Business confidence - down but stable

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Despite energy shortages and worsening socio-political and security situation, it seems like sentiment regarding business is stabilising. Despite a slight decrease in the Business Confidence Index (BCI), OICCI claims business stability has improved. According to OICCI, BCI aims to measure the sentiments prevailing in the market. The latest survey conducted by the Overseas Investors Chamber of Commerce and Investment (OICCI) in November 2011 shows that the business confidence index stands at -25 percent compared to -24 percent in the previous survey conducted in February 2011. The OICCI plays a very important role in facilitating foreign investment into Pakistan and contributes towards the growth of industry. OICCIs surveys collect responses from a diverse pool of businessmen, ranging from heads of multinational to owners of small businesses regarding the global and local industry and Pakistans business situation. The survey shows that the single biggest reason behind the decline in business in Pakistan is inflation, as in the current survey 43 percent of the respondents versus 36 percent in the previous survey opted for it. Other key factors behind the decline in business confidence include electricity and gas load shedding poor governance and poor policy implementation, and terrorism and suicide bombings, etc. Ironically the perception of law and order showed improvement in this survey compared to the last one. The survey shows that respondents think that the global business situation did not pick up; however, respondents believe that the business situation of their industry and company improved. The confidence of retailers and service sectors also showed improvement in the current survey relative to the last one. Despite this, an increase in unemployment is expected in the next six months in all sectors except manufacturing. The survey shows that only 31 percent respondents think that trade with India will impact positively, whereas, 38 percent of the respondents have pessimist view regarding trade with India. The manufacturing sector has a pessimist view on both trade with India and Afghan transit. Over the last two years, the trading volume of KSE has been very low. This, again, reflects the sentiment of low business confidence. On the whole, despite the slight stability seen in the business confidence the overall level is still quite low and serious efforts are needed to boost up business confidence.