The Haze Report 2025 on Palm Oil: Market Trends, Policy Shifts, Biofuel Expansion, and EU Deforestation Regulation

Markets

Trump’s proposed differential tariffs are expected to have minimal disruption in Indonesia's palm oil sector. Analysts, however, are watching for potential indirect effects, such as reduced Chinese purchases of U.S. soybeans, which could shift demand toward palm oil.

Indonesia’s palm oil stands out, supported by:

• Global demand

• Robust downstream industries

• A strong domestic market buoyed by ambitious biofuel mandates (B35, targeting B50)

Despite rising global demand, especially for food and biofuel, Malaysia’s mature oil palm acreage has declined for four consecutive years, while Indonesia’s growth remains marginal. Meanwhile, Brazil’s expanding soybean cultivation has driven high palm oil prices for nine months leading into 2025. Domestic biofuel consumption in Indonesia (B35, aiming for B50) is also drawing down exports, prompting buyers to seek alternative oils and intensifying deforestation elsewhere, notably in Brazil, where forest loss reached 2.82 million hectares in 2024.

On the other hand, calls are growing to revisit Indonesia’s palm oil moratorium. Analysts urge sustainable expansion and urgent replanting with higher-yield seeds, citing aging trees, disease, and underperforming government-linked estates as bottlenecks. While environmental groups often disproportionately target palm oil, they frequently overlook the environmental impact of other commodities like soy and cattle.

Despite being the most efficient oil crop, palm oil continues to face reputational challenges, particularly in the EU, where sustainability concerns and competition from alternative fats and stricter biofuel standards are limiting market access.

Before 2015, commodity price spikes often triggered forest loss in Indonesia through plantation expansion and political cycles. The 2015 fires acted as a wake-up call, and since then, deforestation has moderated despite price fluctuations. In 2024:

• Oil palm expansion slowed slightly

• Peatland conversion dropped

• Overall, deforestation fell 9% compared with 2023.

Forest loss rose modestly in Kalimantan and Sumatra but shifted from illegal to legal clearing within approved concessions. Globally, Indonesia and Malaysia show reduced deforestation, with fire-related losses far below mid-2010s levels, even as major forest loss continues in Brazil, Bolivia, DR Congo, and Peru.

Policies

Under President Jokowi, Indonesia made significant strides in curbing emissions through forest protection and peatland fire prevention. This included a 2021 commitment to achieve a net carbon sink in the forestry and land-use (FOLU) sector by 2030, potentially delivering up to 60% of national emissions reductions. The effort was supported by new carbon pricing and trading regulations and a climate cooperation pact with Singapore. By 2024, Jokowi’s final year, fire rates remained low due to restoration efforts, favorable rainfall, and private-sector action.

Post-Jokowi, concerns have emerged over political support for plantation expansion, threatening climate and haze goals. A recent rise in forest loss in Sumatra and stalled peatland regrowth between 2017–2022 highlight ongoing challenges in sustaining land-based climate gains.

The Prabowo administration’s priorities differ markedly from Jokowi’s.

• While Jokowi implemented palm oil expansion moratoria alongside infrastructure development and mineral downstreaming (with environmental and social costs), Prabowo emphasizes national self-sufficiency in food and energy, viewing carbon markets largely as commercial ventures rather than conservation tools.

• Rising public debt and costly social programs further strain fiscal space.

• State-linked Agrinas aims to control up to one million hectares of contested land, potentially capturing 6–7% of national output. With stagnant palm oil output and limited technological progress, Agrinas’ expansion may strain productivity further.

Nonetheless, Indonesia’s downstreaming strategy seeks to boost value-added processing in palm oil and coconut to support high-income ambitions. Key areas include oleochemicals, food products, and biodiesel expansion (B40 to B50 by 2029). However, rising land-use tensions create a “food vs. fuel vs. export” trilemma. The sector also faces competition from advanced hubs like Malaysia and the EU. Meanwhile, planned estate expansion in Papua faces high development costs and complex local dynamics, raising investor concerns. Amid policy uncertainty and political sensitivities, businesses may become increasingly cautious.

Palm Oil, Biofuels & Industry Transformation

Global demand for palm-based biofuels remains strong, driven by EU and U.S. policies favoring low-carbon fuels. While traditional palm oil faces restrictions, certified waste-derived products such as PFAD and used cooking oil are gaining traction, particularly for aviation and marine fuels. Strict sustainability standards and tight supply make policy clarity essential for future investment.

