evaluated – Plantations, Smallholders, Financial Institutions, NGOs/Think-tanks, and Regional
Governments. Upon analyzing the options, analysis matrices are developed to assist in comparing
between them. Upon comparison, Option 1 (PENALIZE) emerges as the most favorable, and has been
recommended for implementation. Some potential implementation issues relating to stakeholder
concerns, inter-agency coordination, monitoring and public relations are also discussed.
Option Description
Penalize
Link credit financing approval for plantations to fire-safety
practices; Impose fines equal to attributable economic loss
per hectare; Defer new licenses for errant plantations
Reward
Promote plantations with good fire-safety records;
Introduce eco-labeling to raise consumer awareness;
Subsidize investments in zero-burning infrastructure;
Reward villages that report/help suppress fires
Educate
Conduct training programs for smallholders on controlled
burning techniques; Promote zero-burning infrastructure
as a viable long-term investment to plantations
1
2
3

2. Vikas Sharma, PMP®
Principal Consultant, Frost & Sullivan July 2013
P a g e | 2
Background – Recurring Fires in Indonesia
Forest fires have become a pervasive and serious issue for Indonesia, causing damage on numerous
fronts. Economic losses during 1997/98 were estimated at almost USD 4 billion, in the form of losses
in productivity and revenues in industries like tourism, agriculture, forestry, manufacturing etc.
Losses in heavily affected villages amounted to as much as 50% of township income. Adverse public
health impact has included sharp rise in cases of respiratory illnesses and eye/skin disorders; with
thousands hospitalized annually, and even cases of premature mortality. Damage to indigenous flora
and fauna has been severe, with large swaths of forests permanently destroyed and animal species
either extinguished or forced to live in fragmented habitats. Additionally, massive carbon emissions
from the fires are adding to green-house gases and threatening to derail Indonesia’s commitment to
the Kyoto Protocol. Also, smoke-haze escaping to neighboring countries has created diplomatic
tensions on several occasions. While the drought conditions of ENSO years have a role to play (trees
shed leaves/branches that dry up and provide fire risk; water tables go down allowing for more intense
fires), and have been frequently cited in media, the root causes for the fires are discussed below:
Underlying Root Causes:
1. Small farmers use fires as a cheap method to clear land for cultivation and believe that it helps
release nutrients into soil and reduce occurrence of pests/diseases. This is especially true of
farmers who were relocated under the Transmigration initiative to less fertile areas
2. Large plantations frequently use fires for land clearance, shunning more environment-friendly
but costlier alternatives such as zero-burning. While this is clearly illegal, it is suspected that
corrupt local authorities turn a blind eye in return for bribes
3. Land tenure disputes have seen fire being used out of frustration by smallholders as means of
retribution against large plantations
4. Plantations are known to deliberately set fire to smallholders’ lands to negotiate lowered
compensation when trying to purchase their land
5. Accidental fires emanating from discarded cigarettes or cooking fires in forests/peat lands
have also contributed to a lesser extent

3. Vikas Sharma, PMP®
Principal Consultant, Frost & Sullivan July 2013
P a g e | 3
Proposed Options
Considering the problem to be tackled, three distinct policy options are proposed for consideration as
shown in the figure below. The suggested options are directed only at small-scale farmers and
plantations. Options targeting internal reviews and legislative amendments at the government level
have been excluded for now. Also, the ‘status quo’ option in this context equates to not devising any
new policy to tackle the fire problem. Since that would not improve the situation in any conceivable
way, it has been discarded.
Each option is envisaged as a ‘bucket’ of underlying initiatives that are explained further.
Option 1: Penalize
Description: This option proposes punitive measures against parties responsible for fires. The
suggested initiatives are primarily directed at commercial plantations.
Details:
• Initiative 1: Financial institutions to be encouraged to incorporate good fire practices in their
lending criteria when evaluating credit applications from plantations. Applicant firms must
show evidence of fire-fighting capacity, compulsory insurance, adoption of zero-burning
practices, and track record of fire safety before approval.
• Initiative 2: Especially in fire-susceptible peat lands, zero-burning to be mandated for
plantations in ENSO years. Economic studies are available that estimate economic losses
attributable to fires (in terms of USD/hectare). Fines tagged to such estimates should be
Penalize Reward
Educate
Option 1 Option 2
Option 3

