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  • Dec 19, 2014
  • Updated: 8:40pm
My Take
PUBLISHED : Tuesday, 29 January, 2013, 12:00am
UPDATED : Tuesday, 29 January, 2013, 1:41am

Let's become a baby formula hub

If every crisis presents an opportunity, then we should look on the continuing furore over the shortage of baby formula as a transformative moment. Forget about our official pie-in-the-sky schemes to turn the city into an arts hub or logistics centre, and this and that hub. Let's declare what we have already become: a baby formula hub.

We are looking at this shortage problem in a completely wrong way. Worse, the government's non-response, led by Secretary for Food and Health Dr Ko Wing-man, is an abdication of responsibility. In effect, he is telling local retailers to behave and stop hoarding for parallel traders from the mainland. Any enforcement or monitoring? Well, he has left all that to the major suppliers such as Friso, Abbott and Mead Johnson.

Hoarding is a well-understood economic phenomenon, at least for those not indoctrinated by more than half-a-century-old theoretical models inspired by Kenneth Arrow's "invisible hand", according to which all goods necessarily clear in an efficient market.

Inefficiency arises in the distribution and production of formula for Hong Kong because it's no longer a purely local market - where all the parties have good estimates of the levels of supply and demand. There is a massive mainland demand that has spilled into the city because of concerns about food safety north of the border. Chauvinistic "we hate mainlanders" protesters and a sensational Hong Kong media feed into the frenzy, which worsens the anticipated shortage and pushes up prices. Short of banning or restricting mainland visitors, it's hard to eliminate parallel traders.

So, what to do? One way to solve the problem is to let markets believe there will be adequate supply for all. That requires serious government commitment. As a baby formula hub for Asia, we should encourage the big suppliers to use the city as a base of operation, storage and distribution - with appropriate incentives such as tax breaks and subsidised facilities. Instead of attracting unruly fly-by-night mainland traders, we will economise and streamline distribution for large importers from the mainland.

Come to think of it, we should capitalise on mainlanders' other fears about tainted food and drugs and give them what they want.


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FINALLY a "hub" idea that would WORK!!
"Asia's Milk Powder City"
I have seen bus load of shoppers going to outlets to shop for cheaper goods in Boston, America. Perhaps we ought to consider fabricating along this concept, an hub in Hong Kong for milk powder, maternity hospital, medical, or anything that the traders need........ sort of like Silk Route, only now they just hop over in a short time. We Hong Kongers, lets make use of the opportunity, harvest the fruit, lets start formulating with innovative ideas, shall we?
Don't you think CY's (probably not only his own) idea to establish a special business zone at the north can particularly serve such purpose? Not only baby formulas but also services in areas such as medical and education. The competitive edge of HK is its legal and regulation systems. What drives all these cross border trading not because it's cheaper here but because consumers feel more protected. HK cannot be a hub of anything but at the same time barring people to enter the city.
Alex, You omitted one important task.
Baby Milk should become part of CEPA, ( closer economic program ...something ) so that it can gain special reduced duty and tax entry status into China.
( sort of joking ) ( where’s Mike Rowse )
HK could persuasively argue that it will benefit the image of Chinese governments, because it would allow mainland mothers access to higher quality products at reasonable prices.
In reality - I suspect Shenzhen officials already understand this need, which is why they have permitted this grey market to flourish, instead of having to face the wrath of their own citizens being forced to consume only sub-standard products.
Very pragmatic - these bureaucrats across the border !!
One a more serious note
The mainland baby delivery boom in HK should also be seen as an opportunity.
Here are people who are ready and willing to pay for top medical services.
I say let them.
Use the money to finance and upgrade HK’s medical facilities.
In a few years, the boom will have dissipated, but the improved facilities will remain,
just in time for the increasing numbers of aging baby boomers, who will directly benefit
from the improved medical facilities, paid for by today’s wave of new mainland mothers
On this point - I am serious – it is very much an issue of HK bureaucratic dull headedness.
As a Hong Kong resident I would back this 100%. We set up shops to watches, jewelry, electronics and cigarettes. All these are non essentials. Why not set up a massive baby formula shop right at the boarder? This is not just good business sense but is the Godly thing to do. Kids died from tainted Milk formula and many became sick. HK with laws and checks has safe baby formula (guaranteed). I am sure the formula companies would get behind this initiative 100%. All it would take is 1 phone call from the chief executive.
DFS needs to open an outlet at Lowu with a milk powder section along with the watches and booze.


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