The Overseas Investors Chamber of Commerce and Industry (OICCI) has shared the results of a comprehensive Business Confidence Index (BCI) Survey, Wave 23, conducted throughout the country from March to April 2023. This survey has highlighted the views of the overall Business Confidence (BCS) in Pakistan, which has significantly declined and now stands at negative 25 percent (-25%). This is a decrease of 21 percent, compared to BCI of negative 4 percent (-4%) in the previous Wave 22 Survey conducted in September to October 2022.
The largest drop was recorded in the “Manufacturing sector” (22 percent), followed by “Retail & Wholesale trade” (21 percent), and “Services sector” (18 percent). The survey sample consisted of 42 percent of respondents from Manufacturing sector, 35 percent from the Services sector and 23 percent from the retail/ wholesale trade. Overall, the Manufacturing sector recorded a net confidence level of negative 19 percent, whereas services and retail sector stood at negative of 26 percent and 35 percent respectively.
The three major threats to business growth identified in the survey are super high Inflation, by 82 percent respondents, High Taxation (74 percent), and Pak Rupee Devaluation (72 percent) which could potentially slow down business growth in Pakistan, which remained consistent to feedback from the last wave of BCS.
Amir Paracha, President of OICCI observed, “The significant drop in the overall Business Confidence was not a surprise considering the volatile and extremely challenging economic situation during the past year. The acute FX shortage throughout this period has affected import and operations of many businesses, with hyperinflation, very high interest rates, and rapid devaluation of the currency negatively impacting the business environment”.
The OICCI BCI Survey is conducted periodically across nine cities, covering 80 percent of the GDP, with higher weightage given to key business centres of Karachi, Lahore, Rawalpindi-Islamabad, and Faisalabad. The OICCI Survey feedback covers the business environment at regional, national, sectorial, and own business entity levels in the past six months and the anticipated business and investment environment in the next six months.
Overall, three-fourth (75 percent vs 56 percent in previous wave) survey respondents were negative on the business environment in the past six months and going forward 23 percent (vs only 2 percent in the previous survey) were negative for the next six months. The survey respondents expressed a gloomy business outlook for the next 6 months.
The sentiments of the OICCI members, the leading foreign investors, who were also randomly included in the survey, stand at negative 19 percent, which is substantially lower, compared to the positive 6 percent in the previous wave. However, OICCI members’ business confidence stands is still lower than non-members and that has been a trend for a long period.
M. Abdul Aleem, CEO OICCI, observed that “Foreign investors feedback highlights their concern due to extreme restrictions on LCs for business operations, extreme delays in overseas remittances for goods, services and dividends, besides fast diminishing return on their investment in Pakistan.”
Going forward, one-fourth of the respondents indicated new capital investment plans, expansion in business operations and employment, at a level significantly lower than wave 22. The plan for new investment declined to negative 26 percent, followed by plan to increase employment to negative 11 percent and expansion in business to negative 8 percent.