4. Vikas Sharma, PMP®
Principal Consultant, Frost & Sullivan July 2013
P a g e | 4
imposed and enforced upon errant plantations that are detected to be fire sources, and award
of further licenses to them should be deferred indefinitely
Option 2: Reward
Description: This option proposes incentives intended to encourage safe fire practices
Details:
• Initiative 1: State-owned media (newspapers, television, govt. portals etc.) to run promotional
campaigns highlighting plantations that have exceptional fire-safety records
• Initiative 2: Eco-labeling to be introduced for plantation products to raise customer awareness
and create competitive advantages for firms that employ fire-safety practices
• Initiative 3: Subsidies or tax breaks to be granted to selected plantations to facilitate adoption
of zero-burning practices. Selection to be based on scale of operations and past record
• Initiative 4: Villages that contribute by reporting or helping suppress fires to be rewarded with
targeted subsidies/tax breaks/prioritized infrastructure deployment
Option 3: Educate
Description: This option proposes measures intended to raise awareness and adoption of fire-safety
Details:
• Initiative 1: For smallholders, adopting costly zero-burning measures is not a practical option
given their means and scale. Programs training them on controlled burning techniques and
long-term effects of burning on fertility/crop output to be introduced
• Initiative 2: Zero-burning to be promoted to plantations as a viable long-term investment that
would maintain fertility, decrease reliance on fertilizers, and enhance corporate image

5. Vikas Sharma, PMP®
Principal Consultant, Frost & Sullivan July 2013
P a g e | 5
Effectiveness Outlay
Administrative
Operability
Stakeholder Support
Evaluation Framework
Plantations
Smallholders NGOs/Think-tanks
Financial Institutions Regional Governments
Key
Stakeholders
Involved
Firms in other industries
Evaluation Criteria
An analysis framework comprising four distinct criteria is proposed to analyze the generated options.
• Effectiveness: This criterion assesses the ability of the policy alternatives to achieve the
‘focal’ objective (which in this case is reducing recurrent fires in Indonesia).
• Outlay: Each of the proposed options involves some level of public finance commitment.
This criterion assesses the expected monetary outlay required for each option
• Administrative Operability: The three policy options should be assessed on the readiness
and ability of the existing administrative set up to roll them out. This criterion assesses how
each option would perform in terms of commitment, skills, knowledge and support required
from the agency/agencies overseeing it.
• Stakeholder Support: Each option would need to be assessed on the level of support it can
hope to garner from the various stakeholders involved. Some key stakeholders (domestic and
international) are depicted. It should be noted that only stakeholders ‘external’ to the
Indonesian government have been considered in the analysis, not ‘internal’ govt. agencies.

