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(19,5210(17$/Ã5(6285&(6Ã0$1$*(0(17Ã%86,1(66Ã$1'Ã6(59,&(6Ã352027,21Ã81,7Ã Date Description Legislation

29 Jul 1982 The Smoking (Public Health) Ordinance enacted, with provisions governing no smoking areas, health warning, tar group Smoking (Public Health) Ordinance designations an cigarette advertising. (Cap. 371)

13 Aug 1982 Health warning required for cigarette advertisements for radio Smoking (Public Health) Ordinance

15 Nov 1982 Health warning and tar group designation required for cigarette advertisements in printed publications Smoking (Public Health) Ordinance

15 Feb 1983 Health warning required for displayedcigarette advertisements (except advertisements bywayof neon signs) Smoking (Public Health) Ordinance

15 Feb 1983 Ban on smoking in public lifts, lower deck of public transport land vehicles and "no-smoking areas" in cinemas, theatres, concert Smoking (Public Health) Ordinance halls and public transport vehicles. "No-smoking areas" to be demarcated by"No Smoking" signs.

15 May1983 Health warning required for cigarette advertisements bywayof neon signs Smoking (Public Health) Ordinance

15 Aug 1983 Health warning and tar group designation to be printed on packets of cigarettes/retail containers in English and Chinese Smoking (Public Health) Ordinance

15 Jun 1984 Health warning exemption for cigarette advertisements on items and umbrellas no longer prescribed in SPH Ordinance, but in SPH Smoking (Public Health) Ordinance Regulations

5 Dec 1984 Health warning exemption for cigarette advertisements upon a commercial vehicle of cigarette manufacturer, distributor, dealer Smoking (Public Health) Ordinance removed.

1 Mar 1985 Health warning exemption for billboards and advertisements for bonafide television programme sponsorship removed. Note of Guidance dated July1987

13 Nov 1987 Written health warning throughout, not just at the end of cigarette advertisements for television and cinema and standardised voice- Code of Practice 2 issued byTELA on over of health warning at the end of such advertisements lasting no less than 3 seconds. 13 July1987/Note of Guidance dated July1987 1 Dec 1988 Ban on cigarette advertising and sponsorship from 4:00pm to 10:30pm (extended from 6:30pm) on TV Code of Practice 2 issued byTELA.

26 Aug 1989 Ban on cigarette advertising and sponsorship from 4:00pm to 10:30pm on radio Licence to Radio Company

1 Dec 1990 Total ban on cigarette advertising and sponsorship on TV Television Advertising Standards

1 Dec 1990 Total ban on cigarette advertising and sponsorship on radio Radio Advertising Standards/ Smoking (Public Health) Ordinance 1 Aug 1992 To prohibit of smoking in designated public areas (including cinema, theatre, concert hall, public lift, & amusement game centre) Smoking (Public Health) and in all public transport carriers. (Amendment) Ordinance 1992

1 Aug 1992 To display"no smoking" signs in prescribed manner. Smoking (Public Health) (Amendment) Ordinance 1992 1 Aug 1992 To prohibit cigarette advertising in cinemas Smoking (Public Health) (Amendment) Ordinance 1992 1 Feb 1993 To prohibit the sale of cigarette with a tar content exceeding 20 mg. Smoking (Public Health) (Amendment) Ordinance 1992 1 Jan 1994 To require 4 new prescribed forms of health warnings, during a 12 month period, to be displayed with equal frequency in relation to Smoking (Public Health) (Notices) each brand of cigarette (Amendment) (No. 2) Order 1992

1 Jan 1994 To enlarge the area of health warning and tar group designations on packaging of cigarette and cigarette tobaccos. The panel must be Smoking (Public Health) (Notices) displayed on the 2 largest surfaces of the cigarette packet and occupy not less than 20% of such a surface. (Amendment) (No. 2) Order 1992

1 Jan 1994 Health warning panel for cigarette advertisements much occupynot less than 20% of the surface of the advertisement. Smoking (Public Health) (Notices) (Amendment) (No. 2) Order 1992 28 Jan 1995 To extend to all tobacco products the existing requirement for health warnings and restrictions on advertising in respect of cigarettes. Smoking (Public Health) (Amendment) Ordinance 1994 28 Apr 1995 To require restaurants to displaya sign stating whether or not theyhave a no-smoking area. Smoking (Public Health) (Amendment) Ordinance 1994 28 Apr 1995 To require tobacco product retailers to displaya sign informing the public that selling or giving tobacco products to persons under Smoking (Public Health) (Amendment) 18 is prohibited. Ordinance 1994

28 Oct 1995 To require health warnings on the packaging of all tobacco products for sale. Smoking (Public Health) (Amendment) Ordinance 1994 1 Aug 1996 Health warning and the tar group designation in all tobacco advertisements must be presented in black upon a white background. Administration of Justice (Miscellaneous Provisions) (No. 2) Ordinance 1995 1 Apr 1998 To allow restaurants, educational institutes and the new airport to designate whole or part of their premises as no smoking areas. Smoking (Public Health) (Amendment) Ordinance 1997 1 Apr 1998 To prohibit the placing of tobacco advertisements on the Internet. Smoking (Public Health) (Amendment) Ordinance 1997 1 Jul 1998 To prohibit the attachment of gifts etc which tobacco products are sold, and to prohibit the attachment of tobacco products to other Smoking (Public Health) (Amendment) non-tobacco products sold. Ordinance 1997

1 Jul 1998 To prohibit the giving of tobacco products to anyperson for the purpose of advertisement or promotion. Smoking (Public Health) (Amendment) Ordinance 1997 1 Jul 1998 To prohibit smoking in anyindoor area open to the public in supermarkets, banks, department stores and shopping malls. Smoking (Public Health) (Amendment) Ordinance 1997 26 Jun 1999 To ban tobacco displayadvertisements. Smoking (Public Health) (Amendment) Ordinance 1997 26 Jun 1999 To exempt licensed hawkers whose licence is endorsed with the sale of tobacco products and small tobacco retail premises with not Smoking (Public Health) (Amendment) more than 2 employees from the display ban. Ordinance 1997

16 Jul 1999 To adopt new health warnings and new detailed requirements regarding the displayof health warnings and tar group designation Smoking (Public Health) (Notices) in tobacco advertisements in printed publications. (Amendment) Order 1999

16 Jul 1999 To lower the maximum tar yields allowable in cigarettes from 20 mg to 17 mg. Smoking (Public Health) (Amendment) Ordinance 1997 16 Jul 1999 To prohibit the use of words which suggest that a cigarette brand has a low tar yield unless it has a tar yield of not more than 9 mg. Smoking (Public Health) (Amendment) Ordinance 1997 16 Jul 1999 To require restaurants providing more than 200 seats to designate not less than 1/3 of the area (excluding areas for private events Smoking (Public Health) (Amendment) separated byfull-height partitions) as statutoryno smoking areas. Ordinance 1997

31 Dec 1999 To prohibit tobacco advertisements in the printed media after 31 December 1999. Smoking (Public Health) (Amendment) Ordinance 1997 16 Jul 2000 Cigarette packets must carry, in rotation, 6 "new" health warnings, the indication of tar and nicotine yields. Health warning must be Smoking (Public Health) (Notices) on the top of pack, black lettering on white background. (Amendment) Order 1999

TABLE 2.1 SELECTED HISTORY OF TOBACCO LEGISLATION IN HONG KONG Environmental Resources FILE: C2249b Management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(19,5210(17$/Ã5(6285&(6Ã0$1$*(0(17Ã%86,1(66Ã$1'Ã6(59,&(6Ã352027,21Ã81,7Ã 8 RECOMMENDATIONS AND IMPLEMENTATION

8.1 INTRODUCTION

In developing these recommendations, due consideration has been given to Hong Kong Government policies. The Hong Kong Government’s established policy on tobacco control is “to seek, through a gradual step-by-step approach, to discourage smoking, contain the proliferation of tobacco use and protect the public from passive smoking to the maximum extent possible”.

This progressive approach, which is in line with the approach being taken in many other developed economies, suggests that any measures adopted now must both be easy to amend in the future (to further meet the stated objectives) and not require expenditure that might be made redundant in the future through future tightening of tobacco control legislation.

Other Hong Kong policies in such areas as making Hong Kong a global city, ensuring a competitive climate for business and encouraging small and medium sized businesses, are also relevant to this study.

In addition, the Hong Kong and other regional and global economies have entered a significant economic down turn. We have taken the view that measures that will place a significant burden on businesses and on Hong Kong’s competitiveness must be minimised in the short term, while not inhibiting the future tightening of tobacco controls (if this is found to be necessary).

8.2 EXPANSION OF STATUTORY NO SMOKING AREAS

8.2.1 Restaurants and Other Hospitality Venues

The study found that there is potentially both revenue (to the venues themselves) and economic benefits from pursuing a total smoking ban in hospitality venues. However, the analysis is unsurprisingly sensitive (particularly for bars and karaokes) to the assumptions made about the impact of such a ban on the sales at these premises. Although international experience of implementing such smoking bans suggests that they would not have an overall negative impact on sales, there are clearly concerns within the Hong Kong community that they might do so. If the proposed amendments did reduce sales significantly in restaurants, bars and karaokes then there would no longer be a revenue benefit to these venues and the economic benefit to Hong Kong as a whole would be less significant.

Furthermore, given the competition between restaurants, bars and karaokes (they are all able to serve food) and the results of the affordability analysis, it is likely that the granting of exemptions to a particular sector(s) (eg, karaokes and/or bars) could have long term and possibly catastrophic impacts for some small businesses not exempted from such a smoking ban.

ENVIRONMENTAL RESOURCES MANAGEMENT BUSINESS AND SERVICES PROMOTION UNIT 100 Given the views of both the public and the trades themselves, one solution to these issues would be to allow an initial exemption of karaokes and possibly bars, but to limit the ‘competition for smokers’ to certain times of the day - ie provide a level playing field of a total smoking ban throughout most of the day but allow karaokes (and possibly bars) to apply for and/or automatically receive exemptions between, say 10.00 pm and 6.00 am. It should be noted that this proposed exemption is not being recommended as an indefinite solution but solely in response to the consultation paper (eg that bars and karaokes being given a longer grace period if deemed necessary).

This would allow all premises, notably small restaurants, to compete (for smokers and non-smokers alike) on a level playing field during the key hours of business for serving food (eg breakfast, lunch and dinner). It would also reduce staff exposure to SHS in these premises to certain hours of the day (although clearly not eliminate it altogether) and allow for further tightening of the legislation in the future (through the removal of the exemption).

It is not recommended that the smoking ban be extended to outdoor areas of restaurants as, while such a move could have health (and hence economic) benefits, the magnitude of these are uncertain and such a move appears to be out of line with international approaches.