Indonesia and Malaysia face challenges in balancing domestic needs, subsidy costs, and exports. Indonesia's growing biodiesel demand, stagnant output, and unlicensed mills complicate regulation, while Malaysia focuses on higher-margin exports over domestic biodiesel use.

Indonesia’s palm sector is undergoing a shift, with state-backed Agrinas targeting 1 million hectares of reclaimed land, potentially reshaping industry dynamics. Export competitiveness is at risk amid court scrutiny of major traders and ongoing concerns over governance, land control, and regulatory transparency.

EU Deforestation Regulation (EUDR) and Implications

The EU’s deforestation regulation (EUDR), now delayed to late 2025 for large firms and mid-2026 for smaller ones, aims to eliminate imports linked to deforestation, including palm oil, cocoa, and rubber. Recent revisions ease compliance for large companies by allowing annual due diligence submissions and data reuse, resulting in up to a 30% reduction in administrative costs.

Smallholders, however, remain largely unsupported, and compliance depends heavily on origin-country systems. While Malaysia is advancing digital traceability for smallholders, Indonesia appears to have deprioritized EUDR implementation amid other economic pressures. The EUDR is expected to support haze prevention, but risks excluding smallholders from EU markets without additional support.

The Annual Haze Outlook Report 2025 can be found here.

Reach us at khorreports[at]gmail.com

Indonesia's policy, growth, and political-economic shifts

The robust nature of Forest management policies from Jokowi to the Prabowo Regime

According to the Haze Outlook 2025, the Prabowo administration is set to continue Indonesia’s forest governance by building on the policies established under President Jokowi. Key measures carried over include:

• The establishment of the Peatland Restoration Agency and the continuation of its restoration targets.

• High-profile rulings and prosecutions of companies responsible for fires, setting a precedent for the high cost of non-compliance.

• Jokowi’s commitment to achieving a net carbon sink in the forestry and other land use (FOLU) sector by 2030, along with the issuance of carbon pricing and trading regulations, has opened the door to carbon credit generation through ecosystem conservation and restoration projects.

Under Prabowo, it is hoped that this enforcement remains in fire monitoring and land-use compliance, even as the government shifts economic priorities toward domestic food and fuel production.

The Realities: Rapid Growth and Agricultural Expansion with Environmental Protection

The Prabowo administration has set a target of 8% GDP growth by the end of his first term, part of a broader vision to transition Indonesia into a high-income economy by 2045.

Yet, as the Haze Outlook 2025 notes, this goal presents a difficult balancing act. Indonesia enters this next phase of development with limited fiscal space and relatively high debt levels, even before factoring in the added strain of recent global economic uncertainty. While initiatives such as free school meals may help stimulate domestic consumption and economic growth, they also risk placing additional pressure on public spending.

Palm oil remains central to Indonesia’s economic strategy, contributing 2.5–5% of GDP and supporting 16 million jobs. However, the report warns that “this intensifies the need to manage competing demands: boosting food security, meeting energy needs, and sustaining export revenues, all while avoiding environmental degradation.” 

The Outlook further notes, the administration must ensure that agricultural development moves in step with meaningful environmental protection. Several policy initiatives now underway will serve as critical tests of whether this balance can be maintained.

The future of Indonesia through Agrinas, Papua, and Biofuel mandates, amidst constrained fiscal space, high debt levels

Central to the Prabowo administration's development strategy is Agrinas, a new state-owned enterprise formed through the merger of three companies and backed by the Danantara sovereign wealth fund. The Haze Outlook 2025 notes that Agrinas Palma Nusantara aims to manage up to one million hectares of plantations, potentially accounting for 6–7% of national palm oil output. This reflects a broader push to consolidate land control and accelerate downstream industrialization.

The report also highlights Indonesia’s plan to raise its biodiesel blend from B35 to B40 in early 2025, “consuming palm oil volumes comparable to major export markets like the US and EU.” A B50 target is set for Prabowo’s term, alongside the introduction of E5 bioethanol in gasoline by 2026, policies aimed at bolstering energy security and domestic palm oil demand.

Papua is identified as a strategic frontier for agricultural and energy expansion. However, the report cautions that “high land costs and the need to respect indigenous rights and sustainability” must be taken into account.

