ISLAMABAD: The Overseas Investors Chamber of Commerce and Industry (OICCI) announced on Thursday the results of its biannual “Perception and Investment Survey 2019”.
The survey was conducted amongst the leading foreign investors (also the OICCI members) of the country in the last quarter of 2019.
The survey results present an array of insights and shed light on the concerns on the current business environment and confidence of the chamber’s members on the country’s growth potential, a news release issued by the chamber says.
The survey shows that the foreign investors have remained positive on a number of business climate parameters.
Foreign investors are upbeat on the performance of their respective business entities in Pakistan, with 75 per cent of the respondents indicating willingness to recommend new foreign direct investment (FDI) in Pakistan to their parent companies.
Whilst the foreign investors participating in the survey have shown concerns over some areas of doing business, the case for business growth potential and opportunities in Pakistan is supported by over 7 out of 10 survey respondents who indicate their plans to invest more or similar amounts over the next one to five years, as compared to the previous corresponding period.
This view may appear conservative since in the past two years, the OICCI members have reinvested $2.5-3 billion annually in new capital expenditure.
The OICCI members have indicated that compared to the previous 2017’s survey, the federal government is better engaged with the stakeholders on policy issues and its senior functionaries appear to have better understanding and commitment to resolve investors’ issues.
A number of economic disciplinary measures announced by the government last year, like partial withdrawal of incentives on new investments, also affected the chamber’s members.
The strong resistance, especially from a large segment of the market players in the informal economy, towards many bold measures to document the economy has had a negative impact on the business operation of many of the members.
Delayed action on some other key concerns, like interprovincial coordination issues, matters relating the renewal of cellular mobile operators’ licenses, extended time in processing corporate remittances, and capacity issues in some of the regulatory bodies have been raised as concerns for many businesses.
Furthermore, nearly 30pc devaluation of Pakistani rupee, and increase in the central bank’s discount rate from 6.5pc in July 2018 to 13.25pc in 3QFY19, led to an increase in the cost-of-doing-business.
Two key issues of concerns to the foreign investors are overdue tax refunds of around Rs80 billion, and the energy sector’s circular debt.
This challenging business environment is duly reflected in the feedback as the foreign investor’s perspective of doing business has seen a major decline in the 2019’s survey as compared to the last 2017’s survey.
More than 70pc of the foreign investors/OICCI members are partially satisfied with the ‘policy framework’ relating to business but they have concerns on the implementation of policies.
More than half of the respondents are concerned over the consistency and predictability of monetary and fiscal policies.
When asked to name top five key painful points to their business, the CEOs of OICCI membership identified those were Pakistani rupee devaluation, gap between policies and their effective implementation, increasing tax burden, cost-of-doing-business, and increase in borrowing cost/interest rates.
A number of companies belonging to the fast moving consumer goods (FMCGs), food and healthcare sectors have identified counterfeiting, illegal imports and dumping of cheaper imported products as major risks to their businesses.
The foreign investors have expressed concerns on the lengthy timeline in contract enforcement with over two third respondents sharing that it takes around five years in resolving commercial dispute.
Majority of the respondents support the ‘CPEC’ projects, and have also identified key sectors where new FDI could be attracted with the right policies and improved perception about Pakistan, as almost three quarters of the respondents indicate that their parent companies are influenced by the negative image of Pakistan in the foreign media or other sources.
The OICCI members who collectively pay about one-third of the total annual tax revenues collected in Pakistan are positive about the opportunities and potential of the country and foresee expansion of the country’s economy.
This is a welcome sign for all stakeholders, including the young people entering the job market, with nearly 35pc of the OICCI survey respondents indicating that they will add manpower while going forward.
Moreover, two thirds of the respondents forecast increased sales while higher profits are forecast by half of the respondents.
Commenting on the key pain points, OICCI President Shahzad Dada said a noteworthy feedback from the 2019’s survey was the deletion of security as one of the top five challenges.
“This is remarkable as security has been one of the top five concerns in all previous three surveys.”