Cablegate: Hong Kong:Apec Food Security Initiatives

VZCZCXRO8900
PP RUEHCN RUEHGH RUEHVC
DE RUEHHK #1777 2611005
ZNR UUUUU ZZH
P 181005Z SEP 09
FM AMCONSUL HONG KONG
TO RUEHC/SECSTATE WASHDC PRIORITY 8572
INFO RUEHOO/CHINA POSTS COLLECTIVE PRIORITY

UNCLAS HONG KONG 001777

SIPDIS

DEPT EAP/EP RYAN MACFARLANE

E.O. 12958: N/A
TAGS: EAGR EAID ECON ETRD KGHG
SUBJECT: HONG KONG:APEC FOOD SECURITY INITIATIVES

REF: A. SEC STATE 96050
B. HONG KONG 782
C. HONG KONG 1999

1. SUMMARY: The biggest food security challenge that Hong
Kong faces is its dependence on food imports. Hong Kong
imports nearly 95% its food requirements, which leaves it
exposed to export bans, inflation, food safety threats, and
the possibility of global shortages. It addresses these
weaknesses with a sound public health service, strong food
safety measures, food supplier diversification, and a welfare
net for low income people and elderly. END SUMMARY

Hong Kong,s Challenge
------------------------------
2. The biggest challenge that Hong Kong faces related to its
food security is its dependence on food imports. Hong Kong
imports nearly 95% its food requirements. Local production
contributes only 3% of fresh vegetables, 46% of live poultry,
and 18% of live pigs consumed. Currently, mainland China
accounts for approximately 24% of imports and the U.S. is the
second largest food supplier with 14%. Due to its central
location, free tax port status, and role as a regional
purchasing and distribution center, 30% of all Hong Kong
imports are re-exported to other destinations.

3. Given its reliance on food imports, a food supply
disruption at its sources could put Hong Kong at risk. Hong
Kong,s relative wealth helps shield it from supply issues
that only affect a particular source, such as mainland China.
It can either absorb the increased cost or switch or
increase imports from other sources. However, in the rare
event that there were to be a global systemic food supply
disruption, Hong Kong,s food supply could conceivably be at
significant risk.

Hong Kong Food Price Inflation
------------------------------
4. In 2008, as world agricultural commodity prices and food
price inflation rose rapidly due to a range of global
factors, Hong Kong also experienced a sharp rise in food
prices, which registered double digit increases of 10-11%
during February to August 2008. But since August 2008, food
prices have gradually stabilized. In June 2009, food prices
rose only 0.5% from last year,s level. Given Hong Kong's
dependence on imports, domestic food price inflation pressure
will normally follow world food prices.

5. Unlike mainland China which in 2008 imposed a 20% export
tax to discourage exports of domestic production, the Hong
Kong Special Administrative Region Government (HKSARG) has
taken a hands-off stance towards rising food prices, advising
consumers to consider cheaper alternatives, but refusing to
intervene in the food market. The HKSARG did however
increase the "fruit mone" allowance given to the elderly.
While consumer are oncerned about rising food costs, and
incluing a brief run on rice in March 2008, no
demonsrations or disturbances related to food prices in
either Hong Kong or Macau have occurred.

Hng Kong,s Concern for Food Safety
------------------------------
6. Hong Kon consumers, concern about the safety of food
imprts from mainland China, especially after the Melaine
contamination incidents boosted demand for organic, high
quality, all natural foods, and gourmet foods. Tightening of
food supplies from mainland China for products such as pork,
eggs, and milk have lead to increased importation from other
sources, including from the U.S. The HKSARG introduced a
bill requesting importers and distributors to voluntarily
register with the government in order to facilitate food
traceability/recall in case of food safety incidents.

Hong Kong's Safety Net
------------------------------
7. The relative affluence of Hong Kong residents has allowed
most consumers to absorb increases in food prices. The
typical Hong Kong household spends US$2,500/month to meet its
basic living needs, of which 27% is spent on food and
beverages. Low income groups, the 10% of Hong Kong
households making less than US$513/month (4000 HKD/month),
face the biggest challenge. Hong Kong's Comprehensive Social
Security Assistance scheme provides a safety net for the low
income, designed to bring their incomes up to prescribed
levels to meet basic needs. In addition, all elderly also
receive an additional social security allowance (aka. "fruit
money").

MARUT

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