Filthy Air Could Hurt Hong Kong’s Economy

Todd Prado blames Hong Kong’s air pollution for his decision to move to Singapore at the end of this year.

He keeps his job as head of Asian trading for Janus Capital Management, and his children, ages 9 months and 3 years, keep their health.

“I like Hong Kong -- it’s a great city, very dynamic,” said Prado, who was recruited from Fidelity Investments in Tokyo six years ago. “But the fact that my kids and I have to strap on a gas mask every time we go outside is appalling.”

Foul air cost Hong Kong $300 million in medical bills and lost productivity last year, a 3.8% increase from 1995, the University of Hong Kong calculates. With more than one day in four now marred by poor visibility, the city soon may be counting the cost of lost talent and investment, said Jack Maisano, president of the American Chamber of Commerce in Hong Kong.

“We’re close to a tipping point where the negative investment impact is going to be measurable,” said Maisano, adding that the evidence is still anecdotal. “Everybody knows someone who is leaving or has left, or is intending to leave.”

Residents aren’t the only people affected by air quality, said Harry O’Neill, managing director in Hong Kong of Whitney Group, which specializes in recruiting financial services executives. Potential hires from overseas are turning down job offers in Hong Kong because of health fears, he said.

“We’ve brought in quite a few people this year, but it’s definitely a major consideration and we certainly have rejections,” said O’Neill, a resident of Hong Kong for 13 years. “It’s not even that they want more money. People with young children seriously worry about living here.”

Hong Kong’s air contains almost three times more particles of soot and other pollutants than air in New York and Paris, and more than double the amount in London, according to the University of Hong Kong. In Los Angeles, the most polluted U.S. city, people breathe in 29% fewer such particles.

Residing in Hong Kong is worse than living at a Formula One race track, said Anthony Hedley, a doctor and professor of community medicine at the university. “We have the worst pollution of all the socio-economic developed cities of our type in the world,” said Hedley, who has studied air pollution for 18 years.

The situation may be even worse because Hong Kong’s government doesn’t make public some of the most dangerous emissions, said Rob Morrison, chief executive in Hong Kong of CLSA, the Asian investment banking unit of Credit Agricole.

The Environmental Protection Department reports the amount of large, so-called respirable suspended particulates in the air rather than fine ones. In general, the smaller the particulates, the deeper they penetrate into the lungs, department reports show. Health effects range from respiratory irritation to lung-tissue damage that may lead to heart attacks, strokes and cancer.

“Hong Kong talks about being Asia’s world city, but they use third-world calculation methodologies for calculating pollution,” Morrison said. “If they had a fine sieve picking up the fine particulates, what would the reading be then?”

Melisse Craig isn’t waiting around to find out. Her family compared four work options, including extending their 4 1/2 -year stint in Hong Kong, before deciding to move to Singapore in July, she said.

“We made our list of pros and cons,” said Craig, a homemaker from Toronto with children ages 5 and 9. “On the top of the cons list is the air pollution.”

Some progress is being made. The city’s 18,000 taxicabs completed a switch to cleaner liquid petroleum gas from diesel fuel in 2003. Unleaded gasoline has lightened the haze to white from brown, said Maisano of the American Chamber of Commerce.

Still, the number of hours when it wasn’t possible to see farther than 5 miles increased last year to 2,438, the equivalent of 102 days, from 960 hours in 1997, according to Hong Kong’s meteorological office. The count excluded hours when fog, mist or rain were present.

ECA International, a London-based human resources consultant, recommends that companies pay a 10% hardship allowance to lure expatriates, partly because of air quality, said Lee Quane, the company’s general manager in Hong Kong.

CLSA commissioned a report on Hong Kong’s pollution in 2004 because the environment affects investment decisions, Morrison said. Foul air may depress the long-term value of residential property as well as having an effect on public health and the economy, the report found.

CLSA is trying to persuade two senior recruits to settle in Hong Kong instead of Tokyo, Morrison said.

“Pollution isn’t the only issue, but it’s definitely an issue,” he said. “If you’ve got like for like situations, pollution will surely be a tipping point.”