The outbreak of SARS in Taiwan threatened to lay low the economy, sending some sectors reeling. Yet the epidemic also shed some light on weaknesses in the health care system and prompted the government to think of new ways to nurse the economy back to health and be better prepared for the future.
When severe acute respiratory syndrome (SARS) appeared earlier this year, it was the largest political, social, and economic challenge to emerge in Greater China since the Asian financial crisis five years ago. Then suddenly, like the typhoons that frequently plague the region, SARS receded as quickly as it arrived. In Taiwan, a country with an economy largely dependent on international trade, the SARS epidemic has left troublesome questions in its wake, yet there are positive lessons to be learned.
Taiwan was especially vulnerable to this contagious disease due to a daily flow of 70,000 passengers through its two international airports and substantial travel between China, Hong Kong, and Singapore. By the time SARS was contained in late June, there were 678 confirmed cases and 84 deaths.
Along with the loss of life, SARS caused economic losses and left the population jittery. "SARS cut Taiwan's economic growth this year by an estimated 0.5 percent, and our revised annual growth forecast is now about 3.2 percent," says Lin Yi -fu, economic affairs minister. "People are confident things have returned to normal, but we must stay on guard and be prepared to deal with SARS at any time."
SARS had very different effects on the domestic and international sectors of Taiwan's economy. The largest impact was on domestic service industries, such as airlines, hotels, restaurants, and retail sales. People avoided groups and public places, cutting into the service industries that cater to the usually gregarious Taiwanese. Business meetings were canceled and conference calls became the norm, and unless there was a dire emergency most people steered clear of medical facilities. Quarantine, a word not heard for decades, and travel restrictions became features of everyday life.
In contrast, Taiwan's manufacturing and export sector remained largely unaffected as international orders from longstanding customers remained the same or even increased. Trade for the second quarter actually improved as orders began to pick up from recovering Western economies. "SARS affected only domestic consumption and investment. In regard to international trade, the effect was relatively small," says Vincent C. Siew, chairman of the Chung Hua Institution for Economic Research and top economic adviser to Taiwan's President Chen Shui-bian.
Opportunities to develop new business, however, plunged as trade shows and exhibitions were canceled and foreign buyers adopted a wait-and-see approach. In response, government agencies launched initiatives to help companies fill new orders. The Ministry of Economic Affairs (MOEA) and the Bureau of Foreign Trade sponsored a promotional campaign to bring back business. "We subsidized canceled trade-show booths, and sponsored overseas promotions for local companies," explains Lin Yi-fu. "As SARS abated, we increased the ministry's trade promotion activities and supported other business development opportunities for our exporters and manufacturers."
A notable effort to circumvent the isolating effect of SARS was the government's involvement in promoting video conferencing. The MOEA and the Taipei-based China External Trade Development Council (CETRA) provided broadband video phone access free to Taiwan's importers and exporters, and video conferencing facilities were made available to over seas counterparts in CETRA locations worldwide. By August, the threat of SARS had faded to an unpleasant memory and trade shows and exhibitions were back on track for the year, though attendance is expected to lag due to the rescheduled itineraries of foreign buyers.
SARS struck at a time when countries around the world were climbing out of a global recession. Now with a global economy that is gaining steam, Taiwan's government is working to hasten recovery from the epidemic. "On the international side we are doing three things: the tourism bureau is publicizing that SARS is over and everyone is welcome to come to Taiwan; our foreign trade bureau is sending more delegations overseas for trade promotion; and we are quickly rescheduling local and overseas trade fairs that were postponed," notes Siew.
In the aftermath of SARS, crisis management and risk management are receiving much attention. If the disease reap pears, or if there are similar crises in the future, how can the government improve its response and how can businesses reduce their risks?
There are concerns that the government had serious problems with coordination during the epidemic. "The SARS environment highlighted some of the real difficulties with the way the government operates, such as coordination between agencies and ministries and clear spokespersons," points out Richard Vuylsteke, executive director of Taipei's American Chamber of Commerce (AmCham). "The current system needs better coordination and control on the political side and a real crisis management system where there is a clear person speaking for everybody, not ten different voices."
As fear of the SARS epidemic gripped Taiwan, the government took unexpected measures to improve coordination. President Chen, head of the Democratic Progressive Party, invited Vincent C. Siew, vice chairman of the Kuomintang, the main opposition party, to serve as the president's top adviser on the crisis. Siew's former position as premier during the Asian financial crisis reassured the public that the government was utilizing the country's most experienced leaders and was united in the face of the SARS threat. "Everyone was alarmed that SARS would have a huge impact on the economy, and it was creating a lot of uncertainty about the future," explains Siew. "I took the job amid criticism and gossip because I knew my experience and knowledge could help the economy recover."
