February 2002

Mood of the World

Focus on Asia-Pacific
he year 2001 was nothing if not eventfulnot just in the U.S., but globally. Events of the last few months in particular have crossed national boundaries. Connections among countries of the world may never have been more apparent than they are nowor more critical to marketers. In the aftermath of September 11, terrorism has become a top concernnot just for Americans, but for people in many other countries. This ripple effect is clear, but it is not confined to one point of origin in the United States. Events in many places are spreading their own ripples. The overlapping effect is complex. It is also vital in understanding the mood of the worlds consumers. This report reveals initial findings from the 2002 Roper Reports Worldwide study, which has just come out of the field. The data, collected November 2001January 2002, show who has been affected by recent world events and how these events have shaped consumer confidence and shifted peoples priorities. This article focuses on the 11 major Asia-Pacific markets covered in the 2002 survey. These include Australia, Hong Kong, Japan, Korea, Singapore, and Taiwan in Developed Asia, and China, India, Malaysia, the Philippines, and Thailand in Developing Asia. A second report will follow discussing markets in Europe, the Americas, and Middle East/Africa.

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Top Concerns
ach year, the Roper Reports Worldwide study asks people which two or three things on a list of 15 are of the greatest personal concern to them. Although the list of macroeconomic, political, and social issues is couched in non-specific termsthat is, not related to any particular eventconsumers responses are clearly linked to the realities around them.

Worry About Terrorism and Crime

Reality includes a heightened sense of insecurity for many Asians, springing in part from the events of September 11 in the US, but also from a variety of internal and external causes. Worry about terrorism has risen substantially in most Asia-Pacific countries. On average, 20% of Asia-Pacific consumers list terrorism as a top personal concern, quadruple the 5% who said so a year ago. Terrorism now ranks among peoples top-five concerns in four countries, and in the top-ten in all but three. India leads the region in worry about terrorism, where 39% of people list it among their top concerns. Ropers fieldwork took place just as Indians were reeling from the bloody assault on their own countrys political nerve center in early December, rocking a nation already on high alert because of tension in Kashmir and other parts of the country. Terrorism has become the second-ranking concern in India, up from eighth place a year ago. But it is in Japan where worry about terrorism has grown the mostup 34 percentage points since last year (from 1%). Although Japan has not experienced any comparable domestic terrorist attacks in the past year, it may be that memories of the subway gas attacks of the 1990s, which at that time translated into greater worry about religious fundamentalism, are now being channeled into worry about terrorism. It is also probable that the Japanese, with their global economic power and close relationship with the US, more than other Asians, feel their country is a likely target of attacks of the scope seen in the US. At the same time, with this concentration of worry on terrorism, Japanese are less concerned than they were a year ago about regular crime and lawlessness. In other parts of Asia-Pacific, the ripples from September 11 combined with internal events are having a compounded effect. Several countries have been singled out by the US as possible harbors for al-Queda terrorist cells, which could account for increased wariness in places like Malaysia, Singapore, and the Philippines. So could an alleged thwarted terrorist attempt to bomb the US and other western embassies in Singapore, as well as a Filipino government effort to route out Muslim fundamentalist
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Worry about terrorism is up a great deal in many Asian markets. While concern about regular crime is down, crime and lawlessness remains the regions thirdranked concern, after recession and pollution.

