Major foreign businesses operating across diversified sectors in the country have lost confidence in Pakistan’s economy. The overall Business Confidence Score (BCS) dropped 21 percentage points to negative 4% in the past six-months.
The score (BCS) stood at a positive 17% in the previous survey conducted in March- April 2022. Overall, more than half (56% versus 19% in the previous survey) respondents were ‘negative’ on the business environment in the past six months.
“Going forward, only a net 2% (versus 18% in the previous survey) were ‘positive’ for the next six months and 35% of respondents cited no plans to invest,” the Overseas Investors Chamber of Commerce and Industry (OICCI) said in its ‘Business Confidence Index Survey Wave 22’ conducted during September-November 2022.
In the past six-months, the top three reasons for decline in business confidence were political instability, rupee devaluation and high fuel prices. The prevailing energy situation (high electricity cost) and ineffective commercial and trade policies were the other two strong reasons, among the top-five, for the decline in business confidence in the recent past.
The highest drop in confidence was recorded in the services sector (24%), followed by retail and wholesale trade (22%), and the manufacturing sector (20%). The survey sample consisted of 42% respondents from the manufacturing sector, 33% from the services sector and 25% from the retail and wholesale trade.
Commenting on the survey results, OICCI President, Ghias Khan said in a statement that “The substantial decline in the overall business confidence to negative 4% is regrettable but not surprising considering the highly challenging political and economic situation witnessed during the past six months.”
“The record level of rains during August leading to severe flooding in Sindh and other parts of the country further restricted business activities,” he added.
“Foreign investors’ feedback could have been more positive but for serious concerns on a few critical issues like the undue delay in revising the pharma pricing and the extreme delays in overseas (outward) remittances for goods, services and dividends. Such actions are seriously counter-productive when trying to attract FDI (foreign direct investment) into the country,” Khan expounded.
Political instability, the increase in fuel prices and rupee devaluation are expected to remain the top factors to reduce business confidence in the country.
OICCI Vice President, Amir Paracha noted that “These are challenging times. Authorities are doing all they can to navigate the situation, including controlling inflation, managing the economy with restricted availability of foreign exchange and other resource constraints.”
“The key stakeholders, especially foreign investors, will continue to support the authorities in taking long-term policy measures to streamline the economic fundamentals, including fair taxation for all, and facilitate business and investment into the country,” he added.
The latest survey result indicates that the confidence index with respect to the expansion (additional investment) plans of businesses in the next six months has declined to 18% (versus 34% in the previous survey/W21).
Likewise, capital investment (new) plans, for the next six-months, decreased significantly to 2% (versus 21% in the last wave).
Overall, only 7% respondents in Wave 22 cited an increase in total employment (versus 16% in the previous wave). Around 11% of the respondents cited a decrease in total employment in the past six months.
According to the trade body, “OICCI is the collective voice of major foreign investors. Over 200 members, from 31 different countries, have a presence in 14 sectors of the domestic economy and contribute over one-third of Pakistan’s total tax revenue.”
Meanwhile, the rupee slipped 0.02% (or Rs0.05), hitting a two-month low at Rs224.16 against the US dollar in the interbank market on Wednesday.
Published in The Express Tribune, December 8th, 2022.
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