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Business in the Time of Influenza

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As if things weren’t bad enough, a new problem now threatens a global community still reeling from the aftershocks of last September’s economic meltdown.

Airport authorities all over the globe have begun enforcing stricter security measures. Schools and shops in some countries have closed their doors indefinitely. A(H1N1), known on the streets as swine flu, has singlehandedly sparked tension between nations and caused travel bans in some areas. Egyptian officials ordered all pigs slaughtered as a precautionary measure.

A(H1N1), primarily considered a health problem, has now caught the attention of economists as the disease wreaks havoc on the travel and hog industries.

How dangerous is A(H1N1)? And can the battered global economy take another beating from the onslaught of this novel virus?

No Ordinary Flu
The world is no stranger to influenza. According to the World Health Organization (WHO), seasonal flu kills more than 250,000 people each year. Avian flu, a virus that jumps from birds to humans, has killed 262 people since 2003.

Novel influenza A(H1N1) is a ghastly mixture of swine, avian, and human viruses. Research done by Professor Neil Ferguson, a member of the WHO emergency committee handling the outbreak, shows that the new strain can kill four out of 1,000 infected people. Compared to seasonal flu, which kills roughly 1% or 10 out of 1,000 infected people, swine flu seems less threatening.

So if there is a bigger risk of dying from the common flu, why the fuss over A(H1N1)? Well, it’s new, for one thing. That means the vaccine for it is not yet available. And there’s no way to tell how the virus will behave in the coming months.

What’s more, A(H1N1) may not exactly be less dangerous than the more common strain. This stage, warned WHO Director-General Dr Margaret Chan back in May, may just be the calm before the storm as pandemics usually occur in waves and usually start mildly. On June 11, the WHO raised the flu pandemic alert from phase 5 to phase 6, declaring A(H1N1)a global pandemic.

Researchers estimate that A(H1N1) could be as virulent as the 1957 pandemic that killed two million people, although it lacks certain qualities to be as catastrophic as the 1918 Spanish influenza. (See sidebar.)

The US government recently set aside US$1 billion to help American companies develop a vaccine. China, meanwhile, has already received its much awaited flu samples from the WHO and is on its way to producing a vaccine. If all goes well, China will release the A(H1N1) vaccine this month. [Scientists had a difficult time extracting seed stock, the key ingredient in making a vaccine. A(H1N1) grew slowly in labs, hence the initial delay.]

Another concern is that influenza viruses tend to combine with each other. If this novel flu mixes with the seasonal flu or avian flu and mutates into something else, then the world is in for a bigger health crisis.

Well-known virologist Dr Robert Webster says, “This H1N1 hasn’t been overblown. It’s a puppy, it’s an infant, and it’s growing. This virus has got the whole human population in the world to breed in—it just happened. What we have to do is to watch it, and it may become a wimp and disappear, or it may become nasty.”

From Panic to Pandemic
The A(H1N1) virus now joins the list of notorious flu strains as it officially becomes the fourth flu pandemic to hit the world.

Over the past century, three flu viruses have gone on killing sprees around the globe: the Spanish influenza of 1918, the Asian flu of 1957, and the Hong Kong flu of 1968.

A pandemic, according to the WHO, occurs when a virus causes sustained community outbreaks in different regions of the world. A community outbreak means that the virus in an area is so widespread, the original carriers of the disease can no longer be traced.

The 1918 to 1919 Spanish flu, considered the mother of all pandemics, killed at least 50 million people worldwide. It left in its wake more casualties than the First World War. The virus attacked mostly young adults and felled them fast. It occurred in three waves and infected around 20% to 40% of the world’s population.

The 1957 Asian flu was immediately identified. By August that same year, vaccines were handed out to stricken nations. According to the WHO, the 1957 menace killed some two million people worldwide, mostly the elderly.

The Hong Kong flu of 1968 was the mildest of the three. It spread more slowly and killed approximately one million people all over the world.

The virus may not be in its nasty phase yet, but it has already bared its fangs. Aside from killing people across continents, it also sank its teeth into a global economy still reeling from a financial meltdown.

A disease named after swine will certainly have adverse effects on pork producers. Although health officials have often repeated that pork is safe to eat, the man on the street will tend to steer clear of his breakfast bacon for now.

After just two weeks of swine flu reports, the National Pork Producers Council in the US says hog raisers lost an average of US$8.4 million a day. The US pork industry has since sought Washington’s assistance. Other countries, such as China, Russia, and Indonesia, have also banned pork imports from Mexico and the US.

The American Meat Institute estimates that the pork ban could cost the US swine industry some US$13.6 million per week.

Flight Fright
The tourism industry may have nothing to do with swine, but it suffers just as much as the pork industry. Mexico, the center of the outbreak and the hardest hit by the flu, is a prime example.

Airline stocks nosedived as travel companies from Europe and Asia canceled trips to Mexico. The Association of Russian Travel Agencies said in early May around 30% of possible guests canceled flights and asked for refunds from Mexican hotels and travel services.

According to Smith Travel Research, Mexican hotels reported a 50.7% drop in occupancy a week after news of the flu broke out. To economize, airlines also cut flights to Mexico by a third of their pre-A(H1N1) number.

The bad news for Mexicans is that tourism is the country’s third largest revenue source, earning around US$13 billion a year. In the toughest two weeks of the outbreak, tourism related businesses lost approximately US$180 million. During this time, restaurants served only take-out food, while museums, theaters, and cinemas closed.