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guerilla fighters. In Singapore, as in Japan, worry about crime is down. In Malaysia, on the other hand, it is stable and remains the number-one personal concern. In Australia as in Japan, close ties with the US and involvement in international peacekeeping efforts have substantially boosted concerns about terrorism. In addition, Australians are worried about illegal immigrants and refugees landing on their shores. This has boosted concern about immigration in particular (to 13%). It may also be indirectly related to the increased concern about terrorism, as well as relations among racial and ethnic groups (12%) and religious fundamentalism/extremism (10%). As in Japan and Singapore, these increased worries seem to have displaced some concern about normal crime, which has dropped. China is wrestling with Muslim insurgence in the west, and it has alleged that al-Queda trained these Xijiang Muslim freedom fighters. There have also been more frequent reports of fatal explosions and firearm violence. All this has contributed to an increase in worry about terrorism from negligible to modest levels (3% to 10%). Hong Kong acts as a gateway to China. With a free flow of people (including criminals) and goods (including drugs), it has seen a modest increase in worry about both terrorism in particular and crime and lawlessness in general. Top Concerns in Asia: 2002
(Rank of concern out of 15) ASIA Developed Australia Hong Kong Japan Korea Singapore Taiwan Developing China India Malaysia Philippines Thailand Recession & unemployment 1 1 3 1 1 1 1 1 1 1 3 2 2 2 Crime & lawlessness 3 2 1 2 2 4 4 2 6 6 4 1 4 3 Money to live right /pay bills 4 4 4 3 7 5 2 3 4 3 9 5 3 7 Educational quality 5 5 6 4 6 6 5 4 5 4 8 6 6 6

Pollution 2 3 7 6 3 2 8 6 2 2 6 7 9 8

Terrorism 8 6 5 9 4 10 6 10 8 9 2 4 8 10

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Several Asia-Pacific markets have been relatively untouched by terrorism. These are places with no visible domestic terrorism to contend with and less involvement in the global crisis. In Thailand, Korea and Taiwan, concern about terrorism remains at the same low levels that most of the region displayed a year ago.

Its Still the Economy

Even against the backdrop of terrorism, people are affected far more by things that hit closer to homenamely, money. Economic woes have been especially pronounced in Asia-Pacific developed economies. After yet another poor year, recession and unemployment is the number-one personal concern in Japan, Hong Kong, Korea, Taiwan, and Singapore. Only in Australia does it drop below the top spot, ranking third. Recession is also a top concern in many developing Asian economies. It ranks first in China, second in Malaysia, the Philippines, and Thailand, and third in India. Recession has become of markedly greater concern in Hong Kong, Japan, and Malaysia in the past year alone, while Taiwan and Singapore have seen large two-year gains. Singapore, once the pride of the Asian tigers, had one of its worst years in recent history. Where recession looms large, deflation and lack of consumer demand become the problem, and inflation is not an overriding concern. Inflation and high prices have become less of an issue, especially in Hong Kong, Korea, Taiwan, and the Philippines. In Hong Kong, this drop is probably related to dips in the Consumer Price Index and real estate prices, although property remains expensive in this space-constrained citystate.

Terrorism has quadrupled as a top concern in Asia

6% in 2001

20% in 2002

but it remains far less critical than economic conditions

Recession and unemployment Money to live right and pay the bills Inflation and high prices

52% (+1 from 2001) 31% (0) 29% (+1)

In contrast, inflation and high prices edge out terrorism as the number-one personal concern in India, a possible sign of an overheating economy. Indeed, the International Monetary Fund projects that India will have the largest 2002 CPI gain among the 11 Asia-Pacific markets covered in the Roper study.

Its Still Pollution, Too

Anxiety about economic issues and terrorism has knocked it down a few notches in many places, but pollution has been and remains Asia-Pacific consumers second-ranked personal concern. This year, this ranking is due more to the influence of China, where it continues to rank second, than to Japan, where it
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has dropped from second to third place. It ranks second in Korea, and in the top-ten in all other Asia-Pacific markets studied. Concern about pollution in Japan has been dropping since 1998, in fact, as economic concerns, and now terrorism, have taken priority. This doesnt mean it doesnt continue to be a major issue, however, for this congested developed island nation. China is facing the dilemma of many emerging economies on the brink of modernization. That is, it has reached a level of development where it has become vulnerable to the problems of rich countries. This includes pollution, one of the seemingly inevitable side effects of a growing economy.

