Billion+ dollar pak army empire

[dabong1]

Book shines light on Pakistan military's '£10bn empire'


· Business interests range from cement to cornflakes
· Little transparency into officer-led conglomerates

Declan Walsh in Islamabad
Thursday May 31, 2007
The Guardian


The Pakistani military's private business empire could be worth as much as £10bn, according to a ground-breaking study. Retired and serving officers run secretive industrial conglomerates, manufacture everything from cement to cornflakes, and own 12m acres [4.8m hectares] of public land, says Dr Ayesha Siddiqa, author of Military Inc: Inside Pakistan's Military Economy.
The book tackles a previously taboo subject - the range and depth of the military's business interests - considered a major factor in the ambitions of the generals who have ruled Pakistan for more than half of its 60-year history. "It feeds directly into the military's political power; it's an expression of their personal and organisation strength," said Ms Siddiqa, a former director of research at the Pakistan navy.


Five giant conglomerates, known as "welfare foundations", run thousands of businesses, ranging from street corner petrol pumps to sprawling industrial plants. The main street of any Pakistani town bears testament to their economic power, with military-owned bakeries, banks, insurance companies and universities, usually fronted by civilian employees. Ms Siddiqa estimates that the military controls one-third of all heavy manufacturing and up to 7% of private assets.
Profits are supposed to be pumped back into schools, hospitals and other welfare facilities - the military claims it has 9 million beneficiaries - but there is little transparency. "There is little evidence that pensioners are benefiting from these welfare facilities," she said.

Of the 96 businesses run by the four largest foundations, only nine file public accounts. The generals spurn demands by parliament to account for public monies they spend.

The military's penetration into society has accelerated under President Pervez Musharraf, who has also parachuted 1,200 officers into key positions in public organisations such as universities and training colleges. The military boasts that it can run such organisations better than incompetent and corrupt civilians.

In a 2004 speech to open a new industry owned by the Fauji ("Soldier") Foundation, General Musharraf boasted of "exceptional" military-owned banks, cement and fertiliser plants. "Why is anyone jealous if the retired military officers or the civilians with them are doing a good job contributing to the economy?" he said.

But Ms Siddiqa says the military businesses thrive, thanks to invisible state subsidies in the form of free land, the use of military assets, and loans to bail them out when they run into trouble. "There are gross inefficiencies and the military is mired in crony capitalism. The primary purpose of a trained military is war fighting. They are not designed for the corporate sector."

Her £10bn estimate of military wealth is a "rough figure", she says, split between £6bn in land and private military assets.

"Military Inc." comes at a sensitive time for Gen Musharraf, who is struggling to rebuild his popularity after the botched dismissal of the chief justice, Muhammad Iftikhar Chaudhry, in March. The move sparked nationwide demonstrations that have snowballed into a powerful protest movement. The furore has offered an insight into the raw power wielded by the generals. This week, Justice Chaudhry told the supreme court how military intelligence chiefs spent hours trying to pressure him to quit on March 9, before placing him under effective house arrest.

Ms Siddiqa fears her book, which names names and pours cold water on boastful claims, may step on some powerful toes. "Over the past three years a lot of my friends have advised me not to publish this book. They think I have suicidal tendencies."

But Talat Hussain, a retired general and political analyst, said Ms Siddiqa was a "courageous" researcher. "This area has always been considered a sacred cow in our society," he said.

The book will be launched in Islamabad today. The main military spokesman, Major General Waheed Arshad, said he had not yet obtained a copy. "Let me read it and then I'll get back to you," he said.

Backstory

The 650,000-strong military has been at the heart of power since Pakistan was carved from northern India in 1947. Generals seized power in 1958 and have ruled intermittently since. The main intelligence service, the ISI, has consistently meddled in politics. Three-quarters of all army recruits come from Punjab, reflecting a similar imbalance in the country's power structures. The army's reputation for professionalism stretches back to colonial days, but has been eroded by business-related corruption allegations and three wars with India, including the loss of its eastern half, with the independence of Bangladesh in 1971.

 

[Interceptor]

Dabong can you Provide the link please.

This is a good read.

 

[dabong1]

Dr. Ayesha Siddiqa-Agha

Her expertise: South Asia, military expenditure, arms control, arms procurement.

Her Brief Bio:

She did her doctorate from King's College, London in 1996 and has worked on issues varying from military expenditure, defence decision-making, nuclear deterrence, arms procurement, arms production to civil-military relations in South Asia. She is also a Ford Fellow and more recently Pakistan Scholar at t he Woodrow Wilson International Centre for Scholars.
She began her professional career with the Pakistan navy as the Director of Naval Research, making her the first civilian and woman to work at that position in Pakistan's defence establishment. She writes for various international journals such as: Journal of Asian Affairs, Journal of the European Institute of Asian Studies, Jane's Defence Weekly and the Bulletin of Atomic Scientists. Her major publication to date is the book Pakistan's Arms Procurement and Military Buildup, 1979-99: In Search of a Policy (Palgrave Press, 2001).

______________________________________________________

And now for the extracts from an interview she gave to DesPardes.com's Editor-in-Chief Irshad Salim, August 2005, about the new book she is currently working on: "Military Inc, The Politics of Military's Economy in Pakistan".

_____________________________________________________________

Question: So what is this book about?

