Singapore's clean and green reputation has taken a hit from Indonesian forest fires and its standing as a corporate and expatriate haven could be hurt if the smog becomes an annual scourge, analysts warn.

Singapore has long been a destination of choice for thousands of foreign companies and expat families drawn by its gleaming infrastructure, topnotch healthcare and education, and lush green environs that offer a high quality of living.

But its image took a heavy beating in the third week of June after palls of smoke from slash-and-burn agricultural fires on the nearby Indonesian island of Sumatra pushed levels of haze to record highs, shrouding the city in acrid smog.

Favourable winds, thunderstorms and cloud-seeding by Indonesia over Sumatra have dissipated the smog, but Singapore officials warn that severe air pollution could return any time during the June-September dry season.

If the smog becomes an annual crisis, some multinational companies may consider relocating offices, key operations and expatriate families out of Singapore, analysts warn.

"The long-term reputation of Singapore as a clean-environmental place to live in is at risk if the problem gets worse every year and no solution is in sight," said Jonathan Galaviz, managing director of US-based business consultancy Galaviz and Company, which specialises in Asia.

"I know what it's like," said Galaviz, who was an exchange student in Singapore in 1997 when similar blazes resulted in weeks of choking smog across vast swathes of Southeast Asia and billions of dollars in economic losses for the region.

Many expatriate families living in Singapore were already overseas on summer holidays as smog levels started to rise in mid-June. Air pollution also reached harmful levels in neighbouring Malaysia.

Expatriates who stayed in Singapore were hardly comforted by the chatter on online forums, where some members wondered whether their governments would evacuate them as the smog hit unhealthy levels. Some families, desperate for a respite, fled to neighbouring countries on short breaks.

If smog becomes a prolonged or recurring problem, Singapore's tourism industry, which accounts for 6.0 percent of the city-state's GDP, could suffer badly. International arrivals, currently averaging 40,000 a day, could fall, economists say.

During the SARS epidemic in 2003 that grounded air travel during peak periods of the flu-like virus, Singapore's daily arrivals of around 20,000 at that time plunged to 5,000-6,000 a day in the first quarter, said regional economist Song Seng Wun of Malaysian bank CIMB.

At the height of the current haze crisis, several outdoor tourist attractions shut down while some visitors left Singapore earlier than planned. An international conference on reducing the threat of nuclear weapons was cancelled.

More troublingly, observers warn that if the problem escalates there could be a gradual exodus of foreign companies that have set up offices or regional headquarters in Singapore.

Initially, companies might consider "temporarily" relocating key operations should the haze persist for weeks, said Rajiv Biswas, chief Asia Pacific economist at research firm IHS Global Insight.

"However, if the haze escalates to hazardous levels for a protracted period, to the extent that a state of emergency is declared for an extended time, firms may consider shifting some essential operations to other international hubs," Biswas told AFP.

The problem could tarnish the "long-term perceptions of Singapore as a safe, clean environment for expatriates to locate their families compared to other leading global business hubs and financial centres", he added.

But Delphine Granger, a 40-year-old French-British housewife and a mother of two young girls, is unfazed by such dire predictions. She said Singapore offered far better prospects as an expatriate haven than many other Asian capitals that are beset by natural disasters, political turmoil and traffic gridlock.

"Singapore is well ahead of other cities," Granger, who has been based in the city for nine months, told AFP.

Observers point out that rivals Hong Kong, Shanghai and Beijing are burdened by chronic air pollution. Bangkok, the gateway to the Indochinese region, is periodically hit by floods and political unrest, as is Manila, which is fast emerging as a global outsourcing hub.

"I don't think (Singapore's) image is tarnished. There are no natural disasters here. It's not an earthquake zone, it's not a volcano zone. This is a man-made disaster," Granger said.

Meanwhile, Singapore appears keen to step up pressure on Indonesia as it struggles to contain slash-and-burn farming in its rainforests that generates vast plumes of smoke during the dry season.

"We need to put in place a permanent solution to prevent this problem from recurring annually," Singapore Prime Minister Lee Hsien Loong said after Indonesian President Susilo Bambang Yudhoyono apologised to Singapore and Malaysia for the haze crisis.

The smog issue was discussed over the weekend at the Association of Southeast Asian Nations annual foreign ministers' meeting in Brunei, where Indonesia said the forest fires had been greatly reduced and vowed to sustain its efforts to address the problem.

Indonesia says haze fires greatly reduced
Bandar Seri Begawan, Brunei (AFP) June 29, 2013 - Indonesia said Saturday that fires across giant rainforests which caused Southeast Asia's worst air pollution crisis in years had been greatly reduced and were coming under control.

Indonesian Foreign Minister Marty Natalegawa gave the assessment after briefing his counterparts from neighbouring Singapore and Malaysia, the two countries most affected by the toxic smoke.

"The situation is more positive," Natalegawa told reporters after meeting Anifah Aman of Malaysia and Singapore's K. Shanmugam at an Association of Southeast Asian Nations (ASEAN) annual gathering in Brunei.

He said the affected areas on Sumatra island had dropped to 4,081 hectares (10,084 acres), about one quarter of the size from when the fires were at their peak this month.

"So there's been a substantial reduction," he said.

"In other words, through a combination of efforts on the ground and from the air, in terms of seeding clouds and water bombing and propitious and friendly weather, I guess things are becoming more under control," he said.

"But we must continue these efforts... this is a commitment by the Indonesian government to ensure that we address this problem."

The so-called "haze" is an annual concern as traditional slash-and-burn farmers and modern corporate palm oil plantation companies burn Sumatra's forests and peat lands to clear land for agricultural use.

However this year has been the worst since 1997-1998, when haze caused an estimated $9 billion in losses in economic activity across Southeast Asia.

In recent weeks the tiny city-state of Singapore that prides itself on its clean environment has endured its highest air pollution levels on record, forcing residents to wear face masks and stay indoors.

The haze also raised diplomatic temperatures, with Singapore and Malaysia demanding that Indonesia do more to stop the problem.

They have pressed Indonesia to finally ratify a 2002 ASEAN agreement aimed at ending the haze. Indonesia is the only country in ASEAN not to have ratified it, although officials say it is currently before parliament.

Indonesia initially hit back at the complaints, saying some fires were on plantations owned by Singaporean and Malaysian business interests.

However Indonesian President Susilo Bambang Yudhoyono then apologised for the crisis, amid desperate efforts to put out the fires such as by trying to seed clouds to trigger rain.

Shanmugam, the Singaporean foreign minister, gave an upbeat assessment of the trilateral talks on Saturday, describing the discussions as "extremely positive" and "constructive".

"We are close neighbours, the three of us. And we have had a very constructive relationship all these years," Shanmugam said.

The issue is expected to be further discussed when the annual ASEAN talks officially get under way on Sunday, ahead of wider Asia-Pacific meetings involving the United States, China, Russia and other heavyweights.

Singapore and Malaysia have also demanded that Indonesia punish those behind the blazes.

Natalegawa said at least 18 people had been arrested, and vowed those found guilty would be "held accountable", but gave no further details.