Pakistan could not sustain higher business confidence

Survey shows confidence drops in Apr-Sept after a big rise earlier

KARACHI: After showing a massive surge six months ago, business confidence in Pakistan dropped to 17% for April-September 2016, down 19 percentage points from 36% in October-March 2015-16, according to a survey conducted by the Overseas Investors Chamber of Commerce and Industry (OICCI).

The results were part of the Business Confidence Index (BCI) Survey Wave 13, held in September and October 2016 and a biannual assessment that had been sponsored by the 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.

The survey showed a decline in business confidence across all segments of trade and industry. The respondents identified energy shortage, price increase, security, law and order, government policies and regulations, decline in exports, negative impact of new tax laws and a volatile political environment as some of the key concerns, according to a press release.



“Latest survey results, despite being significantly positive versus two years ago, represent a significant correction compared to the previous survey in April 2016. Hence, this should be taken as a key watch out for the government,” OICCI President Shahab Rizvi commented.



Part of the correction could be natural rebalancing of feelings with the euphoria of initial positivity cooling down. However, another part was driven by perceived and real concerns over taxation, inconsistency of policies and management of security and energy issues.

A quick, decisive and visible action from the government was needed in these areas to arrest a potential decline in future surveys, he added.

The decline was noted in the overall business confidence in all sectors. Confidence in the services sector went down by 28%, retail sector 21% and manufacturing sector 12%.

Sentiments of leading foreign investors, represented by the OICCI, followed the drift and showed a fall of 9 percentage points to 46% in the Wave 13 results.

Across varying business sectors, the results reflected that automobile (42%), financial services (37%), food (25%) and chemical (25%) had been the most flourishing sectors followed by transport and communication (23%), petroleum (22%), non-metallic (20%) and retail and wholesale (17%).



However, real estate (8%), textile (8%) and tobacco (-22%) came out as the most conservative sectors in the survey.

Cities with a positive outlook were Lahore (29%), Rawalpindi/Islamabad (22%), Karachi (18%) and Sialkot (12%) while Peshawar (8%), Multan (4%), Faisalabad (1%) and Quetta (-14%) recorded a declining confidence level.

The business confidence for the next six months is positive, but considerably less bullish than the previous survey of April 2016. Businesses are expecting to increase employment in the next six months, but in low proportion compared to the preceding six months.

Many of the survey respondents were optimistic in terms of increase in demand due to expected economic growth and ongoing major infrastructure and China-Pakistan Economic Corridor (CPEC) projects.

There was also some optimism for the next six months with expectations of increase in sales, profits and return on investments with 35% indicating an expansion in their businesses.

“The BCI survey provides a very solid incentive to the authorities to keep focus on improving security and energy situation besides streamlining governance in commercial matters,” said Rizvi.

He emphasised the need for increased interaction with the business community to drive collaboration in order to improve the overall perception, remove communication gaps, improve on the Ease of Doing Business parameters and, above all, ensure sustainability and avoid surprises on policy matters.

OICCI members believe that there is a great opportunity for Pakistan to attract investment and realise its true economic potential.

Published in The Express Tribune, November 23^rd, 2016.

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