Business confidence in Pakistan improves further, says survey

OICCI says stable macroeconomic indicators key reason


Our Correspondent May 06, 2016 3 min read
OICCI says stable macroeconomic indicators key reason. PHOTO: FILE

KARACHI:


Pakistan’s economic outlook is improving as a latest survey has revealed that the business confidence in the country has improved to a positive 36% (Oct-Mar), up 14 percentage points compared to 22% in Apr-Sep 2015.


The survey was conducted by the Overseas Investors Chamber of Commerce and Industry (OICCI).

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The results were part of the Business Confidence Index (BCI) Survey Wave 12 - a biannual assessment that has been sponsored by OICCI since June 2010. The respondents were from common companies as well as members of the OICCI, an association of 195 multinationals operating in Pakistan.

At positive 36%, the overall BCI score reflects a remarkable level of bullishness by the overall business community throughout the country - with the manufacturing sector leading the upswing with a positive 30%, up 17%, depicting a move back to an expansionary cycle. The retail and service sectors followed with net increases of 13% and 8%, respectively.

The business confidence of the leading foreign investors, which were represented by the OICCI members and were also part of the survey, kept pace with the overall increase by recording a similar increase of 14% to go up to 55% from 41% in BCI Wave 11 results.

Reason for improvement

Overall improved security and a stable macroeconomic situation in the country are the main reasons why businesses feel confident about their prospects.

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The business confidence has continuously improved since September 2014, as per the last three BCI surveys. The business confidence was at a positive 1% in September 2014 in BCI Wave 9, which significantly jumped to a positive 18% in March 2015 in BCI Survey Wave 10 and then to a positive 22% in November 2015 in BCI Survey Wave 11.

“The record high level of business confidence indicates that the business community is generally satisfied with the sustainability and the firm resolve of the authorities in effectively tackling law and order situation,” said OICCI President Shahab Rizvi.

The reduced cost of doing business due to reduction in petroleum product prices, low single digit inflation and borrowing rates and expectations of better economic condition following China-Pakistan Economic Corridor (CPEC) and other ongoing energy projects may have also contributed in boosting the confidence of the business community.

Similar to previous surveys, improvement in overall BCI was not one directional as several respondents expressed concern on the very same factors viewed favorably by the majority.

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Moreover, a significant portion of the respondents highlighted poor infrastructure/facilities and over regulation as well as lack of proper policy implementation as detrimental for existing investors as well as new investors in Pakistan. Businesses are seriously concerned with operational issues like delays in tax refunds, lack of reforms in rules and regulations in line with changing environment, cumbersome procedures and lack of accountability and slow decision making process.

The survey indicates that real estate and financial services sectors have flourished the most, followed by petroleum, and fast moving consumer goods (FMCG) sector. Tobacco, textile, motor vehicles and non-metallic sectors remained subdued.

How to keep up

Encouraged by the very positive results, Rizvi advised the government to leverage the positivity by taking bold growth-oriented policy initiatives, along with visible measures to improve governance through predictable, transparent and consistent implementation of policies.

He also said that provincial leaderships can effectively play the critical role they have in improving the business environment, as reflected in the very poor rating of Pakistan in the annual World Bank’s Ease of Doing Business surveys.

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Metropolitan cities across the country recorded higher business confidence with Sukkur, Quetta, Rawalpindi/Islamabad, Lahore, and Karachi, in order of priority, indicating a more positive outlook. While Faisalabad and Sialkot, the cities which respectively host the textile and non-metallic sectors, remained negative along with Peshawar and Multan.

Looking ahead, survey respondents expressed continuing optimism for next six months with 53% expecting expansion in business operations, 56% expecting increase in sales and profitability, 40% of the respondents planning new capital investment and 32% of the companies believe that their employment levels will increase over the next six months.

Conducted through field interviews in all four provincial capitals, Islamabad and key business towns across the country, the survey is based on feedback from representatives of all business segments in Pakistan, including retail covering roughly 80% Gross Domestic Product (GDP) of the country.

Published in The Express Tribune, May 6th, 2016.

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