* President Widodo cut short U.S. visit last month due to haze
* Palm group says better access to credit will help stop burning
* Govt wrong to ask major firms to row back deforestation pledges
By Bernadette Christina and Michael Taylor
JAKARTA, Nov 12 (Reuters) - Forest fires in Indonesia that have caused choking smoke across much of Southeast Asia will flare up again next year because government action to tackle the crisis is ineffective, a palm farmers group said.
Indonesia and the wider Southeast Asian region have been suffering for weeks from smoke caused by smouldering forest and peatland fires, largely in Sumatra and Borneo islands that authorities have struggled to contain.
Green groups and palm oil plantation firms say a 2009 law that allows smallholder farmers to use slash-and-burn practices to clear land for agricultural purposes is a key cause of the annual fires when the burning gets out of control.
"Burning will still happen because the government hasn't changed the regulations," Mansuetus Darto, secretariat at the Indonesian Oil Palm Smallholders Union told Reuters on Thursday.
Indonesia, the world's top palm oil producer and home to the world's third-largest tropical forest, has faced increased political pressure from neighbours Singapore and Malaysia to address the crisis as the haze has spiked to unhealthy levels, causing some school closures and flight cancellations.
Jakarta has said it would review laws that allow farmers to burn up to two hectares (five acres), and last week sent letters to plantation firms and provincial governments demanding peatland conversion is immediately halted.
Previously, the government ordered four companies to suspend operations for allegedly causing forest fires and revoked the land licences of three other firms.
Darto, however, said the government needed to implement stricter regulations to stop burning and give smallholders, who account for 40 percent of Indonesian palm oil output, better access to credit so they could afford to clear land using best practices. His group has 48,000 members, mostly in Sumatra and Kalimantan.
Using tractors, chainsaws or hand tools is the most environmentally friendly way to clear forest areas approved for development, say forestry groups, but these methods are more expensive and time-consuming than fires.
Before his election last year President Joko Widodo promised to provide easier access to credit for smallholder farmers, but has yet to act on that pledge.
He cut short an official trip to the United States last month to try and deal with the crisis as the fires pushed the country's average daily greenhouse gas emissions above those of the U.S.
Smallholder farmers have also been hit hard by a drop in palm oil benchmark prices, which touched a near six-and-a-half year low earlier this year.
To help, the Indonesian government wants major palm oil companies to row back on their historic "no deforestation" pledges made last year. The government says the pledges hurt smallholder producers who cannot afford to adopt sustainable forestry practices and are blocked from the supply chain.
Darto rejected this and said that the real reason why larger companies were not buying from smallholders was due to weak palm prices, not the Indonesian Palm Oil Pledge (IPOP).
The IPOP pledges made by major firms would in fact limit expansion to help bolster palm prices, while strengthening the relationship between his members and big plantations, he said.
"IPOP will benefit the farmers," Darto added. "Companies won't expand their areas and this means they will instead increase cooperation with farmers to increase productivity." ($1 = 4.3600 ringgit) (Editing by Susan Fenton)
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