Business confidence in Pakistan rises

OICCI survey says security and macroeconomic stability has helped situation

KARACHI: The overall business confidence in the country has improved relative to March 2015, stated a survey result that is part of the Business Confidence Index (BCI) Survey Wave 11, a biannual assessment sponsored by the Overseas Investors Chamber of Commerce and Industry (OICCI).

Improved security and a stable macroeconomic situation were the reasons behind the increase in confidence, which rose four percentage points from 18% to 22%, according to the survey.



The business confidence has continuously improved since September 2014, as per the last two surveys. The last BCI Survey Wave 10 was conducted in March 2015 in which the overall business confidence was at positive 18%, a significant improvement of 17% from just the 1% in the survey conducted about a year ago in September 2014.

“The firm resolve of the authorities to tackle law and order issues, especially in Karachi and northern western parts of the country, and improved energy management were among the key drivers for improved business confidence,” OICCI President Atif Bajwa said while sharing survey results with reporters at the OICCI head office on Thursday.

“The survey revealed that record low inflation and borrowing rates, wider media coverage of upcoming projects including the China-Pakistan Economic Corridor projects, and relatively stable political environment have all helped boost business confidence,” he added.



Retail sector shines

Although improvement was recorded in manufacturing, services and retail sectors, the most notable jump was seen in the retail sector which improved by 10% points from 15% to 25%.

This was due to higher consumption driven by household spending and businesses as a direct result of lower inflation.

Sentiments in manufacturing and services improved from 31% to 34% and 11% to 13%, respectively.

Despite the fact that overall business confidence improved, the business confidence of multinationals that are part of OICCI declined notably from 48% to 41%. “This could be due to strong resentment on the imposition of the new ‘super tax’ of 3% and 4% rate in the 2015-16 Finance Act, which impacts most of the large foreign investors, who are also frustrated with the long delays in the tax refund process,” Bajwa said.



The survey respondents said that energy shortage in the country is still their biggest concern. Following energy, leading concerns are over cost of production, security and law and order.

Concerns over energy shortages dropped from 56% to 46%, concerns on the increase in cost of production dropped slightly from 42% to 40% and concerns over security situation declined from 44% to 36% compared to last survey which was conducted in March 2015.

Sectors like real estate (68%), tobacco (38%), transport and communication (37%), Petroleum (32%), Chemicals (31), Finance (31%) were the highest scoring sectors. Whereas, textile (-15%) and non-metallic (11%) were the most conservative sectors.



Metropolitan cities across the country recorded higher business confidence with Sukkur (56%), Quetta (35%), Karachi (29%), Rawalpindi and Islamabad (24%) scoring positive outlook. Faisalabad (-15%) and Sialkot (-8%) had the lowest score because of the low performance of textile and non-metallic sectors in the two cities.

Looking ahead, survey respondents expressed continuing optimism for the next six months with 49% expecting increase in sales volumes, 33% expect to expand businesses and 26% plan to make capital investments.

Summarising the survey results, Bajwa said that positive business sentiment should not be taken as an excuse to drive focus away from critical actions that are needed to address key issues hindering good governance and ease of doing business.

Published in The Express Tribune, December 4^th, 2015.

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