Amid HK protests, crime doesn’t pay

Leslie Shaffer | Writer for
A police officer stands in front of the protest site in Mongkok area on October 6, 2014 in Hong Kong
Ken Ishii | Getty Images

Hong Kong's pro-democracy protests face criticism for disrupting the city, but they might offer one clear social benefit: crime may not be paying off.

"A lot of the shops, brothels, tourism business and bars have been affected because tourism has been affected. Both local and tourism traffic is down," said Michael Degolyer, director of the Hong Kong Transition Project, a research organization targeting improved governance.

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The protests are now on their 13th day, with protests situated in the Mong Kok and Admiralty areas of the city. Last week, suspected triad-gang members violently attacked protestors in Mong Kok and attempted to remove barricades and tents.

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"Mong Kok is an area that has been traditionally very influenced by the triads," Degolyer said, noting the neighborhood is densely populated and has many small, locally owned shops.

"There are also a number of house brothels that the triads control – and there is tourism and bars that they influence and collect protection money from," he said.

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Many analysts have attempted to estimate how badly the protests have hurt Hong Kong's tourism and legitimate businesses. Cosmetics retailer Sa Sa said Wednesday that its same-store sales for the Golden Week holiday fell 3 percent from the year-earlier period, compared with last year's 6 percent rise.

But quantifying the hit to organized crime is difficult.

"The triads don't exactly file annual company reports," David Yang, an analyst at IHS, said via email.

Yang noted the Hong Kong Travel Industry Association reported the territory has lost more than 200 mainland tour groups a day over the holiday, but since these groups tend to be family-oriented, they wouldn't affect illicit business much.

To be sure, data from the Hong Kong Tourism Board indicates the arrivals in Hong Kong from the Mainland over the Oct. 1-7 holiday period were up nearly 7 percent from the year-earlier period.

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"People who patronize bars, night clubs, massage parlors, etc. tend to be free individual travelers (so-called 'FITs'), and the number of individual travelers has not been as seriously affected," Yang said. He also doesn't believe the protests are affecting money laundering options much.

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But he expects the triads are coming in for their share of pain, both from the general loss of tourism traffic and from the individual businesses in affected areas, citing data from the Hong Kong Chamber of Food & Beverage Industry indicating restaurants and bars in the affected areas are losing over 50 million Hong Kong dollars ($6.45 million) a day.

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"We don't know the numbers for other types of businesses (e.g. massage parlors and the like). Some of these businesses may be involved in illicit activities. But even perfectly legitimate businesses may be owned by individuals with triad ties," Yang said.

There are other ways the protests hurt illicit businesses, noted Degolyer.

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"If you were trying to move things without stirring up attention, it's a lot easier in a van rather than be forced out on to the MTR [subway] or other means of transport," Degolyer said, citing road closures. "[With] the illicit cigarettes and liquor trade, it's kind of awkward to walk on to the MTR with a big box and everyone can smell the tobacco."

—By CNBC.Com's Leslie Shaffer; Follow her on Twitter @LeslieShaffer1