Major multinational companies with operations across a variety of sectors in Pakistan have lost faith in the country’s economy. In the previous six months, the Business Confidence Score (BCS) as a whole decreased by 21 percentage points to a negative 4 per cent.
In the earlier survey, which was conducted in March–April 2022, the score (BCS) was positive 17 per cent. In general, more than half of respondents (56 per cent vs. 19 per cent in the prior study) had a “poor” opinion of the business environment in the previous six months.
“Going forward, only a net 2 per cent (versus 18 per cent in the previous survey) were ‘positive’ for the next six months and 35 per cent of respondents cited no plans to invest,” according to the “Business Confidence Index Survey Wave 22” of the Overseas Investors Chamber of Commerce and Industry (OICCI), which was held from September to November 2022.
According to Express Tribune, political unrest, currency depreciation, and rising fuel prices were the top three factors contributing to the recent drop in business confidence. The other two top-five factors contributing to the recent drop in company confidence were the current energy crisis (high power costs) and inadequate commercial and trade policies.
The services industry experienced a confidence decline of 24 per cent, followed by the retail and wholesale trade sectors (22 per cent), and the industrial sector (20 per cent). 25 per cent of respondents were from the retail and wholesale trade, 33 per cent from the services industry, and 42 per cent from the manufacturing sector.
Commenting on the survey results, OICCI President, Ghias Khan said in a statement that “The substantial decline in the overall business confidence to negative 4 per cent is regrettable but not surprising considering the highly challenging political and economic situation witnessed during the past six months.”
“The record level of rains during August leading to severe flooding in Sindh and other parts of the country further restricted business activities,” he added.
“Foreign investors’ feedback could have been more positive but for serious concerns on a few critical issues like the undue delay in revising the pharma pricing and the extreme delays in overseas (outward) remittances for goods, services and dividends. Such actions are seriously counter-productive when trying to attract FDI (foreign direct investment) into the country,” Khan expounded.
The main factors affecting business confidence in the country are anticipated to remain political unrest, rising fuel prices, and rupee depreciation.
OICCI Vice President, Amir Paracha noted that “These are challenging times. Authorities are doing all they can to navigate the situation, including controlling inflation, managing the economy with restricted availability of foreign exchange and other resource constraints.”
“The key stakeholders, especially foreign investors, will continue to support the authorities in taking long-term policy measures to streamline the economic fundamentals, including fair taxation for all, and facilitate business and investment into the country,” he added.
According to the most recent survey results, the confidence index for business expansion (extra investment) plans over the next six months has decreased to 18 per cent from 34 per cent in the previous survey/W21.
Similarly, capital investment (new) plans for the following six months fell sharply to 2 per cent (from 21 per cent in the previous wave).
Compared to Wave 21, just 7 per cent of respondents in Wave 22 reported an increase in overall employment. A drop in overall employment over the previous six months was mentioned by almost 11 per cent of respondents.
According to the trade body, “OICCI is the collective voice of major foreign investors. Over 200 members, from 31 different countries, have a presence in 14 sectors of the domestic economy and contribute over one-third of Pakistan’s total tax revenue.”
In the meantime, on Wednesday, the interbank market saw the rupee fall 0.02 per cent (or Rs0.05), falling to a two-month low of Rs224.16 against the US dollar.