Everybody’s Business
Businesses not related to pork or tourism are not exactly impervious to swine flu. Sick workers, after all, could dent the manpower already cut in half due to the recession.

Alex Hindson, head of enterprise risk management at Aon Global Risk Consulting says, “Organizations could find themselves without key staff for protracted periods, whether ill, looking after relatives, or merely being cautious.”

But not every industry is negatively affected by A(H1N1). Stocks of pharmaceutical companies like Roche, Gilead Sciences, and GlaxoSmithKline skyrocketed mainly because of the outbreak. These companies manufacture Tamiflu and Relenza, anti-viral drugs that are stockpiled by governments all over the world to combat the novel virus.

Masks and hand sanitizers have also been flying off the shelves. Surgical mask manufacturers, such as Alpha Pro Tech, increased their production to keep up with demand. Johnson & Johnson’s hand sanitizer Purell doubled its sales in just a couple of months.

Although pharmaceutical companies have been raking in cash amid the epidemic, Deutsche Bank biotechnology analyst Dr Mark Schoenebaum points out, “If this becomes a major pandemic, no one over the long-term will profit. No one makes money if everyone gets sick.”

Striking Home
The Philippines may be miles away from Mexico and the US but it too has joined the long list of countries hit by the virus. On May 22, Health Secretary Francisco Duque III announced the first confirmed case of A(H1N1) in the country. A 10-year-old girl, who had just visited the US, showed symptoms of the new flu shortly after arriving in Manila. The girl has since recovered. [As this issue went to press, over 400 Filipinos have been infected with A(H1N1). A 49-year-old woman infected with the virus died, although the DOH says death was due to heart failure, not the new virus--Ed.]

So the question is what will happen to us now that swine flu is here?

If what happened in Mexico is any indication of what the flu can do to the Philippine economy, then it would probably strike the country’s booming tourism industry first.

In 2007, the Philippines posted 3.1 million tourist arrivals. Those tourists spent some US$4.89 billion locally. Unsurprisingly, tourism contributed 3% to the GDP that year.

When swine flu finally reached Philippine shores, Australia, Canada, and the United Kingdom immediately issued travel advisories warning their nationals to “exercise high degree of caution” when traveling to the islands. Tourists from the three countries are among the top 10 nationalities who visit the Philippines.

Ma. Paz Alberto, president of the Philippine Travel Agencies Association, says that due to the A (H1N1) scare, “People are still wary. [They] are not traveling.

Alberto also reveals there was a 15% drop in the number of Filipinos flying abroad from April to May this year. But she clarifies that, “It’s not really just the effect of A(H1N1) but the effect of the economic crisis; [so there are] two reasons for the decline.”

Not even bargain basement airline tickets could tempt travelers to fill up rows of empty seats. “[Our] promos are dampened by the A(H1N1) virus. There’s always the risk that people might get sick,” Alberto adds.

But Philippine Association of Meat Processors Inc. executive director Francisco Buencamino says meat processors do not feel the impact of A(H1N1) just yet. Believe it or not the panic even had a positive effect.

“Actually, the scare has lowered the prices of pork, our raw material. It’s easier for us to build up our raw material inventory. On the other hand, we are trying to measure how much impact the virus has on our finished products because the demand was expected to drop also for pork products. But we do not observe that to be happening yet.”

Department of Health (DOH) advisories about the safety of pork consumption also helped mitigate losses for the Philippine pork industry.

Ready for Action?
More important than nosediving stocks and decreasing profits are the lives affected by the new epidemic. As the number of cases in the country surge, people begin to fear for their health and safety. But Secretary Duque is quick to assure the public that the Health Department is armed and ready for action. The DOH stashed a million anti-flu tablets and has prepared clinics and hospitals for victims. People struck by the virus and those they had contact with are also being quarantined and closely monitored.

Education officials even postponed the opening of classes in a number of schools to give students returning from overseas trips enough time for a self quarantine. Granted that the postponement happened after a student of De La Salle University reportedly contaminated a schoolmate, the government’s reaction may just have averted an outbreak.

A closer look at how Manila has provided health care to millions of Filipinos across the archipelago could be a more accurate gauge of how prepared the government is to combat diseases, especially new ones like A(H1N1).

To contain the virus, the government has given DOH the go signal to tap into the two-billion-peso (US$42.44 million) standby calamity fund of the National Disaster Coordinating Council. President Gloria Arroyo also earmarked an additional 150 million pesos (US$3.18 million) should health officials require more assistance.

Although the government has taken immediate steps and set aside funds to avert the spread of the virus, keeping its citizens healthy and, consequently, less susceptible to illnesses like the new flu is a different story altogether.

The budget of the DOH, for instance, changed little from 1991 (7.17 billion pesos or US$152.17 million) to 2007 (11.40 billion pesos or US$241.95 million). There was, however, a remarkable increase from last year (18.90 billion pesos or US$401.12 million) to this year (23.70 billion pesos or US$502.99 million).

A report from the Philippine Center for Investigative Journalism reveals how widespread corruption is in the provision of healthcare, which has forced many doctors working in rural areas to move elsewhere. The report also states “local governments, to which health care services have been devolved by the Department of Health,” are to blame.

Considering that many—especially those in the lower income brackets and living in far-flung provinces—cannot afford to avail themselves of regular health services and medication, it only makes sense for government to keep Filipinos out of sick bay. The sooner government realizes that a healthy populace makes good business sense and sound economic policy, the better the country’s chances are of fighting illnesses, both medical and financial.

Print ed: 07/09


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