Standing in the lift lobby staring in disbelief at his outstretched hand, Kevin Chan tries to joke about having his handshake rejected. "He was afraid to shake my hand," he quipped. "How can you do business if you don't shake your customer's hand?"

Awkward situations like this have become commonplace as the Severe Acute Respiratory Syndrome (SARS) outbreak has turned many businesses on their head.

Mr Chan, head of Longking Trading Company, a modest trading firm exporting stationary equipment mainly to Europe, says business has not been too adversely affected so far by the outbreak. However, all his buyers who had planned to attend the Gifts and Premium Fair on April 28, cancelled their plans. Despite this, he is still taking a booth at the show, and at the July show.

"I don't expect we will get much -- if any -- business out of the show, but what can you do?" he asks.

Just two months ago, Hong Kong was fretting over the budget deficit and whether or not the economy was really on the road to recovery. Now people are talking about surviving, literally, both by avoiding succumbing to the SARS virus, and curbing the huge amounts of cash they are haemorrhaging.

As of May 5, official figures said 187 people in Hong Kong had died from the disease and 1,637 had been infected -- 930 or whom had recovered and been discharged. Worldwide, 435 people had died and 6,234 had been infected.

"It has become quite frightening," says Alex Man, General Manager of Omac Production House. "Some of our American friends have packed up and headed for the hills."

But as Frank Sperling, Head of German Multinational Corporates, Asia, DZ Bank AG, says, "It is in the end in the interest of all of us who live and work in Hong Kong that institutions and people -- in particular in the outside world -- don't overreact. We sincerely hope that the spread of the virus can be contained soon and we return back to 'business as usual'."

Even though the first week of May saw a steady decline in the number of infections down to eight, businesses are still having to deal with a host of challenges to which there are no clearly defined rules. Would wearing masks during meetings make clients uncomfortable? Or would not wearing masks worry them? Should staff who live in a building with suspected SARS cases be quarantined?

Some businesses can do little but play the SARS worry by ear, while others have put in place contingency plans.

"We have had to implement internal realignment procedures to protect ourselves and our products, because if a team goes down we would be stuffed," says Desmound Ko, Managing Consultant and Director of CORE Solutions.

The company, which specializes in providing IT solutions for businesses, has arranged with some of its clients to have "clean teams" work in each others offices to ensure they could continue operating if infection of one member of staff were to force all the office to undergo quarantine.

Mr Sperling says DZ Bank Hong Kong Branch has also implemented comprehensive measures to protect its employees and business operations.

"We have also amended our Business Recovery and Business Continuation Plan to specifically match the potential threats of SARS," he said. "We already had a comprehensive plan in place which we tested annually ... but some modifications were needed to cater for the specific threat of SARS. Specifically we have to assume the worst-case scenario for SARS -- all staff might be quarantined, business operations closed by government order, etc."

Business volume at the bank is down compared to previous years, due in part to the SARS outbreak, but also to the gloomy global economic situation in general and the recent Iraq war and North Korea crisis, he added.

John Chong, Solicitor of Chong, Fu & Co, says his firm has seen a decline in the conveyancing side of business, but that litigation has not seen any noticeable downturn. For his clients still willing to attend meetings, he says they prefer not to shake hands, but overall, he now does a lot more communication over the phone.

Gabriel Li, Corporate Services Manager, The Hong Kong and China Gas Company Limited, says the SARS impact has also had minimal impact on its overall business in the first quarter. Although the commercial side, especially hotels and restaurants has seen some decrease, this has been offset by increased demand from the domestic side.

"Before, people liked to go out to eat, now they want to stay home," he said. "Also, in the old days, people used to cross the border into Shenzhen for the day out or to stay at a holiday home, but now they prefer to stay home. So overall, demand from the residential side is higher."

Thomas Y S Lee, Managing Director of RoboClean (Hong Kong) Co. Ltd., says the SARS epidemic has had a positive impact on his business, which specializes in air-duct cleaning and inspection services.

"Since the SARS outbreak in late March, our air-duct cleaning business has surged by about 30 percent," he said. "More private companies have asked us to provide cleaning services for their offices, which also reflects that businesses have now become more aware of air quality control. Over the long term, this will benefit businesses like ours."

To cope with the expanded business, RoboClean has recruited temporary part-time staff, adding on average 10 workers per week.

Figures released by the Census and Statistics Department show that for March this year, the value of exports increased by 15.4 percent over the same period last year to HK$143.1 billion, after a year-on-year increase of 10.4 percent in February. These figures, which do not reflect the SARS outbreak, do show that despite the war in Iraq, Hong Kong's exports have been enjoying double digit growth this year. But it is the orders that buyers should have been placing in April for shipping in the summer that will hurt traders most.