Niche Concerns
! Some countries have unique problems facing their societies. In the Philippines and Thailand, drug abuse is the number-one personal concern. In Thailand, where the government is attempting to put an end to the illegal narcotics trade at its border with Myanmar, the issue has grown even more heated. Fully 62% of Thais list drug abuse among their top worries, up 10 percentage points from a year ago. Drug abuse ranks second among Australian concerns, just after, but undoubtedly related to, crime and lawlessness. ! In the face of mounting anxiety over external threats from terrorists, drug traffickers, and others outside the law, many Asia-Pacific consumers feel less concerned about internal threats from the official power structure. Government corruption was the number-one issue in Japan in 1997, when 54% placed it among their top concerns; its now dropped to 31%. In the past year alone, concern about government corruption has fallen notably in Australia, Taiwan, Korea, China, Malaysia, and the Philippines, due to visible government campaigns to crack down on corruption in most of these countries. The only place it grew even marginally is in India, where high-level ministerial scandals made media spotlights in the fall. ! Some issues ride the tides of economic and political chaos. Educational quality is such an issue. Whether people live in a developed or developing economy, they recognize the value of education to improve their circumstances, individually and collectively. Other Roper research finds that education is one of the top social causes with which consumers feel business should be involved. Hence, the perennial concern about education. About one in three Asians list education among their top concerns, just as they did last year and the year before that. It ranks in 4th-6th place everywhere but India, where it places 8th. Education has gained some ground in Korea, even as economic anxieties have become less pressing.
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Back-Burner Issues
Everyone cant worry about everything. The Roper Reports Worldwide survey asks respondents to select the two or three things that most concern them, so some items fall to the bottom of the list. Even concerns that might seem related to recent world events remain at the same low levels registered in Asia-Pacific last year: religious extremism/fundamentalism, immigration, relations between racial and ethnic groups, relations with foreign countries, and aid to countries in the Third World. All of these concerns register in the single digits in all AsiaPacific markets, with one exception. About 1 in 10 Australians lists immigration, racial/ethnic relations, or religious extremism among his or her top concerns. These minor concerns may spill over into other major ones. The 5-point increase in worry over recession and unemployment, for example, could reflect anxiety over the effect of immigrants and the bursting of the Internet bubble on Australias job market. In addition, Malaysia saw a bump up in concern about religious fundamentalism, from 5% to 9%.

Consumers Expect a Rocky Year

ts clear that the global economic slowdown is top of mind for Asia-Pacific consumers. Most do not expect these cloudy economic skies to clear any time soon. This in turn is depressing optimism about buying conditions.

The dot com crash and slowing of the US economy has further contributed to the volatility of Developed Asian markets such as Taiwan, Hong Kong and Japan, which were previously showing some sign of recovery. Put plain and simple, consumers in Developed Asia and parts of Developing Asia are apprehensive about their economic futures.

Forecast: Mostly Cloudy, with Patches of Sun Asia-Pacific consumers do not have great expectations for 2002, but bright spots appear in India, Korea, China, and Australia.

Confidence in Developed Asia

After yet another year of recession, any modest improvement in Japanese consumer confidence in 2000 has now diminished; 8 in 10 Japanese consumers are not confident their personal economic situation will improve in the next 12 months (up 5 percentage points since last year). A substantial 44% say it is not a good time to buy the things they want and need, but a good time to wait on those purchases.* This pessimism points to the distrust Japanese people may have in their new governments ability to bring about economic and political reform.

