Pakistan’s business morale hits record high
KARACHI: The overall Business Confidence Score (BCS) in Pakistan now stands at positive 9 per cent, a record improvement from the previous negative 50 per cent score in the Wave 19 Survey conducted in May 2020, a statement said on Monday.
The Overseas Investors Chamber of Commerce and Industry (OICCI) conducted a comprehensive Business Confidence Index (BCI) Survey – Wave 20 throughout the country during May to July 2021, it added.
A positive BCI was last seen during Wave 16 conducted in April 2018.
The OICCI’s BCI Survey is being conducted periodically and is a comprehensive feedback from the frontline business stakeholders of their views on the environment and opportunities impacting their respective business operations.
The feedback covers the business environment at regional, national, sectorial, and own business entity levels in the last six months, as well as the anticipated business and investment environment in the next six months.
This survey is done face-to-face across the country in nine cities, covering 80 per cent of the GDP, with higher weightage given to key business centres of Karachi, Lahore, Rawalpindi-Islamabad, and Faisalabad.
The survey sample consisted of 40 per cent respondents from the manufacturing sector, 35 per cent from the services sector and 25 per cent from the retailers/wholesalers, the statement said.
The confidence of the business community across Pakistan shifting over from negative territory in the last survey to positive territory is driven by all the three segments, manufacturing, services, as well as the retail/wholesale sectors, with the first two recording an increase of 65 per cent each, (manufacturing from -48 per cent to positive 17 per cent and services from -59 per cent to positive 6 per cent), while the retail/wholesale sector went up 44 per cent from -44 per cent to zero).
As the lockdown restrictions have been lifted, many of the manufacturing concerns have gone back to their 100 per cent capacity of production and are able to sell their products even during the lockdowns, which positively impacts all business sectors.
The retailer and wholesalers were largely affected by the Covid-19 restrictions, as their business hours were cut short, resulting in income, cash flow and other issues. This segment also believes that the next six months will fare better with more sales, profits, and a better situation overall for Pakistan.
Commenting on the improved BCS, Irfan Siddiqui, president of the OICCI, said: “The results of the BCI Survey suggest a very dramatic turnaround in the confidence of businesses, including foreign investors. Despite challenging macroeconomic indicators such as the high exchange rate, accelerated inflation, partially offset by reduced bank interest rate, the Wave 20 BCI feedback strongly reflects optimism of the business community moving forward, contrary to the pessimism in the previous Wave 19.”
“The key drivers of this optimism, and turnaround in sentiments are the business community’s strong positive perception towards the future, specifically the next six months. Through proactive economic and social policy measures taken by the authorities supported by the rollout of vaccines, the government appears to have succeeded in building confidence among the key economic stakeholders,” Siddiqui added.
The fiscal budget 2021/22 proved to be a hit among the business community, as the BCI score was significantly higher post-fiscal budget, with respondents perceiving those policies are now more transparent, consistent, and predictable and expecting improvement in their business-related KPIs over the next six months.
The main driving force for the huge turnaround in the Wave 20 Business confidence score is the significant increase in optimism of respondents for the next six months in respect of their respective city’s business situation (+21 per cent), industry business situation (+19 per cent), own business situation (+20 per cent), anticipated sales volume increase (+20 per cent), profit increase (+22 per cent) and return on investment increase (+19 per cent).
The sentiments of the OICCI members, the leading foreign investors, who were randomly included in the survey, has also recorded a sharp turnaround, and witnessed an improvement of 108 per cent, from 74 per cent negative in Wave 19, to 34 per cent positive in the latest BCI Wave 20 survey, surpassing the overall countrywide BCI of 9 per cent.
Commenting on the concerns expressed by several respondents, OICCI CEO/secretary general M Abdul Aleem said: “The three major threats to business growth identified in the survey, are corruption (67 per cent), volatile energy costs (66 per cent) and currency devaluation (60 per cent), which could potentially slow down [the] business growth in Pakistan. Nine of the 10 survey respondents believe that Covid has made it difficult to perform day-to -day business operations.”
Looking ahead, the survey respondents expressed continuing optimism in the next six months with 25 per cent (negative 35 per cent in Wave 19), expecting expansion in business operations, 39 per cent (12 per cent in Wave 19) of the respondents planning new capital investment and 12 per cent respondents (negative 31 per cent in Wave 19) indicated plans for increased employment in their respective businesses.
The OICCI is the collective voice of major foreign investors in Pakistan. The over 200 OICCI members, from 35 different countries, have a presence in 14 sectors of the economy and contribute over one-third of Pakistan’s total tax revenue, besides facilitating transfer of technology and skills and providing employment to a sizeable number of people.
A total of 57 OICCI member companies are listed on the Pakistan Stock Exchange and 50 members are associates of the 2020 Global Fortune 500 companies. Besides their business operations, the OICCI members realise their corporate social responsibilities and are major contributors to various CSR activities benefitting 6.2 million people from underprivileged communities in 2020.
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