If such time-limited exemptions are to be granted, then it is recommended that every premises in Hong Kong with a restaurant or a light refreshment license is included in the smoking ban, but that premises with a karaoke permit and possibly a bar endorsement can apply for, or automatically receive the exemption. The process of applying for such exemption could be relatively straightforward - for example, they would simply be required to submit a copy of the relevant endorsement/permit to the responsible licensing authority and/or display the endorsement/permit in the premise. Alternatively such an exemption could be automatically extended to premises that have such endorsements/permits.

A similar approach could be taken for night-clubs (eg allow for exemptions between certain hours for premises that have a dancing endorsement on their liquor license).

This approach is preferable to one that allows dedicated smoking rooms as this option has lower revenue impacts and higher economic benefits for the premises concerned. It also allows for future restrictions to be applied if social norms regarding smoking in public places demand it (or indeed if econometric studies in Hong Kong illustrate to owners and the public alike the financial and economic benefits of implementing a total no-smoking policy in all public indoor premises).

8.2.2 Schools, Universities and Tertiary Institutions

ENVIRONMENTAL RESOURCES MANAGEMENT BUSINESS AND SERVICES PROMOTION UNIT 101 economic impacts of such a measure, it is clear that such a measure would both meet the objectives of the legislation (to reduce the exposure to SHS and create a desirable example to young people) and is unlikely to have any revenue or economic costs. Indeed there are likely to be only financial and economic benefits associated with such a measure.

The same argument is made with regard to tertiary institutions and universities and this study finds that there is likely to be both an economic and financial argument for extending statutory no smoking bans to tertiary institutions and universities. In addition, the international review suggested that banning (or limiting) smoking in indoor premises of universities and tertiary institutions is not out of line with international practice.

It should be noted however, that this study does not find any convincing financial or economic arguments for regulating to allow separately ventilated smoking rooms in universities and tertiary institutions while banning smoking outside these rooms, as this would infer costs to institutions which neither a total ban or no action would impose. Furthermore such an approach might prevent, or at least slow down, the future implementation of a total smoking ban (if deemed necessary and/or proved to be cost-effective) as it implies that the Administration accepts that there is a safe level of exposure to SHS.

8.2.3 Other Indoor Workplaces

The study found that, although there is currently insufficient data available to conclude that a total smoking ban in all indoor offices would have revenue benefits to employers, there would be a net economic benefit to Hong Kong of banning smoking in all indoor offices and this is likely to be significant. Furthermore, the literature review suggests that if further study were undertaken then it would provide a convincing business case for banning smoking in all indoor offices once all the pertinent costs were quantified.

Thus, while this study has been unable to demonstrate a net revenue benefit to businesses in Hong Kong, it is likely that there will be one. As such, and given the level of public support for such a measure (demonstrated by the 88% approval rating noted in the survey of public opinion undertaken by the Hong Kong Polytechnic University) the Administration could reasonably proceed with the proposed amendment. It is suggested that such an amendment should allow for exemptions for businesses, such as cigar divans and other speciality smoking venues, who would be put out of business by such a measure, and independently ventilated enclosed smoking rooms in buildings where such rooms are a feature of the building's design and would become redundant space if they were not exempted. Without the facility to provide such exemptions, the proposed amendment might place significant costs on individual businesses. The conditions for allowing such exemptions should include that no one is required to perform the duties of their employment in the area to be exempted. The process for applying for such an exemption should be kept as simple as possible while ensuring the protection of workers. The same exemption facility could be applied to those

ENVIRONMENTAL RESOURCES MANAGEMENT BUSINESS AND SERVICES PROMOTION UNIT 102 premises that, as suggested by the consultation document (issued by the Health and Welfare Bureau on 21 June 2001), have “genuine difficulty in complying with the smoking ban requirement”.

However, if it were felt that the current absence of data demonstrating a net revenue benefit to businesses in Hong Kong precludes such a step, then the Administration could allow for voluntary measures to be legally enforceable under the current legislation. This, a relative simple measure that would not impose any costs on business, could be clearly presented as an intermediary step to a full ban in the future. A date could be set to review progress of companies in implementing a smoking ban in the office (eg using the Thematic Household Survey). This measure would not preclude the future total banning of smoking in indoor offices and would not impose any costs on business (unlike regulating to allow for smoking rooms). Alternatively, this option could be utilised for those business sectors that, as suggested by the consultation document, have “genuine difficulty in complying with the smoking ban requirement”.

With reference to the international review, of those localities examined, only Australia has implemented a total workplace ban on smoking (and then in only 5 of the 6 federal states). Singapore and Thailand have banned smoking in air-conditioned offices, while Canada, California and New York City allow smoking in designated smoking rooms and/or separate offices.

Again, it should be noted that this study does not find any convincing financial or economic arguments for regulating to allow separately ventilated smoking rooms in indoor workplaces while banning smoking outside these rooms, as this would infer costs to businesses which neither a total ban or no action would impose. Furthermore, such an approach might prevent, or at least slow down, the implementation of a total smoking ban in the future (if deemed necessary and/or proved to be cost-effective) as it implies that the Administration accepts that there is a safe level of exposure to SHS.

8.3 TOBACCO ADVERTISING AND PROMOTION

8.3.1 Display of Tobacco Advertising

The economic analysis does suggest a need to further restrict tobacco advertising if it will result in reduced smoking rates (which the literature review suggests will be the case). However, given the current economic climate and the identified revenue and affordability impacts of the proposed amendment (to remove the current exemption from hawkers and small retailers) it is recommended that the exemption is further restricted but not entirely removed.

There are several reasons for the current, perceived or otherwise, abuse (and hence impact) of the current exemption, including:

• display of tobacco advertising by premises that are clearly unlikely to suffer from livelihood impacts if the exemption was removed; and

ENVIRONMENTAL RESOURCES MANAGEMENT BUSINESS AND SERVICES PROMOTION UNIT 103 • the volume of tobacco advertising in localities that have a high visual impact (and hence are likely to promote tobacco use).

Recognising that there is a link between locality, demand for their advertising space, turnover and hence sustainability and long term profitability of their business, we recommend that the qualification for the current exemption is altered to exempt only those hawkers and small retailers whose annual turnover is less than HK$ 500,000 and who sell tobacco products.

This level of turnover or gross income (HK$500,000) is chosen as it is the level used by the tax authorities in Hong Kong to determine whether a ‘small business’ or ‘small corporation’ needs to submit supporting documents with their profits tax submission. Thus it would be relatively easy to enforce with reference to the previous year’s tax submission (businesses and corporations are required by law to retain such documents for seven years).

The tax authorities define total gross income as “all types of income including sales and other ordinary business income, sales income from closely connected persons, proceeds from the sale of capital assets and other non- taxable income, whether or not derived from the principal business activity”.

To avoid abuse of this approach, new businesses who have never submitted a profits tax return should be prevented from displaying tobacco advertising.

It is anticipated that this approach:

• would reduce the number of premises advertising tobacco products (as the average income of hawkers and small retailers with two or less employees is over this amount);

• would prevent abuse by large family run retailers who have less than two employees but a relatively high turnover and profit; and

• would remove tobacco advertising from some of the most well visited localities in Hong Kong (and hence reduce their advertising impact) as those hawkers and/or retailers in these locations are likely to have higher turnovers (but could still have less than two employees).

In addition, those hawkers and small retailers currently displaying tobacco advertising in good locations (and hence with higher turnovers) are likely to have a better chance of identifying alternative sources of advertising revenue and will thus not be significantly impacted in the long term, particularly if the revised regulations are phased in over a period of six months or more.

ENVIRONMENTAL RESOURCES MANAGEMENT BUSINESS AND SERVICES PROMOTION UNIT 104 This is essentially a low cost option against which the need for any future restrictions on tobacco advertising could be identified (ie if the guidelines were not being met then further advertising restrictions could be imposed). The currently anticipated amendments to the Smoking Ordinance should allow for these further restrictions to be imposed without the need to revert to the Bills Committee (ie it would be an administrative action as opposed to a legislative one if the guidelines are not met). This would make the threat of future regulation more real to all parties concerned and hence support compliance with the guidelines.

However, enacting such administrative measures might fall foul of industry legal action so appropriate legal advice should be sought prior to pursuing this recommendation to ensure implementing these measures would not face such a challenge.

8.3.2 Price Boards and Markers

Information provided during the course of the study suggests that the financial impact of altering the size of price boards and markers is unlikely to be significant (when compared to the turnover and profit of the industry concerned). It has however, been impossible to predict the economic impact of this measure in isolation from other measures to limit tobacco advertising and promotion.

In this light the study recommends that if the Administration feels that it cannot effectively restrict the advertising impact of price boards and markers through other means (such as by agreeing guidelines with manufacturers and/or retailers) then the proposed measure should be implemented.

8.3.3 Sale of Tobacco Products in Association with Other Products

Information provided during the course of the study suggests that the financial impact of banning the sale of tobacco products in association with other products is unlikely to be significant (when compared to the turnover and profit of the industry concerned). It has however, been impossible to predict the economic benefit of this measure in isolation from other measures to limit tobacco advertising and promotion (although there would appear to be no direct economic costs per se).

An argument has been made that banning such tobacco promotion entirely might restrict the ability of newcomers and incumbents alike to bring new products to the market. Given the acknowledged addictive nature of the product in question, this argument is persuasive. However, it is clear that the Administration should not be supporting the current status quo where significant incentives can be offered to non-smokers (including young people) to purchase tobacco products.

ENVIRONMENTAL RESOURCES MANAGEMENT BUSINESS AND SERVICES PROMOTION UNIT 105 price of the good being promoted such that it cannot be less than some percentage (say 25%) of the tobacco product price (eg if the tobacco product costs HK$ 100 the cost of the associated product must be at least HK$ 25).

It is however acknowledged that such an endeavour might not be effective without the co-operation of the trade and, as such, any measure should be monitored. In addition, the current amendments to the Smoking Ordinance should allow for a simple administrative measure to be implemented to completely ban tobacco promotions (either altogether or by offending manufacturers) without the need to revert to the Bills Committee. Again, enacting such administrative measures might fall foul of industry legal action so appropriate legal advice should be sought prior to pursuing this recommendation to ensure that implementing these measures would not face such a challenge.

8.3.4 Tobacco Sponsorship

The study found that there are potentially direct negative revenue impacts to event organisers, advertisers and the tourism trade of further limiting tobacco sponsorship. Conversely, if such measures reduce the overall smoking rate, then they are likely to lead to long-term economic benefits.

Thus, if tobacco brand sponsorship results in increased smoking rates then any economic benefits to Hong Kong as a whole (from both tourism and a better quality of life through the provision of community events) are likely to be reduced or negated.