Despite these ambitions, fiscal constraints and high public debt limit the government’s capacity to fully fund sustainability efforts. At the same time, the expansion of agriculture, food security programs, and biofuel mandates continues to place pressure on land use and forest governance.

The Outlook underscores the central challenge ahead: balancing economic growth, energy and food security, and environmental protection without undermining fire prevention and emissions reduction targets.

The Annual Haze Outlook Report 2025 can be found here. Part 1 of the analysis of the Haze Outlook report 2025 can be found here.

Reach us at khorreports[at]gmail.com

Outlook on forest fires, market indicators, farmers, and EU trade compliance

The Shift from Low to Medium Haze Risk in 2025 (Transboundary Haze in Sumatra)

The Haze Outlook 2025 has raised the regional risk level from green (low risk) to amber (medium risk), citing elevated agricultural prices, an uptick in deforestation, and economic and policy shifts driven by pressure to boost agricultural output for food security as attributes to this change.

Key points to note from the report:

• While deforestation declined between 2017 and 2022, it has increased again from 2023 into 2024, particularly in Sumatran provinces near Singapore and Peninsular Malaysia, where fire activity surged in July 2025.

• Despite forecasts of a shorter dry season, hotspots and smoke haze in parts of Sumatra in mid-July have already affected air quality in parts of Peninsular Malaysia, indicating that fire risk remains elevated even under average weather conditions.

With climate trends pointing to another unusually dry season between 2027 and 2030, and structural drivers like land clearing and commodity demand continuing to fuel haze episodes, the report recommends prioritizing sustainability measures “to avoid creating more fire-prone conditions.”

The surging of commodity prices with deforestation on the uptick (Most especially, palm oil prices surpassing soybean)

Linked to these structural pressures, the Outlook notes that agricultural commodity prices, especially for palm oil, have surged due to supply failing to keep pace with rising global demand.

According to the report, palm oil from Indonesia and Malaysia, typically the world’s cheapest vegetable oil, has traded above soybean oil prices at key destinations for nine consecutive months, an unprecedented trend. This price surge is significant because historical spikes in commodity prices have often preceded increased deforestation in subsequent years. 

Although the rate of primary forest loss between 2015 and 2019 remained largely flat or declined despite fluctuations in commodity prices, the report notes that the current cycle may differ: “estimates show some uptick in deforestation in Indonesia from 2023–2024.”

Will EUDR be further delayed to 2028? How will smallholders cope with these regulations

The report also highlights the approaching enforcement of the European Union’s Regulation on Deforestation-free Products (EUDR), scheduled to take effect for large companies on 30 December 2025. The regulation targets seven commodities, palm oil, soy, wood, cocoa, coffee, cattle, and natural rubber, and requires proof that imports are not linked to deforestation after 31 December 2020.

According to the report, key developments related to the EUDR include:

• The regulation imposes strict reporting requirements, which critics argue may exclude smallholder farmers unable to meet compliance standards.

• In response, the EU has simplified some administrative rules, allowing annual submissions and reuse of due diligence statements for reimported goods, cutting estimated compliance costs by 30%.

• Indonesia and Malaysia have developed national digital platforms to provide legality and traceability data, while respecting data protection laws. These systems aim to support smallholders and enable international buyers to file EUDR-compliant submissions through national dashboards.

• Indonesia has urged the EU to postpone full implementation until 2028 to allow more time for preparation and alignment across all stakeholders.

The report suggests that while the EUDR aims to curb deforestation linked to commodity trade, its real-world impact will depend on how effectively origin countries and the EU implement and enforce these measures, especially regarding smallholder inclusion.

The Annual Haze Outlook Report can be found here.

Reach us at khorreports[at]gmail.com

In the media: China Daily on Market Diversification in Southeast Asia

Is the Southeast Asian Market cushioned from harsh US tariffs through diversification?

Editor’s Note: On May 28, the U.S. Court of International Trade ruled that the global tariffs imposed by Trump are illegal. However, many of the sector-specific tariffs like those on Southeast Asian agricultural exports remain in effect even as trade negotiations continue in the on-off Trump Tariff saga.

Segi Enam Advisors principal Khor Yu Leng was cited by China Daily on 5 May 2025 for her views on market diversification among ASEAN countries, following the impact of high US tariffs on the Southeast Asian market.

