International | Sep 16 2006
By Chris Shaw
For years the logical entry point into the Chinese market has been through Hong Kong, as much for its logistical advantage as for the fact it is a well-established base for many global businesses.
But a report by CLSA Asia Pacific Markets suggests Hong Kong is in danger of losing its prime position as a business hub in the Asian region and as a conduit to China as a continuing worsening of the air pollution situation makes it a less attractive and more dangerous location.
Al Gore may be bringing global warming and environmental issues to the masses through his movie “An Inconvenient Truth” but to date it is being ignored in Hong Kong, where the population suffers from some of the most polluted air in the world. Its air quality is so poor the damaging particle levels are more than twice recent World Health Organisation guidelines.
CLSA suggests this is enough to act as a deterrent to both foreign investment and skilled foreign workers, especially when Singapore is more active in promoting itself as an environmentally friendly place to both live and establish or operate a business.
The other potential impact on Hong Kong goes beyond it failing to be attractive as a destination for foreign investment, as a large portion of it would simply disappear in a global warming scenario were the polar caps melted and had they caused a raising of the sea level.
It is an issue CLSA notes the government has been loathe to do anything about, as it points out air standards in Hong Kong simply don’t meet what are the very low standards currently in place. Recognition of the problem is taking the form of “we’ll look into it”, though again CLSA notes the government is displaying a distinct lack of urgency and seemingly putting it all into the too hard basket.
But a closer look at the issue reveals street level pollution is a major problem as roadside pollution levels are high enough to be dangerous to health, while more and more of the ships entering its ports are powered by high-sulphur bunker fuel. At the same time, increased demand for power means emissions from electricity generation are also rising.
CLSA suggests the increase in pollution has two obvious effects. First, the number of health related problems are rising as more of the population is exposed to the poor quality air, which increases costs both for business and the government. This has led to a shift in the business community, as many companies are now choosing lifestyle over proximity and relocating to or selecting Singapore as a base. It may also impact on property prices, as less incentive to live in Hong Kong means less demand for housing.
Secondly, it suggests growing awareness of the issue is likely to lead to a reduction in tourist numbers, which remains a major source of income for Hong Kong.
While it is difficult to put an accurate dollar value on the impact of pollution, CLSA estimates an improvement in air quality could be as high as HK$21 billion annually, a not inconsiderable sum. This doesn’t take into account the potential for a healthier society to make a greater contribution to the economy, so the estimate probably understates the value of improving the air quality by a significant amount.
Signs pollution is beginning to impact are apparent, as a survey by ECA International shows from 2004/05 to 2005/06 Hong Kong slipped to 32nd from 20th in terms of the best place in the world for Asians to live and from 3rd to 5th in terms of the best place in Asia for Asians to live. Add in the fact Seoul, Taipei, Singapore and Tokyo all have cleaner air than Hong Kong and the implications are potentially serious as it will continue to lose out in terms of the lifestyle decision.
The report suggests authorities in Hong Kong could learn a lot from other major cities such as London, Los Angeles and Tokyo, all of which have implemented tougher regulations and looked for ways to reduce emissions in an attempt to improve the level of air quality. It is an attempt the Hong Kong authorities have yet to make, and one that CLSA suggests could wind up costing them dearly in the longer-term.