As such, it is recommended that the impact of tobacco brand sponsorship on smoking rates is limited through the use of guidelines. This could be done by prohibiting the use of tobacco brand names in events that attract a significant youth contingent and/or a wide audience (eg events that will be televised). These guidelines should allow for the gradual reduction and replacement of sponsors from events that attract a significant audience as opposed to a sudden ban (that might prevent such events seeking alternative sponsors). This gradual approach should go some way to mitigating the financial and economic impacts of restricting a source of sponsorship revenue.

Acknowledging that this is likely to be difficult without the co-operation of the trade, it is further recommended that such measures allow for a simple administrative measure to completely ban tobacco brand sponsorship (either altogether or by offending manufacturers) without the need to revert to the Bills Committee. Again, enacting such administrative measures might fall foul of industry legal action, so appropriate legal advice should be sought prior to pursuing this recommendation to ensure implementing these measures would not face such a challenge.

8.4 HEALTH WARNINGS ON TOBACCO PRODUCTS

It has not been possible to estimate the revenue impacts of the proposed measures as no details of how or what the exact requirements will be, have yet

ENVIRONMENTAL RESOURCES MANAGEMENT BUSINESS AND SERVICES PROMOTION UNIT 106 been developed. Experience from overseas suggests that equivalent measures may assist in reducing smoking rates and have corresponding economic benefits, although all such requirements do have a revenue impact on the tobacco industry (both direct and indirect).

As such it is recommended that the proposed amendment be enacted but that any future requirements for pictorial and graphic contents take into account the likely financial and economic costs of implementation and that these be weighed against the likely health and economic benefits likely to arise.

ENVIRONMENTAL RESOURCES MANAGEMENT BUSINESS AND SERVICES PROMOTION UNIT 107 5()(5(1&(6

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Summary of Issues Surrounding Options C1 SUMMARY OF ISSUES RELATING TO BUSINESS IMPLICATIONS OF THE VARIOUS OPTIONS UNDER CONSIDERATION

C1.1 INTRODUCTION

The following sections presents a summary of issues surrounding the various options under consideration, either raised during consultations with business stakeholders or suggested by the literature review. It should be noted that these comments primarily relate to financial and equity implications for business (as opposed to presenting the health and economic implications of the proposed amendments which are discussed in other sections of this report).

C1.2 OPTIONS FOR REDUCING THE IMPACT OF SHS IN HOSPITALITY VENUES

C1.2.1 Option A1: Proposed Legislative Amendments for Hospitality Venues

Issues surrounding this proposed amendment, raised during consultations with stakeholders and literature review, include:

• whether outdoor eating areas are included within the proposed amendments;

• does not provide any choice for smokers;

• it is unclear whether the proposed legislation would cover specialist smoking venues such as cigar divans;

• providing a legal definition that distinguishes between restaurants and bars if a longer grace period is to be granted to bars (see Box C1 below); and,

• the difficulties inherent in venue staff enforcing the legislation.

Box C1 Differentiating between Restaurants and Bars

At present all premises with a liquor licence, apart from clubs, are required to have a restaurant or light refreshment licence, making a legal definition based on licensing difficult (ie all bars are licensed to sell food). Similarly a legal definition based on the value of food and alcohol sales might also prove difficult due to the fact that some actual restaurants might sell a larger proportion of alcohol compared to food (by value) due to the high prices of alcohol in some restaurants in Hong Kong. One possible solution would be to define a bar as a premise that has a bar endorsement on their liquor licence (although, again this could cause problems for enforcement as it is possible that an actual restaurant could apply for, and receive, a bar endorsement regardless of whether it is actually a bar or not - although the additional licensing cost for a bar endorsement could be prohibitive for some smaller premises)

C1.2.2 Option A2: Legislate to allow designated smoking rooms in hospitality venues but prohibiting smoking outside these rooms

Issues surrounding this proposed option, raised during consultations with stakeholders and literature review, include:

ENVIRONMENTAL RESOURCES MANAGEMENT BUSINESS AND SERVICES PROMOTION UNIT C1 • Would provide smokers with some choice although might not enable a level playing field as smaller businesses that have neither the space and/or the funds to establish separate smoking rooms could be disadvantaged. More than 45% of Hong Kong restaurants have less than 10 employees (Census and Statistics Department, Report on 1999 Annual Survey of Wholesale , Retail and Import and Export Trades, Restaurants and Hotels, 2001).

• issues associated with legislating for a safe level of SHS (see Box 5.1 in Section 5.3.1)

• the application of separate ventilation systems for smoking and non- smoking areas would not protect employees, who are required to work in and service these areas, from the harm caused by SHS;

• when compared to Option A1, Option A2 appears to present additional costs to venues while possible providing fewer or lower benefits (depending on whether there is a net loss or gain from non-smokers going out more versus the productivity losses entailed in staff still being exposed to SHS). In addition, the cost of implementing, monitoring and enforcing Option A2 could be higher than Option A1 due to the need to design and monitor acceptable ventilation standards.

C1.2.3 Option A3: Exempting Bars and Karaokes from the Smoking Ban

Issues surrounding this proposed option, raised during consultations with stakeholders and literature review, include:

• karaokes should be treated differently as they have separate rooms for different groups of clientele;

• equity considerations as bars and karaokes might gain custom at the expense of restaurants (all bars and the majority of karaokes are licensed to sell food);

• providing a legal definition that distinguishes between restaurants and bars (see Box C1 above); and,

• could allow for venues to be exempted after a certain hour so that workers are not exposed all day while smokers still get the opportunity to smoke.

C1.3 OPTIONS FOR REDUCING THE IMPACT OF SHS IN OTHER INDOOR WORKPLACES

C1.3.1 Option B1: Proposed Legislative Amendments

An issue surrounding this proposed amendment, raised during consultations with stakeholders and literature review was that the proposed amendment suggests that special consideration will be given to some businesses - it is unclear which these might be.

ENVIRONMENTAL RESOURCES MANAGEMENT BUSINESS AND SERVICES PROMOTION UNIT C2 C1.3.2 Option B2: Allow separately ventilated smoking rooms in indoor workplaces

Issues surrounding this option, raised during consultations with stakeholders and literature review, include:

• it allows employers to accommodate smoking employees with out forcing them out onto the street (with associated lower productivity costs);

• issues associated with legislating for a safe level of SHS (see Box 5.1 in Section 5.3.1)

• a member of staff would presumably still have to clean and maintain the room for the smokers. Singapore legislation allows for such designated smoking rooms (enclosed and separately ventilated) in workplaces as long as they are not ‘required to be used by any person employed in such premises for the performance of the duties of his employment’;

• when compared to Option B1 there are likely to be additional costs of implementing and monitoring any specific ventilation requirements; and

• not all employers could afford to provide such facilities.

C1.3.3 Option B3: Provide for voluntary measures in workplaces to be legally enforceable under the current legislation

Issues surrounding this option, raised during consultations with stakeholders and literature review, include:

• it is unclear whether any more offices would become non-smoking so the objective of the amendment might not be achieved;

• it might provide a cost-free stepping stone to a complete ban in the future (if that is the long term objective) when compared to Option B2 (which entails cost in installing separately ventilated smoking rooms); and

• additional awareness raising and education (on the financial benefits) might provide an incentive for employers to designate the office no smoking while also providing them with legal support to enforce such a designation.

C1.4 OPTIONS FOR REDUCING SHS EXPOSURE IN EDUCATIONAL ESTABLISHMENTS

C1.4.1 Option C1: Proposed Legislative Amendments

An issue surrounding this proposed amendment, raised during consultations with stakeholders, was that there is no information available on how many educational establishments have not implemented a total smoking ban - is legislation necessary?

ENVIRONMENTAL RESOURCES MANAGEMENT BUSINESS AND SERVICES PROMOTION UNIT C3 C1.4.2 Option C2: Legislate to Ban Smoking But Allow Designated Smoking Rooms

Issues surrounding this option, raised during consultations with stakeholders and literature review, include:

• this option would provide some choice to staff who smoke but it would entail costs to schools who choose to provide such facilities (as such it is unlikely that many public sector establishments would choose to adopt this approach if it were available);

• it is unclear whether there is a currently a demand for such facilities at educational establishments;

• issues associated with legislating for a safe level of SHS (see Box 5.1 in Section 5.3.1)and

• as for indoor workplaces a member of staff would presumably still have to clean and maintain the room for the smokers. Singapore legislation allows for such designated smoking rooms (enclosed and separately ventilated) in workplaces as long as they are not ‘required to be used by any person employed in such premises for the performance of the duties of his employment’.

C1.4.3 Option C3: Allow for Voluntary Schemes in Universities and Tertiary Institutions

An issue surrounding this option, raised during consultations with stakeholders, was that while the benefits to both staff and pupils/students alike under Option C3 are likely to be smaller than under Option C1 (and indeed the costs are likely to be higher) this option does allow for adults to make their own, hopefully informed, decisions regarding smoking and its associated costs.

C1.5 OPTIONS FOR REDUCING THE IMPACT OF TOBACCO ADVERTISING AND PROMOTION

C1.5.1 Option D1.1: Legislative Amendments to Remove Current Exemptions for Hawkers and Small Retailers

An issue surrounding this legislative amendment, raised during consultations with stakeholders, was that the exemptions were provided to protect the livelihoods of those exempted. It is doubtful whether the financial situation of these hawkers and retailers have improved since the previous amendment was made given the general economic climate that has prevailed in Hong Kong since 1997.

ENVIRONMENTAL RESOURCES MANAGEMENT BUSINESS AND SERVICES PROMOTION UNIT C4 C1.5.2 Option D1.2: Legislative Amendments to Limit the Size of Price Boards and Price Markers

An issue surrounding this legislative amendment, raised during consultations with stakeholders, was that the change of the price board from 2000 cm2 to 1,500 cm2 is essentially arbitrary and entails cost - it is unclear whether the size change would reduce the advertising impact of the price board.

C1.5.3 Option D1.3: Legislative Amendments to Limit Sale of Tobacco Products in Association with Other Products

Issues associated with this proposed amendment, raised during consultation and from literature review, were:

• in relation to equity considerations as new entrants would be unable to gain market share from established operators through product promotion; and

• with regard to the wording, as some retailers felt that it might preclude tobacco being sold as part of any other transaction.

C1.5.4 Option D1.4: Legislative Amendments to Prevent Use of Tobacco Brand Names in Sponsorship

An issues associated with this proposed amendment, raised during consultation was that it is unclear whether corporate sponsorship from tobacco companies with the word tobacco in their name (eg British American Tobacco or Japan Tobacco International) would be able to sponsor community events and be recognised for it.