* The Roper Reports Worldwide survey gauges consumers confidence with two questions. One asks people how confident they are that they will be personally better off in 12 months. The other asks if they feel it is a good time to buy the things they want and need, a good time to wait, or someplace in between.
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The situation is less dire in Hong Kong and Taiwan, but it isnt looking up, either. In Hong Kong, two in three consumers (64%) are not confident their economic situation will improve in the next 12 months. In Taiwan, a major importer of American technology, this proportion is nearly 6 in 10 (58%). Asian GDP Trends In sharp contrast with Hong Kong, Taiwan, and especially Japan, Korea depicts a more cheerful picture. After a year of modest economic growth, consumer confidence there has risen 14 percentage points since last year, to 51%. While more than half of Korean consumers still feel it is a good time to wait to make purchases, 17% feel it is a good time to buy, up 6 points since last year. Singapores economy lost ground in 2001, yet about half of consumers there are confident their personal economic situation will improve this coming year, a confidence supported by a projected slight turnaround in GDP for 2002. On the down side, at 17%, consumer buying optimism is even lower than it was two years ago.* Almost half of Singaporeans feel now is a good time to wait before making purchases.
Average Annual GDP Growth 2001 2002 2.3% 3.3% -0.3 1.0 -0.4 -1.0 2.6 3.2 -2.9 1.2 -2.2 0.7 7.3 4.4 0.3 2.9 1.5 6.8 5.2 2.5 3.2 2.0

Australia Hong Kong Japan Korea Singapore Taiwan China India Malaysia Philippines Thailand

Source: International Monetary Fund

Seemingly untouched by economic and political crises elsewhere, confidence in Australia remains stable. Like Koreans, Australians have seen economic growth in the past year and are more confident than other consumers in Developed Asia; 64% think their personal economic situation will improve in the next year. Buying optimism is up from a year ago, too; 31% say it is a good time to buy, up 6 points from 2001.

Confidence in Developing Asia

The worlds two most populous countries dominate emerging Asian markets. China and India saw respectable GDP growth last year, and China joined the World Trade Organization. Consumers in these two markets continue to maintain high personal confidence, with almost 3 in 4 consumers confident their personal situation will improve in the next year. In India, this translates into buying confidence as well. Despite the threat of war, or perhaps because of it, almost 1 in 4 Indians say now is a good time to buy. Chinese consumers are more guarded; just 12% say now is a good time to buy, down 6 points from last year.

Singapore was not included in the 2001 survey, so trends noted are two-year rather than one-year.
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In Thailand, consumer confidence and purchasing optimism remain more or less unchanged from last year, with almost half of consumers confident their personal financial situation will improve in the next year and 19% saying now is a good time to buy. Malaysia is slightly more optimistic than Thailand; 56% are confident their personal economic condition will improve in the coming year; yet this confidence does not translate into buying optimism. Half of Malaysians say now is a good time to wait before making purchases.

Asian Confidence in Buying Conditions and the Year to Come

Good time to buy
35

Australia
30 25 20 15 10 5 0

India Hong Kong Thailand Singapore Japan Taiwan Philippines

Malaysia China

Korea

The Philippines does not 0 10 20 30 40 50 60 70 have the best-performing Confident will be better off in 12 months economy in the region, and its residents dont expect things to pick up in the near future. Most remain less than confident that their economic situation will improve in 2002. Nonetheless, this lack of confidence has dropped from 78% last year to 64% this year.

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The Reverberations Continue

The direction of local climate is both reflected in and driven by consumer attitudes. With the exception of Australia and Korea, consumer confidence in Developed Asia is low, but the candle of hope remains gently burning in the largest markets of Developing Asia, namely India and China. The things people worry about do not exist in a vacuum. They are interwoven. Events that happen in one country have profound effects on other nations thousands of miles away. The events of September 11 bring to mind another event that took place on American soil more than 200 years ago. This, too, has been a shot heard around the world. And since the world is both larger (in terms of people and dollars) and smaller (more interconnected) than it was in the late 1700s, the repercussions have been more wide-ranging. The ripples will continue to spread.
Interviews for the 2002 Roper Reports Worldwide global survey were conducted between November 2001 and January 2002. Field dates for the 2001 survey were November 2000 through January 2001, and those for the 2000 survey were November 1999 through January 2000.
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