Business Confidence Survey 2015

Abstract

In March 2015, Lahore Chamber of Commerce & Industry (LCCI) and the Lahore School of Economics signed a Memorandum of Understanding which established a link between academia and the business community. As part of this collaboration, the Lahore School and the LCCI conducted its first annual business confidence survey to understand the perceptions of the business community regarding the prevailing economic conditions. Almost 200 firms completed the survey and results from these responses shed light on the prevalent economic conditions facing firms in Pakistan as well as the sector specific issues facing the business community. Firms that responded were put into different sectors (manufacturing, services and retail sectors) in order to see the differences in the economic performance across various sectors. Some of the key results from the survey were: • A majority of the survey firms said that their sales were higher over the past year and they also expected sales to be higher in 2015. • A significant number of firms in the manufacturing sector said that their export sales increases over the last year and they expected it to increase again in 2015. • A majority of firms said that investment increased over the last year and the largest increase in investment in 2014 came in the manufacturing sector where around 70% of firms were able to increase their investment. • Across all firms, the increase in investment in 2014 was not financed by bank borrowing but by the enhanced sales revenues. • More than 60% firms in the manufacturing and services sectors plan to increase their investment in 2015. A significant majority of firms do not plan to utilize bank borrowing for financing their higher levels of investment in 2015. • A significant proportion of manufacturing and service sector firms managed to increase their number of employees in 2014 and both these sectors seem optimistic about further increases in their employment levels in 2015. • There was significant optimism when firms were asked about their expectations about Pakistan’s Economy, with approximately 50% of the firms expecting the economy to do better in 2015. • Access to finance was considered a critical element for conducting business since 58% of the firms (in the sample) found “access to finance” to have a major impact on their business. • 52% of the firms considered shortage of skilled labour to have a major impact on business and this proved to be a key issue for the manufacturing and services sectors. • Slow or ineffective mechanisms to enforce contracts were significantly more important for firms in the services sector as compared to the firms in the retail and manufacturing sector. • As expected, energy shortages have had the most significant impact on firm level growth with about 8 out of 10 firms surveyed in the manufacturing and retail sector finding this to be their greatest constraint. • The survey found that problems of law and order are almost as important to firms as energy shortages with almost 7 out of 10 of the firms considering law and order to have a major impact on business. • 75% of the firms considered provincial taxes to have a major impact on business. • 69% of the firms considered federal corporate tax policies to have a major impact on business and 76% of firms considered import or custom duty policies to have a major impact on business.