C1.5.5 Option D1.5: Legislative Amendments to Allow Health Warning to Contain Pictorial and Graphic Contents

Issues associated with this proposed amendment, raised during consultation and from literature review, include:

• considerable uncertainty as to what costs this amendment will place on the manufacturers;

• the visual impact on customers (including those not buying cigarettes) might deter customers from purchasing other products in retail outlets; and,

• equity considerations as small producers would be unable to afford to produce products for the Hong Kong market and the labelling requirements would act as a barrier to trade to these producers.

ENVIRONMENTAL RESOURCES MANAGEMENT BUSINESS AND SERVICES PROMOTION UNIT C5 C1.5.6 Option D2.1: Amend Subsidiary Regulations to the Ordinance to Increase the Size of Warnings and/or Limit the Size of Advertising and/or Content

An issue associated with this option, raised during consultation and from literature review was whether it would be possible to limit the advertising impact by controlling the size and/or content of tobacco advertising.

C1.5.7 Option D2.2: Legislative Amendments to Limit Tobacco Promotions (frequency, type and/or price of the products that are sold together with tobacco products)

Issues associated with this option, raised during consultation and from literature review, include:

• option would allow tobacco promotions but it would be possible to restrict them to promotions that are not attractive to youth; and

• other countries have adopted limits on the tobacco promotions (eg Taiwan limits the price of gifts to under one quarter of the price of the tobacco products).

C1.5.8 Option D3.1: Issue strict guidelines on the size and/or content of tobacco advertising by Hawkers and Small Retailers, with the threat of further regulatory amendments

Issues associated with this option, raised during consultation and from literature review, include:

• given the potential impact to hawkers and small retailers it may be worth considering the issuing of guidelines on the understanding that non- compliance could lead to future regulatory action;

• discussions with tobacco manufacturers suggest they would be willing to enforce and implement such guidelines if it meant they could continue to advertise;

• theTobaccoInstitutenotethattheyhaveacodeofconductforadvertising which could, if necessary, form the basis of a negotiation with health officials for developing such guidelines; and

• this approach would require monitoring by enforcement agencies although it is unlikely to require any more than for the proposed amendments.

C1.5.9 Option D3.2: Issue Strict Guidelines on the Size of Price Boards and Price Markers

Issues surrounding this legislative amendment, raised during consultations with stakeholders and literature review, include:

• it would be relatively easy to issue guidelines on the size of price boards and markers and it would not require any legislative time;

ENVIRONMENTAL RESOURCES MANAGEMENT BUSINESS AND SERVICES PROMOTION UNIT C6 • such guidelines could allow for the gradual reduction in price board sizes (eg allow for price boards to be reduced from 2000 cm2 to 1500 cm2 only when they needed to be updated) while immediately limiting the size of price markers to 50 cm2;

• this approach would require monitoring by enforcement agencies although it is unlikely to require any more than for the proposed amendments; and

• discussions with tobacco manufacturers suggest they would be willing to implement such guidelines.

C1.5.10 Option D3.3: Issue Strict Guidelines to Limit Frequency, Content and/or Price of Tobacco Promotions

Issues associated with this proposed amendment, raised during consultation and from literature review, include:

• guidelines could be developed that restrict them to tobacco promotions that are not attractive to youth; and,

• would allow new entrants and small manufacturers to promote their products and possibly win market share.

C1.5.11 Option D3.4: Guidelines for the Content and Type of Tobacco Sponsorship

An issue associated with this proposed amendment, raised during consultation, was that it could be possible to issue guidelines that prevented or limited brand name sponsorship of events that are likely to attract significant youth attention while not removing as much sponsorship. For example events that are going to be televised could be excluded through guidelines.

ENVIRONMENTAL RESOURCES MANAGEMENT BUSINESS AND SERVICES PROMOTION UNIT C7 Annex D

Calculation Sheets Table D 1: Option A1 Revenue Impacts to Restaurant, Bar and Karaoke Trade

HK$ ('000s) 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Total Costs Lost Profits in Karaokes 12,840 12,840 12,840 12,840 12,840 12,840 12,840 12,840 12,840 12,840 128,400 Total Costs 12,840 12,840 12,840 12,840 12,840 12,840 12,840 12,840 12,840 12,840 128,400 Benefits * Fire damage avoided in Restaurants 465 465 465 465 465 465 465 465 465 465 4,650 FiredamageavoidedinBars 23232323232323232323230 FiredamageavoidedinKaraokes 12121212121212121212120 Avoided loss profit after fires in Restaurants 7.4 7.4 7.4 7.4 7.4 7.4 7.4 7.4 7.4 7.4 74 Avoided loss profit after fires in Bars 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9 9 Avoided loss profit after fires in Karaokes 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 4 Reduced maintenance costs in Restaurants 64,728 64,728 64,728 64,728 64,728 64,728 64,728 64,728 64,728 64,728 647,280 Reduced maintenance costs in Bars 3,202 3,202 3,202 3,202 3,202 3,202 3,202 3,202 3,202 3,202 32,016 Reduced maintenance costs in Karaokes 1,670 1,670 1,670 1,670 1,670 1,670 1,670 1,670 1,670 1,670 16,704 Total Benefits to Restaurants 65,200 65,200 65,200 65,200 65,200 65,200 65,200 65,200 65,200 65,200 652,004 Total Benefits to Bars 3,225 3,225 3,225 3,225 3,225 3,225 3,225 3,225 3,225 3,225 32,255 Total Benefits to Karaokes 1,683 1,683 1,683 1,683 1,683 1,683 1,683 1,683 1,683 1,683 16,828 Total Benefits 70,109 70,109 70,109 70,109 70,109 70,109 70,109 70,109 70,109 70,109 701,087 Net revenue impacts To Restaurants 65,200 65,200 65,200 65,200 65,200 65,200 65,200 65,200 65,200 65,200 652,004 To Bars 3,225 3,225 3,225 3,225 3,225 3,225 3,225 3,225 3,225 3,225 32,255 To Karaokes- 11,157 - 11,157 - 11,157 - 11,157 - 11,157 - 11,157 - 11,157 - 11,157 - 11,157 - 11,157 - 111,572 Total Net Revenue Impacts 57,269 57,269 57,269 57,269 57,269 57,269 57,269 57,269 57,269 57,269 572,687 Net present values Benefit to Cost Ratios (>1.0= Positive) To Restaurants 528,834 To Restaurants ! To Bars 26,161 To Bars ! To Karaokes- 90,495 To Karaokes 0.1 Overall 464,501 Overall 5.5

Discount rate 4% Average profitability of restaurant sector** 4.6% Number of restaurants** 9,300 Average profitability of bar and karaoke sectors** & **** 10.7% Number of bars** 460 Loss of revenue in karaokes 5% Number of karaokes*** 240 Average fire damage costs fire (HK$ 000s) 500 Total number of venues 10,000 Number of fire incidents avoided per annum 1 Total revenue of restaurant sector (HK$ 000s)** 64,500,000 Reduced maintenance costs (as % of revenue) 0.1% Total revenue of bar sector (HK$ 000s)** 2,700,000 Annual lost profits during clear-up and repair after fires 10% Total revenue of karaoke sector (HK$ 000s)*** 2,400,000 Percentage of custom diverted to other businesses 75% Total revenue of all sectors (HK$ 000s) 69,600,000 Notes: * Benefits aportioned in accordance with number of premises in sector ** From Census and Statistics Department Data *** Consultants calculation based on CSD data and Fire Services Department survey **** Karaokes are assumed to have a similar profitability as bars Table D 2: Option A2 Revenue Impacts to Restaurant, Bar and Karaoke Trade

HK$ ('000s) 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Total Costs LostProfitsinRestaurants 49,450------49,450 LostProfitsinBars 4,815------4,815 LostProfitsinKaraokes 4,280------4,280 Cost of installing smoking rooms in Restaurants 232,500 ------232,500 Cost of installing smoking rooms in Bars 11,500 ------11,500 Cost of installing smoking rooms in Karaokes 6,000 ------6,000 Total Costs to Restaurants 281,950 ------281,950 TotalCoststoBars 16,315------16,315 TotalCoststoKaraokes 10,280------10,280 Total Costs 308,545 ------308,545 Benefits * Fire damage avoided in Restaurants 310 310 310 310 310 310 310 310 310 310 3,100 FiredamageavoidedinBars 15151515151515151515153 FiredamageavoidedinKaraokes 888 888888880 Avoided loss profit after fires in Restaurants 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 50 Avoided loss profit after fires in Bars 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6 6 Avoided loss profit after fires in Karaokes 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 3 Reduced maintenance costs in Restaurants 43,152 43,152 43,152 43,152 43,152 43,152 43,152 43,152 43,152 43,152 431,520 Reduced maintenance costs in Bars 2,134 2,134 2,134 2,134 2,134 2,134 2,134 2,134 2,134 2,134 21,344 Reduced maintenance costs in Karaokes 1,114 1,114 1,114 1,114 1,114 1,114 1,114 1,114 1,114 1,114 11,136 Total Benefits to Restaurants 43,467 43,467 43,467 43,467 43,467 43,467 43,467 43,467 43,467 43,467 434,670 Total Benefits to Bars 2,150 2,150 2,150 2,150 2,150 2,150 2,150 2,150 2,150 2,150 21,503 Total Benefits to Karaokes 1,122 1,122 1,122 1,122 1,122 1,122 1,122 1,122 1,122 1,122 11,219 Total Benefits 46,739 46,739 46,739 46,739 46,739 46,739 46,739 46,739 46,739 46,739 467,392 Net revenue impacts * To Restaurants- 238,483 43,467 43,467 43,467 43,467 43,467 43,467 43,467 43,467 43,467 152,720 To Bars- 14,165 2,150 2,150 2,150 2,150 2,150 2,150 2,150 2,150 2,150 5,188 To Karaokes- 9,158 1,122 1,122 1,122 1,122 1,122 1,122 1,122 1,122 1,122 939 Total Net Revenue Impacts- 261,806 46,739 46,739 46,739 46,739 46,739 46,739 46,739 46,739 46,739 158,847 Net present values Benefit to Cost Ratios (>1.0= Positive) To Restaurants 81,450 To Restaurants 1.3 To Bars 1,753 To Bars 1.1 To Karaokes- 785 To Karaokes 0.9 Overall 82,419 Overall 1.3