In addition to coordination issues, there are concerns that Taiwan's health care system could have been better prepared. "As in other service sectors, Taiwan is not very sophisticated in the health care area," says Richard Vuylsteke. "We found that physicians were doing public health work and administrative work instead of devoting attention to the challenge of the epidemic. It should be a warning shot across the bow that the sophistication of health services has a long way to go." Vincent C. Siew agrees that hospital management was not up to scratch and thinks it is an area that the government should work on. "I have proposed to the government," he says, "that they establish a nonprofit organization to take care of management coordination and planning between and within hospitals, including standard operating procedures on how to deal with SARS. This will provide professional hospital management instead of management by doctors."
During the epidemic, hospitals often lacked essential medical supplies and equipment, necessities that a prosperous country like Taiwan should not be caught short on. "There were shortages of many items such as face masks and protective clothing," says Lin Yi-fu. "Now we have established a system to stockpile a month's supply of these items. In the case of a recurrence, we'll be prepared." However, a major reason for the limited availability of needed medical supplies was bureaucratic red tape. "There were a lot of medical devices that were required but impossible to get because of the long drawn-out process for the registration of foreign medical devices," says AmCham's Vuylsteke. "That kind of bottleneck causes a real problem here."
As a result of SARS, risk management has become a priority issue for businesses all over Asia. Fears of cross -border contagion had governments restricting regional business travel and subjecting travelers to quarantine. Taiwanese businesses operating in China are small and medium-sized companies that depend heavily on the on-site management of Taiwanese managers and staff. SARS prevented managers from traveling freely between Taiwan and China. "As Taiwanese companies expand and make new investments, they need to prepare in case this happens again. Do they have a system where substitute managers can serve as a backup?" asks Siew.
Basic overseas business strategies are being reconsidered. "In the past, we promoted the idea of industrial clusters to boost efficiency and competitiveness," says Lin Yi-fu. "But something like SARS would have a blanket effect on industrial clusters. Now we recommend that companies reduce risk by not placing all of their investment in one country."
Foreign businesses operating in Taiwan and the region also have a new focus on risk management. With SARS, "a lot of companies have more interest in diversification issues, such as data backup and alternatives for keeping basic business operations alive and viable," says Vuylsteke. There is hope that Taiwan can gain a niche as a global logistics center as foreign businesses realize the necessity for diversified locations in Asia, but that means being prepared for the unexpected. "The SARS situation has prompted the government to get an early start on the planning of logistics industry development," says Lin. "For the issue of diversifying risk, people should be made aware that Taiwan is becoming a global operations center."
But before Taiwan can become a logistics center, there must be changes in the way government implements policy. "SARS gives a brief window into different macro issues," says Richard Vuylsteke. "They have good policies but are not implementing them. By not allowing domestic and international businesses to work a regional business plan and have flexibility in hiring and innovation power on products and services, people must work in a restrictive environment. Foreign companies continue to downsize here, and domestic companies continue to move out. This will continue until implementation takes place."
So what are the lessons that have come from Taiwan's SARS experience and what is in the works to limit the damage of another outbreak?
AmCham's Richard Vuylsteke points out that the government has an opportunity to improve on coordination issues, with clarity of press releases and announcements and designated spokespersons. In addition, the public health system should receive a thorough evaluation in everything from statistical reporting and vetting patients in emergency rooms to hospital organization, training, and equipment. "These issues addressed constructively would push the government and hospitals to a new level of understanding and responsiveness," he says.
Presidential adviser Vincent C. Siew points out that the government is intending to set up a nonprofit organization to carry out overall planning, education, disease control, coordination, and management to quicken Taiwan's response time in the event of future crises. In addition, hospitals are all working from standard operating procedures for quarantine and treatment so that any new SARS cases would be easy to handle and life in broader society would not be disrupted. "People should not worry about coming to Taiwan," says Siew. "We have comprehensive contingency plans." For all the hardship and panic the disease caused, it gave Taiwan a much better understanding of how to control such an outbreak. "We know now that we can handle SARS in a fairly orderly manner," says Lin Yi-fu.
Although there are many opinions, no one knows if SARS is gone for good, or if it poses a seasonal threat like the region's typhoons. The lessons learned from Taiwan's initial encounter with SARS, however, provide a valuable opportunity to improve the way the government and health sector respond to crises, and the way businesses deal with risk.
Butler Waugh is the director of Asia IQ
Consulting based in Taipei.
Copyright (c) 2003 by Butler Waugh.