OICCI survey: Business confidence goes down but only slightly

Rising costs, energy crisis and deteriorating law and order cited as reasons.

KARACHI: Businesses across Pakistan have conveyed a minor decline of 1% in business confidence in March 2014 compared to 2% in August 2013 mainly due to the rising cost of doing business, energy crisis and deteriorating security environment, OICCI bi-annual survey revealed. 

Announcing the survey results, Overseas Investors Chamber of Commerce and Industry (OICCI) President Asad S Jafar on Tuesday said that more businesses have hinted at expanding capacity, planning new investments and seeking to increase the work force.

However, he also said that the investors expect better governance from federal as well as provincial governments to tackle major issues pertaining to the economy.

The survey results are part of Wave 8 of Business Confidence Index (BCI) survey that OICCI has been conducting bi-annually since 2010.



According to Jafar, confidence had picked up strongly in mid 2013 on the back of smooth political transition and the expected reforms program of the new PML-N government.

Business sector performance

Talking about the performance of sub-sectors in this survey, Jafar informed that manufacturing sector posted stronger confidence than the retail and services sector. The sentiments of manufacturing sector surged to 12% in March 2014 against 4% in August 2013. This is in line with the strong 6.4% year on year growth posted by the manufacturing sector during July to December 2013.

The services sector confidence index dipped to negative 3% in March 2014 against positive 5% in August 2013. Whereas, the retail sector has shown the sharpest decline as its confidence index was down to negative 15% in March 2014 from negative 6% in August 2013.

Reasons for dip

Jafar said that the minor decline in BCI in March was due to rising cost of doing business, persistent energy crisis and deteriorating security environment. Investors have listed frequent power cuts and gas shortage as the single biggest reason for lower confidence (49% in March 2014 against 47% in August 2013).

Despite steps taken by government including paying out circular debt to improve supply of electricity and hike in power tariffs to reduce subsidy – energy crisis, it seems, has not eased for a vast majority of business entities.

Deteriorating law and order environment led as the second biggest deterrent of business confidence (47% in March 2014 against 42% in August 2013). The most surprising part of the survey has to be the fact that these obstacles to doing business have become a much bigger issue in 2014 with 39% of firms listing it as the top problem faced by their business – a sharp increase from 26% in August 2013.

This is quite surprising as the expectations of investors were high that the new federal and provincial governments would improve governance and transparency.

The BCI survey of OCCI is largely attitudinal and is carried out to evaluate business sentiments. The survey reflects feedback from a cross section of business people representing approximately 80 % of the GDP and operating in major cities of Karachi, Lahore, Faisalabad, Multan, Peshawar, Quetta and Islamabad-Rawalpindi.

Published in The Express Tribune, March 26^th, 2014.

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