A majority of 67 percent respondents of a survey, conducted by Overseas Investors Chamber of Commerce and Industry (OICCI), showed that the law and order situation in the country has worsened from 2008, badly affecting the country's economy.
While more than 90 percent of the respondents or 113 existing investors currently operating in the country said they do not plan to curtail business due to these concerns, the uncertainty had significant impact on future investment and expansion plans for majority of the respondents as most companies are being conservative in bringing further capital into the country in 2010.
This was stated by the president of OICCI, Farrukh H Khan, while addressing a press briefing on 'Perception Survey' report 2009, based on responses of 183 OICCI members here on Wednesday. He said that most of the members said they see law and order as the top challenge facing the government, followed by shortage of energy and stability of the government.
He said that the tone of the responses from 71 percent of the members from diverse sectors was positive. However, 33 percent said they thought otherwise, he added. The average tax rate is below 30 percent in regional countries including India, Bangladesh, Sri Lanka and Singapore. They recommended to the government to improve policy implementation and reduce high corporate tax rate (35 percent) on businesses. The OICCI has recommended a tax rate of 30 percent.
Farrukh said that 60 percent of the respondents found the overall business climate as "average", while 40 percent termed it "poor", and suggested further improvement in the climate. Responding to the question of comparison of ease of doing business in Pakistan, they considered Pakistan as a better place to do business, compared to emerging markets like China, India, Hong Kong, Vietnam and the Middle East, he added. He said that 124 out of 181 OICCI companies contribute 29 percent of the total GNP and 22 percent of the overall tax receipts.
More than 67 percent of the respondents supported the effectiveness of corporate governance. Ten percent of them termed it "good" while 57 percent rated them as an "average". About 77 percent of respondents termed the present corporate tax rate as heavy burden on their profitability. Similarly, majority of respondents gave high rating to the availability of utilities particularly to POL and gas, while 89 percent of the OICCI members were not satisfied with electricity availability.
They lauded the performance of Ministries of Communication, Finance, Commerce and Port and Shipping, while the Ministry of Water and Power and Ministry Health were the most unpopular among them. About 62 percent of the respondents gave high ranking to SBP, SECP, FBR, PTA and BoI and disliked Wapda, Nepra and IPOP.
Farrukh said that 93 percent of the respondents noted that the government was not doing enough to improve the perception of Pakistan. They suggested to the government to develop a more aggressive and optimistic media campaign showcase success stories of foreign investors operating in Pakistan for the last 150 years, he added.
The OICCI chief said that the members had also advised the government to increase involvement of stakeholders in policy making and formulate a more robust investment promotion strategy to bring about a paradigm shift in attracting FDI into Pakistan.
OICCI members also proposed to the government to broaden the tax base to ease pressure on existing taxpayers. The government should tax those sectors, which are currently not under tax net. These are agriculture, real estate, capital market and some services, he noted.
Though limited, the declining interest of foreign investors is a strong indicator that perceptions can change overnight. The same is supported by the OICCI Investment Survey 2009, whereby members indicated decline in investments by approximately 37 percent. During the press briefing, Farrukh was accompanied with Unjela Siddiqui, secretary general, OICCI, and Abdul Aleem, member OICCI.