‘’OICCI Business Confidence Index Survey – Improvement in Overall Sentiment 5th Wave Results and Analysis”
The trend of the business community sentiment indicates stability and improvement in confidence, in the 5th wave of the Business Confidence Index (BCI) survey undertaken by the Overseas Investors Chamber of Commerce and Industry (OICCI) during November 2011, following four earlier ones which were conducted during the period starting from Feb/Mar 2010. The latest results indicate that the BCI stands at ‐25%, a marginal drop from ‐24% during the 4th wave in February 2011, and combined with all the other trends coming out of the BCI survey, shows that the business community, despite the concerns, is showing signs of stability and some confidence. Figure 1: Business Confidence Index Chart
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The sudden drop in confidence levels amongst the business community in the 2nd wave was already explained in our previous reports, viz. the influence of factors like, poor law and order, continuing double digit inflation, electricity and gas load shedding issues. Similarly, the aftermath of the devastating 2010 floods in large parts of the country which negatively impacted not only supply and costs of agricultural products to the respective industrial consumers but also displaced a significant number of people, seemed to have dampened the spirits in the third and fourth waves surveys conducted in November 2010 and February 2011. A significant change, noted in the latest BCI, is that inflation has been cited as the biggest single reason, (43% respondents vs 36% in the 4th wave), for “decline in business situation” in the last six months, pushing back all the other factors, including the law & order related matters which are indicated to have improved significantly during the same period (19% vs 23%). Other factors mentioned include load shedding of electricity & gas (39% vs 31%), poor governance and poor policy implementation (26% vs 16%). In the 4th wave survey conducted in February 2011, poor governance was cited as the biggest reason for the low Business Confidence.
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Figure 2: Reasons for Low Business Confidence in the 5th BCI survey
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40% 30% 20% 10% 0% High Inflation level Load Shedding (electricity & natural gas) Poor Policies Terrorism / Suicide bombings Overall Demoralizing situation High cost of running business
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26% 19% 16% 11%
The index also analyses trends in different segments of the economy, some highlights are: • The business community is of the opinion that overall Global situation did not improve during the current survey period. However, this does not seem to impact the respondents with respect to business situation in their respective companies where the BCI shows an improvement both in respect to the respondents industry as well as their own company with the 5th wave negative percentages showing an improvement over the 4th wave. Business confidence of Retailers is showing a continuously improving trend in the past 6 months with the BCI of the retailers showing a ‐62% with regards to the Business situation in Pakistan. It was ‐76% in the previous quarter and ‐84% in June 2010. The Retailers also indicate a similar improvement in the Local Business Environment in their respective cities. The Services sector also indicated a significant improvement in the Business Situation in their sector with a drop from ‐57% in the last survey in February 2011 to ‐43% in the 5th wave. They were even more positive in respect of the Business situation of their own company where the BCI went down from ‐35% to ‐19%. As mentioned earlier inflation is now the foremost concern of the business community for the poor business environment. On the other hand, inflation also impacts certain businesses positively. 34% businessmen surveyed expect their business to expand in the next six months, whereas an equal number are contemplating no expansion and the remaining 32% are not sure about the direction. However when questioned more specifically, 69% of all the respondents plan to make capital investments, 64% expect sales to increase, 54% expect profits to increase and 47% are of the opinion that Return on Investments (ROI) will go up.
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Decrease in employment in the next 6 months is expected in all sectors except for manufacturing. It was anticipated by 31% respondents that trade with India will impact business positively whereas 38% indicated a negative impact. The negativity was mainly expressed by 48% of the manufacturers. 47% of the respondents were of the opinion that the revised Afghan Transit trade agreement will negatively impact business – an opinion shared by a large majority of 64% of the manufacturers, whereas 19% of all respondents gave a positive response.
The OICCI Business Confidence Index survey is appreciated by all key stakeholders in the economy and assists in better understanding of the overall business climate in the country. BCI has been, occasionally, referred by the media as well.
OICCI conducts a “Business Confidence Index” survey every quarter, through a professional research company, to measure the sentiments prevailing in the market. The survey helps in identifying the economic direction of the country and highlights factors that continue to affect the confidence levels of the business community. The BCI is based on responses from heads of multinationals to owners of small businesses in busy city districts OICCI is the first and only organization in Pakistan which is conducting the Business Confidence survey. The Fifth wave survey was conducted in November 2011 to gauge the sentiments of the business community in the following areas for the past as well as the next six months: Global Business Situation Business Situation in Pakistan Local Business Environment in Your City Business Situation in Your Industry Business Situation of Your Own Company
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