6. Vikas Sharma, PMP®
Principal Consultant, Frost & Sullivan July 2013
P a g e | 6
a) Plantations: Commercial operations that own plantations over large tracts of land; have
access to capital and other infrastructure. Primary targets of proposed options.
b) Smallholders: Typically small-scale farmers that own <100 hectares of land and use it for
cash and food crops, fishing, grazing etc. Primary targets of proposed options.
c) Financial Institutions: Banks, lending cooperatives and others that provide credit
facilities to plantations (primarily) and smallholders.
d) NGOs/Think-tanks: These groups would likely comment on the suitability of the adopted
policies. It would be ideal to consider their views and aim to achieve their support.
e) Regional Governments: The intent is to develop a ‘domestic’ policy, not one targeting
regional/international cooperation. Nevertheless, several large plantations in Indonesia are
owned by companies based in neighboring countries such as Singapore and Malaysia. It is
ideal to consider their governments’ reactions to proposed policies.
f) Firms in Other Industries: Errant burning practices impact the fortunes of firms in other
industries as well as they endure productivity losses, lower receipts etc. It is important
therefore to include them in the analysis as well.
Analysis of the Options
This section discusses the performance of the three policy options on the evaluation criteria.
Stakeholder analysis is provided by each stakeholder category.
• Effectiveness: Measures under Option 1, if implemented well, would affect offending firms’
bottom line most significantly and hence, most effective in changing their behavior. Option 2
ranks second. While PR campaigns/eco-labeling are attractive incentives, subsidies for zero-
burning infrastructure may be prone to misappropriation. Option 3 ranks last. Plantations have
long known benefits of safe fire-practices and not changed behavior.
• Outlay: Option 3 requires least cost-outlay among all. Under Option 1, cancelled
permits/licenses can conceivably lead to loss of corporate tax-income. Under Option 2,

7. Vikas Sharma, PMP®
Principal Consultant, Frost & Sullivan July 2013
P a g e | 7
subsidizing purchase of zero-burning infrastructure for plantations and giving out rewards to
villages requires significant cost outlay and hence, Option 2 ranks lowest on this criterion.
• Administrative Operability: Option 1 requires least (non-monetary) resource commitment
and effort. Fines and enforcement mechanisms, properly implemented, would work over a
long period. Option 3 requires more continuous and proactive effort in running
educational/promotional efforts. Option 2 involves on-going PR campaigns; on-going
selection of firms for subsidies and villages for rewards; conceivably requiring the highest
resource commitment over time. Hence, Option 2 is ranked lowest on this criterion.
• Large Plantations: Would provide most support to Option 2 due to in-built subsidies they
can benefit from, and least support to Option 1 due to punitive measures.
• Smallholders: Smallholders’ extreme discontent with predatory land-acquisition tactics used
by plantations indicates most support for Option 1. Rewards built into Option 2 for villages
that help in fire prevention/suppression place it second-ranked in terms of support
• Financial Institutions: Tightening credit evaluation criteria for plantations (as suggested in
Option 1) would significantly impact monies lent out by banks. Also, if plantations lose
licenses, banks would lose important customers. Hence, Option 1 would be lowest ranked.
Option 2 involves giving subsidies to plantations to finance acquisition of zero-burning
infrastructure. This would probably go through banks and hence, Option 2 is ranked highest.
• NGOs/Think-tanks: Strict measures enumerated in Option 1 against errant plantations would
find great support among environmental NGOs/Think-tanks, ranking it highest. The subsidies
offered in Option 2 would be seen as detrimental to Indonesia’s already weak public finance
situation and hence, ranked lowest.
• Regional Governments: Concerned about stamping out the spillover effects of fire pollution
to their countries, regional governments would conceivably back Option 1 the most, even
though it may involve sanctions against some of their own firms. Wary of incremental
financial support they may have to provide to Indonesia to support financial obligations in
Option 2, regional governments would rank it last.

8. Vikas Sharma, PMP®
Principal Consultant, Frost & Sullivan July 2013
P a g e | 8
Analysis Matrices
For ease of reading and visual interpretation, the above analysis results have been summarized in the
two matrices given below – one for all criteria (except stakeholders) and one for stakeholders.
Policy Recommendation
Taking both the Options Evaluation Matrix and the Stakeholder Analysis Matrix together in
consideration, Option 1 seems to emerge as the most favorable. In the Option Evaluation Matrix, it
emerges BEST twice and MODERATE once on the three parameters. In the Stakeholder Analysis
Matrix, it emerges MOST supported thrice out of the 5 stakeholder segments. Hence, based on the
information available and the analysis of the three options, Option 1 (PENALIZE) is recommended.
Options Evaluation Matrix (excludes Stakeholder Analysis)
Criteria
Ranking of Proposed Options
Option 1 (PENALIZE) Option 2 (REWARD) Option 3 (EDUCATE)
Administrative Operability BEST WORST MODERATE
Effectiveness BEST MODERATE WORST
Outlay MODERATE WORST BEST
Regional Governments MOST LEAST MODERATE
Financial Institutions LEAST MOST MODERATE
NGOs/Think-tanks MOST LEAST MODERATE
Plantations LEAST MOST MODERATE
Smallholders MOST MODERATE LEAST
Stakeholder Analysis
Stakeholder Category
Support for Proposed Options
Option 1 (PENALIZE) Option 2 (REWARD) Option 3 (EDUCATE)

