Lam said the financial tsunami exposed the over-reliance of the Hong Kong economy on exports to the United States, the European Union and Japan, which accounted for 60 percent of Hong Kong's consumer product export to other economies.
Lam said the TDC estimate that the crisis could last 18 to 24 months, and that the two quarters of 2009 would be the toughest time for international trade.
"We will not see positive signs take helm until the end of first half," he said.
Lam said the impact of the current crisis on Hong Kong exports was much larger than the Asian financial storm in 1998 and the SARS outbreak in 2003, with the impact of the former largely confined to Asia and the latter having limited impact on Hong Kong's export, which was still growing in 2003.
DOWNWARD ADJUSTMENT OF EXPORT GROWTH FORECASTS
Lam said the TDC has recently adjusted the Hong Kong 2008 export growth forecast downward to 5.5 percent from 7-7.5 percent, which was put forward in spring.
TDC statistics show Hong Kong's exports to the United States began to decline around August and September, coupled with an equally negative performance in export to Japan in recent months and modest growth in exports to the European Union.
Positive growth in export growth in October, at 9 percent, was better than expected but does not represent the whole picture of Hong Kong trade because quite a chunk of its exports to the mainland, Hong Kong's largest trading partner, was components and parts for export manufacturing. In 2009 export decrease was possible, he said.
"We have yet to give a qualitative projection for 2009, but we are prepared for bad numbers," he said.
If so, it will be the first export decrease for Hong Kong since the burst of the IT bubble in 2000, when the international trade hub recorded a decrease of 5.8 percent in export.
Lam said confidence had been a key factor in the current crisis, including a lack of confidence in each other between buyers and sellers, between firms and the financial institutions, as well as a lack of confidence of consumers in their employment prospect.
"It takes a short time for confidence to tumble, but long to recover," he said.
Lam said the TDC will have to look to sales statistics in the United States in the two to three weeks before Christmas for clues for Hong Kong exports next year, adding that there has been a modest growth in the first several days of the Thanksgiving holiday.
Some small and medium enterprises operating in Hong Kong the mainland were dropping out under the impact of the tsunami, Lam said, adding that he was nevertheless confident of the prospect after the coming one or two years.
OVER-RELIANCE ON U.S. CONSUMPTION, NEED TO DIVERSIFY
Lam said the ongoing crisis exposed Hong Kong's over-reliance on exports to developed economies such as the United States, the EU and Japan.
The Trade Development Council, a promotion arm of the Hong Kong Special Administrative Region (HKSAR) government, has been encouraging Hong Kong businesses to explore the emerging markets since three years ago, he said.
Russia, the Middle East, South America, India, among others, do have the demand as well as rising consuming capacity to make a sound export market, but Hong Kong businesses have been used to easy money on bills from the developed economies.
"You can do well if you try. We started in the Middle East a couple of years ago and have been doing well ever since. Now we are expanding into Iran," he said.
The TDC has recently earmarked 120 million HK dollars (15.38 million U.S. dollars) to help attract more buyers to Hong Kong and subsidize local firms on trade fair fees.
"We are trying to bring buyers here. It is what we can do best," Lam said.
Lam said the TDC was working on a major expansion project on the Convention and Exhibition Center, which hosts part of Hong Kong's exhibitions organized by the Trade Development Council, which totaled 25,000 exhibitors a year.
MAINLAND MARKET
"What we look to the most for potentials is the mainland market," Lam said in fluent mandarin Chinese, or putonghua.
The mainland currently accounted for only about 8 percent of Hong Kong's consumer product exports, which, from another perspective, means great potential, Lam said.
He said Hong Kong is well-positioned to benefit from a combination of overseas advantages and the market potentials of the Chinese mainland, as the city has comparative advantages such as good designs, management, and manufacturing.
Specifically, Lam said Hong Kong may use the mainland market to grow indigenous international brands, which the city lacks in spite of its international trade hub status.
The TDC planned to open a store of its Hong Kong Design Gallery in Beijing in 2009, Lam said, referring to a gallery showcasing local designs and brands located at the Hong Kong Convention and Exhibition Center in the city's downtown area.
The TDC was also planning fashion shopping fairs in the mainland second-tier cities of Chongqing and Wuhan, in southwestern and central China, respectively.
Services trade with the mainland is also of great potential, with the CEPA, or the Closer Economic Partnership Arrangement, which reduces trade barriers.
Lam said he was thinking of trade fairs to bring together buyers from the mainland and sellers of products like wine and tea from the rest of the world.
Lam recounted the inspiring experience of visiting young men in Henan province in central China, who established the food brand Sinian within a couple of years.
"I was thinking, if it was us, we would have managed it even better," he said, "that is where our comparative advantage lies."
