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Business climate worsened in last 3 months: ACCI survey

Business climate worsened in last 3 months: ACCI survey

Aug 04, 2015 - 19:31

KABULinfo-icon (Pajhwok): The Afghanistaninfo-icon Chamber of Commerce and Industry (ACCI) on Tuesday revealed in its latest survey the business situation in the country had extremely deteriorated during the last three months.

The ACCI Business Tendency Survey Report found Balkh and Nangarhar enjoying comparatively better business conditions, compared with Herat, Kabul and Kandahar.

It said the manufacturing sector remained confident while construction, trade and services extremely suffered during the last three months, with the majority of companies saying they hired fewer people.

The report said the security condition had deteriorated across the regions and increasingly more people asked for administrative reforms.

It valued the overall business climate indicator in June 2015 for Kabul, Balkh, Kandahar, Nangarhar and Herat regions altogether at 2.20 points while last year it was 1 point for the same season, when the businesses experienced the worst condition due to the political confusions caused on the presidential elections results.

The survey was conducted in five regions --- Kabul, Balkh, Kandahar, Herat and Nangarhar --- and 560 companies were interviewed through phone during second and third weeks of June 2015.

Although, the businesses surveyed expected a better condition for coming months, the current situation of their businesses was reported to be very poor (-42).

Herat shows the least favorable condition, followed by Kabul and Kandahar while Balkh and Nangarhar are comparatively more confident regarding the six coming months. None of the regions show any improvement in their business climates if compared to last season.

The survey shows a sharp decline in all sectors, except manufacturing. Construction companies have reported the worst condition and manufacturers top in sectorial ranking.

Trade and service sectors also suffer from a worsened business condition compared to the last survey. Respondents remain hopeful about the coming six months, while the balances of positive minus negative responses on their current business performance ranged between -27.3 and -56 across the sectors.

Comparison of three latest surveys shows that the real business condition has largely worsened after the last presidential elections while expectations remain positive and the business community struggle to see the materialization of promises made during elections and after the establishment of the national unity government.

Like last survey the business climate for both SMEs and Large enterprises has deteriorated but SMEs report comparatively more problems.

The Business Climate Indicator value for SMEs declined to -5.4, which reflects the concerns of business community regarding the lack of practical steps for the improvement of business environmentinfo-icon despite gushy promises.

The Business Climate for larger companies also shows a notable decline from 27.5 points to 13 points. Despite the worsening current condition majority of businesses remain hopeful expecting that the business climates will improve in coming months.

In general, the managers and owners of surveyed companies were optimistic regarding their employments in coming three months. The balance of the employment plans is 19.3 points across the sectors which are considerably lower than the previous survey (38.39).

In March, the surveyed companies expected an increase of about 38.4 points in their employments for then the coming three months, but this survey showed a negative tendency in employment during last three months.

The number of respondents who say they have decreased their employees is 47.86% more than those who say they have employed more people during last three months.

Construction and Trade employees have lost considerably more jobs (-53) compared to manufacturing (-48.5) and service (-37.9). Construction is the only sector that expects a negative employment indicator for coming six months.

Security Situation

The security condition has reportedly deteriorated in all regions. Kandahar, the only region that recorded a positive security indicator in this survey has also reported a less favorable security condition (19.78) compared to three months back (54.45).

Business managers in Kabul, Nangarhar and Balkh regions have reported that their security conditions were extremely deteriorated during last three months.

The evaluation of major business constraints shows that the most important factor for business development is considered to be security; it is followed by market and demand, administrative reforms, better infrastructure and access to finance.

Senior ACCI official Atiqullah Nusrat said the business situation in Afghanistan had deteriorated and would further deteriorate over the next six days if the government failed to pay attention.

He said if the situation persisted, it would lead to capital flight, increased unemployment and poor economic condition of the people.

He said the situation deteriorated despite pledges by President Ashraf Ghani and CEO Abdullah Abdullah with people during their electioneering that they would work for the economic development of the country.

He said businessmen interviewed had complained the two leaders had failed to honour their election pledges.

Nusrat urged officials of the ministries of finance, economy, commerce and industry and the central bank, who were present at the launch of the survey, to take practical steps for resolution of problems mentioned in the report.

Commerce and Industry Minister Humayun Rasa said the survey was good for planning, but added the situation was not that worrisome.

He said his ministry had chalked out programmes for resolving problems being faced by investors and the business situation would improve with their implementation.

Economy Minister Sattar Murad said the country’s economic situation had not deteriorated and the government considered economic development its second top priority after security. He said the government had already developed economic programmes and had prepared necessary laws and policies in this regard.

On the basis of government programmes and international policies, Afghanistan would start its journey to self-reliance until 2016, he said. The survey’s findings would be incorporated in 100-day action plans of the ministries concerned.

Deputy Finance Minister Gul Maqsud Sabit said he would share a cut in tariff with the Commerce Ministry as he himself could not legally promise a decrease.

Central Bank chief Khalil Sediq acknowledged the business climate in Afghanistan had deteriorated. He promised efforts at releasing loans to investors.



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