On 2 April, the US imposed a baseline 10% tariff on all its trading partners, along with additional, country-specific tariffs. Among those hit hard were countries in Southeast Asia. For example, Indonesia, the world’s biggest coffee exporter, was hit with a 32% tariff, even though the US is one of its key markets. Thailand the second largest was hit with a 32% while Cambodia 49%. Meanwhile, Vietnam, which is considered more vulnerable due to its strong reliance on the US and the likelihood of future tariffs, was slapped with a 46% tariff.

In response, countries in the ASEAN region continue the negotiations with the US, but they’re also actively working to protect their respective economies by diversifying their export markets and improving export competitiveness.

Planters and traders in Indonesia, for instance, remain optimistic as they turn to other key markets like Singapore, South Korea, and the Middle East. Governments in the region are also stepping up support. In Malaysia, Prime Minister Anwar Ibrahim announced a 1 billion ringgit (about $235 million) relief fund to help small and medium-sized businesses affected by the tariffs. Meanwhile, Thailand is hosting a global rice summit from May 25 to 27, led by its Commerce Ministry. The goal is to promote Thai rice exports and secure purchase orders worth over 2 billion baht (around $61 million).

Yu Leng’s comments below touched on the diversification of markets among ASEAN countries following the impact of the US tariffs.

Khor Yu Leng, director of Singapore-based consultancy Segi Enam Advisors noted that the US tariffs are of great concern in ASEAN countries as exporters have a similar range of agricultural products, including rice, palm oil, and fruits. She said Vietnam and Thailand seem more vulnerable, with relatively higher US tariffs and heavier dependence on niche markets and products, including jasmine rice.

Reach us at khorreports[at]gmail.com

Improving Malaysia’s Ecological Fiscal Transfers: Key Takeaways from Macaranga Media's Webinar

On 23 April 2024, Samantha Ho (Eco Business), Surin Suksuwan and Teckwyn Lim, moderated by Yao-Hua Law of Macaranga Media, gathered to discuss Malaysia’s Ecological Fiscal Transfer (EFT) policy, a federal initiative aimed at incentivizing state governments to conserve forests and protected areas. The webinar shed light on the program’s challenges, transparency gaps, and potential improvements. Here were the key takeaways:
1. Limited Funds Disbursed, Lack of Transparency

Since its introduction in 2019, the federal government has allocated RM800 million under the EFT scheme. However:

• Less than 5% of the funds have been disbursed.

• In some years, the amounts given to state governments were lower than publicly stated.

• The Ministry of Natural Resources and Environmental Sustainability (NRES) did not disburse funds in certain years, raising questions about oversight.

While some projects—such as Tasik Chini’s conservation and an artificial reef in Kelantan—were highlighted, most states provided little detail on how funds were used. Johor was the most transparent but only shared data from 2021, leaving earlier allocations unaccounted for.

2. Why Does the Federal Government Need States’ Cooperation?

• States control land, while the federal government has international commitments (e.g., protecting 20% of Malaysia’s land).

• Without state cooperation, federal conservation goals (such as maintaining 50% forest cover) may fail—especially as states like Sarawak continue converting forests for agriculture.

• Currently, there is no penalty for states that reduce forest cover, and little compensationfor states like Pahang and Sabah, which already maintain high forest coverage.

3. Ambiguity in Definitions and Monitoring

• The federal government retracted a list of protected areas from MyBIS, claiming it was a temporary delay—but five and a half years later, clarity is still lacking.

• Without clear definitions, it’s difficult to determine what qualifies as a protected forest or how much forest cover exists.

• No strict monitoring ensures funds are used for conservation. Some states reportedly spent EFT money on roads and other non-conservation projects. However, some panellists agreed that for EFTs to work, state governments should have freedom to choose as to what they define as constituting ‘conservation’.

4. Should EFTs Be Tied to Conservation Outcomes?

• Teckwyn argued that EFTs should increase protected areas and maintain forest cover, not just fund existing state activities.

• Surin suggested that states failing to protect forests should lose funding, turning EFTs into a performance-based incentive.

• Samantha emphasized transparency—even if funds aren’t spent on conservation, the public deserves to know how they’re used.

5. Rethinking EFTs: Opportunity Cost, Not Just Conservation Funds

• Since federal transfers to states are constitutionally mandated, EFTs could be structured as compensation for lost economic opportunities (e.g., logging or mining bans).

• Surin proposed: “If you have X amount of forests, you get X amount of money.”

