'It has been reported that as Southeast Asian countries are offering better quality goods at cheaper prices than Hong Kong, the local tourist industry has been under pressure in recent years. In this connection, will the government inform this council ...' Legislator Raymond Ho Chung-tai, Legco question, November 17 WHAT HE WANTED to know, of course, was whether there has been any growth in arrivals of non-mainland tourists, whether there have been any complaints from them about the prices they are charged here and what the government is doing to attract more of them. The reply he got consisted mostly of the predictable 'rest assured that we are doing all we can to ...' and was otherwise notable only for an egregious fudging of the figures. For the first nine months of this year, said Secretary for Economic Development Stephen Ip Shu-kwan, non-mainland visitor arrivals were up 43 per cent over the same period last year. Conveniently forgot to mention, did you, Mr Ip, that this growth rate is so high only because Sars kept arrivals way down last year? Oh well. What the figures actually show is that all the growth of visitor arrivals in recent years is based on mainland visitors. The non-mainland element collapsed in 1997 and is still well below 1996 levels. Thus let us consider Mr Ho's contention that our regional neighbours offer better goods and better prices and that this has put our tourist industry under pressure, ignoring, what with all those mainland visitors, that the only pressure from which the industry actually appears to suffer at the moment is the bursting at the seams kind. The shoddy goods count we can dispense with easily. Apart from a few local specialities, there is not much difference across Asia in what tourist shops sell to tourists. An Omega watch is the same wherever you go. That leaves us with price and, in the same way that Mr Ho had to fall back on 'it has been reported that', I am afraid I have seen no comprehensive survey comparing tourist prices across the region. But I also think it may not be needed. Two ongoing trends say that if we do indeed charge higher prices for equivalent goods it cannot be by a wide margin and the premium pricing is steadily being trimmed. The first chart shows you an index of the Hong Kong dollar's exchange value against the currencies of all the countries, other than the mainland, from which our visitors come. It is weighted by origin of visitor and based on a value of 100 for June 1997, just before the Asian financial crisis caused most Asian currencies to collapse. It clearly shows a sharp appreciation of the Hong Kong dollar during that crisis, which undoubtedly made Hong Kong more expensive for visitors. But look at the right-hand side of the chart, at what has happened since the US dollar began to show weakness, taking our linked currency along with it. We are still not back at pre-1997 levels but we are least halfway to them from the peak and the trend is accelerating. This certainly serves to make Hong Kong cheaper for visitors Now narrow the picture a little to the Southeast Asian countries Mr Ho speaks of and look at the difference in the second chart between inflation in Hong Kong and in Asia outside of the mainland and Japan. Since June 1997, consumer prices across these Asian countries have risen by a weighted average of 45 per cent while in Hong Kong they have tumbled by 12 per cent. Put that together with the evidence of the first chart and it strongly suggests that we need not worry about Hong Kong being overpriced for tourists. If it still is, and I very much doubt so, there is no need to call on government for a fix. The present course of relative exchange rates and interest rates will provide one on its own. In fact, Mr Ip, with his responsibility for economic development, would do better to beware of the other danger, which is that we could be setting ourselves up for a new bout of inflation and economic overheating. He could make a good start on that course by ignoring vote-pandering legislators.