Dr. Siddiqa: This book is about military business operations with a case study of Pakistan.

Question: So what prompted you to write this book?

Dr. Siddiqa: I was a civil servant. During the course of my work I had to deal with numbers of military spending and doing that one slowly realized that a lot was hidden. It is the search for numbers that took me in this direction. The other thing is that it is essential to understand the dynamics of the institution that virtually controls Pakistan's past, present and future.

Question: Ok, so who did you work for as a civil servant?

Dr. Siddiqa: I joined the civil service in 1988 and left in 2001. Served in military accounts, defence audit and later the navy.

Question: Going back to the Pakistan army’s business, what are your findings?

Dr. Siddiqa: Several. First, the military has become predatory engaging in political and economic predation. Second, political predation is not complete without economic predation. Third, military has mutated into a separate class that shares interests with other members of the ruling elite. Finally, because the military protects its vested interests, it leads to alienation of the masses.

Question: When did all this start?

Dr. Siddiqa: It dates back to the early 1950s. The business ventures were started with the establishing of the first foundation called the Fauji Foundation in 1953. This was established with the war veteran's rehabilitation fund of Rs. 18 million.

Question: Why do you consider forming Fauji Foundation a predatory step by the army?

Dr. Siddiqa: Listen you have to understand the concept. A politically strong entity that engages in political predation needs to feel economically or financially autonomous. This completes the picture of predation. The generals thought that they wanted to establish independent means of providing for their welfare and not depending on the civilians like it happened in India. The financial autonomy gradually created the logic for greater interest in political control.

Question: Give me one or two instances when the 1953 move swirled into predation.

Dr. Siddiqa: It started right then with Ayub Khan and his cabal getting agricultural land and establishing independent means for themselves.Look at Ayub Khan. He not only got several squares of agricultural land in Sindh, he also established his sons into business. Look at the entire lot of generals at the moment. A Major General has a legal worth of about Rs. 300 million [Rs. 30 crores]. These are conservative estimates.

Question: Going back to Pakistan army's economic superpower...What percentage of the GDP and GNP is it?

Dr. Siddiqa: This is difficult to calculate but their own estimates are about 4 % of GDP. I would say that their share in private sector assets is about 7-10 percent of private sector assets. This is a large number for any single group.

Question: Can you translate that into crores?

Dr. Siddiqa: 7-10 percent of private sector assets cannot be translated but I can give you another figure: They are worth about Rs. 200 billion. It is just the business. If you put in real estate then we are talking about a Rs 1 trillion plus economy.

Question: You mean Pakistan army's side economy?

Dr. Siddiqa: Yes. This includes real estate, businesses done by subsidiaries, organizations and individuals. You have to understand that this economy is predatory by nature because it does not accept any form of civilian control over it. It is independent in terms of planning, appropriation of funds, etc.

Question: If Pakistan army's assets total Rs 1 trillion can they fund Pakistan’s annual budget wholly or partially if they have to?

Dr. Siddiqa: This would, converting these resources into liquid assets and then it would be possible to pay. A lot of these resources are state resources that could provide for military expenditure and more. It is difficult to say that this money would fund the entire budget. Of course, it can but over what period? These assets were acquired over time and their value should be added to the annual defence budget.

Question: What was the defence budget for the year 2001?

Dr. Siddiqa: 131 billion. If you add these numbers the budget would escalate to over Rs. 400 billion

Question: When you left in 2001 how many generals, etc were there who form the command structure of Pakistan forces?

Dr. Siddiqa: Brigadier and up would be a few hundred.

Question: So if we assume 100 then 100 times 300 million = 30 billion is the legal worth of army's command structure correct?

Dr. Siddiqa: it is more but don't get into these fancy numbers... Plus the higher you go the more pricy you become. A full general is worth Rs 500 million [Rs. 50 crores] plus

Question: How much land does the forces own in each province?

Dr. Siddiqa: Difficult to bifurcate but to give you a taste - they own about 7-9 million acres in Punjab alone

Question: What percentage is it of whole of Punjab?

Dr. Siddiqa: I am still trying to figure this out. It is not an issue of what percentage is this of Punjab but that a major portion of state land is appropriated by one group

Question: What about Sindh?

Dr. Siddiqa: My sense is that it is less in Sindh

Question: Why is that?

Dr. Siddiqa: Most of the land is around the 2 barrages constructed after independence. Because they didn't make new barrages.

Question: What is their modus operandi in getting these lands allotment

Dr. Siddiqa: 10 % of land, according to the 1912 Colonization of Land Act, is allotted to the military

Question: 10% everywhere?

Dr. Siddiqa: Yes it would be everywhere land is found. Colonization of land refers to each land reclaimed due to creation of water channels and other irrigation projects. However, they tend to get more in Punjab

Question: Does India have this act too?

Dr. Siddiqa: No. They got rid of such acts when they did land reforms. Remember India is a state moving towards capitalism. A capitalist state would not create means for institutionalizing feudalism

Question: Are you saying Pakistan army has institutionalized feudalism?

Dr. Siddiqa: I am saying that it is a feudal institution as well

Question: So in that case their interests converge with feudal system correct?

Dr. Siddiqa: Yes

Question: Do you think they resisted land reform along with the feudal?