Discount rate 4% Average profitability of bar and karaoke sectors** & **** 10.7% Number of restaurants** 9,300 Loss of revenue in 2002 in those installing smoking rooms 5% Number of bars** 460 Average fire damage costs per fire (HK$ 000s) 500 Number of karaokes*** 240 Number of fire incidents avoided per annum 1 Total number of venues 10,000 Reduced maintenance costs (as % of revenue) 0.1% Total revenue of restaurant sector (HK$ 000s)** 64,500,000 Annual lost profits during clear-up and repair after fires 10% Total revenue of bar sector (HK$ 000s)** 2,700,000 Percentage of custom diverted to other businesses 75% Total revenue of karaoke sector (HK$ 000s)*** 2,400,000 Average cost of installing a separately ventilated smoking room (HK$ 000s) 75 Total revenue of all sectors (HK$ 000s) 69,600,000 Percentage of premises who install smoking rooms 33% Average profitability of restaurant sector** 4.6% Notes: * Benefits aportioned in accordance with number of premises in sector ** From Census and Statistics Department Data *** Consultants calculation based on CSD data and Fire Services Department survey **** Karaokes are assumed to have a similar profitability as bars Table D 3: Option A3 Revenue Impacts to Restaurant, Bar and Karaoke Trade

HK$ ('000s) 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Total Costs Lost Profits in Restaurants 148,350 ------148,350 Total Costs 148,350 ------148,350 Benefits * Fire damage avoided in Restaurants 465 465 465 465 465 465 465 465 465 465 4,650 Avoided loss profit after fires in Restaurants 7.4 7.4 7.4 7.4 7.4 7.4 7.4 7.4 7.4 7.4 74 Reduced maintenance costs in Restaurants 64,728 64,728 64,728 64,728 64,728 64,728 64,728 64,728 64,728 64,728 647,280 Total Benefits to Restaurants 65,200 65,200 65,200 65,200 65,200 65,200 65,200 65,200 65,200 65,200 652,004 Total Benefits 65,200 65,200 65,200 65,200 65,200 65,200 65,200 65,200 65,200 65,200 652,004 Net revenue impacts * To Restaurants- 87,714 60,636 60,636 60,636 60,636 60,636 60,636 60,636 60,636 60,636 458,014 Total Net Revenue Impacts- 87,714 60,636 60,636 60,636 60,636 60,636 60,636 60,636 60,636 60,636 458,014 Net present values Benefit to Cost Ratios (>1.0= Positive) To Restaurants 349,171 To Restaurants 3.7 Overall 349,171 Overall 3.7

Discount rate 4% Average profitability of restaurant sector** 4.6% Number of restaurants** 9,300 Average profitability of bar and karaoke sectors** & **** 10.7% Number of bars** 460 Percentage loss of revenue in restaurants (in 2002) 5% Number of karaokes*** 240 Average fire damage costs per fire (HK$ 000s) 500 Total number of venues 10,000 Number of fire incidents avoided per annum 1 Total revenue of restaurant sector (HK$ 000s)** 64,500,000 Reduced maintenance costs (as % of revenue) 0.1% Total revenue of bar sector (HK$ 000s)** 2,700,000 Annual lost profits during clear-up and repair after fires 10% Total revenue of karaoke sector (HK$ 000s)*** 2,400,000 Percentage of custom diverted to other businesses 75% Total revenue of all sectors (HK$ 000s) 69,600,000 Notes: * Benefits aportioned in accordance with number of premises in sector ** From Census and Statistics Department Data *** Consultants calculation based on CSD data and Fire Services Department survey **** Karaokes are assumed to have a similar profitability as bars Table D4: Option B1 Revenue Impacts to Other Indoor Workplaces

HK$ ('000s) 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Total Costs Lost productivity of smokers 294,084 294,084 294,084 294,084 294,084 294,084 294,084 294,084 294,084 294,084 2,940,836 Total Costs 294,084 294,084 294,084 294,084 294,084 294,084 294,084 294,084 294,084 294,084 2,940,836 Benefits Increased productivity due to no SHS 197,622 197,622 197,622 197,622 197,622 197,622 197,622 197,622 197,622 197,622 1,976,223 Avoided fire damage costs 4,500 4,500 4,500 4,500 4,500 4,500 4,500 4,500 4,500 4,500 45,000 Avoidedlossofproductivityduetoinjury111111111112 Avoided medical expenses 40,658 40,658 40,658 40,658 40,658 40,658 40,658 40,658 40,658 40,658 406,575 Total Benefits 242,781 242,781 242,781 242,781 242,781 242,781 242,781 242,781 242,781 242,781 2,427,809 Net revenue impacts- 51,303 - 51,303 - 51,303 - 51,303 - 51,303 - 51,303 - 51,303 - 51,303 - 51,303 - 51,303 - 513,027 Net present value- 416,111 Benefit to cost ratio (>1.0=positive) 0.8

Discount rate 4% Working hours per day 7.5 Number of employed smokers 588,900 Number of workers exposed to SHS in indoor workplace 734,026 Percentage of workers working mainly indoors 79.5% Days lost due to exposure to SHS at work (per annum) 0.7 Percentage of workers currently allowed to smoke in the workplace 31.4% Average fire damage costs per fire (HK$ 000s) 500 Extra time taken to smoke (minutes per cigarette) 3 Number of fire incidents avoided per annum 9 Number of cigarettes per day smoked at work 5 Number of injuries avoided per annum 0.6 Median salary (HK$ 000s) 10 Average number of days off per injury 5 Working days per month 26 Annual medical costs due to SHS exposure of staff (HK$ 000s) 40,658 Percentage of current workplace smokers who would impose costs 50% Table D5: Option B2 Revenue Impacts to Other Indoor Workplaces

HK$ ('000s) 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Total Costs Cost of installing smoking rooms 375,000 ------375,000 Total Costs 375,000 ------375,000 Benefits Increased productivity due to no SHS 197,622 197,622 197,622 197,622 197,622 197,622 197,622 197,622 197,622 197,622 1,976,223 Avoided fire damage costs 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 25,000 Avoided medical expenses 40,658 40,658 40,658 40,658 40,658 40,658 40,658 40,658 40,658 40,658 406,575 Total Benefits 240,780 240,780 240,780 240,780 240,780 240,780 240,780 240,780 240,780 240,780 2,407,798 Net revenue impacts- 134,220 240,780 240,780 240,780 240,780 240,780 240,780 240,780 240,780 240,780 2,032,798 Net present value 1,592,363 Benefit to cost ratio (>1.0=positive) 5.4

Discount rate 4% Days lost due to exposure to SHS at work (per annum) 0.7 Number of employed smokers 588,900 Average fire damage costs per fire (HK$ 000s) 500 Percentage of workers working mainly indoors 79.5% Number of fire incidents avoided per annum 5 Median salary (HK$ 000s) 10 Average cost of installing separate ventilation (HK$ 000s) 75 Working days per month 26 Number of companies installing smoking rooms 5,000 Number of workers exposed to SHS in indoor workplace 734,026 Annual medical costs due to SHS exposure of staff (HK$ 000s) 40,658 Table D6: Option D1 Revenue Impacts

HK$ ('000s) 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Total Costs Option D1.1 Hawkers & Small Retailers Loss of advertising revenue 120,000 96,000 72,000 48,000 24,000 12,000 12,000 12,000 12,000 12,000 420,000 Lost profit from tobacco sales 7,150 7,150 7,150 7,150 7,150 7,150 7,150 7,150 7,150 7,150 71,500 Costofremovingcurrentadvertising47,600------47,600 Net Costs 174,750 103,150 79,150 55,150 31,150 19,150 19,150 19,150 19,150 19,150 539,100 Net present value- 476,578 Option D1.1 & D1.4 Advertising Firms Loss of advertising revenue (D1.1) 1,500 1,200 900 600 300 150 150 150 150 150 5,250 Lossofadvertisingrevenue(D1.4)1,200------1,200 Net Costs 2,700 1,200 900 600 300 150 150 150 150 150 6,450 Net present value- 5,814 Option D1.1 & D1.4 Printing and other firms Loss of advertising revenue (D1.1) 6,000 4,800 3,600 2,400 1,200 600 600 600 600 600 21,000 Lossofadvertisingrevenue(D1.4)4,800------4,800 Net Costs 10,800 4,800 3,600 2,400 1,200 600 600 600 600 600 25,800 Net present value- 23,256 Option D1.1 to D1.4 - Tobacco and Related Industries Importerlossprofits 5050505050-----250 Net present value- 222 Wholesalerlossprofits2323232323-----117 Net present value- 104 Retailerlossprofits 66666----- 31 Net present value- 28 Manufacturer loss profit 371 742 1,113 1,485 1,856 1,856 1,856 1,856 1,856 1,856 14,846 Replacingpriceboards&markers1,000------1,000 Net Costs to manufacturers 1,371 742 1,113 1,485 1,856 1,856 1,856 1,856 1,856 1,856 15,846 Net present value- 12,580 Net Costs 1,451 822 1,193 1,564 1,935 1,856 1,856 1,856 1,856 1,856 16,244 Net present value- 12,934 Option D1.4 Event Organisers Loss of tobacco sponsorship 20,000 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 42,500 Net present value- 37,104 Option D1.4 Tourism Industries Retailprofitlosses 122------122 Net present value- 117 Hotelprofitlosses 62------62 Net present value- 60 Restaurantprofitlosses38------38 Net present value- 36 Entertainmentprofitlosses11------11 Net present value- 11 TourOperatorprofitlosses11------11 Net present value- 11 'Other'industryprofitlosses31------31 Net present value- 30 NetCosts 276------276 Net present value- 265 Total Costs 209,976 112,472 87,343 62,214 37,085 24,256 24,256 24,256 24,256 24,256 630,370 Benefits None ------Net revenue impacts- 209,976 - 112,472 - 87,343 - 62,214 - 37,085 - 24,256 - 24,256 - 24,256 - 24,256 - 24,256 - 630,370 Net present value- 555,951 Benefit to cost ratio (>1.0=positive) -