• Others questioned whether framing EFTs as “conservation funds” is effective—perhaps they should be seen as payments for ecosystem services.

Conclusion
Malaysia’s EFT policy has the powerful potential to safeguard Malaysia’s natural heritage as well as being a legitimate tool to back up the Malaysian government’s pledge of maintaining 50% forest cover. Notwithstanding, the general consensus was concern over the lack of transparency at how public funds were being spent.

Part 1 of Macaranga Media’s coverage of EFTs can be found here. Part 2 may be found here.
MyBIS’ list of protected areas may be found here.

Reach us at khorreports[at]gmail.com

SCMP Interview: Malaysia pushes for premium palm oil in China as overall imports decline

Segi Enam Advisors principal Khor Yu Leng was cited by South China Morning Post (16 March), for her views on China’s declining demand in importing Malaysian palm oil. Once the top importer of Malaysian palm oil, China has now been ceded by India. According to the Malaysian Palm Oil Board, China imported 1.76 million tonnes of Malaysian palm oil in 2022, representing 11.2% of Malaysia’s exports of the commodity, but that fell to 1.47 million tonnes (9.7%) in 2023 and 1.39 million tonnes (8.2%) last year.

Yu Leng’s comments, as quoted by South China Morning Post, are as below. She opined that Chinese consumers are now after oils perceived to be healthier and referenced the demand for value-added products.

Chinese consumers now have enough money to demand foods made with oils that are considered to be healthier, said Khor Yu Leng, a political economist at Singapore-based Segi Enam Advisors. Much of it can be refined domestically, she added.

Rapeseed oil is common now and may be sourced from China, she said, while much of the vast amounts of soybean China imports each year goes to making oil.

“There is still a middle-income trap for palm oil because there’s a perception that it’s not as healthy,” she said. Specialty, health-focused palm oil is a “niche” industry now, she added, but it is morphing into a new norm.

“There’s been talk that there’s more demand for value-added products,” Khor said. “Everyone’s trying to produce some now.”

…

To help shore up the industry, Malaysia secured more than RM230 million (US$51.8 million) worth of palm oil trade deals in July when the country’s deputy plantation and commodities minister, Chan Foong Hin, visited China.

They included an e-commerce deal to help sell palm oil as health products in China, Bernama, Malaysia’s national news agency, reported, while another deal targeted the expansion of vitamin-rich red palm oil use in Chinese animal feed.

Another aimed to expand Malaysian refinery Able Perfect’s Chinese “presence” in refined palm oil and palm shortening to about RM200 million, Bernama quoted the deputy minister saying.

“This looks better than past MOUs, since [it’s] apparently specific on new and value-added products,” Khor said.

Reach us at khorreports[at]gmail.com

SCMP Interview: Indonesia’s triumph over palm oil ‘win’ over EU before the WTO but demand and market access issues could sour hopes

Segi Enam Advisors principal Khor Yu Leng was cited by South China Morning Post (25 Jan), for her views on Indonesia’s palm-oil biofuel ambitions following the WTO’s decision. The decision, issued on 10 January 2025, ultimately upheld the EU’s ability to take environmental and climate-based action under its Renewable Energy Directive and affirmed the EU’s classification of palm-oil based biofuel as ‘high risk’ due to its links with deforestation. Notwithstanding, the organisation also criticised the EU’s procedures for lacking transparency and for insufficiently reviewing data to justify its ‘high risk’ designation, rendering them inconsistent with WTO rules. Indonesia, the world’s leading palm oil producer, has since framed the WTO’s criticism of the bloc’s procedures as a “win” in its ongoing battle against EU restrictions on its palm-oil biofuel ambitions. The EU has since stated that it will ‘take the necessary steps to respect its WTO obligations’. 

Yu Leng’s comments, as quoted by South China Morning Post, are as below. She referenced Malaysia’s 2021 dispute, in which Malaysia brought a WTO claim against the EU over the latter’s classification of palm oil and palm crop-based biofuels as being at ‘high risk’ of indirect land-use change and argued the measures were discriminatory. In 2024, the WTO upheld the measures taken by the EU, as well as affirming certain related French measures. 

Khor Yu Leng, a political economist at Singapore-based Segi Enam Advisors, noted that the ruling echoed Malaysia’s earlier dispute with the EU. “The EU broad policy was upheld, again, but its procedures were faulted,” she said, describing it as “deja vu”....

