KARACHI, Sept 26: The respondents of the 6th Wave Business Confidence Index (BCI) survey undertaken by the Overseas Investors Chamber of Commerce and Industry (OICCI) between June and August 2012 indicated no plans to increase employment levels in their businesses during the next six months.

The survey revealed a nine per cent dip in business sentiments over the past six months due to growing concerns related to energy shortages, worsening security, high inflation, governance issues and rising cost of doing business.

The biggest factor impacting business in the next six months is expected to be high inflation. This is followed by fuel prices, uncertain security environment, poor government policies, load shedding, and rupee devaluation.

Energy crisis, law and order and inflation have resulted in a decline in expectations of business expansion from 34 per cent in November 2011 to 19 per cent in August 2012. However, in respect of plans for the next six months, 16 per cent of respondents expect to expand business and have a positive outlook in increase in sales, profits and return on investment.

Decline has been noted in capital investment plans for the next six months, which has fallen from 69 per cent in the previous survey to 55 per cent in the current survey.

The sharp drop in business confidence is led mainly by poor sentiments of the retail sector where the BCI score went down from negative 29 to negative 48 per cent and of the manufacturing sector which also declined significantly from negative 23 to negative 37 per cent.

This decline was partially offset by the relatively positive outlook of the service sector where BCI improved by seven per cent from negative 24 to negative 17 per cent.

Of these, the service sector has the highest positive outlook at 33 per cent for business expansion, within which finance is the most optimistic sub-sector. In the manufacturing sub-sectors, the auto industry is the most optimistic.

A notable feature of the survey is that the perception on government policies has improved by 12 per cent from the previous survey.

Around 60 to 67 per cent of respondents consider Federal Budget 2012 -13 did not have any positive impact on their business or the overall economy, whereas only six per cent felt there was a positive impact.

There is significant variation in the opinion pattern between various cities. The reduction in positive outlook and increase in negativity is much more pronounced in Peshawar and Quetta, followed by Islamabad/Rawalpindi and Faisalabad, as compared to the declining sentiments in Karachi, Lahore and Multan.

Approximately 10 per cent of respondents indicated planned capital expenditure for capacity and/or productivity expansion.

A small percentage of this capital expenditure was being considered for new facility, renovation and improvement in quality.