Pakistan’s overall business morale posts a sharp fall: survey

KARACHI: Country’s business morale is ebbing lower primarily owing to increasing uncertainties over politics, governance, macroeconomics, industrial growth, investment inflows, and wobbly world economy, a survey showed on Tuesday.

“The overall business confidence in Pakistan [currently] stands at 14 percent positive, a significant decline from the 21 percent positive recorded in November, 2017,” the results of Business Confidence Index (BCI) Survey – Wave 16, conducted by Overseas Investors Chamber of Commerce and Industry (OICCI) showed.

The OICCI in a statement said the survey results were largely influenced by the pessimism in the retail and wholesale trade sector, which recorded a sharp decline in business confidence to positive 6 percent compared to positive 40 percent in the Wave 15.

“The confidence of the manufacturing sector was stable at 15 percent positive, while the services sector was bullish at 23 percent positive compared to 15 percent recorded in Wave 15,” the statement said.

OICCI BCI survey, conducted every six months, is a comprehensive review of both local and global business aspects and is indicative of the direction in which the economy is moving based on the perceptions of key stakeholders of the business community across the country and representing about 80 percent of the GDP.

The chamber said based on respondents’ feedback, the major factors denting business confidence were a combination of significantly reduced perceptions of global, local, and industrial situation during the past six months and also in the next six months, as well as decreased level of anticipated capital investment, profitability and return on investment over the next six months.

“The growing concern on governance and government policies, inflation and security conditions together with pessimism about the future due to upcoming election related political uncertainty and developing energy crises were stated as the leading reasons for the decline of the business confidence,” the OICCI survey said.

It added that the sentiments of the leading foreign investors, represented by the OICCI members, who were part of the survey, also recorded a decrease, albeit by 4 percent only, to go down to 38 percent from 42 percent in the Wave 15 results.

The survey also showed that despite an increase in the BCI for Lahore and Rawalpindi, the overall score for metros declined by 8 percent as Karachi’s score slumped 18 percent, whereas the score for non-metros declined marginally by 3 percent.

“Looking ahead, for the next six months, the major reasons identified by Wave 16 respondents for decline was in terms of the lower profit and rate of return expectations and upcoming political instability,” the OICCI survey showed.

It further added that return of energy crises was also a reason for increasing pessimism about the future followed by concern on the sustainability of the security situation.

Among the positive aspects, it said, was a directional increase in total number of employees, plans for business expansion, security improvement, expectations of new business alliances like China-Pakistan Economic Corridor (CPEC), and an increase in demand.

Bruno Olierhoek, president OICCI, said the significant decline in business confidence was not surprising, considering the country had had many challenges during the past six months like balance of payment crisis, political uncertainty, and related media hype on non-economic issues, decline in foreign exchange reserves and significant weakening of exchange rate and inclusion in FATF grey list together with regular concerns on economy reported by local and international media.

“OICCI members believe that this situation should be taken as a wake-up call by the highest authorities and leaders, who should, by proactively engaging with key stakeholders of the economy, like OICCI, resolve current concerns of investors on matters of taxation, mounting tax refunds and circular debt,” Olierhoek said.

He added that the government should also focus on harmonisation of policies across different federal and provincial jurisdictions, supported by visible improvement in good governance and a policy framework which is progressive, transparent, consistent and predictable.

Olierhoek added that the OICCI members were confident that with genuine public-private partnership and proactive and timely interventions by the authorities on all issues hindering investment and economic activities, Pakistan could achieve much higher economic growth.