… Indonesia and Malaysia together produce more than 85 per cent of the world’s palm oil and have been at the forefront of the push for palm oil-based biofuel. Both have sought to leverage their palm oil reserves as a renewable energy source by blending the commodity with ordinary fossil-fuel diesel.

But palm oil biofuel faces an uphill battle. Despite ambitious targets – Indonesia plans to increase its biodiesel blend to 40 per cent this year and up to 50 per cent by 2029 – the global market for palm oil-based biodiesel remains thin, Khor said.

“For a thinly traded palm product, there has been a surprising amount of ink and political capital spent on it,” she said, noting that even neighbouring Southeast Asian countries are prioritising electrification over biodiesel.

“Despite giddy hopes over 10 years ago, there’s just not much trade in this product. Both Malaysia and Indonesia cannot even get neighbouring countries to provide policy support for this.”

Retrospective: Floods in Thai rubber areas, China Daily Interview

by Khor Yu Leng, yuleng@segi-enam.com

News Alert: Since 28 January 2025, heavy rainfall in Malaysia’s Borneo has caused severe flooding, displacing thousands. Sarawak has over 12,000 evacuees, with Bintulu the hardest-hit district, while Sabah reports over 5,000 evacuees, mainly in Kota Marudu, Pitas, and Lahad Datu. Although conditions improved in early February, NADMA warns that thousands remain in relief centers, and on 5 February, Sarawak issued a red alert for potential floods in 26 districts. A Sarawak politician described the flooding in Bintulu, Miri, and Kuching as among the worst, with some floods and landslides everywhere else in the state. (See 30 January weather warnings from Google and Met Malaysia below).

Note: In related news, Bintulu MP Tiong King Sing blames ‘devastating’ floods on failure to see through Sungai Sibiew deepening | Malay Mail and Sarawak braces for king tide amid eased flood situation | Borneo Post Online

On 3 Dec 2024, Khor Yu Leng shared these comments to Prime Sarmiento at China Daily, who was reviewing the problem of the southern Thai floods: 

Khor Yu Leng, director of Singapore-based consultancy Segi Enam Advisors, said climate change is influencing global rainfall variability and cyclonic patterns, leading to an increase in monsoon-related flooding.

Khor, a veteran commodities trade analyst, said the current flooding in southern Thailand and northern Malaysia was worsened by high population density in flood-prone areas, vulnerable river systems, coastal exposure, and inadequate flood defenses.

Our detailed analysis behind our comments given to China Daily is as follows.

Though the full impact of the floods of end November-early December 2024 has yet to be fully comprehended at this juncture, it is already apparent that non-core production regions in Thailand were affected notwithstanding that the total farm output or GDP impact remains to be seen.

However, we can preliminarily look at rubber price as a market indicator and what kind of consequences one can expect. Reports on the ground say as follows: “Southern provinces, subsiding now”’; “I don’t think it’s bad as they make it, but if there are to be handouts then perhaps they build it up to be more major”.

Context of November-December 2024 flooding in Southern Thailand 

Southern Thailand grappled with severe flooding following torrential rainfall driven by the north-east monsoon. The north-east monsoon typically runs from November to March whereby winds from the north-east picks up moisture from the Gulf of Thailand to later deposit it as heavy rain across the gulf islands and parts of Thailand’s southern peninsula. 

Southern Thailand typically experiences high rainfall annually around November-December, but November-December 2024 saw the region experience rainfall at levels significantly above average, affecting five provinces: Songkhla, Satun, Pattani, Yala, Narathiwat.

The above-average rainfall of end-2024 resulted in significant flooding in five provinces, affecting 136,000 households, claiming 29 lives and causing significant damage particularly to rubber plantations, with losses estimated at 20bn baht (~USD $550m). The estimated area impact spans an estimated 800,000 hectares.

Map of affected regions, southern Thailand

These areas experienced extensive damage, with over 5 million rai (approximately 2 million acres) of rubber plantations impacted. The Rubber Authority of Thailand (RAT) indicated that farmers will be unable to tap their rubber trees for another six weeks, exacerbating the financial losses due to the current latex price of 65 baht per kilogram (~USD $1.8).

Causes of floods in the region

Meteorology experts have identified several key factors contributing to the recent flooding to the region that spans South Thailand and to North Malaysia, too. The analysis reveals a combination of climatic conditions, seasonal patterns, and geographical vulnerabilities.

