Selling Hong Kong after Sars

Mary Hennock
BBC News Online business reporter

Life is gradually returning to normal

Hong Kong's people can breathe more freely now that global health officials have declared the city is no longer unsafe from the lethal Sars flu virus.

But restoring the health of its economy - wheezy enough before Sars - remains an uphill job.

To that end, the Hong Kong government is to spend roughly £80m ($131m) to restore the city's image and lure back business travellers and tourists, according to Andrew Leung, Hong Kong's official spokesman in Britain.

Although budget and slogans are still being fine-tuned, "we are all gearing ourselves up to revive international confidence", Mr Leung said on Tuesday, flanked by trade and tourism senior officials.

Bargain holiday

"Hong Kong will take your breath away" is one travel advert that will definitely not be getting a fresh outing.

It was scrapped soon after the discovery of the killer flu virus, Kevin Welch, regional director for Europe, Africa and the Middle East at the Hong Kong Tourism Board (HKTB) admitted.

Hong Kong hopes to attract sightseers

His current message is less sophisticated, more direct: Hong Kong is cheap, he told the relaunch press conference, reeling off a list of flights below £350.

"There has never been a better time to visit...one of the world's 'must see' destinations," says HKTB.

A blitz of advertising is in the pipeline, plus sometime in the autumn a headline grabbing festival "to welcome back the media, trade partners, opinion formers, celebrities".

Tourism was growing before Sars struck. Visitor numbers rose 20% in 2002 to 16.5 million, and 10% in January and February 2003 on year-earlier.

Waiting for visitors

Restoring tourism is a priority. At the height of the Sars outbreak, the government dished out tax cuts and underwrote cheap - even free - bank loans to help hotels, shops and restaurants pay wages.

We expect the economy to grow by 1.5% instead of 3%

Andrew Leung, HK Economic and Trade Office

Nonetheless, unemployment is running at 7.8%, back at its mid-2000 record.

Economic pain for ordinary people has been worst for workers in travel and catering. Many have taken pay cuts or unpaid leave to keep jobs in industries where wages can be as much as 40% of fixed costs.

Banks can expect to shoulder some of the damage wrought by the Sars outbreak on business.

"The operating environment of the banks has been made more difficult, and their profitability is likely to be affected," said Priscilla Chiu, the Hong Kong Monetary Authority's (HKMA) representative in London.

Gateway to China

Officials readily acknowledge the economy has taken a battering. "We expect the economy to grow by 1.5% instead of 3%" this year, says Mr Leung.

Hong Kong is a trade conduit for China

Without a revival in business travel to Hong Kong, its wider selling point as a jumping off point for doing business in China would be threatened.

Such a thing is unlikely to happen. As Mr Leung says, Hong Kong is "a place to leverage the market in China".

Economists have shaved China's growth forecasts because of Sars, but "even at 7%" it remains "a beacon of growth," said Mr Leung, in his role as Director General of the Hong Kong Economic and Trade Office (HKETO).

He cited "four mega trends" bolstering the city's long term growth prospects. All of them have to do with China and Hong Kong's role as the portal through which investment can pass.

They are coastal China's "huge internal market"; its leaders' penchant for building giant infrastructure projects; a growing trend towards external investment; and the giant manufacturing zone next door

Exports from South China's Pearl River Delta flanking Hong Kong were not disrupted by Sars, growing 19.1% on year-earlier in the first quarter of 2003, said Mr Leung.

'Strong fundamentals'

Sars was "a transient external shock" to Hong Kong's economy, said Ms Chiu, arguing that even if the city's banks suffer, their balance sheets remain sound.

Factories in China worked through Sars

Hong Kong will be selling its "strong fundamentals", its "robust" financial centre, legal system and standards of corporate governance, and has hired international PR firm Burson-Marsteller to do it.

Hong Kong officials also hope for economic spin-offs from Sars through better co-operation with officials in China's neighbouring Guangdong province, where the outbreak began.

Tourism will be the first industry to benefit. China has scrapped travel restrictions limiting its citizens to visiting Hong Kong in pre-booked tour groups and allowed spontaneous, lone travel for the first time.

Early signs are of 100,000 extra visitors next month, and perhaps 1 million this year, said Mr Leung.

There may be more changes on the way. "Discussions are in hand between Hong Kong and the mainland authorities to put together measures under the closer co-operation partnership consistent with World Trade Organisation rules," said Mr Leung.