Business confidence low: FNCCI survey

Though the business fraternity is losing confidence, it is optimistic that the business climate will improve in the future despite the deteriorating economic conditions.

"Some 46 per cent of company respondents think that the volume of production will increase in the next six months," according to the business confidence survey conducted by the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) that was released here today.

"But some 51 per cent think that the country's economic condition will deteriorate, against only 17 per cent, who think it will improve in the next six months," the survey added.

Overall, business confidence in the country is low, and though the current business climate is not good, the business community is optimistic about the future, according to director general of FNCCI Dr Hemant Dawadi.

Respondents from associations are more optimistic than company (individual) respondents.

Companies are not optimistic about increasing employment, the key issue that has lead the youth to migrate to the Gulf and Malaysia due to the government's failure in creating jobs back home.

"Among company respondents, some 34 per cent from the service sector think that employment will increase, while 26 per cent from the agriculture sector think it will decrease," the survey revealed, adding that some 67 per cent of companies think that cost of production will increase in the next six months, while nine per cent think it will decrease.

Despite the bleak scenario, companies think that exports will increase in the future. "Some 43 per cent of the total respondents expect exports to increase in the future, while 24 per cent think it will decline, whereas some 83 per cent of the total respondents expect imports to increase in the future," added the survey that was carried out among some 54 member-organisations of FNCCI and some 349 individual business entities. In total, some 403 responses were received from 42 districts and five development regions.

Business people from the service sector are more optimistic than people from the manufacturing sector (industry) and people from industry are more optimistic than those from agriculture.

However, respondents are divided about profitability. "Agriculture sector respondents think profitability will increase, whereas industrial sector thinks it will decrease," the survey — supported by USAID/NEAT — revealed.

Surprisingly, most of the businesses are expecting the business climate to improve. "Some 41 per cent of company respondents expect the business climate to improve in the next six months, while only 16 per cent think it will decline," according to the survey conducted by FNCCI for the first time in Nepal.

"A majority of respondents — at 83 per cent — think inflation will increase in the coming six months while only five per cent think it will decline," the survey that has also produced Business Confidence Index (BCI) that is a tool to gauge the short-term perception of the business community about business prospects and the investment climate and is used as a forecasting system to understand the trends of the economy.

Most of the respondents opined political instability — as the key hindrance to doing business –– to increase, followed by energy crisis, strikes, governance, labour and financial problems as critical challenges facing the economy.