Dr. Siddiqa: I wouldn't say that they resisted but they had sufficient stakes not to pursue a policy that had a negative impact on their benefits. For example, who buys the land the Faujis sell? The local feudal or the new rural capitalist class that is equally feudal in nature. Why should the officers then try to destroy the class that bails them out financially. After 1999, generals have started to keep their lands

Question: What happened after 1999

Dr. Siddiqa: Since the value of land has gone up, especially after 9/11, generals now keep lands and have turned into absentee land lords

Question: Why did the value of land in Pakistan go up after 9/11

Dr. Siddiqa: Because of the money that started to flow in from Pakistani expatriates plus other Muslim countries

Question: What is their modus operandi in getting these lands allotted to generals individually and to their housing societies collectively?

Dr. Siddiqa: The provincial governments allot the land to the Ministry of Defence who then gives the land to the three services for further dispersal. The land is also given to the Jawans but the quantity is lesser than what is given to the senior officers. Plus, the generals get greater facilities in making the land cultivable.

Question: All this is based on 1912 colonization of land act that India got rid of and Pakistan still has?

Dr. Siddiqa: Yes, but they have done alterations as well. For instance, the act does not say that land meant for operational purpose be appropriated for personal use. It is against the law

Question: Are you saying that land meant for operational purposes are or have been appropriated to the generals for personal use or to the housing societies?

Dr. Siddiqa: Of course. All land in the cities is military land turned into housing colonies

Question: What is the conclusion of your book?

Dr. Siddiqa: Simple: The political leadership in Pakistan has to negotiate the military's gradual withdrawal from the economy if they want democratic institutions to grow

Question: At what value does the army buy land?

Dr. Siddiqa: Between Rs. 30-60 per acre. In some cases they pay more. This refers to the private housing schemes

Question: You mean in Defence Society in Karachi, the army gets land from the provincial govt for 30 to 60 rupees an acre only?

Dr. Siddiqa: There are 2 methods for getting land. All the military land converted for personal use is given at the ridiculous price I quoted. Then there are other schemes where they pay a little more. For instance, the Cantonment Board distributed plots of 500 yards each by appropriating part of the parking lot of the Karachi stadium. Each plot was for about Rs 600,000

Question: What was the fair market value of each plot at that time?

Dr. Siddiqa: One and a half crore

Question: Who got these plots?

Dr. Siddiqa: Generals. The bulk goes to generals. This was done by General Tauqeer Zia. As Chairman Cricket Control Board he authorized himself to return this land that once belonged to the Cantonment Board for further distribution

Question: Any more instances of such land grabbing?

Dr. Siddiqa: The entire Lahore Cantonment was turned into housing schemes. In fact, except for Defence phase I & II (Lahore), the rest of the land does not even belong to the military

Question: How many acres is Lahore Cantonment, if you know?

Dr. Siddiqa: About 8000 to 10,000.

Question: What is its fair market worth now

Dr. Siddiqa: Runs into billions. It should be around Rs. 700 billion

Question: What was the "grabbing price"

Dr. Siddiqa: As I said, Rs. 30-60. This is the rate that officers pay.
______________________________________________________

I recall a journalist telling me that once at a press conference Sardar Attaullah Mengal declared that while the military regime constantly lambasted the Baloch sardars like him for cornering the wealth of Balochistan, he would gladly swap all his assets with those of any general any time, any day.

Now, thanks to Dr Siddiqa, I finally realise what Mengal was getting at.

It soon becomes very obvious that most of us have opted for the wrong career. If a banker friend of mine is right, then the highest paid salaried civilian is one Farooq Bengali, currently heading some Arab bank based in Karachi. Bengali’s annual salary package is rumoured to be in the range of Rs. 3 crores per annum.

Considering it took Farooq Bengali years of much lower salaries to get there and the fact he’ll mostly likely get this kind of salary for eight years at the very most – the maximum he can hope to accumulate in his lifetime is Rs 30 crores. This sum equals, according to Dr Siddiqa, an average major general’s net worth. There must be a few dozen of major generals around at any given time, so there ought to much great scope in getting there; after all there is only job available like Farooq Bengali’s, and he is currently occupying it.

Besides, once Farooq Bengali retires he goes home. The same doesn’t apply to our retired generals; they can become provincial governors, federal ministers, ambassadors, heads of one of the numerous Fauji conglomerates or even be in a position to mismanage the Pakistan Cricket Board. Now that is what a richly rewarding career is all about.

 

[dabong1]

Dabong can you Provide the link please.

This is a good read.

http://www.guardian.co.uk/pakistan/Story/0,,2091816,00.html

 

[dabong1]

The khaki lords of Pakistan
Amir Mir


According to an assessment based on the value of rural or urban plots, the worth of a general in the Pakistan Army in real estate terms is anything from a hefty 150 to 400 million rupees. And that is a conservative estimate.

This startling revelation has been made by a noted defence analyst Dr Ayesha Siddiqa in her latest book, Military Inc: Inside Pakistan’s Military Economy. While the political and administrative influence of the Pakistan Army is well known, public knowledge of its vast business interests was still limited, and Dr Ayesha Siddiqa has made an exceptional attempt to enlighten the people of Pakistan on this important issue. Her first book titled Pakistan’s Arms Procurement and Military Buildup, 1979-99: In Search of a Policy was the first detailed analysis of defence decision-making in Pakistan. Her second publication is a blisteringly pragmatic indictment of the enormous social and political costs of the Pakistani military’s extra-curricular business activities.

