Reach of the Indian Ocean Earthquakes and Tsunamis

Its damages being considered, the disaster is expected to post short-term challenges to the affected countries, although the degree of impact may vary from one country to another. The region's tourism industry certainly will suffer a major blow across the board, as some tourists may avoid the region for the time being. The overall economic impact nevertheless hinges on the relative size of the tourism business. The Maldives and Seychelles, where tourism accounts for 74% and 57% of their respective GDP, are expected to be most affected. For other countries, the blow will be less severe.

In the interim, the disaster, together with the knock-on impact on tourism, will sadden consumer confidence and business sentiment of the affected countries. Despite a growing demand for health care and reconstruction needs, private consumption will likely suffer a temporary falloff. Government subsidies and investment however will be jerked up with the rebuilding of devastated areas, though this may worsen the fiscal strain of certain countries.

Size of Tourism Industry*

The overall trade impact for Hong Kong will however be modest. For one thing, the size of Hong Kong's trade with the affected countries is relatively small, only taking up 5% of Hong Kong's total trade with the world in January-October 2004. For another, Hong Kong's exports to the affected countries are mainly related to processing trade, of which 51% are raw materials and 32% are machinery. Since the disaster did not destroy any major industrial and port facilities of the affected countries, its impact on the region's processing trade and in turn Hong Kong's exports will not be excessive.

Accordingly, damages to Hong Kong's trade will be contained and largely confined to consumer goods, mainly audio-visual equipment, clothing, timepieces and toys, which account for 17% of Hong Kong's exports to the region. However, for any individual markets, the exact impact on Hong Kong exports will pivot on consumer goods' share in the trade which varies by country. Again, despite a small value of goods being traded, the Maldives and Seychelles are most affected markets for Hong Kong exports, given that 60% of the trade are consumer goods, likely for satisfying tourist demand.

For other markets with stronger trade ties with Hong Kong, consumer goods are not the main items being traded and thus the impact on Hong Kong exports should be rather limited. Say for Thailand, Malaysia, India and Indonesia, while they together account for 89% of Hong Kong's exports to the affected region, 82% of goods being traded are raw materials or machinery, leaving the remaining for direct consumption.

Trade between Hong Kong and the Affected Countries by Major Product Categories

Note:* Including Bangladesh, India, Indonesia, Malaysia, The Maldives, Myanmar,Seychelles, Somalia, Sri Lanka and Thailand.
Source:HKSAR Census and Statistics Department

Trade between Hong Kong and the Affected Countries in Jan-Oct 2004

Note: * Including Bangladesh, India, Indonesia, Malaysia, The Maldives, Myanmar, Seychelles, Somalia, Sri Lanka and Thailand
Source: HKSAR Census and Statistics Department

Hong Kong's Exports to the Affected Countries by Major Product Categories

Note: * Including foodstuffs and oil products.
Source: HKSAR Census and Statistics Department