Busi­ness con­fi­dence

The Pak Banker - - FRONT PAGE -

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.

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