Writes Ayesha in her latest book: “The military, including its serving and retired members, own massive tracts of land in rural as well as urban centres. They believe the distribution of land amongst military personnel, particularly within the various housing schemes, denotes the defence establishment’s superior capacity at managing resources. However, the mechanics behind the issue are not so simple. Is the allocation of military land nothing more than a tradition inherited from the British to reward defence services personnel? Or should the acquisition of land by the military be viewed in the larger perspective of the power the armed forces wield over the state and its resources?”

The author says that the military today is one of the prominent players in urban real estate. Its stakes in urban centres amount to billions of dollars and remain largely undocumented. “The defence establishment has the ability to bring any government land under its control for ‘public purpose’ by using the Land Acquisition Act of 1894. The military’s political influence is critical in defining ‘public purpose’ as meaning that it may redistribute the land for (the) personal benefit of its officers. This power is unmatched…the military’s utilisation of its influence to engage in economic predatoriness to accentuate the personal political-economic power of the armed forces (is obvious),” writes Dr Ayesha Siddiqa.

She adds: “Since the early 1950s, the military has acquired millions of acres of land throughout the country for distribution to serving and retired armed forces personnel. The Pakistani armed forces control about 12 million acres, constituting about 12 per cent of total state land. Out of this, 62 per cent is in the Punjab, 27 per cent in Sindh and 11 per cent in NWFP and Balochistan. About seven million acres of the total is agricultural land and has an estimated worth of Rs 700 billion. Interestingly, only about 100,000 acres are directly controlled by the armed forces and its subsidiary companies, the Fauji Foundation, the AWT and the Bahria Foundation, and distributed amongst serving and retired personnel. The remainder was given (at highly subsidized rates) to army personnel as awards to be used for their personal gratification.”

“Pakistan military enjoys complete autonomy from all civilian stockholders when it comes to its numerous commercial ventures, with the result that the more the military’s economic power increases, the weaker civil society becomes...This fraternity that enjoys both political and economic power has gradually emerged as an independent class with well-defined rules and control of markets by institutional mechanisms that protect its political and economic interests…Many senior generals today own up to seven to eight properties in rural areas and in the cities. This development of a land-rich military is the result of a decades-old policy of awarding land, particularly agricultural land, to loyal military personnel. However, a number of officers own more than just one piece of land due to the fact that every gallantry award is accompanied with a piece of urban or rural property.”

Dr Ayesha believes that any way one looks at it, this monopolization of resources is unfair in a country where there are about 30 million landless peasants. “The military’s control of land feeds the largest social injustice in the country: widespread poverty. Like the feudal class, the military has been known to use its power to redistribute land amongst its own without any regard for the country’s poor ethnic populations. In Bahawalpur, there are instances when land developed through years of hard work by landless peasants has been snatched away for distribution to the military bureaucracy…Across the country, there are many examples of the military wielding absolute authority to suppress landless peasants in areas where they directly control the land.”

“In Okara, a conflict ensued between local tenants and the army that had unilaterally decided to change the terms of contract from share-cropping to rent-in-cash. While share-cropping pertains to an arrangement whereby the tenants share both the input and the output with the owner or whoever controls the land, the rent-in-cash arrangement dictates that land is cultivated in exchange for money, or rent. The additional benefit of share-cropping to the tenant is that his right over the land is recognized by law. The Okara farm tenants, who had resided on the land and were responsible for tilling it, feared the new system of contract would empower the army, who were not even the owners of the land, to displace the poor tenants from their homes.”

In this particular case, Ayesha adds, the army had changed the terms of the contract for land it did not own. “Moreover, the land lease had expired before Partition in 1947, not to be renewed again. To enforce its authority, the Rangers besieged the villages twice, imposed curfew, restricted freedom of movement, stopped supply of medicine, food and vegetables, and used numerous other pressure tactics.” Commenting on the Okara farms case, she writes, Director-General Inter-Services Press Relations (ISPR), Major General Shaukat Sultan, said, “The needs of the army will be decided by the army itself, and the government will decide this. Nobody [else] has the right to say what the army can do with 5,000 acres or 17,000 acres. However, the Okara incident was not an issue of how the army determined the usage of its land. This, like many other cases, is about the illegal use of military authority to change the legal nature of the land under its control.”

Dr Ayesha continues: “The military business has altered the character of the Pakistan army as an institution. Years of involvement of senior generals in profit-making activities has led to the formation of a group of capitalists with the power to exploit the financial resources of the state. The senior generals have used the Pakistan army’s influence to further their financial and political power. The military enjoys complete autonomy from all civilian stockholders when it comes to its numerous commercial ventures, with the result that the more the military’s economic power increases, the weaker the Pakistani civil society becomes.”

“Today, the acquisition of perks and privileges is taken for granted in the army. Housing schemes, agricultural land and other facilities such as subsidised electricity, water and gas supply to armed forces personnel are justified as part the necessary benefits which ensure greater commitment to work, namely the ‘defence’ of the state. The most serious consequence of the military’s involvement in economic ventures and its financial autonomy affects its sense of judgment regarding the state’s political control, which it feels encouraged to retain. The influx of the military into civilian administration has never been greater than it has been since 1999. This has weakened civilian institutions further.”