Benson Pau, Managing Director, Wings Trading (HK) Company, says April is always his busiest month for overseas visitors from all around the world, but during the month, not one overseas customer visited his office.

"Due to no overseas visitors coming to see us in April, we have lost the impulse purchase orders that we usually get through the trade fairs," he says. "This can be partly compensated through email and phoning, but of course the result will be much less. As a result, we guess we will lose about US$2 million in sales from this impact."

If there is any good news out of that, it is that manufacturers and traders do not think SARS will have a long-term impact on exports if the outbreak can be contained, according to a telephone survey in early April by HKTDC. However, with face-to-face meetings and factory and trade fair visits greatly reduced or altogether cancelled, those with well established customers and regular orders are better placed to weather the crisis than SMEs looking for new buyers, says TDC's Chief Economist, Edward Leung.

That said, "While many overseas buyers are cancelling their trips to Hong Kong and the Mainland, our businessmen are still trying to do business with buyers by phone, fax, email, video-conferencing and sending samples by couriers," he added.

To date, production activity in the PRD remains largely intact. Standard items, re-orders and OEM orders seem to be less affected than new products and ODM items. Mr Leung predicts that if the disease -- which in early May was showing signs of being controlled in Hong Kong and Guangdong -- spreads further in Hong Kong and the PRD over the medium term -- the development of new products and new businesses will be greatly affected.

The survey also found that that seasonal buying cycles and the presence of potential competitors meant that industries were being affected differently. All, however, identified soft demand from overseas markets and the impact of SARS on new product development as factors pulling down their business.

Sales of electronics and household appliances have not been substantially affected, as many orders had been placed at trade fairs in advance of the SARS outbreak. Presently, there are no signs of trade diversion from Hong Kong and the PRD to other sources, thanks to the well-established production cluster for consumer electronics and household electrical appliances in the region.

In the clothing sector, although many major buyers were reluctant to travel to Hong Kong or the Mainland, orders continued to be placed for basic items and through their buying agents in Hong Kong. Large players in the Hong Kong garment industry, with overseas offices, were also better placed to service customers. Moreover, some larger traders were establishing temporary showrooms overseas for buyers to view their latest products.

The SARS outbreak has been a disaster for the travel industry as people put off vacations and travel plans, or countries restrict travel to and from infected areas. Although figures for April arrivals had yet to be released when The Bulletin went to press on May 6, the Hong Kong Tourism Board (HKTB) was predicting a 70 percent fall in visitors for April.

HKTB Executive Director Clara Chong said there are now glimmers of light at the end of the tunnel as the daily number of new cases in Hong Kong steadily declines. "With the government's stringent health monitoring measures now in place at the airport and all land and sea border points, we are hopeful that the WHO will feel able to lift their advisory on Hong Kong before too long."

At the end of April, the average number of passengers that Cathay Pacific was carrying per day was approximately one-third of that for the comparable period last year, and forward bookings are also very week.

"The airline has been forced to make cuts in operations due to the steep fall in bookings across its network and in all, 23 destinations are affected with 218 weekly services cut -- or 45 percent of the airlines weekly schedule," said James Evans, Executive Assistant to Director and Chief Operating Officer, Cathay Pacific Airways.

Most of the cuts are from regional routes, although long-haul destinations have also been affected.

Besides telling its staff to exercise greater vigilance to look out for any signs of SARS from passengers, Cathay is also following WHO's new guidelines to thoroughly clean and disinfect its aircraft after every flight. Aircraft also undergo a more thorough sanitation procedure on a weekly basis as well as a regular "super clean programme," he said.

The airline has also been working to ease the public's worries about possible contamination onboard aircraft. Mr Evans says fresh air continuously flows into the cabin from outside the aircraft for the duration of every flight.

The entire cabin air volume is exchanged every three to five minutes. During that cycle, half of the cabin air volume passes through a set of special high efficiency particle air particulate arrestor (HEPA) filters designed to remove more than 99.97 percent of airborne contaminates, bacteria and larger virus particles.

Hong Kong might have seen the worst of the SARS outbreak, whereas Mainland China and other countries have yet to peak, which is one reason for optimism. Most businesses that The Bulletin spoke to say they could survive for some time operating under the current conditions, but obviously they hope that will not be necessary.

The government's recently announced SARS relief initiatives will help reduce operating costs for some businesses, but as Benson Pau points out, "Efforts by the government and everyone in Hong Kong to fight SARS will be the best help for businesses to recover."

More >>