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SARS UPDATE: Already reeling from the fear of SARS, Hong Kong citizens were given more bad news this week when chief executive Tung Chee-Hwa opined publicly on the situation. “I fully understand that the epidemic has dealt a very severe blow to Hong Kong’s economy,” he said at a news conference.

This story first appeared in the April 15, 2003 issue of WWD.  Subscribe Today.

For the public, such words are not reassuring. Two more housing estates were found to have numerous cases of SARS and the government ordered mandatory isolation for anyone who has had close contact with a person who has contracted atypical pneumonia.

The city, normally bustling with commercial activity, has been grounded. Top hotels are reporting occupancy of less than 10 percent and many, including the Grand Hyatt and The Peninsula, have closed off entire floors to save money. They have also closed many of their restaurants. The Mandarin Oriental, for example, has closed two of its most famous: Vong and Man Wa.

The drop in tourism has meant that most hotel employees are now facing compulsory unpaid leave. James Lu, executive director of the Hong Kong Hotels Association, commented that “this is the most dire situation we’ve faced since the 1967 riots in Hong Kong.”

At the airport, normally the region’s busiest international passenger terminal, fewer and fewer flights arrive. According to the Airport Authority, 22 percent of flights for this month have been canceled. And daily arrivals at Chep Lap Kok are said to be around 30,000 a day compared with the normal 80,000.

The local government is implementing a new system whereby all people leaving Hong Kong will have their temperature taken before they can board a plane.

Compounding the problem is international reaction to the epidemic. Although Hong Kong has reported 1,190 SARS cases to the World Health Organization, with 82 deaths (as of Monday), that total is less than 0.01 percent of the region’s population. Still, pilots from Air India are refusing to fly to Hong Kong and Malaysia’s government announced that tourist visas would not be issued to Hong Kong citizens. Hong Kong officials have reacted strongly and are calling on Malaysia to reconsider. “There is no reason why the mobility of Hong Kong residents who do not have any close contact with infected persons should be restricted,” said Regina Ip, Hong Kong’s secretary for security.

Panama has also banned travelers from Hong Kong. Singapore has banned those with low incomes, like domestic helpers. Philippines’ President Gloria Arroyo has asked her fellow compatriots in Hong Kong not to come home for Easter, affecting thousands of maids in Hong Kong.

Retail sales are also falling. Yu Pang Chun, chairman of the Hong Kong Retail Management Association, said retail sales have fallen 50 percent since the outbreak of SARS in the city. He has called on landlords to halve rents for merchants for three months in order to soften the blow. Giordano International, which sells casual clothing through one of Asia’s largest chains, reported that its sales fell 20 percent since the outbreak. Its stock price fell 13 percent on the news.

In the meantime, the only merchants enjoying brisk sales are those selling face masks. And, in a sign that Hong Kong has lost neither its nose for a commercial opportunity nor its sense of style, one may purchase face masks decorated with Hello Kitty, Snoopy, camouflage prints or even Burberry logos.
— Constance Haisma-Kwok

ROOM AT THE INN: The average office vacancy rate in Tokyo’s central business district — comprising the five central wards of Chiyoda-ku, Chuo-ku, Minato-ku, Shinjuku-ku and Shibuya-ku — rose 0.19 percentage points from a month earlier to 8.18 percent at the end of March, according to local real estate firm Miki Shoji. “As major companies canceled leases in line with steps to close, consolidate or relocate offices, the supply of vacant office space in existing large-scale office buildings increased in the month of March by about 23,000 tsubo [818,340 square feet],” said the firm.

In 2003, a raft of completions of redevelopment projects and construction of company-owned buildings have led to a conspicuous number of lease cancelations. Occupancy conditions for office buildings scheduled to reach the end of construction in less than one year are generally favorable, and the number of fully or mostly occupied new large-scale office buildings has increased, according to Miki. On the other hand, because existing large-scale office buildings have also seen an increase in attractive vacancies, these buildings are actively courting companies seeking to relocate to more appealing space. Moreover, management consolidations at large corporations and the establishment of new companies have sparked renewed demand for office space. “Given these kinds of conditions, and irrespective of the space available in newly constructed buildings or existing buildings, the competition to attract tenants has grown intense,” said the firm. — Koji Hirano

BANKRUPTCIES FALL: Some good news and some bad news on the Japanese bankruptcy front. While 18,928 companies went bankrupt in Japan for fiscal 2002 ended March 31, down 5.6 percent from a year ago, the year was the fourth worst after World War II, and the second worst since the nation’s bubble economy collapsed in early Nineties, according to business research firm Teikoku Data Bank. Their debts amounted $110.9 billion (converted from yen at current exchange rates), 17.5 percent lower than a year ago. The number of public companies that went bankrupt was 22 compared with last year’s 21. — K.H.

SAIGON SEWING: The talks between the U.S. and Vietnam about the imposition of import quotas was a major topic of concern at a trade show held in Ho Chi Minh City last week. Exhibitors at the 2003 Vietnam Textile and Garment Expo acknowledged that quotas would likely slow the strong growth rate of the nation’s apparel industry, according to Pham Van Tan, director of show organizer Vietnam National Textile and Garment Corp. “They worry about this problem,” he said. “They need to plan ahead but they don’t know what will happen in the future. We can only wait to see what happens with the talks in Washington.” Exhibitors also worried about their industry’s prospects come 2005, when quotas will be dropped among members of the World Trade Organization. Vietnam is not a WTO member, which means quotas imposed by the U.S. will continue to limit its exports in 2005.
— Elizabeth Durnan