Business Confidence Survey conducted by OICCI - “Inflation, the main factor affecting business activities in the country”

Karachi, February 21, 2011: Overseas Investors Chamber of Commerce and Industry (OICCI) recently announced the results of the third quarter Business Confidence Survey. Conducted in October and November 2010, the survey indicates that business confidence, which had taken a sharp dip in the second quarter of 2010, has now begun to recover.

The Business Confidence Survey is conducted on a quarterly basis to gauge the sentiments of the business community towards the global and local business situation and the business environment in the city, in their particular industry, and also the environment in their own organization. The survey further highlights the sentiments of the business community in the past 6 months and their forecast for the next six months.

The business confidence index (BCI), which was +6% in the first quarter, had dropped to ‐27% in the second quarter. However, in the third quarter survey, it stabilized with -26% Business Confidence Index (BCI).

While business sentiment was relatively higher at the beginning of 2010 when organizations were laying out plans for the upcoming months, it fell short of expectations in the second quarter. Additionally, the second quarter survey was conducted immediately after the budget which may have contributed in lowering confidence levels. Likewise, the devastating floods may have dampened spirits in the third quarter.

The respondents of the survey felt that the global and local business situation is expected to remain unchanged in next six months (which includes 1^st quarter of 2011).   Manufactures were less optimistic about improvement in business in comparison to the services and the retail sectors. The major reason for not anticipating further improvements in business was the ongoing rise in Inflation and the deteriorating security situation, as can be seen in figure 1.

Figure 1: Quarterly Analysis of Factors Affecting Business

An overall business confidence comparison of quarter 3 vs. quarter 2 indicates the Business Confidence of OICCI members is up by 8%, while non OICCI members have shown a negative confidence in the business by registering a -4% change.  It is   evident from figure.2 that the slight improvement in the BCI is due to better confidence level amongst OICCI members.

Figure 2: Confidence Level Comparison between OICCI and Non-OICCI Members

Major findings of the OICCI Business Confidence Survey Quarter 3:

• 70% of respondents (comprising manufacturers, services and retail sectors) do not support Reformed GST.  In the business category, 80% of retailers and 66% of manufacturers and service providers gave a negative response.

·         The overall business confidence in quarters 2 and 3  has remained almost the same

• The Textile, Chemical and  Finance sectors have performed comparatively better over the year

• The Food and Petroleum industries are planning to increase their investments over the next six months.

• Employment seems to have decreased in almost all sectors over the past nine months with the exception of the Food Industry and the Financial Sector.

• The worst hit segments were Real Estate and Textiles showing lower profit margins as well as decreasing employment levels.

 OICCI is the first and only organization in Pakistan conducting these surveys on a quarterly basis. “Business Confidence Survey” is an indicator to measure the sentiments prevailing in the market. The undeniable role of the survey as a tool to gauge the business and investment environment is a well established fact amongst the developed and developing economies. 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 Overseas Investors Chamber of Commerce & Industry represents 185 foreign companies doing business in Pakistan, many of whom began operations in Pakistan over 60 years ago. OICCI is the oldest chamber in the country and region having been established 150 years ago. OICCI members collectively contribute over 29 percent towards Pakistan’s total GNP, 22 percent of total tax receipts, provide direct employment to approximately 150,000 people and spend Rs 1 bn a year on CSR. OICCI also plays an active role in terms of representation and advocacy to the government, various regulatory bodies, and policy makers. For further information on the activities of the Chamber, please log on to www.oicci.org.