SARS outbreak already causes business struggles

AP ^ | April 3, 2003 | Elaine Kurtenbach

[sarcasm]

HONG KONG — The mysterious life-threatening SARS illness is straining economic activity across Asia, forcing manufacturers to temporarily shut down, bankers to cancel face-to-face meetings and visitors to stay away.

Near-term productivity will undoubtedly suffer, delivering the harshest blow to the struggling travel industry. Economists say the outbreak of SARS, or severe acute respiratory syndrome, will hurt much of the retail and service sectors as consumers avoid malls, restaurants and other forms of entertainment.

The greatest financial impact, so far, has been felt in Hong Kong and Singapore, where the incidence of infection is highest. But financial analysts are also keeping an eye out for signs of the disease's spread in mainland China, South Korea and Vietnam.

"The outbreak of SARS is significant enough to affect growth across the region," said Merrill Lynch economist T.J. Bond.

Bond and other financial experts yesterday lowered their 2003 economic growth forecasts for East Asia, which excludes Japan, by 0.6 percent. Those predictions assume the spread of SARS will be under control by early summer, a hopeful scenario given the current environment of fear and ignorance surrounding the illness.

Motorola and Hewlett Packard briefly closed factories in Singapore and Hong Kong, respectively, to disinfect them after workers showed symptoms. Intel canceled a trade show in Taiwan and General Motors scrapped plans to have journalists tour its operations in South Korea.

Several major banks shut down branches near Hong Kong's Amoy Gardens, an apartment complex where the government imposed a 10-day quarantine Monday after reporting about 200 cases of the disease.

Such outbreaks have led many companies, including U.S.-based Eastman Kodak and Finland-based Nokia, to restrict travel to Asia. Others, such as Samsung Electronics and LG Electronics, have asked families of employees working in Hong Kong to return to South Korea.

Standard Chartered, Hong Kong's fourth largest bank, told employees to avoid face-to-face meetings. But teleconferencing and other technologies has helped ease the crisis. "We're using virtual or online reporting for most offices," said Mary Lam, a spokeswoman for Motorola Asia Pacific.

Still, the alarm caused by the deadly flu-like illness has had a devastating effect on Asian tourism, causing airline and hotel bookings to drop sharply. Many carriers have reduced service to the region and future bookings remain weak as business fliers postpone trips and leisure travelers explore other options.

With the exception of two U.S. airlines — United, which derives about a fifth of its revenue from Asian routes, and Northwest Airlines, which generates roughly a quarter of its revenue from the region — U.S.-based corporations with operations in Asia are at relatively little financial risk, for the time being.

But even the slightest negative news becomes magnified at a time when the global economy is already dealing with the effects of war, terrorism fears and high oil prices. While the overall impact on gross domestic product in the region may be less than 1 percent in 2003, revenue for Asian airlines, hotels and the rest of the tourism industry could drop between 15 percent and 30 percent for the year, economists said.

Those estimates assume that the spread of the virus will not be a serious issue in three months — a position financial analysts concede was somewhat optimistic.

[desertsolitaire]

M.O.O.N. taht spells SCARY.