The economic fallout from SARS
By Bruce Einhorn
BUSINESSWEEK ONLINE
April 21 — With its hotels empty and the airport quiet, Hong Kong’s economy is getting hammered by severe acute respiratory syndrome. It’s so bad that many people have said SARS is to Hong Kong what September 11 was to New York — a sudden, unexpected event causing death and economic paralysis.
WHILE THE SHEER NUMBER of deaths is nowhere near September 11’s toll, the economic impact is all too similar.
I recently spoke to Howard Kunreuther, an expert in how companies cope with disasters, to see if Hong Kong companies can learn any lessons from how others have coped with such catastrophes. Kunreuther is a professor of decision sciences and public policy in the Operations & Information Management Dept. of the University of Pennsylvania’s Wharton School, and he spends much of his time trying to understand how companies deal with terrorism and natural and technological disasters. Edited excerpts of our conversation follow:
Q: How is the impact of SARS like that of a terrorist attack?
A: Fear, ambiguity, and uncertainty are the kinds of things that businesses just don’t like. Things come to a grinding halt [because] everyone is extraordinarily concerned that nobody knows what will happen next. After an event when there’s enormous uncertainty...fear is created. September 11 had that effect. It’s not all that different with respect to SARS. People will be concerned, paralyzed.
Q: What impact does that have in the short term?
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A: The reverberations on the Asian economy will be enormous. The more uncertainty you have, the harder it is to function.
Q: And how long will that last?
A: As you move over time, the concerns will be dissipated. Over a period of weeks or months, there will be some feeling that one will have to go on with one’s life, because it gets too costly. That happens after every kind of event. Some degree of normalcy has to be reached.
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Q: Many people accuse Beijing of covering up the severity of SARS in China. What impact do you think that has on how people are reacting?
A: The issue on the China situation is: Are you really going to be getting correct information? When people are concerned that they’re not getting correct information, that makes things worse.
Q: You look at how businesses cope with natural disasters — for example, earthquakes — as well as man-made ones such as terrorist attacks. How does SARS compare?
A: In a natural catastrophe, it’s over, it’s done. Prior to a disaster, people feel, “It can’t happen to me.” [Before the crisis, people don’t pay] much attention to the possibility of a disaster.
After the event, people want protection. They buy earthquake insurance after an earthquake, when the chances [of another one] are lower. That’s a real difference with terrorism. With terrorism, it’s not over. After terrorism, people want reassurance, something to give a sense of security.
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World health experts are concerned about how quickly severe acute respiratory syndrome, or SARS, a new form of deadly pneumonia, is spreading through Southeast Asia and other parts of the world. For more information about the illness, click on a question above.
Most patients start out with a fever greater than 100.4 ° F (38° C) and often have accompanying chills, headache, malaise, body aches and mild respiratory symptoms. In the early stage, many patients have a decreased white blood cell count and may also have diarrhea. After 3 to 7 days, the patient may develop a dry, non-productive cough that increases in severity. As the disease progresses, chest X-rays may show significant lung congestion. Eventually not enough oxygen can get to the blood and, in 10 to 20 percent of cases, patients will require mechanical ventilation. Illness severity can vary, ranging from mild symptoms to death. Only patients who have traveled within 10 days of the onset of symptoms to an area with suspected SARS cases, or have had contact with a person suspected of having SARS, are considered possible carriers of the disease.
Scientists with the World Health Organization and in Hong Kong say the illness spreads through droplets by sneezing or coughing and that such direct infection can occur within a radius of 3 to 6 feet. The virus can also spread indirectly since it can survive outside the human body for three to six hours. Health officials have not ruled out that the virus could travel through the air for longer distances, for example through air conditioning or on the wind. Once someone has been exposed to the virus, it takes on average three to seven days for symptoms to develop.
Researchers are not yet certain what pathogen is behind the illness. CDC scientists say they believe the disease is caused by a new form of the coronavirus, one of a few viruses that can cause the common cold. They think it is the primary causative agent but more laboratory work is necessary to pinpoint its characteristics. Vaccine development will take years.
The WHO says SARS appears to be less infectious than influenza and not highly contagious when protective measures, such as hand washing, are used. Scientists speculate that some people may be better able to transmit the virus.
Patients highly suspected of having the illness are being isolated in hospitals. Until health officials learn its cause, there is no definite course of treatment. Some doctors have reported patients respond well to treatment with antiviral medications and steroids. If treated early, most patients without other illnesses recover.
The fatality rate among persons with SARS is approximately 3 percent, according to the World Health Organization. Its death rate, to date, is less than other infectious diseases. It is not as deadly as the Ebola virus, which kills 90 percent of those infected. The death rate from endemic dysentery due to Shigella ranges from 5 to 15 percent. Ten percent of people with typhoid fever die if not treated with antibiotics. The major form of smallpox has a 30 percent fatality rate.
The CDC says travelers should consider postponing trips to countries at risk, including Hong Kong and China. In addition, the U.S. State Department has warned citizens not to travel to Vietnam because the country lacks medical facilities to deal with the outbreak there. The CDC has begun handing out notices to travelers returning from Hong Kong, China and Vietnam warning them to be on the lookout for symptoms of SARS. Americans living abroad are urged to avoid activities, such as visits to hospitals, that might bring them into contact with people who have SARS. Airline crew members are asked to be on the lookout for sick passengers and quickly isolate them from other passengers if possible.
Suspected cases of SARS have been reported in China, Hong Kong, Taiwan, Singapore, Malaysia, Thailand, Vietnam, Canada, United States, France, Germany, Switzerland, Italy, Britain, Ireland, Brazil, Spain, South Africa, Romania, the Philippines and Indonesia. So far China, Hong Kong, Vietnam, Singapore, Canada, Thailand and Malaysia are the only countries with reported deaths from the illness.
In the United States, people who think they may have SARS and have recently traveled to Asia, or have been in contact with someone who has, should contact their doctor for a full evaluation. Health workers who suspect cases of SARS are asked to report them to their state health departments. The CDC requests that reports of suspected cases from state health departments, international airlines, cruise ships, or cargo carriers be directed to the SARS Investigative Team at the CDC Emergency Operations Center (770-488-7100). Outside the United States, health workers who suspect cases of SARS are requested to report them to their local public health authorities.
The WHO says the disease originated in China’s southern province of Guangdong before spreading to Hong Kong, where it was carried around the world by air travelers.
Source: World Health Organization; U.S. Centers for Disease Control and Prevention; Associated Press
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Q: What’s different about SARS?
A: There’s a major difference. With SARS you know exactly what [the disaster] will be: It will be people catching the virus. And with SARS, you know that things are happening — it’s a question of how quickly it will spread, or will it be contained?
Q: How does this SARS outbreak compare to other outbreaks you’ve seen in terms of economic impact?
A: I don’t remember anything quite like this, at least in recent years. Not this kind of fear. I can’t remember any remember any epidemic that has had the impact on business this way.
We are dealing with something new. It’s rapidly spreading, unlike AIDS. And it’s affecting a fairly wide region and one that has [competitive] alternatives. [Foreign companies] don’t have to deal with Hong Kong. There are options here.
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