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SARS
fever hits economies
By Alan Boyd
SYDNEY - Asian economies may escape with only a mild fever from the war in
Iraq, but they face a far more serious threat to their well-being from the
relentless spread of severe acute respiratory syndrome (SARS).
Gross domestic product (GDP) is expected to decline by an average of 1-1.5
percent as a direct result of the outbreak, largely due to the effect of image
problems on the sensitive tourism industry, which in some cases accounts for as
much as 15 percent of private consumption.
Stock markets are reeling from the twin threats of war and disease, with weak
airline and hotel stocks dragging down indices. Kuala Lumpur was one of the few
exchanges to register any growth during the first quarter.
Equities shed 5.1 percent of their value in Singapore, one of the countries hit
worst by the SARS scare, and 15.6 percent in Seoul, while the Hong Kong market
lost 7.8 percent and the Taipei stock exchange 4.5 percent.
Malaysian Airlines System, Cathay Pacific Airways, Singapore Airlines, Qantas,
Eva Airlines, China Airlines, Thai Airways and China Southern Airlines have all
seen their stock prices plummet after announcing route cutbacks and falling
passenger loads.
Few in the travel industry are expecting a turnaround before the second half of
the year, even if no further SARS cases are reported, as the outbreak is now
too closely identified with Asia. As when the first AIDS cases began to appear
in Asia in the mid- 1980s, it is global perceptions that are having the biggest
impact on business, rather than the actual rate of infection.
Tourism organizations are already taking cover, with the Bangkok- based Pacific
Asia Travel Association (PATA) calling on authorities to "be as geographically
specific as possible" on outbreaks, "and not make alarmist general statements
about the region".
"Instead, advisories and media reporting should point out that outbreaks have
been confined to a handful of very specific urban centers, and within those
centers, the vast majority of cases, or suspected cases, have been confined to
hospital care staff or family members in 'close contact' with the infected,"
PATA stated.
Hotels, airlines, tour agents and other travel service sectors have every
reason to be worried, as they will be the first to feel the heat as TV networks
trace SARS back to its Asian origins.
Tourism arrivals are expected to fall by as much as 20-25 percent, clipping at
least US$85 billion from collective travel income and a further $15 billion
from corporate income even if the scare is not prolonged.
It could be worse: foreign arrivals fell by up to 30 percent in some countries
in the late 1980s after AIDS was linked to liberal domestic sex industries,
partly because governments were less than open about the spread of the disease
and their medical response.
A similar state of self-denial surrounds the incidence of SARS, and this could
have a strong bearing on the recovery timeframe for Asian economies.
Like AIDS, the SARS issue is being driven by a mixture of fear, ignorance and
government self-denial that is frustrating efforts to keep the infection threat
in its proper context.
As of Monday, China had still not issued travel clearance for a World Health
Organization (WHO) team of specialists that wants to visit the scene of the
initial outbreak in the southern province of Guangdong.
WHO members attending a conference in Beijing have reported a strained
atmosphere over the virus, with health officials apparently more intent on
saving face than openly confronting the threat.
China's Health Department ceased publishing infection data at one point in
February after mistakenly linking the outbreak to a sexually transmitted
disease. It is now reporting again, but the figures are still believed to be
understated.
The government then declared that the contagion risk was over, in a
public-relations exercise that might have been related to the information
blackout that surrounded the country's recent leadership transition.
"At the end of the day it is in everybody's interests for China to come clean
on infection rates, especially as it appears this virus has been around for at
least six months and hence it may be a lot more widespread than was originally
thought," said an Australian specialist in infectious diseases.
"This of course is not something that is unusual in China. We have seen a
similar response by the Chinese to drug-addiction rates, AIDS, proliferation of
the sex industry, anything that might impact on the state."
Initially at least, the economic fallout appears likely to follow the same
route as the transmission of SARS, with the WHO warning of a particular threat
for visitors to China, Hong Kong and Vietnam.
The WHO has not recommended any specific travel bans, but others have not been
so circumspect. The US Centers for Disease Control (CDC) issued a travel
circular on Friday that goes somewhat farther.
"CDC advises that people planning elective or non-essential travel to mainland
China and Hong Kong, Singapore, and Hanoi, Vietnam, may wish to postpone their
trips until further notice," the advisory stated.
Supported by the US State Department, this warning is in effect until June 26,
and appears likely to be extended to other countries once suspected SARS cases
are reported - assuming they are forthright.
China has already suffered its first setback, with the prestigious World
Economic Forum indicating on the weekend that it would probably cancel the
annual China Business Summit, scheduled for the middle of this month. Expected
to be attended by 500 leading business representatives, the summit usually
serves as a showplace for foreign investment in China and was to have focused
on a range of global trade issues.
Business travel had been expected to generate almost $6 billion for the Chinese
economy this year, according to projections released by the World Travel and
Tourism Council (WTTC). The tourism industry is worth an additional $67
billion, equivalent to 10 percent of personal consumption. Growth of 9.1
percent had been predicted in 2003, but that was before the twin threats became
apparent from the Iraq war and SARS.
The WTTC warned last month that even a 1.5 percent drop in demand from foreign
markets, the least that might be expected from a prolonged war, would lead to
the loss of nearly 500,000 Chinese jobs in tourism.
With SARS included, some assessments point to a loss of 3 million to 4 million
jobs in China, and tourism growth of only 2-3 percent at most, with flow-on
effects being felt in aviation, the hospitality sector and the restaurant
trade.
However, Hong Kong and Singapore, with their greater dependency on travel
receipts, are likely to suffer more on a per capita basis, and could even slip
into recession if the downturn is particularly severe.
Singapore derives 18.1 percent of personal consumption from travel receipts and
earns $7.1 billion a year in direct income alone. Capital expenditure on
tourism adds another $3.6 billion to the economy, while the government
contributes $1 billion.
Hong Kong, with $13 billion of receipts and $6 billion of capital investment,
faces an even longer recovery period, as it has kept the issue running by the
wholesale disinfection of buildings and possible mandatory health checks on
visitors.
Most countries could normally have fallen back on regional tourism income in
times of crisis, as affluent North Asians cancel long-haul flights and take
their holidays closer to home. But that is not going to happen this time,
because airlines and hotels, with their constant turnover of clients, appear to
have been the unwitting culprits in the initial spread of the SARS virus.
And besides, now the main threat is at home.
(©2003 Asia Times Online Co, Ltd. All rights reserved. Please contact
content@atimes.com for information on our sales and syndication
policies.)
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