Cautious approach: Investors play safe, want quick settlement

FPCCI says confidence of investors has been shaken.

KARACHI:

When the PML-N took the reins of the country in June last year, few businesspersons would have thought that the government, which is perceived to be pro-business, will face such a strong protest movement within 15 months.

The situation took a sharp turn in mid-August when long marches and sit-ins by two political forces forced investors to play safe while considering their short and long-term investment plans.



According to some investor accounts, persistent protests in Islamabad have not only hurt the economy, but more importantly, have dented the confidence of local and international investors in the country’s economic progress.

“The on-going protests and sit-ins have put a question mark over political stability, which no business, whether small or big, can afford,” said Asad S Jafar, President of Overseas Investors Chamber of Commerce and Industry (OICCI), an association of over 195 multinational firms operating in Pakistan.



OICCI, whose members come from 35 different countries, conducts surveys regularly to determine the mood of investors.

It released on Friday a quick survey on the on-going agitation against alleged election rigging. About a third of the respondents expect a fresh review of their investment plans for the next three years, indicating that the investors are perturbed about the prospects of future capital injections.



Earlier in an interview with The Express Tribune in May this year, Jafar had, however, said despite unfavourable conditions OICCI members were planning to invest around $3 billion over the next five years. In the survey, over 50% of respondents said recent events had caused the postponement or cancellation of scheduled business meetings in Pakistan with overseas shareholders and regional management.

Apart from long-term repercussions, there was some immediate ripple effect on business operations and product distribution. About 40% of respondents expect a decline in sales and profitability with a possible drop in tax payments.

Similarly, a majority of them (62%) foresee serious damage to the 2014-15 fiscal targets of the government.

“Pakistan is a country that offers a lot of business opportunities and that’s why many of our long-term investors look at it positively. But yes, the protests are detrimental to the investment plans, especially for the short term,” Jafar added.



Bearing the brunt

Talking to The Express Tribune, Federation of Pakistan Chambers of Commerce and Industry (FPCCI) President Zakaria Usman said investor confidence had borne the brunt of the political standoff as it had been shaken to the core.

“The current crisis will continue to haunt the country at least for months, if not for years,” remarked Usman, who represents the apex trade and commerce body of the country.

Endorsing the OICCI survey, he said multinational companies must have been disturbed by the political impasse. “Nobody will invest when your country and the government are stuck in such a crisis.”



He was of the view that the politicians could not even estimate the loss businesses had suffered in the past few weeks, adding many of the business people were just looking at factors that were tangible and could be calculated like the loss of factory output, decline in exports and imports, etc.

“But what about the impact on future investment that may get late or probably will never come. The decline in confidence of investors, especially foreign investors, is intangible and irreversible,” he said.

Taking a cautious stance, Pakistan Business Council Chief Executive Kamran Y Mirza stressed that it was too early to say that investor’s trust in the economy had been badly hit and investments would drop in coming days.



PBC, a business policy advocacy body that represents 44 leading conglomerates of Pakistan, enjoys a considerable influence in the policymaking circles.

“It is good that the situation is still in control of the authorities. But we wish to see it (political crisis) settled as early as possible,” Mirza remarked.

Published in The Express Tribune, September 8^th, 2014.

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