OICCI Business Confidence Index: Business sentiment sees significant improvement

With overall business sentiment showing improvement over last six months, the confidence level of leading foreign investors operating in Pakistan has declined, the OICCI said Thursday. This was revealed by the Wave 11 results of Business Confidence Index (BCI) Survey the Overseas Investors Chamber of Commerce and Industry (OICCI) shared with journalists here at the Overseas Chamber office.
The results were unveiled by President OICCI Atif Bajwa and Secretary General M Abdul Aleem. BCI's 11th survey shows a further four percent improvement over the previous one, Wave 10, announced in April. At 22 percent positive, the overall BCI score showed further improvement as compared to 18 percent positive in Wave 10. Improvement was recorded in all sectors with the retail sector once again leading the upswing with 25 percent positive sentiment, showing 10 percent growth. The services and manufacturing sectors followed with a modest net increase of 3 and 2 percent, respectively.
Notably, though overall business sentiment increased over the last six months, confidence level of leading foreign investors declined in comparison to Wave 10 results, with OICCI members' score going down 7 percent. "This could be due to strong resentment on the imposition of the new "super tax" at rate of 3 and 4 percent in the Finance Act 2015," said President OICCI Bajwa. The levies, the banker said, impacted "most" of the large foreign investors who also were "frustrated" with long delays in the tax refunds process.
Additionally, improvement in overall BCI was not one directional as a number of respondents expressed concern on the very same factors viewed favourably by the majority. Specifically, the real estate, tobacco and transport and communication sectors flourished most, followed by petroleum, chemicals and financial services. Textile and cement sectors, on the other hand, remained subdued. "We still think that OICCI members are net positive," Bajwa told reporters insisting that the decline in foreign investors' confidence was "in positivity".
Metropolitan cities across the country recorded higher business confidence with respondents from Karachi, Rawalpindi and Islamabad, Sukkur and Quetta indicating a more positive outlook. Faisalabad and Sialkot, which respectively host the textile and non-metallic sectors, remained negative. "The authorities' resolve to tackle law and order issues, especially in Karachi and northern areas, coupled with improved energy management were among the key drivers for improved business confidence," said Bajwa.
He said the record low level of inflation and borrowing rates together with wider media coverage of upcoming projects, especially those related to China-Pakistan Economic Corridor, as well as a relatively stable political environment, have all helped boost business confidence as revealed in the survey. Going forward, the survey respondents expressed continuing optimism for next six months with 42 expecting increase in sales, 37 percent forecasting growth in profitability and one-third planning expansion in their businesses.
Summarising the survey results, Bajwa said positive business sentiment should not be taken for granted and drive focus away from critical actions needed to address key issues hindering good governance and ease of doing business. Pakistan's rating has gone down further in this year's World Bank report on "Ease of Doing Business" and there is an alarmingly low level of FDI in the country over the past few years.
The authorities need to devise strategies to address issues of policy implementation, lack of co-ordination among federal and provincial authorities, tax anomalies and settlement of the long pending tax refunds through proactive engagement of key stakeholders. Conducted through field interviews in all four provincial capitals, Islamabad and key business towns across the country, the survey is based on feedback from representatives of all business segments in Pakistan, including retail, and covers roughly 80 percent Gross Domestic Product. The 195-member OICCI, a collective voice of major foreign investors from 35 different countries, has a presence in 14 sectors of economy and contribute over one-third of Pakistan's total tax revenue.