9. Vikas Sharma, PMP®
Principal Consultant, Frost & Sullivan July 2013
P a g e | 9
Implementation Issues – Stakeholder Concerns
Given the punitive nature of the recommended policy, adverse reactions from certain stakeholder
segments are to be expected (as was briefly touched upon in the stakeholder analysis earlier). Some
possible concerns and ways to address them are listed:
Plantations:
1) Concern: May dispute the efficacy of data used to calculate fines
Solution: Commission/use data from reputable research institutes on the estimated economic
impact attributable per hectare of burning land
2) Concern: May claim that fires were not started by them
Solution: In collaboration with the plantations themselves, enhance security on plantation
perimeters. Also, use verifiable satellite monitoring of hotspots to pinpoint origin of fires
3) Concern: May protest that capabilities such as mandatory fire-fighting capacity, compulsory
insurance, zero-burning practices, would require prohibitive resource commitment
Solution: Impress upon plantations the necessity of following these regulations as cost of
doing business. To allow more time to build capabilities, mandate implementation in more
susceptible peatlands first
Financial Institutions:
1) Concern: Tightening lending criteria for plantations would impact their business significantly.
Also, if plantations lose licenses, financial institutions lose customers
Solution: For financial institutions that take part in the initiative, consider measures such as:1)
Preferential treatment in financing government schemes 2) Lowered fractional reserve rates to
enlarge monetary pool they can lend out
Foreign Governments:
1) Concern: May worry that their firms operating in Indonesia would be targeted as scapegoats
for the proposed punitive measures

10. Vikas Sharma, PMP®
Principal Consultant, Frost & Sullivan July 2013
P a g e | 10
Solution: Assure regional governments of the transparency of processes behind meting out
fines/ deferring licenses, and emphasize that the policy is geared towards addressing their
concerns over recurrent spillover fire pollution
Implementation Issues – Interagency Coordination and Monitoring
For the success of this policy, significant coordination and collaboration would be required among a
host of agencies related to Finance, Environment, Police, Forestry, Health and Statistics, all having
their own existing agendas and resource commitments. It is therefore paramount that efforts are made
to bring them to the same page and convince them of the underlying merit and usefulness of the
policy. Especially important is to communicate the policy’s merits to ‘street-level’ bureaucrats that
hold significant discretion over eventual outcomes of policies. Clear assignment of roles and
responsibilities needs to be done among the various agencies involved, along with setting measurable
Key Performance Indicators (KPIs) to track implementation progress.
Implementation Issues – Public Relations
Given its punitive nature, the policy can be expected to be not a popular one in several segments (as
has been discussed under stakeholder concerns). Imposing fines, deferring licenses, limiting access to
financing, are measures that would affect plantation firms’ bottom-line significantly and the
government should ready itself for a severe lash back. A concerted and effective public relations
campaign would be needed to communicate the motivations behind the policy and the potential
benefits it could bring over the longer term.
Conclusion
Recurrent fires have become a serious issue for Indonesia, causing damage on numerous
fronts – Economic, Health, Environmental and Diplomatic. Having analyzed various options,
Option 1 (PENALIZE) has been recommended for implementation. While sure to face
several challenges (stakeholder concerns, coordination, monitoring, public relations etc.), it is
hoped that successful implementation can significantly mitigate the problem at hand.