Discount rate 4% Percentage of tourist spending on hotels** 26% Number of hawkers advertising tobacco products 600 Average Hotel Profitability* 4.2% Number of small retailers advertising tobacco products 9,400 Percentage of tourist spending on restaurants** 14.5% Average annual advertising revenue from tobacco firms (HK$ 000s) 12 Average Restaurant Profitability* 4.6% Percentage of advertising revenue recovered every year from other sources 20% Percentage of tourist spending on entertainment** 2% Percentage of advertising revenue never recovered 10% Percentage of tourist spending on tours** 2% Hawker & Small Retailer % of profit from tobacco sales 10% Percentage of tourist spending on 'other'** 5.5% Average revenue (HK$ 000s) of Hawkers and Small Retailers* 715 Average Entertainment, Tour Operator and 'Other' Profitability 10% Average profitability of Hawkers & Small Retailers* 10% Reduction in smoking due to amendments (per annum over 5 five years) 0.3% Loss of Hawker & Small Retailer profit from tobacco sales due to no advertising 10% Value of tobacco goods imported for domestic consumption (HK$ 000s)* 450,000 Average cost of removing current advertising from hawkers (HK$ 000s) 1 Average profitability of tobacco importer (%)* 3.7% Average cost of removing current advertising from small retailers (HK$ 000s) 5 Average revenue of tobacco wholesaler (HK$ 000s)* 11,100 Value of tobacco advertising (HK$ 000s to advertising and related trades) 7,500 Average profitability of tobacco wholesaler (%)* 2.7% Percentage of advertising revenue going to printers and related industries 80% Number of tobacco wholesalers* 26 Value of tobacco sponsorship (HK$ 000s to event organisers) 50,000 Average revenue of tobacco retailer (HK$ 000s)* 2,980 Value of tobacco sponsorship advertising (HK$ 000s to advertisers & related industrie 10,000 Average profitability of tobacco retailer (%)* 2.7% Percentage of sponsorship recovered from other sources (2002) 60% Number of tobacco retailers * & *** 26 Percentage of sponsorship recovered from other sources (2003-onwards) 95% Cost of replacing price board and markers (HK$ 000s) 0.5 Per capita overseas visitor spending (HK$ 000s) ** 4.539 Number of price board and markers requiring replacement 2,000 Number of visitor not travelling to Hong Kong to attend 1,250 Manufacturer profit per stick (HK$s)**** 0.04 Percentage of tourist spending on retail** 50% Number of sticks sold in Hong Kong (000s in 2001) ***** 3,093,000 Average Retailer Profitability* 4.3% Notes: * Estimated From Census and Statistics Department Data ** From Hong Kong Tourism Board, A Statistical Review of Hong Kong Tourism 2000 *** Number of tobacco retailers only includes those retailers whose main sales are of tobacco products **** Manufacturer profits are calculated on a per stick basis from figures found in British American Tobacco's Annual Report (for Asia Pacific Region) ***** Number of sticks sold in Hong Kong for 2001 is estimated from figures available for year 2000 and first six months of 2001 (source Customs and Exercise Department) Table D7: Option D2 Revenue Impacts

HK$ ('000s) 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Total Costs Option D2.1 Hawkers & Small Retailers Costofremovingcurrentadvertising47,600------47,600 NetCosts 47,600------47,600 Net present value- 45,769 Option D1.4 Advertising Firms Lossofadvertisingrevenue1,200------1,200 Net present value- 1,154 Option D1.4 Printing Firms Lossofadvertisingrevenue4,800------4,800 Net present value- 4,615 Option D1.2, D1.4, D2.1 & D2.2 - Tobacco and Related Industries Importerlossprofits 3333333333-----167 Net present value- 148 Wholesalerlossprofits1616161616-----78 Net present value- 69 Retailerlossprofits 44444----- 21 Net present value- 19 Manufacturer loss profit 247 495 742 990 1,237 1,237 1,237 1,237 1,237 1,237 9,898 Replacingpriceboards&markers1,000------1,000 Net Costs to manufacturers 1,247 495 742 990 1,237 1,237 1,237 1,237 1,237 1,237 10,898 Net present value- 8,707 Net Costs 1,301 548 795 1,043 1,290 1,237 1,237 1,237 1,237 1,237 11,163 Net present value- 8,943 Option D1.4 Event Organisers Loss of tobacco sponsorship 20,000 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 42,500 Net present value- 37,104 Option D1.4 Tourism Industries Retailprofitlosses 122------122 Net present value- 117 Hotelprofitlosses 62------62 Net present value- 60 Restaurantprofitlosses38------38 Net present value- 36 Entertainmentprofitlosses11------11 Net present value- 11 TourOperatorprofitlosses11------11 Net present value- 11 'Other'industryprofitlosses31------31 Net present value- 30 NetCosts 276------276 Net present value- 265 Total Costs 75,176 3,048 3,295 3,543 3,790 3,737 3,737 3,737 3,737 3,737 107,539 Benefits None ------Net revenue impacts- 75,176 - 3,048 - 3,295 - 3,543 - 3,790 - 3,737 - 3,737 - 3,737 - 3,737 - 3,737 - 107,539 Net present value- 97,851 Benefit to cost ratio (>1.0=positive) -

Discount rate 4% Percentage of tourist spending on entertainment** 2% Number of hawkers advertising tobacco products 600 Percentage of tourist spending on tours** 2% Number of small retailers advertising tobacco products 9,400 Percentage of tourist spending on 'other'** 5.5% Average cost of removing current advertising from hawkers (HK$ 000s) 1 Average Entertainment, Tour Operator and 'Other' Profitability 10% Average cost of removing current advertising from small retailers (HK$ 000s) 5 Reduction in smoking due to options (per annum over 5 five years) 0.20% Value of tobacco sponsorship (HK$ 000s to event organisers) 50,000 Value of tobacco goods imported for domestic consumption (HK$ 000s)* 450,000 Value of tobacco sponsorship advertising (HK$ 000s to advertisers & related indus 10,000 Average profitability of tobacco importer (%)* 3.7% Percentage of advertising revenue going to printers and related industries 80% Average revenue of tobacco wholesaler (HK$ 000s)* 11,100 Percentage of sponsorship recovered from other sources (2002) 60% Average profitability of tobacco wholesaler (%)* 2.7% Percentage of sponsorship recovered from other sources (2003-onwards) 95% Number of tobacco wholesalers* 26 Per capita overseas visitor spending (HK$ 000s) ** 4.539 Average revenue of tobacco retailer (HK$ 000s)* 2,980 Number of visitor not travelling to Hong Kong to attend 1,250 Average profitability of tobacco retailer (%)* 2.7% Percentage of tourist spending on retail** 50% Number of tobacco retailers * & *** 26 Average Retailer Profitability* 4.3% Cost of replacing price board and markers (HK$ 000s) 0.5 Percentage of tourist spending on hotels** 26% Number of price board and markers requiring replacement 2,000 Average Hotel Profitability* 4.2% Manufacturer profit per stick (HK$s)**** 0.04 Percentage of tourist spending on restaurants** 14.5% Number of sticks sold in Hong Kong (000s in 2001) ***** 3,093,000 Average Restaurant Profitability* 4.6% Notes: * From Census and Statistics Department Data ** From Hong Kong Tourism Board, A Statistical Review of Hong Kong Tourism 2000 *** Number of tobacco retailers only includes those retailers whose main sales are of tobacco products **** Manufacturer profits are calculated on a per stick basis from figures found in British American Tobacco's Annual Report (for Asia Pacific Region) ***** Number of sticks sold in Hong Kong for 2001 is estimated from figures available for year 2000 and first six months of 2001 (source Customs and Exercise Department) Table D8: Option D3 Revenue Impacts

HK$ ('000s) 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Total Costs Option D3.1 Hawkers & Small Retailers Costofremovingcurrentadvertising47,600------47,600 NetCosts 47,600------47,600 Net present value- 45,769 Option D3.4 Advertising Firms Lossofadvertisingrevenue960------960 Net present value- 960 Option D3.4 Printing Firms Lossofadvertisingrevenue3,840------3,840 Net present value- 3,840 Option D3.1, D3.2, D3.3 & D3.4 - Tobacco and Related Industries Importerlossprofits 1717171717-----83 Net present value- 74 Wholesalerlossprofits 88888----- 39 Net present value- 35 Retailerlossprofits 22222----- 10 Net present value- 9 Manufacturer loss profit 124 247 371 495 619 619 619 619 619 619 4,949 Replacingpriceboards&markers500------500 Net Costs to manufacturers 624 247 371 495 619 619 619 619 619 619 5,449 Net present value- 4,353 Net Costs 650 274 398 521 645 619 619 619 619 619 5,581 Net present value- 4,472 Option D3.4 Event Organisers Loss of tobacco sponsorship 16,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 34,000 Net present value- 29,683 Option D3.4 Tourism Industries Retailprofitlosses 98------98 Net present value- 94 Hotelprofitlosses 50------50 Net present value- 48 Restaurantprofitlosses30------30 Net present value- 29 Entertainmentprofitlosses9------9 Net present value- 9 TourOperatorprofitlosses9------9 Net present value- 9 'Other'industryprofitlosses25------25 Net present value- 24 NetCosts 221------221 Net present value- 212 Total Costs 69,271 2,274 2,398 2,521 2,645 2,619 2,619 2,619 2,619 2,619 92,202 Benefits None ------Net revenue impacts- 69,271 - 2,274 - 2,398 - 2,521 - 2,645 - 2,619 - 2,619 - 2,619 - 2,619 - 2,619 - 92,202 Net present value- 84,752 Benefit to cost ratio (>1.0=positive) -

Discount rate 4% Percentage of tourist spending on entertainment** 2% Number of hawkers advertising tobacco products 600 Percentage of tourist spending on tours** 2% Number of small retailers advertising tobacco products 9,400 Percentage of tourist spending on 'other'** 5.5% Average cost of removing current advertising from hawkers (HK$ 000s) 1 Average Entertainment, Tour Operator and 'Other' Profitability 10% Average cost of removing current advertising from small retailers (HK$ 000s) 5 Reduction in smoking due to options (per annum over 5 five years) 0.10% Value of tobacco sponsorship (HK$ 000s to event organisers) 40,000 Value of tobacco goods imported for domestic consumption (HK$ 000s)* 450,000 Value of tobacco sponsorship advertising (HK$ 000s to advertisers & related indus 8,000 Average profitability of tobacco importer (%)* 3.7% Percentage of advertising revenue going to printers and related industries 80% Average revenue of tobacco wholesaler (HK$ 000s)* 11,100 Percentage of sponsorship recovered from other sources (2002) 60% Average profitability of tobacco wholesaler (%)* 2.7% Percentage of sponsorship recovered from other sources (2003-onwards) 95% Number of tobacco wholesalers* 26 Per capita overseas visitor spending (HK$ 000s) ** 4.539 Average revenue of tobacco retailer (HK$ 000s)* 2,980 Number of visitor not travelling to Hong Kong to attend 1,000 Average profitability of tobacco retailer (%)* 2.7% Percentage of tourist spending on retail** 50% Number of tobacco retailers * & *** 26 Average Retailer Profitability* 4.3% Cost of replacing price board and markers (HK$ 000s) 0.5 Percentage of tourist spending on hotels** 26% Number of price board and markers requiring replacement 1,000 Average Hotel Profitability* 4.2% Manufacturer profit per stick (HK$s)**** 0.04 Percentage of tourist spending on restaurants** 14.5% Number of sticks sold in Hong Kong (000s in 2001) ***** 3,093,000 Average Restaurant Profitability* 4.6% Notes: * From Census and Statistics Department Data ** From Hong Kong Tourism Board, A Statistical Review of Hong Kong Tourism 2000 *** Number of tobacco retailers only includes those retailers whose main sales are of tobacco products **** Manufacturer profits are calculated on a per stick basis from figures found in British American Tobacco's Annual Report (for Asia Pacific Region) ***** Number of sticks sold in Hong Kong for 2001 is estimated from figures available for year 2000 and first six months of 2001 (source Customs and Exercise Department) Table D9: Option A1 Economic Analysis

