The Scars From SARS

When dealers used to talk about a slowdown in the Asian economy, they'd use the phrase "Asian flu."

Now that phrase has taken on a more ominous meaning, with the advent of severe acute respiratory syndrome (SARS), a contagious and sometimes fatal disease that has cropped up in Canada, the United States, Europe, and Asia, particularly Hong Kong and China. (See sidebar for more information.)

SARS has had a major impact on the industry—particularly in Hong Kong, a major producer of and market for jewelry. In the first weeks following the discovery of the illness, domestic demand in Hong Kong plunged as much as 75%. The rest of the Asian market also suffered. The disease even hurt Hong Kong's ability to interact with the rest of the industry, as buyers were reluctant to travel to Asia and sometimes uneasy about Hong Kong dealers visiting them. And it's become an issue at trade shows—one that blew up at Basel and was a serious concern for The JCK Show ~ Las Vegas. SARS has also forced the cancellation of one Chinese trade show and the postponement of a China-bound ICA Congress.

Trade goes on. Here in the United States, Robin Chiu, regional director for the Americas for the Hong Kong Trade Development Council (HKTDC), tried to put a positive spin on the situation, noting that Hong Kong dealers have found ways to adapt to the new circumstances.

"By and large, trade is still going on," he explains. "Shipments are still being made, production is ongoing. People in Hong Kong are resilient and quite nimble, and they are finding ways to cope. There's less face-to-face meeting, so they are doing more work on the phone and through video-conferencing."

He says the threat is far less now that Hong Kong has taken precautions to halt the spread of the disease. "We want the world to know this is a serious problem and we are not taking it lightly," says Chiu. "We ourselves do not want to be infected, and we don't want to infect the world."

However, he adds, the situation is improving. "The number of new cases is shrinking daily," he notes. "We know a lot more about the disease and we are hopeful and confident that, through the summer, this problem will slowly melt away. All signs seem to say this is going in the right direction. The mood now in Hong Kong is one of cautious optimism."

Still, most think the problems this virus has caused Hong Kong will not go away overnight. "We are expecting higher unemployment figures," says Lawrence Ma, chairman of the Diamond Federation of Hong Kong. "Tourism and retail are all badly hurt. Companies are talking about layoffs and no-pay leaves. I think the coming months will be very difficult."

Overseas holds up. The picture is slightly better in the export market. (The World Health Organization has said that products from a SARS-affected area pose no risk to public health.) Benson Wong, director of Hong Kong's Belford Jewelry, says overseas demand for his products has not suffered terribly, although things are not as easy as before. "We can send photos and e-mails of new designs, but most buyers would rather see the actual pieces than a photo," he says.

From an industry perspective, SARS has had the biggest impact on trade shows. Fairs like VicenzaOro2 have severely limited the participation of Asian exhibitors. Twelve companies from China that were supposed to exhibit there did not, and the fair indefinitley postponed the planned inauguration of a Hong Kong Pavilion meant to include 75 companies. A "Luxury China" event scheduled for September in Shanghai also has been canceled.

In Basel, the disease became a distracting sideshow that helped to turn the prestigious annual fair into a disaster. At the height of SARS hysteria in March, the fair—under orders from the Swiss government—put onerous burdens on the 300 attending firms from Hong Kong, requiring them to wear masks, have their booths disinfected daily, and get extensive medical checks that would mean missing several days of the show. The Hong Kong delegation felt blindsided and pulled out of the fair altogether. (In one of the stranger aspects of the policy, Asian buyers could still walk the fair without issue.) The HKTDC has since hired legal counsel and filed a complaint against the decree issued by the Swiss government, the first step in preparing a lawsuit. According to a HKTDC release, it is uncertain whether the Hong Kong delegation—a major part of the fair for years, representing 12% of total exhibitors—will ever return to Basel.

"We have been a part of that fair for many years," says Chiu. "We had 2,000 people there [that had to go home]. That's the unconscionable part. We feel the Swiss government overreacted, and we are talking to lawyers to address the problem legally."

A similar situation brewed at the June JCK Show ~ Las Vegas. At first the show—which is associated with this magazine—put out an innocuous-sounding press release saying it was "monitoring" the situation. But when some buyers balked at attending the show if Hong Kong exhibitors were there, fair organizers discussed having a separate tent for Hong Kong exhibitors.

But attendees from Hong Kong—nearly 1,200 in all—were upset at being placed in what they saw as a modern-day leper colony. (Fair spokeswoman Christine Anderson notes the tent option was never official policy.) Eventually a compromise was reached: Visitors from affected areas would have their health screened before they left their home countries and arrive in Las Vegas 10 days early, as that is the outer limit of the SARS incubation period. They also agreed to have their temperatures taken twice daily and get a clean bill of health from a U.S. doctor. Organizers note these precautions are more stringent than those recommended by health authorities. At press time, visitors from affected areas had indicated they would comply with the guidelines, Anderson says.

Many Hong Kong manufacturers consider the fears of their presence exaggerated. Chiu says that fewer than 2,000 people have been infected out of a population of 6.8 million, a ratio of 0.2%. "More people are killed by other illnesses or traffic accidents," he says. "People have overreacted, and that overreaction has cost Hong Kong quite a bit of business."

Yet while Hong Kong merchants may privately disagree with the fears about their presence, they also understand them in a city where, during the height of the panic, usually bustling public spaces became ghost towns and many still go out in public wearing surgical masks.

"The fact is at the Basel fair we had nearly 2,000 Hong Kong people visiting and not one case of SARS was transmitted," notes B.K. Chou, general manager of the Hong Kong Jewelry Manufacturers Association. "But we had to do something to restore the international community's confidence. We want to assure people that everyone from Hong Kong who attends will be 100% virus-free."

And while the Hong Kong attendees have agreed with the requirements, they are hardly easy to comply with.

"We have to bring people in for 10 days extra," says Wong. "It's a big problem, with the time lost and all the additional expenses."

But Ma says it's a price they're willing to pay. "It's our wish that all the visitors and buyers feel at ease," he notes. "We are already suffering. We don't want anyone in the world to suffer like we did."