Indonesia's Fiery Crises

Abstract

Since the summer of 1997, Indonesia has been engulfed in the worst economic crisis witnessed in Southeast Asia. Simultaneously, a second—environmental—crisis is taking place in the shadow of currency devaluations and stock market crashes. The latter signals the negative consequences of rapid, poorly regulated economic development for the region's environment and is exemplified by the raging forest fires in Indonesia spreading out of control and enveloping neighboring countries in a thick harmful haze. This article explores the multiple links between the two crises in Indonesia and their underlying causes. It shows that the International Monetary Fund-backed Indonesian structural reform program leaves the problem of forest fires unresolved and is likely to result in further environmental degradation. The very fate of these reforms is assessed in light of the prevailing political uncertainty. Finally, alternative solutions that begin to deal with both the environmental and the financial crises are proposed.