Home »Business and Economy » Pakistan » Business confidence declines during last six months: OICCI survey

  • News Desk
  • May 14th, 2017
  • Comments Off on Business confidence declines during last six months: OICCI survey
Business confidence in Pakistan has declined during the last six months due to challenges the country is facing in energy, security and government policies, according to a recent survey conducted by the Overseas Investors Chamber of Commerce and Industry (OICCI). OICCI announced the results of the Business Confidence Index Survey (BCI) - Wave 14- conducted throughout the country in March/April 2017.

Overall Business Confidence Score (BCS) remains positive, but the positively has declined from 17% in November'2016 to 13% in the latest survey with a drop of 4%. The OICCI April 2017 Survey released on May10, 2017 shows decline in business confidence among manufacturing and retail segments but improvement has been recorded in the services segment.

In line with the previous surveys the April 2017 BCI survey is also not one dimensional and a large number of respondents have expressed satisfaction, albeit with a lower BCS as compared to the previous survey, on a number of same matters which have been cited as concerns by a majority of respondents. The sentiments of the leading foreign investors, represented by OICCI members, who were randomly included in the current survey, also declined by 9% as compared to last November 2016 survey, but with a BCS of 37%, they continue to maintain significantly more positive sentiments than the remaining respondents, which augers well for future FDI inflow.

Commenting on the BCI results, OICCI President Khalid Mansoor said "downward trend in the business confidence, including amongst foreign investors, is alarming, considering current improved economic parameters, government focus on improving the energy and security situation, and the positive fall out expected from the ongoing CPEC projects". He added "OICCI members are confident that economic managers of the country will analyze key messages coming out of this latest comprehensive sentiment of the business community to take proactive corrective measures to reverse the trend."

The key factors affecting the current BCS results comprise of following indicators: -- Significantly reduced level (-17%) of capital investments foreseen in the next six months as compared to the plans in the previous survey.

-- Global, Pakistan and Industry business situations in the past six months were perceived as negative (-15%, -9% and -4%), which contributed significantly to the decline in Business Confidence Score.

-- Law & order situation/security concerns, energy shortages, inadequate basic Infrastructure, and high cost of doing business have been highlighted as key impediments for the low local and foreign direct investment in the country.

-- Around 76% business entities believed that law and order situation in Pakistan has improved. The respondents are not sure of the sustainability of the improved security situation. Moreover the increasing level of street crimes and occasional act of terrorism, like the one in Sehwan and Lahore during the period of this survey, have had serious negative impact on the image of the country and also affected their response in the survey.

-- Street Crimes (66%) followed by Kidnapping for ransom (57%) and Threats (52%) remain the major concern for businesses at all levels whether it is their own, customers' or suppliers businesses or their respective employees.

-- Energy crises remains one of the biggest concern among business entities which they feel will have a more negative effect in future. Moreover business entities once again have confirmed that they do not foresee the government to be able to solve the energy issues before elections in 2018. The pessimism on energy is more pronounced in wave 14 than before.

-- Existing Government policies such as increase of Circular Debt (71%), unsatisfactory Inter-provincial Co-ordination on Taxation matters (53%), and continuation of Super Tax for another year (51%) are the major government policies brought into spotlight by this survey that are adversely affecting the businesses.

-- Steady increase in inflation in the last few months has raised concern of rising cost of doing business.

-- Around 48% business entities mainly in the manufacturing and services sector highlighted Pakistan's declining exports as a matter of serious concern. Exporters identified high cost of doing business, especially energy cost, as an impediment.

-- Overall, 62 percent business indicated that recent revelations on offshore companies will negatively affect the trust level of investors/ businesses, in respect of government and regulatory institutions.

-- High or volatile energy cost (79 %) , bribery and corruption (79 %) , supply chain disruption (79 %), and intellectual property right (IPR) infringements (78%) have been identified as potential threats for growth of business entities.

During April 2017 survey services sector BCS recorded growth of 4 % to 18 % which is quite encouraging considering this sector had recorded the highest fall by 28 % (42 % in April 2016) in the November 2016 BCI survey. Both manufacturing and retail sector were down compared to November 2016 survey. Retail sector BCS went down by 4 % (from 17 %in November 2016 to 13 %) and the confidence of manufacturing sector also retreated by 9 % (from 18 % in November 2016 to 9 percent).

Sectorial business confidence reflected that financial services (58%), chemical/cement (25%), non-metallic (23%), and real estate (21%) as the most flourishing sectors followed by transport and communication (14%) and food (13%). However tobacco (-38%), Petroleum (-13%) and textile (-2%) came out as the most conservative sectors in the latest survey. Automobile industry confidence has recorded the steepest fall from a positive of 42% in November 2016 to only 4% in this survey-a fall by 38 %.

BCS of metro cities of Karachi, Lahore, Islamabad combined, declined and recorded a positive of 10% only, as compared to 19% in the previous survey, mainly due to fall in BCS of Lahore to a negative 3% from positive 26% in the previous survey.

BCS for Karachi on a stand alone basis declined to positive 10% v/s 17% previously whereas for Islamabad/ Rawalpindi registered a significant improvement and posted a BCS of 33% v/s 19% in the last wave 13 surveys. The BCS of non-metro cities of the four provinces improved to a positive 20% compared to 8% recorded In November survey.

OICCI members' response has been relatively more negative in the past six months on the local business situation as well as global situation and employment opportunities also seen to be constrained. This may have been caused by less than satisfactory interaction by authorities at the federal and provincial level, delayed resolution of pending issues like long pending tax refunds, lack of effective co-operation on inter provincial issues, increasing taxation on large businesses and insufficient dialogue on operational issues by the respective authorities. Imposition of super tax for yet another year appears to have become a major concern of OICCI members.

During wave 14, the overall business confidence scores have declined on two tiers, global and Pakistan whereas city business situation remain static and decline was noted in the business situation in own industry. Marginal improvement of one percent has been noted in own business of respondents. Manufacturing sector indicated that business situation had worsened at all tiers in past six months. Retail sector reported the decline at global, country and city level in the past six months, whereas services sector indicated drop at global and at their business level.



the author

Top
Close
Close