HK$ ('000s) 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Total Costs Government enforcement costs 57 57 57 57 57 57 57 57 57 57 567 Total Costs 57 57 57 57 57 57 57 57 57 57 567 Benefits Fire damage costs 496 500 500 500 500 500 500 500 500 500 4,996 Reduced maintenance costs 69,600 69,600 69,600 69,600 69,600 69,600 69,600 69,600 69,600 69,600 696,000 Savings in emergency services 226 226 226 226 226 226 226 226 226 226 2,263 Total Benefits 70,322 70,326 70,326 70,326 70,326 70,326 70,326 70,326 70,326 70,326 703,259 Net economic impacts 70,266 70,270 70,270 70,270 70,270 70,270 70,270 70,270 70,270 70,270 702,693 Net present value 569,946 Benefit to cost ratio (>1.0=positive) 1,241.0

Discount rate 4% Number of fire incidents avoided 1 Number of new TCO staff 10 Emergency services attendance costs for fire incidents (HK$ 000s) 226 Average salary of TCO staff (HK$s 000s) 17 Table D10: Option A2 Economic Analysis

HK$ ('000s) 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Total Costs Cost of installing smoking rooms 250,000 ------250,000 Governmentenforcementcosts 57575757575757575757567 Total Costs 250,057 57 57 57 57 57 57 57 57 57 567 Benefits Fire damage costs 333 333 333 333 333 333 333 333 333 333 3,333 Reduced maintenance costs 46,400 46,400 46,400 46,400 46,400 46,400 46,400 46,400 46,400 46,400 464,000 Savings in emergency services 151 151 151 151 151 151 151 151 151 151 1,509 Total Benefits 46,884 46,884 46,884 46,884 46,884 46,884 46,884 46,884 46,884 46,884 468,842 Net economic impacts- 203,172 46,828 46,828 46,828 46,828 46,828 46,828 46,828 46,828 46,828 468,276 Net present value 139,429 Benefit to cost ratio (>1.0=positive) 1.6

Discount rate 4% Number of fire incidents avoided 1 Number of new TCO staff 10 Percentage of venues installing smoking rooms 33% Average salary of TCO staff (HK$s 000s) 17 Emergency services attendance costs for fire incidents (HK$ 000s) 226 Table D11: Option A3 Economic Analysis

HK$ ('000s) 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Total Costs Governmentenforcementcosts 57575757575757575757567 Total Costs 57 57 57 57 57 57 57 57 57 57 567 Benefits Fire damage costs 465 465 465 465 465 465 465 465 465 465 4,650 Reduced maintenance costs 64,728 64,728 64,728 64,728 64,728 64,728 64,728 64,728 64,728 64,728 647,280 Savings in emergency services 210 210 210 210 210 210 210 210 210 210 2,105 Total Benefits 65,403 65,403 65,403 65,403 65,403 65,403 65,403 65,403 65,403 65,403 654,035 Net economic impacts 65,347 65,347 65,347 65,347 65,347 65,347 65,347 65,347 65,347 65,347 653,468 Net present value 530,021 Benefit to cost ratio (>1.0=positive) 1,154

Discount rate 4% Number of Restaurants 9,300 Number of new TCO staff 10 Number of Bars 460 Average salary of TCO staff (HK$s 000s) 17 Number of Karaokes 240 Possible number of fire incidents avoided in all venues 1 Total number of venues 10,000 Emergency services attendance costs for fire incidents (HK$ 000s) 226 Table D12: Option B1 Economic Analysis

HK$ ('000s) 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Total Costs Government enforcement costs 57 57 57 57 57 57 57 57 57 57 567 Lost productivity of smoking workers 294,084 294,084 294,084 294,084 294,084 294,084 294,084 294,084 294,084 294,084 2,940,836 Total Costs 294,140 294,084 294,084 294,084 294,084 294,084 294,084 294,084 294,084 294,084 2,940,836 Benefits Fire damage costs 4,500 4,500 4,500 4,500 4,500 4,500 4,500 4,500 4,500 4,500 45,000 Avoidedlossofproductivityduetoinjury111111111112 Savings in emergency services 2,037 2,037 2,037 2,037 2,037 2,037 2,037 2,037 2,037 2,037 20,370 Increased productivity due to no SHS 197,622 197,622 197,622 197,622 197,622 197,622 197,622 197,622 197,622 197,622 1,976,223 Avoided medical costs 143,906 143,906 143,906 143,906 143,906 143,906 143,906 143,906 143,906 143,906 1,439,062 Total Benefits 348,067 348,067 348,067 348,067 348,067 348,067 348,067 348,067 348,067 348,067 3,480,666 Net economic impacts 53,926 53,983 53,983 53,983 53,983 53,983 53,983 53,983 53,983 53,983 539,830 Net present value 437,796 Benefit to cost ratio (>1.0=positive) 1.2

Discount rate 4% Annual medical costs from SHS exposure of staff (HK$ 000s) 143,906 Number of new TCO staff 10 Number of fire incidents avoided 9 Average salary of TCO staff (HK$s 000s) 17 Emergency services attendance costs for fire incidents (HK$ 000s) 226 Table D13: Option B2 Economic Analysis

HK$ ('000s) 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Total Costs Government enforcement costs 57 57 57 57 57 57 57 57 57 57 567 Cost of installing smoking rooms 375,000 ------375,000 Total Costs 375,057 57 57 57 57 57 57 57 57 57 375,567 Benefits Fire damage costs 2,500 4,500 4,500 4,500 4,500 4,500 4,500 4,500 4,500 4,500 43,000 Savings in emergency services 1,132 1,132 1,132 1,132 1,132 1,132 1,132 1,132 1,132 1,132 11,317 Increased productivity of office workers 197,622 197,622 197,622 197,622 197,622 197,622 197,622 197,622 197,622 197,622 1,976,223 Avoided medical costs 143,520 143,520 143,520 143,520 143,520 143,520 143,520 143,520 143,520 143,520 1,435,200 Total Benefits 344,774 346,774 346,774 346,774 346,774 346,774 346,774 346,774 346,774 346,774 3,465,739 Net economic impacts- 30,283 346,717 346,717 346,717 346,717 346,717 346,717 346,717 346,717 346,717 3,090,173 Net present value 2,449,688 Benefit to cost ratio (>1.0=positive) 7.8

Discount rate 4% Annual medical costs from SHS exposure of staff (HK$ 000s) 143,520 Number of new TCO staff 10 Number of fire incidents avoided 5 Average salary of TCO staff (HK$s 000s) 17 Emergency services attendance costs for fire incidents (HK$ 000s) 226 Table D14: Option D1 Economic Analysis

HK$ ('000s) 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Total Costs Costofremovingcurrentadvertising47,600------47,600 Replacingpriceboardsandmarkers1,000------1,000 Lossoftourismrelatedprofit 276------276 Government enforcement costs 85 85 85 85 85 85 85 85 85 85 850 Total Costs 48,961 85 85 85 85 85 85 85 85 85 49,726 Benefits Reduced morbidity costs 1,920 3,839 5,759 7,679 9,599 9,599 9,599 9,599 9,599 67,190 Total Benefits - 1,920 3,839 5,759 7,679 9,599 9,599 9,599 9,599 9,599 67,190 Net economic impacts- 48,961 1,835 3,754 5,674 7,594 9,514 9,514 9,514 9,514 9,514 17,464 Net present value 3,859 Benefit to cost ratio (>1.0=positive) 1.1

Discount rate 4% Current number of smokers 804,200 Number of new TCO staff 10 Reduction in smoking rate per annum for five years 0.3% Average salary of TCO staff (HK$s 000s) 17 Current morbidity costs per smoker (HK$ 000s per annum) 0.88 Current morbidity costs (HK$ 000s) 711,000 Percentage of morbidity costs recovered per smoker 90% Table D15: Option D2 Economic Analysis

HK$ ('000s) 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Total Costs Costofremovingcurrentadvertising47,600------47,600 Replacingpriceboardsandmarkers1,000------1,000 Lossoftourismrelatedprofit 276------276 Government enforcement costs 57 57 57 57 57 57 57 57 57 57 567 Total Costs 48,932 57 57 57 57 57 57 57 57 57 49,442 Benefits Reduced morbidity costs - 1,280 2,560 3,839 5,119 6,399 6,399 6,399 6,399 6,399 44,793 Total Benefits - 1,280 2,560 3,839 5,119 6,399 6,399 6,399 6,399 6,399 44,793 Net economic impacts- 48,932 1,223 2,503 3,783 5,063 6,342 6,342 6,342 6,342 6,342- 4,649 Net present value- 13,093 Benefit to cost ratio (>1.0=positive) 0.7

Discount rate 4% Current number of smokers 804,200 Number of new TCO staff 10 Reduction in smoking rate per annum for five years 0.2% Average salary of TCO staff (HK$s 000s) 17 Costs per smoker (HK$ 000s per annum) 0.88 Current morbidity costs (HK$ 000s) 711,000 Percentage of morbidity costs recovered per smoker 90% Table D16: Option D3 Economic Analysis

HK$ ('000s) 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Total Costs Costofremovingcurrentadvertising47,600------47,600 Replacingpriceboardsandmarkers500------500 Lossoftourismrelatedprofit 221------221 Government enforcement costs 57 57 57 57 57 57 57 57 57 57 567 Total Costs 48,377 57 57 57 57 57 57 57 57 57 48,887 Benefits Reduced morbidity costs - 640 1,280 1,920 2,560 3,200 3,200 3,200 3,200 3,200 22,397 Total Benefits - 640 1,280 1,920 2,560 3,200 3,200 3,200 3,200 3,200 22,397 Net economic impacts- 48,377 583 1,223 1,863 2,503 3,143 3,143 3,143 3,143 3,143- 26,491 Net present value- 29,740 Benefit to cost ratio (>1.0=positive) 0.4

Discount rate 4% Current number of smokers 804,200 Number of new TCO staff 10 Reduction in smoking rate per annum for five years 0.1% Average salary of TCO staff (HK$s 000s) 17 Costs per smoker (HK$ 000s per annum) 0.88 Current morbidity costs (HK$ 000s) 711,000 Percentage of morbidity costs recovered per smoker 90% EXECUTIVE SUMMARY

BACKGROUND

The Hong Kong Government’s established policy on tobacco control is to seek, through a gradual step-by-step approach, to discourage smoking, contain the proliferation of tobacco use and protect the public from passive smoking to the maximum extent possible. In May 2001, the Secretary for Health and Welfare put forward to the LegCo Health Services Panel, a number of proposed amendments to the Smoking (Public Health) Ordinance. The proposed amendments were principally aimed at addressing the following needs:

• Reduce the exposure and impacts of second hand smoke (SHS). The legislative amendments aim to reduce the exposure and impacts of SHS by banning smoking in hospitality venues, educational establishments and other workplaces.

