(CNN)Indonesia, Singapore and Malaysia are choking under a thick haze of smog caused by the annual burning of land for the production of pulp, paper and palm oil on the island of Sumatra, in western Indonesia and Borneo.
Indonesian haze: Why it's everyone's problem
The smog has become so bad the Indonesian government has declared a state of emergency in Riau province, one of the worst affected areas.
Seven executives from companies alleged to be behind the fires have been arrested, said Indonesian police chief, General Badrodin Haiti.
It's a persistent, annual problem that disrupts lives, costs the governments of Indonesia, Singapore and Malaysia billions of dollars, and leaves millions of people at risk of respiratory and other diseases. The land that burns is extremely carbon rich, raising Indonesia's contribution to climate change.
For 18 years, large pulp and paper and palm oil plantations have farmed the rich peatlands that run along the Sumatran coast of Indonesia and Borneo Island.
Every year, existing farmland is dried out and burned for the next season's crop and to clear surrounding forests for expansion. The fires are large and hard to control and dry, CO2-rich peatlands can burn for many weeks.
"Those big scale companies are also eager to expand their operations into the adjacent peatland," said Yuyun Indradi, from Greenpeace Indonesia.
"Whether they deliberately set the fire, or they can also ask people in the communities around their areas to burn the land, that's also a possibility. And then at the end, those burned areas are proposed as the expansion of their plantation."
CNN meteorologist Tom Sater said there are as many as 1,143 hot spots along the Sumatran coast at present where fires are burning. This year's strong El Nino has exacerbated the problem, creating extra dry conditions that fan the flames.
Severe fires in 1997 -- one of the worst years on record -- were estimated to have cost the Indonesian government $20.1 billion, according to a study published in Ecological Economics. During the same episode, the Singaporean government estimated they lost $9 billion through increased healthcare costs and disruptions to air travel and business.
This weekend's Singaporean Grand Prix is at risk, and although organizers have insisted it will go ahead, that may change depending on the weather conditions.
Locally in Indonesia, more than 3,000 personnel, including military and police, are working to put out fires and investigate suspects involved in starting the burning. Indonesian aircraft are water bombing and "cloud seeding" by using chemicals to induce rain.
The human costs from the problem are broader.
Thousands of people have fled Pekanbaru in Riau Province, Indonesia, to escape the record air pollution levels, according to the World Resources Institute.
In a blog post, Greepeace media campaigner Zamzami, describes how he left his village with his daughter and pregnant wife to try to escape the haze. "But like a dark cloud over my head I've since discovered that wherever I go, smoke follows," he says.
The health implications of breathing in the thick air pollution are severe. The particles in the pollution can increase the risk of cardiovascular and respiratory diseases and cancer and more than three million people die prematurely each year from prolonged exposure to air pollution, according to a new study from the World Health Organization (WHO).
Air quality index readings have been as high as 983 in Pekanbaru, Sumatra -- anything over 200 is unhealthy -- while numbers are fluctuating between unhealthy and very unhealthy in Singapore and Malaysia, depending on the wind.
Residents in regions in all three affected countries have been recommended to stay indoors and more than 2,000 schools have closed across Indonesia and Malaysia, affecting 1.5 million students and their parents. Singapore has face masks ready for Grand Prix participants and spectators to purchase on the weekend.
Diplomatically, the annual fires cause friction, with the Singaporean and Malaysian governments pressuring Indonesia to do more to stop them. An Indonesian parliamentarian in charge of international relations and the environment, Hamdhani Mukhdar, apologized to both governments at a September ASEAN meeting in Kuala Lumpur, local media reported.
Indonesia has strict plantation laws and a company found guilty of clearing land by burning can be fined up to 10 billion rupiah (US$700,000), and management faces up to 10 years in jail.
This year, in a groundbreaking verdict, Indonesia's Supreme court upheld charges against palm oil producer PT Kallista Alam, after the company was accused of illegally burning a large area of protected forest in Aceh, Sumatra in 2012. They were ordered to pay fines of RP 366 billion (US$25.3 million), according to the Jakarta Post.
However, despite these harsh measures, forest campaigners say that companies continue to flaunt the law. "We can see that there is a close relationship between the private sector and the government in terms of corruption and this is part of the issue that the government needs to seriously tackle," said Indradi.
Indradi welcomed news of the recennt arrest of seven executives, but said the process to punish companies is too slow, often taking many years, and evidence collection was difficult.
"The announcement of the arrests is good, but it is a move from the government to show people they are doing things," he said.
Ivan Png, an economist from the National University of Singapore who has studied the fires, said financial incentives were needed to encourage whistleblowers to come forward so that people flouting the rules can be caught. He also called for a certification system to identify safe producers, so consumers can take direct action themselves.
"Just as in developed countries, fair trade coffee and clothing has gained traction, we need to have the same certification for palm oil products and paper products," Png said.
Ultimately, the global cost of the fires is something everyone bears.
Indonesia was ranked the world's sixth worst emitter of greenhouse gasses by the WRI in 2014. Although the country has prepared a draft document outlining how it will deal with climate change for the global climate change summit being held in Paris in November, there was no mention of peatland protection or fires.