Inconsistent govt policies, energy challenges weaken business confidence

KARACHI: Business confidence among entrepreneurs in Pakistan weakened in September-October period as lingering concerns about energy challenges and inconsistent government policies hurt all the segments of trade and industry, a survey showed on Tuesday.

A survey, conducted by the Overseas Investors Chamber of Commerce and Industry (OICCI), showed a decline in business confidence across all the segments of trade and industry in the country, though it’s still in positive territory.

 “Overall business confidence score remains positive, but the positivity declined from 36 percent in April 2016 to only 17 percent with a drop of 19 percent,” said the survey, conducted throughout September and October.

The respondents expressed concerns over energy challenges, security issues, law and order, government policies and regulations, falling exports, negative impact of new tax laws and volatile political environment.

“This should be taken as a key watchout for the government,” a statement quoted Shahab Rizvi, president of OICCI as saying. “Part of this correction could be natural rebalancing of feelings with the euphoria of initial positivity cooling down.”

Rizvi said another part of this correction is driven by perceived and real concerns on taxation, policies inconsistency and management of security and energy issues. “We believe quick, decisive, and visible action from the government in these areas is needed to arrest potential decline in future surveys.”

Business confidence of manufacturing sector fell 12 percent, retail sector 21 percent and services sector 28 percent, according to the survey’s findings.

“The BCI survey provides a very solid incentive to the authorities to keep focus on improving security and energy situation besides streamlining governance on commercial matters,” Rizvi said. He said there is a need to increase interaction with the business community, drive a collaboration mindset, improve the overall perception, remove any communication gaps, improve ease of doing business parameters, ensure sustainability and avoid surprises on policy matters.

“There is a great opportunity for Pakistan to attract investment and realise its true economic potential,” he added.

The survey was conducted through field interviews in all the four provincial capitals, Islamabad and key business towns across the country. It is based on feedbacks from representatives of all business segments in Pakistan, covering approximately 80 percent gross domestic product.

Many of the survey respondents were optimistic in terms of increasing demand due to expected economic growth and ongoing major infrastructure and China-Pakistan Economic Corridor projects.

“The sentiments of the leading foreign investors, represented by the OICCI members, who were part of the survey, followed the drift and posted a lessening of 9 percent confidence to come down from 55 percent to 46 percent in the Wave 13 results.

Sectorial Business Confidence reflect that automobile  (42 percent), financial services (37 percent), food (25 percent), and chemical (25 percent) as the most flourishing sectors followed by transport and communication (23 percent), petroleum (22 percent), non-metallic (20 percent), and retail and wholesale (17 percent) sectors.

However, tobacco (-22 percent), real estate (8 percent) and Textile (8 percent) came out as the most conservative sectors in the latest survey.

Cities with positive outlook were Karachi (18 percent), Lahore (29 percent), Rawalpindi/Islamabad (22 percent), and Sialkot (12 percent), while Quetta (-14 percent), Faisalabad (1 percent), Multan (4 percent) and Peshawar (8 percent) have recorded a downward confidence level.

 “Going forward, the business confidence for the next six months is positive but considerably less bullish than the previous April 16 survey,” the statement said.

“Businesses are expecting to increase their employment in the next six months, but somewhat in lesser proportion compared to the last six months.”

The statement said there was also some optimism for next six months and expectation of an increase in sales, profits and returns on investment with 35 percent indicating expansion in their businesses.

“The BCI survey provides a very solid incentive to the authorities to keep focus on improving security and energy situation besides streamlining governance on commercial matters, increased interaction with the business community to drive a collaboration mind-set to improve the overall perception and remove any communication gaps,” Rizvi added.