JAKARTA, Indonesia—Indonesia’s Forestry Ministry said Tuesday it would take legal action against a palm-oil company that allegedly cleared land through illegal burning and took environmental investigators hostage.

Environment and Forestry Minister Siti Nurbaya Bakar said that companies found responsible for the fires that cloak much of Southeast Asia in noxious haze each year need to be prosecuted. “If we let this carry on and don’t resolve it, then Indonesia will remain like this,” she said.

Ms. Bakar also condemned attempts to halt the investigation by dozens of men suspected of being hired by the company, PT Andika Permata Sawit Lestari. Last week, a team of seven officials investigating wildfires in Sumatra’s Riau province were detained and threatened with death.

A legal representative for the firm on Tuesday denied using fire to clear land and said that the men who threatened the investigators belonged to local farmers’ groups.

The incident highlights the challenges Indonesia faces in bringing to justice those responsible for starting fires to clear forests and peat lands for plantations. The recurring problem has ignited regional tensions, affected public health and cost billions in economic losses. Last month, air pollution in Singapore and Malaysia reached unhealthy levels after the fires flared in Riau.

It also follows a recent investigation by several environmental organizations into a Jakarta-based conglomerate singled out for allegedly clearing land through illegal burning in Indonesia’s remote province of Papua.

Burning tracts of native forest remains the cheapest and fastest way to clear land for the palm-oil and pulp-and-paper plantations that support Southeast Asia’s largest economy.

Jakarta has pledged to toughen enforcement in its efforts to combat deforestation, but it faces challenges such as corruption, poverty and difficulty monitoring rural areas that are hard to access. Environmental groups say Indonesia’s attempts to prevent forest fires are being hampered by “a crisis in law enforcement.”

Ms. Bakar said this was the first time investigators had been threatened in the field and that the ministry won’t back down from pursuing the case.

Before being released, the investigators were forced to delete photo and video evidence, but officials say drone images showing uniform squares of burned land were proof that the burning had been planned.

    ‘If we let this carry on and don’t resolve it, then Indonesia will remain like this.’
    —Environment and Forestry Minister Siti Nurbaya Bakar

Under Indonesian law, companies found guilty of setting fires to clear land can face hefty fines and individuals can be imprisoned for up to 10 years.

Indonesia says more than 450 people suspected of starting fires have been arrested since January and at least nine companies are currently under investigation.