HONG KONG, 15 October 2003 - Despite the recent SARS epidemic and uncertain world economic climate, Asia-Pacific countries overall demonstrated high adaptation skills to spur retail and consumer growth, with Hong Kong and Singapore already showing signs of recovery, according to PricewaterhouseCoopers' thought leadership study, Retail & Consumer Growth Dynamics from New Delhi to New Zealand. The study on the retail and consumer sector in the Asia-Pacific region, now in its second year, was launched at the World Economic Forum East Asia Economic Summit held in Singapore from 12 to 14 October 2003.

In Asia, GDP growth forecasts are expected to be around 3.5-4.5% for the next few years. These forecasts are well in excess of the 0.5-1.5% expected for the European Union and the 1.5-2.5% estimated for the United States. In particular, China acts as a strong lever for the economic development of Asia, showing growth rates of 8.2% for the first half of 2003. Its impressive growth rate is driven by domestic demand, a trend observed in Australia, Malaysia and Thailand as well.

The emerging countries of Asia-Pacific are witnessing the burgeoning of a modern retail and consumer sector, driven in many cases by multinational companies. The growth of local industries and the outsourcing of the production facilities of western companies are important factors that will underpin the development of Asian economies.

The study combines key economic data and analyses of the retail and consumer environment of each of fourteen countries in Asia-Pacific, comprising: Australia, China, Hong Kong, India, Indonesia, Japan, Singapore, South Korea, Malaysia, New Zealand, The Philippines, Taiwan, Thailand and Vietnam. It aims to provide investors with a broad overview of the economic, social and cultural background to the countries in the region, and highlights challenges and opportunities in the retail and consumer goods sector.

Given the multiple opportunities and differing levels of maturity of the retail and consumer industry across the region, the study includes an Asia-Pacific Retail & Consumer Barometer that provides companies with a high-level view that assists them in implementing a "caution/wait/go/niche investment" strategy. The measures in the Barometer comprise: the organised retail industry situation, regulatory constraints, risk, retail and consumer issues and opportunities, winning formats and retail and consumer trends/outlook.

Investors are faced with differing levels of regulatory environment in the region, from a restrictive regulatory environment in China, Indonesia, Vietnam and to some extent, Thailand, to a considerably easier investment context in Hong Kong, Australia, Malaysia, New Zealand, Singapore and South Korea. Joint ventures with local companies continue to be the preferred path for investment where foreign companies benefit from the more lenient development rules governing companies that are majority local owned.

"Consumers in the Asia-Pacific region are extremely brand conscious and are always looking for 'value for money'. This leaves further opportunities for the creation of strong, local brands which will become a major trend in the consumer packaged goods industry in the future," said Jacques-Etienne de T'Serclaes, PricewaterhouseCoopers Global Retail and Consumer Industry Leader.

Hong Kong has gained a reputation for the capability of producing a variety of quality products at competitive prices, with a short lead-time. In the garment industry, for example, many well-known labels have their apparel produced by Hong Kong companies with manufacturing facilities in China and other Asian countries. "The leading garment manufacturers in Hong Kong have acquired international recognition and they are also moving up market by introducing products with their own brand names and design," said Carrie Yu, PricewaterhouseCoopers Retail and Consumer Industry Leader in China and Hong Kong.

Hong Kong's highly advanced retail infrastructure, with modern retail formats are most popular with Hong Kong's increasingly convenience-oriented consumers. Superstores/megastores have emerged in recent years and are welcomed by the consumers because of their wide collection of merchandise. These stores also provide an added benefit of offering one-stop shopping. There have also been a growing number of local brands which have been successfully established in Hong Kong because of their customer service and value-for-money concept. These retailers are expanding to into the China and overseas market.

Ms Yu continued "Retailers in Hong Kong have been coping well in the past few years, as they have been operating under a deflationary climate and shrinking margins. With SARS behind us, and the regulatory relaxation permitting individuals from China to visit Hong Kong in their own capacity, the retail marketplace is active once again. In August this year, tourists from China increased by 43% compared to the same period last year and this has boosted consumer spending."

In addition, the signing of the Closer Economic Partnership Arrangement (CEPA) between Hong Kong and China offers Hong Kong companies a firstmover advantage to tap the huge and growing consumer market in China. This arrangement has contributed to a positive market sentiment.

Ms Yu added, "The distribution sector should seize this window of opportunity, rethink their strategy and position themselves to maximise the benefits offered from CEPA of their business expansion."

"The Asian entrepreneurs are adaptable, resilient and possess the winner's mentality. The region will be developing rapidly in the next few years, and will present strong competition but also tremendous opportunities for western countries," said Mr de T'Serclaes. He concludes, "The latter need to revisit their own business models and accompany the local players on their path to growth.