Dr Ayesha further writes: “The financial cost for the army to withdraw from politics is very high. Under the circumstances, it is almost impossible for the military to totally withdraw to the barracks and allow democratic institutions to flourish. The generals argue that since civilian institutions are incompetent, as is the political leadership, democracy is impossible. The issue, thus, is not about the military being a better performer than the political governments, but about all the dominant classes contributing to creating a predatory cycle of politics.” Siddiqa feels that it is not possible to get the military out of politics nor should the military be expected to strengthen democratic institutions. “The military exploits the state’s resources in partnership with its civilian clients,” she says, and finds that the military has also grabbed the intellectual discourse and induced people to accept its own view of the world.

“The national security paradigm has been marketed so effectively that there is hardly any cogent element in the country that could challenge the basis for the military’s existence or its dominance of the state and its society,” she writes. On the other hand, however, General Musharraf claims that all is fair in real estate and military governance: “So, what is the problem if they the armed forces are contributing to the town development anywhere in Pakistan, for that matter? In Lahore, in Rawalpindi — their output is the best. The defence societies everywhere are the top societies of Pakistan…now, why are we jealous of this? Why are we jealous if somebody gets a piece of land, a kanal of land, cheap when it was initially, and because of the good work done by the society, the price rises by 100 times, and the man then earns some money. What is the problem? Why are we jealous of this? There is no problem at all,” Musharraf said on November 25, 2006 during the inauguration of a multi-billion-rupee luxury homes project centred on a golf course.

However, Dr Ayesha reminds that in the historic Abdul Karim Supreme Court judgment, the judges endorsed the following quotation from John Steinbeck’s Grapes of Wrath and cautioned against accumulation of property in the hands of a few: “And the great owner, who must lose their land in an upheaval, the great owners with access to history, with eyes to read history and to know the great fact: when property accumulates in too few hands, it is taken away. And that companion fact: when a majority of people are hungry and cold they will take by force what they need. And the little screaming fact that sounds through all history: repression works only to strengthen and knit the repressed. The great owners ignored the three cries of history. The land fell into fewer hands, the number of the dispossessed increased, and every effort of the great owners was directed at repression. The money was spent for arms, for gas to protect the great holdings, and spies were sent to catch the murmuring of revolt so that it might be stamped out. The changing economy was ignored, plans for the change ignored; and only means to destroy revolt were considered, while the causes of revolt went on.”

The writer is the former editor of Weekly Independent, currently affiliated with Gulf News and the Spanish News Agency EFE as its Pakistan incharge

http://www.thepost.com.pk/OpinionNews.aspx?dtlid=100009&catid=11

 

[dabong1]

This is from NOVEMBER 12, 2001


Pakistan: Armed Forces Inc.

The country's military dominates business
Guns and Cornflakes


It's early morning in Islamabad, and a middle-class child sits down for breakfast. He pours sugar refined from Fauji Sugar Mills into a bowl of Fauji oatmeal, which his mother cooked using gas bottled by Fauji LPG. In the next room his father logs onto his computer running on electricity produced by the Fauji Kabirwala power plant and clicks onto a program that uses Fauji software. The house they all live in was, of course, built with Fauji cement.

The Fauji group is as pervasive a commercial presence in Pakistan as General Electric is in the U.S. And the Fauji companies, all part of the Fauji Foundation, are closely linked to an even more ubiquitous institution--the Pakistani military, itself a formidable force in the economy.

As international policymakers try to figure out how to help the economy of Pakistan, its reluctant ally in the war against terrorism, the issue of the military's role in the economy could turn out to be divisive. Long before a bloodless 1999 coup put General Pervez Musharraf on top, Pakistan's generals wielded tremendous influence on Pakistan's economy. That has hampered development of other businesses that might compete with military enterprises and also gives the generals a huge stake in maintaining the economic status quo--even though the economy has lurched from crisis to crisis. Meanwhile, civilian politicians who want to stay in office have been loath to tamper with the military's business privileges.

If American aid and loans start to pour into Pakistan, some of it will certainly end up with these companies, which have a flawed record, to say the least. Although Fauji and other military foundations use business profits to finance welfare benefits for ex-servicemen and their families, many of their companies are losing money, and the cash-strapped government is in no position to bail them out. Critics are calling more loudly for reform--not just because these companies are poorly operated, but because they have helped create a dual society in which military families are much better off than average Pakistanis. "The clout of the army makes it more influential than any other corporate body in terms of influencing nonmilitary decisions," says Tariq Rehman, professor of Linguistics and South Asian Studies at Quaid-i-Azam University in Islamabad. "It impedes the development of a civil society."

The Fauji Foundation is at the heart of the military's economic machine. With annual turnover of more than $500 million and profits of $41 million, Fauji provides womb-to-tomb benefits for more than 8.5 million ex-military men and their dependents. Retired servicemen get preferential hiring for the 10,000 jobs at the foundation's wholly owned companies. Thousands more find work at Fauji subsidiaries, while top management jobs are reserved for retired generals.

