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The military actions against Iraq will surely impact on the Asia Pacific region, while the seriousness of the impact will depend on how long the war will last, leading foreign businessmen in Hong Kong believed.
The sectors getting the direct impact will be oil, transportation, export and tourism, they agreed.
In an interview with Xinhua, Brigadier Christopher Hammerbeck, executive director of the British Chamber of Commerce in Hong Kong, said the surge of oil price and transport premium will add extra costs to airlines and shipping companies in the short term.
Huang Yiping, vice president of economic and market analysis of Asia Pacific of Salomon Smith Barney, agreed with Hammerbeck.
He told Xinhua that the war risk will reduce the flow of passengers and cargo and the war impact on airlines will be quite negative.
However, Huang said, the airlines in the Chinese mainland will not get very severe impact compared to their overseas counterparts, but they will get some negative impact to some extent.
Due to the worry about increased transportation cost, many Japanese factories in the Chinese mainland have already kept larger amount of storages of raw materials and spare parts and shipped their products to Europe in advance, said Shigeru Kimura, director general of by the Japanese External Organization, Hong Kong.
He said what Japanese exporters concern most about is the possible closure of Suez Canal amid the war.
If that happened, Japanese cargo exported to Europe would have to go all the way via Cape of Good Hope, he said, noting that extra shipping fee and insurance premium will be added, as one-week longer cruise time is required from Asia to Europe.
In referring to the war impact on export, Hammerbeck said external trade of Hong Kong will be significantly affected due to the decreasing demand in the United States after the war.
The exporting enterprises in Asia will be affected, but the situation will not last too long if the war finishes in a short period, he said.
Huang also identified the negative impact on Hong Kong's external trade, which constitutes about 140 percent of the GDP.
However, Hong Kong's economy features service industry and does not heavily rely on the oil.
When asked to comment on the military actions impact on the GDP growth of Hong Kong, Huang said it is hard to predict.
Solomon Smith Barney's forecast of 2.8 percent GDP growth for Hong Kong in 2003 has already reflected the possible war impact to some extent.
But the GDP growth could be readjusted if the war lasts longer, he noted.
For the tourism industry, Hammerbeck and Huang both agreed that it will suffer considerably from the war impact.
As Hong Kong's tourism is mainly backed by mainland tourists, the impact of war on its tourism sector will be offset to some extent, compared to other southeast Asian countries, they said.
As the war started, questions arose about how such a conflict might affect Standard & Poor's 93 ratings and about the possible events that could lead to changes to those ratings.
Standard & Poor's has maintained that a war will be short and decisive.
However, a prolonged war will keep oil prices high, perhaps at even twice their current level, which, in turn, will induce a global economic contraction.
All the 93 rated economies will be tested in such an environment, according to Standard & Poor's.
Their fiscal accounts will worsen, except for the handful of economies with state-owned oil companies that contribute a large share of government revenue and national exports.
External imbalances will become more pronounced. Trade and capital flows will constrict.
Sovereign ratings that currently have a negative outlook, such as those of India, Japan and the Philippines, will be at particular risk of downgrade, said Standard & Poor's.
In other cases, the Chinese mainland, Hong Kong and Korea can manage to instill confidence and compensate for any interruption in inward capital flows, as they have markedly augmented their international reserves.
In a recent report, Goldman Sachs noted that there is an imperfect analogy in terms of stock performance and consumer confidence between the 1990-1991 Gulf War and the current war in Iraq.
The similarities include the serious potential for military engagement, sharply higher energy prices, decelerating global growth and heightened uncertainty and risk aversion among business and investment decision makers.
Investors at both periods hewed to risk-averse strategies, favoring short-duration fixed income vehicles, such as US treasury securities, and equities with exposure to energy, precious metals or offering perceived safety.
There are also differences between the two periods, pointed out Goldman Sachs.
One of the most important involves the perceived length and scope of each conflict.
In early 1991, the Gulf War was viewed as one with a short duration and geographically limited to Iraq's attacks on Kuwait and Israel, and the coalition's response in the region.
The current war is not so clearly defined in the minds of many. There are unanswered questions about the duration of the current war, both with regard to military action and subsequent rebuilding activities in Iraq and elsewhere in the Middle East.
Further, the events of Sept. 11, 2001 have raised the possibility that retaliatory acts might occur outside the region.
Another potential difference may be the reaction in energy prices. The Goldman Sachs Commodities research team believes that crude oil and natural gas prices may remain somewhat elevated, even with a successful outcome in Iraq.
As the war has broken out, the ASEAN countries will be more seriously affected than the Chinese mainland and Hong Kong, many businessmen in Hong Kong believed.
Hammerbeck said that the war will even trigger civil conflicts in some Asian countries.
Huang Yiping also agreed that the war will severely batter Singapore, the Philippines, Malaysia and Thailand.
These countries belong to the open economies, the war will worsen the sentiment, capital market and tourism, Huang added.
On the other hand, the war will benefit some industries, such as oil, ammunition, terminally guided missile parts as printed circuits industry and some other high-tech enterprises, and real estate, according to Hammerbeck.
The breakout of the war demands on high technology products as upgraded high-performance computers will offer opportunities to manufacturers in the region, he said.
Moreover, some UK developers are prepared for the rebuilding of Iraq after the war, he added.
(Xinhua News Agency March 21, 2003)
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