Business sentiment soared sharply from minus 34 percent in August 2012 to positive 2 percent in July 2013, following smooth transition of government, according to the 7th Wave Business Confidence Index (BCI) survey sponsored by Overseas Investors Chamber of Commerce and Industry (OICCI).
A bi-annual exercise carried out at regular intervals, BCI is the only survey that gauges attitudinal outlook, reflecting feedback from a country-wide cross section of business representing some 80 percent of the Gross Domestic Product or GDP. As such, it provides invaluable cues for all stakeholders, including policy makers, to improve business environment.
“The latest BCI survey results are largely in line with the feelings of OICCI members. The turnaround in sentiment appears to be influenced by the perception of PML (N) [Pakistan Muslim League (Nawaz)] as a ‘business friendly’ political party … expected to exercise good governance and astute sense to manage the economy,” opined President Kimihide Ando. This, coupled with the consistent downward inflationary trend – from 10.8 percent in July 2012 to 7.4 percent in June 2013 – and expectations it will remain within the single digit-mark has contributed to positivity, he added.
The manufacturing sector recorded the biggest turnaround from minus 37 percent to positive 4 percent, followed by the retail sector that improved from minus 48 percent to minus 6 percent, trailed by the services sector witnessing an uptick from minus -17 percent to positive 5 percent.
The positive sentiment is fueled mainly by the perception that the new government will improve governance, take appropriate measures to reduce load shedding and control plummeting security, daunting challenges impeding economic growth.
Reasons of improvement in Business Situation: Next 6 Months
Notably, 60 percent expressed confidence in the government’s ability to improve security in the Punjab, Balochistan, Khyber Pukhtunkhwa and Gilgit-Baltistan as opposed to Karachi-based respondents who remained pessimistic.
Over 40 percent of respondents remained bullish on Foreign Direct Investment (FDI), estimating higher inflows of US$ 3 billion during the current year. Similarly, 48 percent respondents plan on increasing capital investment over the next six months, expecting increase in sales and returns. A majority of the respondents also believe that Federal Budget 2013 -14 will produce little or no impact on business.
The results offers an opportunity for government to capitalize on positive sentiment and improve governance and security, making Pakistan more attractive for larger FDI inflows, concluded Ando, adding that OICCI will play its due role in facilitating economic growth in the country.