BIG PLAYER. And Fauji represents just part of the military's business operation. The army, navy, and air force operate their own corporate foundations, running everything from shoe stores to insurance companies. The foundations control some of the largest listed companies on the Karachi stock exchange. Beyond that, the Ministry of Defense pours public money into its own lucrative businesses, such as the Frontier Works Organization, which are engaged in such nonmilitary pursuits as road building, trucking, and property development.

Just how big a slice of the economic pie the military controls remains a well-guarded secret, but it's safe to say it is by far the single biggest player. Fauji Fertilizer Co. was one of Pakistan's most profitable companies in 2000, earning $44 million on sales of $170 million. Outside of the Fauji network, Askari Commercial Bank, controlled by the Army Welfare Trust (AWT), is the country's largest private bank in terms of assets and profits. Military companies enjoy access to prime real estate, easy bank credit, and tax breaks, and routinely beat out civilian companies in bidding for contracts.

Started in 1947 with a $3.6 million endowment from the departing British colonial administration to provide for the needs of World War II widows and their families, the Fauji Foundation remained a modest institution until the late 1970s, when it started expanding aggressively. Using money made by its 20 companies, the foundation spends $18 million a year running some of Pakistan's best hospitals and schools. For all that, Fauji Foundation Secretary Brigadier (retired) Mumtaz Hussain denies that his group has any special privileges. "The environment we deal with is ruthlessly competitive," he says. "If we offer better deals, we win. If we can't, we are nowhere. No crutches are available, never."

But many Fauji offshoots are in deep financial trouble. Fauji Cement Co. has lost $23 million since it began operations in late 1997, due to massive overcapacity in the cement industry and a crippling foreign debt burden, including $19 million to Britain's Commonwealth Development Corp. and $39.9 million to the International Finance Corp.

By far the biggest corporate dog is Fauji Jordan Fertilizer Co. Its plant in Sindh province was financed with a $100 million syndicated bank loan and a loan from the Export-Import Bank of the U.S. To lure investment, the Pakistan government promised to subsidize the company if fertilizer prices fell below $250 per ton. Bankers clamored to sign on. "At the time it was a golden syndication," says Askari Commercial Bank senior vice-president Nasier Sheikh. Today, prices for fertilizer made at the Sindh plant are below $200 per ton, and the government has imposed a much less generous subsidy. The Fauji Foundation has had to inject cash to keep the company afloat.

Despite their spotty record, the military foundations and other army-connected companies are generally above reproof. "If you criticize the armed forces, you are committing treason," says Rifaat Hussain, chairman of Defense & Strategic Studies at Quaid-i-Izam University. "The military is sacrosanct." Less reticent are some ex-military men. Speaking of some business debacles at the AWT, former Interior Minister and retired general Nasirullah Khan Babar says, "There should be accountability. But because [managers] are protected by the army, there are no checks."

Some ex-officers know the army is in over its head. "The army should not get involved in business," says retired Lieutenant-General Talat Masood. "We will ultimately end up like the Chinese People's Liberation Army," which was deeply involved in business until Beijing civilian leaders finally forced the PLA to divest its corporate holdings.

Nonmilitary critics worry that the system, with its free health care and top-ranked high schools and technical institutes, perpetuates a gap between the military haves and the civilian have-nots. "It's a flaw in the system," says Quaid-i-Izam University's Hussain. "It doesn't operate on the principal of equal opportunity and access." And Pakistan won't either until it stops tilting the playing field to favor the military.


By Frederik Balfour in Islamabad
http://www.businessweek.com/magazine/content/01_46/b3757138.htm

 

[dabong1]

Military's sprawling business enterprises
Sultan Ahmed

Commercial and industrial enterprises promoted by the Army Welfare Trust and the Fauji Foundation are steadily on the increase, and they now form a significant part of the economy of the country. Along with the army, the Pakistan Navy and the Air Force, too are setting up varied enterprises - commercial, financial and real estate - to promote the welfare of their own people. They provide employment to the retired military personnel if they are not re-employed in civilian posts as many are now and the income from such outfits goes towards the welfare of their personnel.

The diversity of such enterprises is, indeed striking. They range from the Shaheen Air Lines manned mostly by the retired air force personnel to the Askari Commercial Bank, Askari General Insurance and Shaheen Insurance. Then there is the Askari Leasing Company. The only area of the financial sector left out is the usually non-profitable Modaraba. In the large-scale manufacturing sector, there is the very profitable Fauji Fertiliser whose share price shot up to Rs100 for Rs10 recently before it slipped down marginally. Then there is the Fauji Jordan Fertilisers which lost money heavily as it was regarded a fool hardy venture and it was subsidized heavily by the Fauji Fertilisers, the real cash cow, and other official outfits.

Then there is the Fauji Cement whose share price is picking up following the increasing demand for cement, in the country after the reduction of the central excise duty by 25 per cent. Then there is the Bahria Housing Complex and Shopping Mall outfits. Now Bahria is to build the largest shopping mall in Asia close to Islamabad and is advertising very heavily. There are the Askari Apartments, particularly in Karachi. Although the apartments are meant to be sold to defence personnel or retired servicemen they are free to re-sell them to civilians at high profits. There is the excellent Naval Housing Complex next to Do Talwar in Clifton where Admiral Mansurul Haq, too, has his famous residence.

