Overseas Investors Chamber of Commerce and Industry (OICCI) shared the results of its comprehensive Business Confidence Index (BCI) Survey – Wave 20, conducted throughout the country from May to July 2021, which revealed that the overall Business Confidence Score (BCS) in Pakistan now stands at a positive score of 9 percent, a record improvement by 59 percent from the previous negative 50 percent score in Wave 19 Survey conducted in May 2020.
It may be noted that a positive BCI was last seen during Wave 16 conducted in April 2018.
OICCI BCI Survey conducted periodically, is 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 past 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% of the GDP, with higher weightage given to key business centers of Karachi, Lahore, Rawalpindi-Islamabad, and Faisalabad. The survey sample consisted of 40 percent respondents from the manufacturing sector, 35 percent from the Services sector, and 25 percent from the retailers/wholesalers.
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 recordings an increase of 65% each, (manufacturing from -48% to positive 17% and services from -59% to positive 6%) whilst the retail/wholesale sector went up by 44% (from -44% to 0). As the lockdown restrictions have been lifted many of the manufacturing concerns have gone back to their 100% capacity of production and are able to sell their product even during the lockdowns, which positively impacts all business sectors. Retailers 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 6 months will fare better with more sales, profits, and a better situation overall for Pakistan.
Commenting on the improved BCS, Irfan Siddiqui, President OICCI, observed “the results of BCI Survey suggests a very dramatic turnaround in the confidence of businesses, including foreign investors. Despite challenging macro-economic indicators like the high exchange rate, accelerated inflation, partially offset by reduced bank interest rate, the Wave 20 BCI feedback strongly reflects the 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 6 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”.
The fiscal budget 2021-22 proved to be a hit amongst 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 percent), industry business situation (+19 percent), own business situation (+20 percent), anticipated sales volume increase (+20 percent), profit increase (+22 percent) and return on investment increase (+19 percent).
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 percent, from 74 percent negative in Wave 19, to 34 percent positive in the latest BCI Wave 20 survey, surpassing the overall countrywide BCI of 9 percent.
Commenting on the concerns expressed by several respondents, OICCI CEO/Secretary General M. Abdul Aleem stated that “the three major threats to business growth identified in the survey, are corruption (67 percent), volatile energy costs (66 percent) and currency devaluation (60 percent) which could potentially slow down business growth in Pakistan. Nine of ten survey respondents believe that COVID had made it difficult to perform day to day business operations.”
Looking ahead, survey respondents expressed continuing optimism in the next six months with 25 percent (negative 35% in Wave 19) expecting expansion in business operations, 39 percent (12 percent in Wave 19) of the respondents planning new capital investment, and 12 percent respondents (negative 31 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 the transfer of technology and skills and providing employment to a sizeable number of people. 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 realize their corporate social responsibilities and are major contributors to various CSR activities benefitting 6.2 million persons from underprivileged communities in 2020.