• Reduce the uptake of smoking and hence overall smoking rates. The legislative amendments are aimed at reducing the uptake of smoking (and hence overall smoking rates) by closing loopholes in the current ban on advertising and promotion of tobacco products, and reducing the exposure of young people (particularly in educational establishments) to smokers. In addition the legislative amendments aim to raise awareness of the impacts of smoking, and hence reduce the uptake of smoking (and hence overall smoking rates) by including an enabling provision in the Ordinance that allows for the inclusion of graphic and/or pictorial health warnings.

Against this background, ERM-Hong Kong Ltd was engaged to conduct a Regulatory Impact Assessment of the proposed amendments.

INTERNATIONAL REVIEW

ERM undertook a review of tobacco control legislation in 15 localities. Key findings of the International Review are as follows:

• smoking bans in restaurants and other public areas are most effective when supported by public awareness and expectations which lead to ‘self- enforcement’ of the bans;

• phased introduction is an effective method of implementing smoking bans in areas where smoking is firmly entrenched, once bans have been socially accepted elsewhere;

• exemptions to smoking bans should be avoided wherever possible, in order to avoid confusion as to where the bans apply and to avoid creating an ”unlevel playing field” amongst affected premises;

ENVIRONMENTAL RESOURCES MANAGEMENT BUSINESS AND SERVICES PROMOTION UNIT i • key terms within tobacco control legislation should be clearly defined to avoid non-compliance through exploitation of “loop-holes”;

• voluntary or partial bans are largely ineffective and the prevalence of smoking tends to be higher where these are in place; and

• the proposed amendments will bring Hong Kong into line with countries and states with the strictest tobacco control legislation world-wide.

REGULATORY AND NON-REGULATORY OPTIONS

A regulatory impact assessment needs to evaluate the proposed legislative option against other regulatory or non-regulatory options. Based on a review of the available literature and discussions with stakeholders ERM identified a number of feasible options to be taken forward in the analysis.

Options for Reducing the Impact of SHS in Hospitality Venues

The study considered the following possible options:

• Proposed legislative amendments to ban smoking in all hospitality venues

• Legislate to allow designated smoking rooms but prohibiting smoking outside these rooms

• Proposed amendments but allow for exemptions for certain types of hospitality venues (eg Bars and Karaokes)

Another option, aimed at changing the current legislative requirements to increase the availability and size of no smoking areas in restaurants has not been considered as it is unlikely to reduce SHS exposure of staff and patrons in restaurants.

Options for Reducing SHS exposure in Educational Establishments

The study considered the following possible options:

• Proposed legislative amendments to ban smoking in all educational establishments

• Legislate to allow designated smoking rooms but prohibiting smoking outside these rooms

• Exclude universities (& other tertiary institutions) from the proposed amendments (however voluntary schemes in Universities would remain legally enforceable under the current legislation)

Options for Reducing the Impact of SHS in Indoor Workplaces

The study considered the following possible options:

• Proposed legislative amendments to ban smoking in all indoor workplaces

ENVIRONMENTAL RESOURCES MANAGEMENT BUSINESS AND SERVICES PROMOTION UNIT ii • Legislate to allow designated smoking rooms but prohibiting smoking outside these rooms

• Provide for voluntary measures in workplaces to be legally enforceable under the current legislation

Options for Reducing the Impact of Tobacco Advertising and Promotion

The study considered the following possible options:

• Proposed legislative amendments to further restrict tobacco advertising and promotion.

• Amend the Ordinance/ subsidiary regulations so tobacco advertising/promotion is limited in size and/or content and/or frequency

• Issue strict guidelines with the threat of future regulation if these guidelines are not followed.

Analysis of Options

The various options were subject to analysis to identify the impacts to businesses and society as a whole. A distinction was drawn between economic and revenue impacts. Economic analysis seeks to assess impacts from the perspective of society as a whole, while revenue impact analysis only considers direct cash implications for businesses affected by the proposed options.

In addition, the study identified small businesses interests that could be adversely impacted by the proposed options. An affordability analysis was then carried out to identify whether the various options would impact on the viability of these businesses.

FINDINGS AND RECOMMENDATIONS

Expansion of Statutory No Smoking Areas

Restaurants and Other Hospitality Venues

The study found that there is potentially both revenue (to the venues themselves) and economic benefits from pursuing a total smoking ban in hospitality venues. In particular the study found that the economic benefits are likely to be significant. However, the revenue analysis is unsurprisingly sensitive (particularly for bars and karaokes) to the assumptions made about the impact of such a ban on the sales at these premises. Although international experience of implementing such smoking bans suggests that they would not have an overall negative impact on sales, there are clearly concerns within the catering industry that they might do so. If the proposed amendments did reduce sales significantly in restaurants, bars and karaokes then there would no longer be a revenue benefit to these venues and the economic benefit to Hong Kong as a whole would be less significant.

ENVIRONMENTAL RESOURCES MANAGEMENT BUSINESS AND SERVICES PROMOTION UNIT iii Furthermore, given the competition between restaurants, bars and karaokes (they are all able to serve food) and the results of the affordability analysis, it is likely that the granting of exemptions to a particular sector(s) (eg, karaokes and/or bars) could have long term and possibly catastrophic impacts for some small businesses not exempted from such a smoking ban.

Given the views of both the public and the trades themselves, one solution to these issues would be to allow an initial exemption of karaokes and possibly bars, but to limit the ‘competition for smokers’ to certain times of the day - ie provide a level playing field of a total smoking ban throughout most of the day but allow karaokes (and possibly bars) to apply for and/or automatically receive exemptions between, say 10.00 pm and 6.00 am. It should be noted that this proposed exemption is not being recommended as an indefinite solution but solely in response to the consultation paper (eg that bars and karaokes being given a longer grace period if deemed necessary).

Schools, Universities and Tertiary Institutions

It is recommended that statutory no smoking areas are expanded to include all indoor and outdoor areas of schools. While it has been impossible, within the time-frame available for this study, to quantify the likely revenue and economic impacts of such a measure, it is clear that such a measure would both meet the objectives of the legislation (to reduce the exposure to SHS and create a desirable example to young people) and is unlikely to have any revenue or economic costs. Indeed there are likely to be only financial and economic benefits associated with such a measure.

Other Indoor Workplaces

ENVIRONMENTAL RESOURCES MANAGEMENT BUSINESS AND SERVICES PROMOTION UNIT iv banning smoking in all indoor offices and this is likely to be significant. Furthermore, the literature review suggests that if further study were undertaken then it would provide a convincing business case for banning smoking in all indoor offices once all the pertinent costs were quantified.

Tobacco Advertising and Promotion

Display of Tobacco Advertising

ENVIRONMENTAL RESOURCES MANAGEMENT BUSINESS AND SERVICES PROMOTION UNIT v retailers) it is recommended that the exemption is further restricted but not entirely removed.

There are several reasons for the current, perceived or otherwise, abuse (and hence impact) of the current exemption, including:

• display of tobacco advertising by premises that are clearly unlikely to suffer from livelihood impacts if the exemption was removed; and

• the volume of tobacco advertising in localities that have a high visual impact (and hence are likely to promote tobacco use).

To avoid abuse of this approach, new businesses who have never submitted a profits tax return should be prevented from displaying tobacco advertising.

Furthermore, it is recommended that guidelines on the content, size and display of tobacco advertising are agreed with tobacco manufacturers. These guidelines could include restrictions on the size of adverts, the content (limit those directed at youth audiences) as well as the number of adverts any one retailer or hawker could display. This is essentially a low cost option against which the need for any future restrictions on tobacco advertising could be identified (ie if the guidelines were not being met then further advertising restrictions could be imposed). The currently anticipated amendments to the Smoking Ordinance should allow for these further restrictions to be imposed without the need to revert to the Bills Committee (ie it would be an administrative action as opposed to a legislative one if the guidelines are not met). This would make the threat of future regulation more real to all parties concerned and hence support compliance with the guidelines.

Price Boards and Markers

ENVIRONMENTAL RESOURCES MANAGEMENT BUSINESS AND SERVICES PROMOTION UNIT vi In this light the study recommends that if the Administration feels that it cannot effectively restrict the advertising impact of price boards and markers through other means (such as by agreeing guidelines with manufacturers and/or retailers) then the proposed measure should be implemented.

Sale of Tobacco Products in Association with Other Products

As such, it is recommended that at a minimum, tobacco promotions are limited through guidelines to products that are only of interest to current smokers (eg lighters) and/or cannot appeal directly to youth and non- smokers. Further, it is suggested that these guidelines include limits on the price of the good being promoted such that it cannot be less than some percentage (say 25%) of the tobacco product price (eg if the tobacco product costs HK$ 100 the cost of the associated product must be at least HK$ 25).

Tobacco Sponsorship

The study found that there are potentially direct negative revenue impacts to event organisers, advertisers and the tourism trade of further limiting tobacco sponsorship. Such revenue impacts are, for the most part, likely to be temporary in nature as alternative sponsors are likely to be found. Conversely, if such measures reduce the overall smoking rate, then they are likely to lead to long-term economic benefits.

ENVIRONMENTAL RESOURCES MANAGEMENT BUSINESS AND SERVICES PROMOTION UNIT vii As such, it is recommended that the impact of tobacco brand sponsorship on smoking rates is limited through the use of guidelines. This could be done by prohibiting the use of tobacco brand names in events that attract a significant youth contingent and/or a wide audience (eg events that will be televised). These guidelines should allow for the gradual reduction and replacement of sponsors from events that attract a significant audience as opposed to a sudden ban (that might prevent such events seeking alternative sponsors). This gradual approach should go some way to mitigating the financial and economic impacts of restricting a source of sponsorship revenue.

Health Warnings on Tobacco Products

It has not been possible to estimate the revenue impacts of the proposed measures as no details of how or what the exact requirements will be, have yet been developed. Experience from overseas suggests that equivalent measures may assist in reducing smoking rates and have corresponding economic benefits, although all such requirements do have a revenue impact on the tobacco industry (both direct and indirect).

ENVIRONMENTAL RESOURCES MANAGEMENT BUSINESS AND SERVICES PROMOTION UNIT viii