Then there are the Shaheen Apartments for the Air Force personnel. But now the Defence Housing Authority is out to sell luxury apartments directly to the civilians as through the fabulous Creek City at Clifton. An allotment there is cash on the nail-head because if you get an allotment 90 per cent of the cost of construction will be met by the Askari Bank. So many of those who have allotments have been on the look out for buyers offering large profit from day one after they won the lot. The Army's National Logistic Cell has been engaged in water distribution in the city as well. In the past ordinarily-civilians could also get the water through advance payments; but now they are lucky if they get it. The Rangers too are distributing water in the city at a rate lower than the commercial tankers. But too few are able to get the water after a great deal of hassle.

The most adventurous of the defence housing societies in the country, the Defence Housing Authority in Karachi has gone in a big way for clubs, restaurants and a hotel, by the sea side. Its Carlton Hotel is popular as a place for weddings and other functions. It has set up the Creek Club and the Marina Club where the defence personnel may pay as low as Rs25,000 as entrance fee, while the civilians have to pay Rs600,000 or just about that. There is also the new DHA Golf Course which is given out on rent for various functions. The restaurants on Seaview are not very popular with hotel managers as the rents charged by the DHA are very high. Anyway more and more restaurants are coming up there.

In addition the DHA is using its various modest clubs like the Sunset Club for renting out to weddings and other functions. Now these armed forces welfare institutions are entering education in a big way. Earlier they used to set up and manage schools. But recently they went for colleges and IT institutions. And now they are moving towards universities like the Bahria University. That may be a welcome development as they admit civilian students as well. But the problem is the children of the civilians have a higher fees to pay compared to the nominal fees paid by the children of the military personnel. If such institutions want to do a service to the country they should have uniform fees for all students. However the fees in these institutions are not as high as the fees in some private schools and colleges which are regarded as elite institutions.

Now a major question is: following the popularity of the Creek City with 90 apartments for housing the rich or speculators, will more such luxury housing projects be set up? As long as the Askari Commercial Bank is there to finance such luxury enterprises without a hassle, the DHA may be ready to opt for more such projects. But by opting for such projects the armed forces are identifying themselves more and more with the rich in the country and the real estate speculators. Now the DHA authorities say they want to make the place really green. That was a commitment made 20 to 30 years ago but has not materialised, except in the areas developed initially. Will the DHA fulfil its new commitment now?

Following the lead given by the armed forces with their very profitable enterprises, the police have set up the police foundation and the judges the Meezan Foundation. But they have not been as successful as the armed forces with their varied enterprises. I was told that when Benazir Bhutto was the prime minister she was shown a World Bank report which said the public sector in Pakistan was expanding. She asked how could that happen when her government was stepping up privatization. She was told the World Bank meant by that the expansion of the Fauji Foundation enterprises. Twenty-years ago before the DHA went into the luxury clubs including the Golf Club, it had a proposal to set up a desalinization plant that is yet to materialise although the DHA has gone to ten phases. Now the Austrians are said to be interested in the project.

Some years ago a reply was given to a query in parliament that the number of defence housing societies, colonies etc in the country was about 84. Most of them keep expanding although the record for expansion is held by DHA. But the DHA is not a model for any housing society other than the basis plan. What matters is its execution and maintenance. In that area the DHA has been failing signally but that does not prevent it from constantly coming up with glossy new projects like the Creek City so heavily funded by the Askari Commercial Bank.

 

[dabong1]

Pakistan Army takes over economy, administration
Sunday, October 05 2003
With an Army foundation running several large state-owned companies in Pakistan, a local daily has come out with a list of over 1,000 Armed forces officers occupying top posts in the government and foreign missions since Pervez Musharraf took over in 1999, reflecting their stranglehold over the economy and administration. "As many as 104 serving and retired lieutenant generals, major generals or those with equivalent ranks from other services are among 1,027 military officers inducted in civilian posts in different ministries, divisions and Pakistani missions abroad after the October 12, 1999 military takeover", Pakistani daily The Dawn reported.

The number of Army brigadiers or their equivalent ranks from the Navy and Air Force was "even higher at 160", it said, quoting an annexure placed in the Senate library. As many as 14 ambassadors and one high commissioner have been appointed from the Armed forces ranks during the period. The report comes in the wake of another one published in The Saturday Tribune, which said the Army's fauji foundation was "all set to take over" the multi-billion dollar state-run Pakistan State Oil (PSO), described as "gold mine" for its prospective buyers, through a "rigged and manipulated" privatisation process.

The foundation, which is technically devoted to the welfare of retired Army personnel, currently runs several big firms, including the Fauji-Jordan Fertiliser Company, Fauji Fertiliser Company, Fauji Cereals, Fauji Corn Complex, Foundation Gas, Fauji Oil Terminal, Fauji Kabirwala Power Company and Mari Gas Company. The Saturday Tribune said the serving generals, who head the foundation, report directly to Musharraf as the Chief of Army staff and the Defence Secretary. On Armed forces personnel in diplomatic posts, The Dawn said these included 13 lieutenant generals and major generals appointed ambassadors in different countries. A brigadier and a major "also got ambassadorial positions".

