Business Confidence Index: Not ‘a bright future’ ahead, survey reveals

Compared to March, businesses see bleaker road ahead.

KARACHI: Most businesses do not see a ‘bright future’ in the next six months, according to the September edition of the Business Confidence Index Survey (BCI) conducted throughout the country by the Overseas Investors Chamber of Commerce and Industry (OICCI).

“Compared to March, businesses think the future is bleaker. Business confidence has decreased across all levels – global, country, industry, city, own company,” the OICCI said on Thursday. However, services sector is positive and has shown improved confidence compared to March, it added.



OICCI represents 195 leading foreign investors belonging to 35 countries and include several Fortune 500 companies operating locally. The confidence level of OICCI members participating in the BCI showed a noticeable decline from 31% in March to 16% in the latest edition.

About one-third of businesses in the survey are expecting an improvement in the business situation mainly because they are expecting an improvement in law and order (46%) and are also hopeful about the government’s new projects (34%).

About 34% businesses expecting a decline in the future are worried because of energy issues (38%), inflation (36%), political instability (19%), poor government facilities (13%), and poor government policies (11%).

Over the next six months, businesses foresee energy crisis and law and order as the two biggest challenges, the survey said. Most of the companies believe their employment levels will remain constant over the next six months.



The business confidence of the manufacturing sector declined sharply to 5% in September from positive 12% in March, depicting a move back to a contracting cycle. The retail sector also recorded a marginal decline in confidence and also remained in a contracting cycle. The overall score was largely boosted by the pickup in confidence of the services industry, which was recorded at positive 7% in September versus negative 3% in March.

The biggest challenges faced by businesses during the past six months included the energy crisis (39%) and law and order problems (35%). There was a significant increase in respondents who cited inflation (35%) and rules and regulations (9%) as causes of deteriorating business conditions. The increase/decline in the number of employees is almost identical to that witnessed in the last BCI edition released in March.

It said the economy is still in an expansionary mode albeit with a downward trend. Against 38% in the previous survey, only 30% respondents expect businesses to expand in the next six months. Only 24% of the respondents have plans for capital investment to expand capacity while the remaining 76% have no plan for expansion. When questioned to share reasons for not expanding, the energy shortage, security concerns, government policy and high cost of financing were highlighted as major impediments. Most businesses are neutral to youth business loan schemes, GSP Plus membership and banking credit. Businesses are neutral to the availability of banking credit because it is not the main source of funding for their investment plans. These factors were rated low on importance, the survey said.

The survey said that about 36% business entities are confident the federal government will improve the business situation in the next one to two years.

Retailers have the highest level of distrust in the current government. The top-ranked law and order issue impacting businesses negatively is kidnapping for ransom, the survey said.

Published in The Express Tribune, November 21^st, 2014.

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