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Asian Economies Remain Sick as SARS Scare Eases - 2003-06-25

Beijing is celebrating its removal from the World Health Organization list of places with new infections of Severe Acute Respiratory Syndrome. Taiwan is hoping to be dropped from the WHO SARS list on Thursday. But while East Asia's SARS crisis appears to be near an end, he region's economies remain in bad health.

The WHO is also lifting its warning against travel to the Chinese capital. Nightclubs and other entertainment venues are reopening for the first time in two months.

Although one suspected case of SARS in Southern China was reclassified as confirmed, health officials say the worst of the outbreak is over.

Since the outbreak began, the disease has taken almost 350 lives in Mainland China. Two hundred ninety-six people died in Hong Kong, which was removed from the WHO infection list on Monday; Taiwan, Asia's third most affected location, has suffered at least 84 SARS deaths.

Along with lives, SARS has devastated the region's economies. In Beijing, for example, one estimate put tourist arrivals at the height of the crisis down 98 percent. Even in countries not badly affected by the disease, such as Thailand and Indonesia, tourism all but died during the crisis.

Veronica Gonzales, whose Beijing-based company provides hotel booking and other services to foreign businesses, says business travel to the city is already returning to normal from its low point in May. She says tourist travel is another story.

"There are some hotels that are located near the airport, those hotels are not affected at all because there are some people who still need to come into China to do business," Ms. Gonzalez said. "But there are other hotels that are more focused on package tours; those hotels are much more affected."

Tourist industry workers say Hong Kong's slump from SARS peaked sometime in April. But economists like Tim Condon of ING Financial Markets in Hong Kong are predicting that the effect on tourism will linger for several months.

"We are not going to get to where we were pre-SARS, until possibly later toward the end of this year," he said. "The drop in tourism has really been huge and it seems unlikely that it will really snap back that quickly."

Some restaurateurs, on the other hand, are hoping that post-SARS euphoria could actually bring an improvement over the period before the outbreak.

"Before the SARS, things were still not great because everybody was nervous about the Iraqi war at the time," said Scott McLean, who manages an upscale Western restaurant in Hong Kong. "There was not the same kind of feel-good factor that seems to be happening now.

The economies of China and Taiwan are less reliant than Hong Kong's on the tourist trade, and ING's Mr. Condon thinks this will translate into a faster recovery in those places. "SARS has really not interrupted the manufacturing engine in China, and particularly in Southern China," he said. "It has had an impact on retail sales, as it has in Hong Kong, but that should be short-lived."

But he added that the region was not in great shape even before SARS hit. The East Asian region has been in a financial downturn since 1997, Mr. Condon said, and the disappearance of the disease alone will not cure that problem. "It certainly did not help in any of the countries," he added. "It was bad news. But I do not think the recovery from SARS accelerates the overall closing of the gap in terms of how quickly or how far economies are from their potential."

For Asia to return to the "tiger economy" days of the 1990s, he says, will take real structural changes, and not just the absence of SARS.