According to the Business Confidence Index (BCI) Survey - Wave 16 recently done by the Overseas Investors Chamber of Commerce and Industry (OICCI), overall business confidence in Pakistan has dropped by seven percentage points, standing at 14%. In the last survey in November 2017, the business confidence in Pakistan stood at 21%. It may be added here that the survey results were largely influenced by pessimism in retail and wholesale trade, which recorded a sharp decline in business confidence to 6% compared to 40% in Wave 15. Whereas the confidence of the manufacturing sector remained stable at 15%, the services sector showed bullishness at 23% against 15% in the previous survey.
Sentiments of leading foreign investors, represented by the OICCI, who were part of the survey, also showed a downward curve, albeit by only 4%, to 38% from 42%. Despite an increase in the business confidence for Lahore and Rawalpindi, the overall score declined by 8% due to a drastic fall of 18% in the score of Karachi. The score for nonmetropolis declined marginally by 3%. The OICCI survey, conducted every six months, is a comprehensive review of both local and global business scene and is indicative of the direction in which the economy is headed. It is based on perceptions of key stakeholders of the business community that represents about 80% of gross domestic product. Based on the respondents' feedback, the decline in business confidence was mainly caused by a combination of significantly reduced perception of global, country and industrial business situation over the past six months and in the next six months as well as decreased level of anticipated capital investment, profitability and return on investment over the next six months.
The reasons for a downturn in business confidence are multifarious. As experts have pointed out, the country has faced many challenges over the past six months. OICCI's Secretary has disclosed that Malaysia, which was also going through a similar political phase, might also be having roughly similar index numbers. Experience shows that the index usually drops in an election year, but at the same time, uncertain economic conditions and chances of economic slowdown have also played their part. It is also no secret that Pakistan is facing a balance of payments crisis, political uncertainty, decline in foreign exchange reserves and significant weakening of the exchange rate.
It is relevant to add here that Pakistan has also been included in the FATF grey list for alleged failure to curb terror financing together with regular concerns over Pakistan's economy reported by the local and international media. Growing concerns over governance and government policies, inflation and security conditions together with pessimism about the future due to upcoming election-related political uncertainty and developing energy crisis were stated as leading reasons for the decline in business confidence.
According to experts, the findings of the latest survey have great importance in view of the current economic indicators. These have come at a time when the country is facing general elections. Due to various government policies the cost of doing business is very high. Production costs are also on the increase. It is to be hoped that the authorities concerned will analyse key messages coming out of the latest survey about the sentiment of business community and take corrective measures. Confidence is the key factor in the rise of business activities. The authorities concerned need to take timely action to put the economy on an even keel.