Pakistan’s business climate has worsened, say investors

They, however, indicate improvement in country’s global perception

KARACHI: Despite improvement in Pakistan’s ranking on the Ease of Doing Business Index of the World Bank and better international perception of the country, businessmen in Pakistan are not happy as a majority of US investors have rated the business environment poorer than last year, in a perception survey conducted by the American Business Council (ABC).

According to the survey, over 59% of the respondents indicated that the international perception of Pakistan had become better. This is a marked improvement over FY18 when 57% of the participants rated it as being the same.

However, 61% of the respondents said the business climate of Pakistan had worsened when compared to the year before and 40% of the participants felt that it had become even more difficult to do business in Pakistan.

ABC is one of the largest investor groups in Pakistan with 65 members which contribute a sizeable amount to the national exchequer in direct and indirect taxes. Last year, the members contributed Rs109 billion and exported goods worth Rs40.64 billion.

The survey allowed ABC members to rate their satisfaction over various economic, regulatory and political factors that affected the performance and growth of business over FY18-19. The ease of doing business was about government processes, like licences, tax submission process and paperwork for import and export, which no doubt had improved, said Elixir Securities’ Director Hamad Aslam.

“Ground realities like devalued rupee, interest rate, buying power, etc are different things, which have a negative impact in a different way,” he explained.

“Ease of doing business is about hard facts and government rules while surveys are sentiments which only improve when businessmen make money and currently that is happening,” he said.

In FY19, the rupee depreciated 35% against the US dollar to an all-time low and policy rate increased to 13.25% as of November, one of the highest in the country’s history owing to high inflation.

“Higher interest rate means increase in financial cost, or hike in gas prices means jump in production cost, which wipes out profits of businessmen and they will not be happy just because government processes have been streamlined,” he said.

However, a positive indicator was that over 90% of the respondents were optimistic about the long-term (more than two years) economic and operating climate.

The survey also revealed the optimism of American investors with over 40% of the respondents seeing Pakistan as one of the many destinations for near-term global investment plans and quite a few considered Pakistan as the top priority for future investment.

“I am very optimistic about the future of the country. After a very long time, the country is spearheaded by an honest, committed and hardworking leader,” said American Business Council of Pakistan President Adnan Asad.

“The first year was geared towards correcting the course and putting Pakistan on track; the country had to pay for it by way of price hikes, inflation and extremely high interest rate.”

He foresaw 2020 as a stable year with the economy settling down and the business environment improving and normalising.

Published in The Express Tribune, December 13^th, 2019.

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