The Overseas Investors Chamber of Commerce and Industry (OICCI) has unveiled the findings of an extensive Business Confidence Index (BCI) Survey, Wave 23, which was carried out nationwide between March and April 2023.
Survey Reveals in Business Confidence in 2023
The recently conducted survey has brought to the forefront the perspective on Business Confidence (BCS) across Pakistan, revealing a notable decline of 25 percent. This represents a significant decrease of 21 percent compared to the previous Wave 22 Survey, conducted between September and October 2022, where the BCI stood at negative 4 percent.
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The largest decline in business confidence was observed in the Manufacturing sector, which experienced a significant drop of 22 percent. Following closely behind were the Retail & Wholesale trade sector with a decrease of 21 percent, and the Services sector with a decline of 18 percent. The survey participants were divided into different sectors, with 42 percent representing the Manufacturing sector, 35 percent from the Services sector, and 23 percent from the retail/wholesale trade. In terms of net confidence levels, the Manufacturing sector recorded a negative 19 percent, while the Services and Retail sectors stood at negative 26 percent and 35 percent, respectively.
Reveals 21 Percent Decline
According to the survey, there are three significant challenges that pose threats to business growth in Pakistan. The majority of respondents, 82 percent, expressed concerns about the soaring inflation rate. High taxation was identified as a pressing issue by 74 percent of the participants, while 72 percent highlighted the devaluation of the Pak Rupee as a potential obstacle. These factors have the potential to impede business growth in the country, and the survey results remain consistent with the feedback received in the previous wave of Business Confidence Survey (BCS).
Amir Paracha, the President of OICCI, remarked, “The considerable decline in overall Business Confidence does not come as a surprise, given the volatile and immensely challenging economic conditions witnessed in the past year. The acute shortage of foreign exchange (FX) has adversely affected the import and operations of numerous businesses. Factors such as hyperinflation, exorbitantly high-interest rates, and rapid currency devaluation have had a detrimental impact on the business environment.”
The OICCI BCI Survey is conducted regularly across nine cities, encompassing 80 percent of the country’s GDP. The survey places greater emphasis on key business hubs such as Karachi, Lahore, Rawalpindi-Islamabad, and Faisalabad. The feedback obtained from the OICCI Survey encompasses various levels, including regional, national, sector-specific, and individual business entity perspectives. It assesses the business environment over the past six months and provides insights into the anticipated business and investment climate for the next six months.
In general, three-fourths of the survey participants (75 percent, compared to 56 percent in the previous wave) expressed a negative perception of the business environment over the past six months. Looking ahead, a significant increase was observed, with 23 percent of respondents (compared to only 2 percent in the previous survey) expressing a pessimistic outlook for the next six months. The survey results indicate a prevailing sense of gloom regarding the business outlook in the coming months.
The sentiments of the OICCI members, who are prominent foreign investors and were included in the survey on a random basis, exhibited a negative 19 percent confidence level. This represents a significant decline compared to the positive 6 percent recorded in the previous wave. It is worth noting that OICCI members’ business confidence remains lower than that of non-members, and this has been a prevailing trend over an extended period.
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Abdul Aleem, the CEO of OICCI, noted, “The feedback from foreign investors sheds light on their apprehensions stemming from severe restrictions on letter of credits (LCs) for conducting business operations. Additionally, the significant delays in overseas remittances for goods, services, and dividends, along with a rapid decline in investment returns in Pakistan, have raised concerns among foreign investors.”
Looking ahead, a quarter of the respondents expressed intentions for new capital investments, business expansion, and employment growth, albeit at a substantially lower level compared to Wave 22. The plan for new investment recorded a negative 26 percent, followed by a negative 11 percent for employment expansion and a negative 8 percent for business expansion.