The postings included those in Riyadh, Beirut, Kuala Lumpur, Tripoli, Mexico, Rabat, Tashkent, Abu Dhabi, Bahrain, Bangkok, Jakarta, Pyongyang, Dushanbe and Bandar Seri Sangwan. Besides these, the service officers were holding top posts in organisations like Space and Upper Atmospheric Research Organisation (Suparco), Pakistan Post Office, Civil Aviation Authority, Pakistan National Shipping Corporation, Surveyor General, Federal Employees Benevolent Fund and Group Insurance, Federal Public Service Commission, National Finance Commission, National Accountability Bureau and Pakistan Railways, besides ministries of health, food, agriculture and livestock. They were also positioned in top slots in Gwadar Port Authority, Karachi Port Trust, Karachi Shipyard, Pakistan Aeronautical Complex Board, Oil and Gas Development Company, Directorate General Intelligence and Investigation, State Life Insurance Corporation of Pakistan and Pakistan State Oil Company.

 

[romeo5]

I don't get it? The amy producing goods is a bad thing?

 

[SMC]

I don't get it? The amy producing goods is a bad thing?

Well.. some people here want Ganja and bibi back in the country. Can't blame them when they take the country back to stoneage.

 

[Awesome]

Is there a comparison whether or not these military men already belonged to some money. Like Musharraf, who's family was already quite wealthy...

The armed forces are large. Combining all of their assets sums up to a Billion dollars? Geez.

 

[Interceptor]

Well.. some people here want Ganja and bibi back in the country. Can't blame them when they take the country back to stoneage.

I thought that is inevitable that those figures would return to Pakistan. Otherwise there is no point of having elections.

What does this book have to do with those respected parties, the Author was in the armed forces herself and she was a accounts officer. It has nothing to with a political party more a book about the many scandals that the Pakistani army has.

Why are you weeping about Nawaz and Benazir they are not even in Pakistan, so you still have a dictatorship in Pakistan cheer up?

 

[araz]

AsSalam oAlaikum.
These are interesting times. During interesting times ,even "good people" make alliances with the devils. This is what we are seeing in Pakistan. We all know how corrupt BB and Nawaz were during their tenures. Is Musharraf going to be painted with the same brush as them. We have yet to see. I for one hope and pray that the case against Judiciary gets the momentum going for a positive change. We really need checks and balance process in our country. A process that gives leeway to none. Then and only then can we have accountability and punish those who have looted the national exchecquer, whether in a uniform or not. The irony is that it was the judiciary which repeatedly shot itself in the foot by siding up with the wrong side. What we are seeing today is a consequence of a catalogue of their own disasters.Frankly I am very worried that the 2 steps we might have taken forward are going to results in another 4 steps back.
In the long run, I dont think the countries future lies with the Army taking over, We need our own, corrupt version of democracy to continue long enough for all the corrupt top brass to be sifted out and then , Perhaps we might eventually have a government which is accountable to the people for its deeds.All the other options are too bloody to contemplate.
WaSalam
Araz

 

[Interceptor]

AsSalam oAlaikum.
These are interesting times. During interesting times ,even "good people" make alliances with the devils. This is what we are seeing in Pakistan. We all know how corrupt BB and Nawaz were during their tenures. Is Musharraf going to be painted with the same brush as them. We have yet to see. I for one hope and pray that the case against Judiciary gets the momentum going for a positive change. We really need checks and balance process in our country. A process that gives leeway to none. Then and only then can we have accountability and punish those who have looted the national exchecquer, whether in a uniform or not. The irony is that it was the judiciary which repeatedly shot itself in the foot by siding up with the wrong side. What we are seeing today is a consequence of a catalogue of their own disasters.Frankly I am very worried that the 2 steps we might have taken forward are going to results in another 4 steps back.
In the long run, I dont think the countries future lies with the Army taking over, We need our own, corrupt version of democracy to continue long enough for all the corrupt top brass to be sifted out and then , Perhaps we might eventually have a government which is accountable to the people for its deeds.All the other options are too bloody to contemplate.
WaSalam
Araz

Why is this book been given a political colour, while it does not belong to any political organisation! It is only exposing the many scandals of the Pakistani military and so forth.

The dictators have left there seeds into Pakistani politics and those seeds have blossomed and created new entities. Military governments have only taken from the country and when they left, they would always leave destruction. It is the bullet that pierces the flesh and it that leaves an odourless disease that only implodes and weakens more the voices of the people. The military has no right to rule the country there duty is to serve the country, why do what is not in the interest of the country, and bring forth dictators and support them. It is the people I would like to see plebiscites there views on a democrat not a Military general the constitution does not allow it and the people won’t stand by it. The book is an act that is in response to freedom of democracy a freedom to rid these ridicule generals that have betrayed and walked against the future of Pakistan. The book exposes the intent of why these generals have contributed in toppling governments for fringes in their empires. I won’t stand by it and I know the People of Pakistan will not tolerate military governments as they have felt the harsh whip before. What wrong has the author done she is only showing the other side of the generals to the people, and let the people decide if they will tolerate the military regimes anymore, all power to the people.

 

[Owais]

Well.. some people here want Ganja and bibi back in the country. Can't blame them when they take the country back to stoneage.

no its not bad thing but its not Army's work to do business specially in real estate. the land provided to them is for defence purpose and it is almost free of cost but the construct towns on it and earn huge profit.