1. Heavy Rainfall: Experts note that heavy and prolonged rainfall has been a significant contributor to flooding, particularly in states like Kedah. Rainfall has been exacerbated by low-pressure systems originating from the Kra Isthmus in Thailand, which have led to increased precipitation in the region.

2. Northeast Monsoon: The onset of the northeast monsoon, that typically peaks annually in November and March, brings heavy rains to the east coast of Peninsular Malaysia. In 2024, climatologists warned that the monsoon may lead to more intense rainfall due to an unstable atmosphere associated with La Niña conditions. 

3. High Tides: The combination of heavy rain and high tides has been particularly concerning. Experts predicted that extra high tides occurring between 18 to 20 October may have coincided with heavy rainfall, significantly increasing the risk of flooding in coastal areas. 

4. Geographical Vulnerabilities: Areas like Kedah are prone to flooding due to their topography, where rapid water flow from upstream areas can overwhelm drainage systems, leading to flash floods. This has been observed in districts such as Baling and Kota Setar.

5. Recurrence of Flood Events: Many regions have experienced repeated flooding events, where new downpours follow quickly after waters recede from previous floods. This cycle creates a compounding effect on flood risks. 

6. Climate Change Factors: Experts highlight that climate change is exacerbating extreme weather patterns, making it increasingly difficult to predict rainfall accurately. The interaction between various weather systems, including low-pressure areas and monsoonal flows, has led to unexpected flooding events.

El Niño/Indian Ocean Dipole and typhoon season trends

The current flooding in southern Thailand (and northern Malaysia) is linked to a low-pressure system that formed over the South China Sea. This system moved through the Gulf of Thailand into the Andaman Sea, bringing heavy rains and causing widespread flooding. Notably, this event is apparently not directly tied to a specific typhoon or named storm​.

Scientists seem to agree that climate change is associated with variability of rainfall and cyclonic patterns globally, and excessive monsoon flooding has become frequent in recent years. 

Some warned earlier this year that the monsoon could bring more intense rainfall due to an unstable atmosphere associated with La Niña conditions. However, at present, the relevant climatic metrics show an ENSO-neutral phase, and the Indian Ocean Dipole (IOD) is tending negative. If both were negative (i.e., strong La Niña conditions), it would serve as a stronger indicator of heightened rainfall and storm activity. The northeast monsoon, which peaks between November and March, typically brings heavy rains to the east coast of Peninsular Malaysia and southern Thailand​.

Attending the ASEAN Economic Opinion Leaders Conference: Insights for 2025

We recently attended the ASEAN Economic Opinion Leaders Conference: Outlook for 2025, held at MITI, Kuala Lumpur, from 8-9 January, 2025. The event brought together key industry leaders, policymakers, and economists to discuss the region's future under Malaysia's ASEAN Chairmanship.

Across two days, we joined insightful sessions, including:

1. The Digital Economy and Green Economy - ASEAN’s Future Engines of Growth: Yeoh Keong Hann (YTL Power) emphasized the importance of balancing domestic advantages in renewable energy with equitable distribution across ASEAN. He proposed ideas like connecting regional power grids to facilitate energy trading. Firdaus Hisham (UEM) highlighted the need to harmonize regulations to attract investments and accelerate large-scale green initiatives.

2. World Bank’s Economic Outlook for ASEAN: Manu Bashkaran (Centennial Asia Advisors) and Aakash Mohpal (World Bank) provided a comprehensive view of post-pandemic economic recovery. They stressed empowering SMEs as critical drivers of innovation and job creation while addressing geopolitical risks, such as shifts in global trade patterns and increasing transport costs.

3. Reinforcing Regional Economic Integration for a Resilient ASEAN: Satvinder Singh (ASEAN Secretariat) and Nazir Razak (ASEAN-BAC Malaysia) explored innovative solutions like the idea of an ASEAN business entity to facilitate seamless operations across borders. They also discussed revisiting older initiatives, such as customs integration, to strengthen regional supply chains.

These dialogues underscored ASEAN's resilience and potential, with a focus on sustainable growth, innovation, and regional collaboration. The conference set an optimistic tone for Malaysia’s role in leading ASEAN into 2025 and beyond.

Panel Discussion, ‘Reinforcing Regional Economic Integration for a Resilient ASEAN’

With Chee Hau (Ministry of International Trade and Industry)