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AAPBS President's Message_Feb 2020
attached file : e Newsletter AAPBS_President's message_Feb.2020.docx



Dear AAPBS Members,

The new coronavirus that originated in the Chinese city of Wuhan is raging all over the world with about almost 10,000 confirmed infected as of the end of January 2020. The pandemic flu that we experienced in the past two decades together with the coronavirus flu should be taken as informative lessons for the future risk aversion management. At the same time, an economic analysis should be made. I wanted to summarize what we experienced when the 2003 SARS epidemic hit us in the world, as far as I recall, since I was coping with this matter as Dean of admissions at APU


A high body count is not the only meaningful number attached to the epidemic. The potential cost of a global outbreak of the flu or some other highly contagious disease is essential for government officials and business leaders to know. Only by putting a price tag on such an occurrence can they hope to establish what containing it is worth.


The financial damage by itself can be devastating. The expense of major epidemics is evident every time a health agency totes up the cost of treating infected people — the outlays for drugs, doctors’ visits, and hospitalizations. But that spending is only the most obvious economic impact of an outbreak.


Consider the effect on international airlines. During the 2003 SARS, which began in southern China and lasted about seven months, business and leisure travelers drastically cut back on flying. Asia-Pacific carriers saw revenue plunge $6 billion and Asian airlines lost another $1 billion.


Fear even hurt businesses dependent on sales calls. AIG, which pulled almost 30 percent of its revenue from Asia back then, was hobbled when the epidemic kept its agents from visiting potential customers.


That’s just the easily measured stuff; the indirect costs pushed the total SARS bill much higher. The biggest driver of the economics of pandemics is not mortality or morbidity but risk aversion, as people change their behavior to reduce their chance of exposure. People don’t go to their jobs, and they don’t go to shopping malls. There can be a huge decrease in consumer demand, and if a pandemic continues long enough, it can affect manufacturing, as producers cut output to align supply with lower demand. If schools are closed, healthy workers may have to stay home with their children. People afraid of becoming infected are less likely to go out to stores, restaurants or movies.


Most of China was essentially on lockdown in the first half of 2003 as the government did everything in its considerable power to minimize human-to-human contact and, hence, the spread of SARS. Beijing was shut down tight. Discos, bars, shopping malls, indoor sports facilities, and movie theaters were closed, and 80 percent of the capital’s five-star hotel rooms were vacant.


It’s not surprising that a pandemic hurts companies dependent on employees or customers moving from point a to point b (as AIG and the airlines learned), but SARS also set back transport companies such as FedEx (closed airports; fewer people doing business), telecom equipment-makers such as Nortel (vendors and customers staying home) and cable-TV-box maker Scientific-Atlanta (multiple parts made in Asia). It even cut deeply into profits for Estee Lauder, which under normal circumstances sells a lot of cosmetics in Hong Kong, Singapore and China, and in duty-free airport shops.


The World Bank finally estimated China’s SARS-related losses at $14.8 billion, and although the United States and Europe were largely spared its ravages, the pandemic reduced the global GDP by $33 billion. And here’s a scary thought: As health crises go, SARS wasn’t that bad: It killed just 916 people and lasted well under a year. The Department of Health & Human Services estimates that the ho-hum seasonal flu is responsible for 111 million lost workdays each year in the United States. That’s $7 billion in sick days and lost productivity.


I sincerely hope the new corona virus epidemic ceases so soon with less patients than in 2003. At the same time, the total economic damage will hopefully be less than that.


Sincerely yours,


AAPBS Feb. Secretariat NEWS 2020


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