mega scandals & corruption of general pervez musharraf government

8/14/2019 MEGA SCANDALS & Corruption of General Pervez Musharraf Government

1/101

MEGAOF General Pervez Musharraf Government

The process of privatization of PSMC stands vitiated by act of omission and

commissions on the part of certain state functionaries reflecting violation of

mandatory provisions of law and the rules framed hereunder which

adversely affected the decisions qua pre qualification of a member of the

successful consortium (Mr. Arif Habib), valuation of the project and the finalterms offered to the successful consortium which were not in accord with the

initial public offering given through advertisement.

Supreme Court of Pakistan in Steel Mill Case

Pakistan Muslim League (N)

House No 20-H streets 10, sector F-8/3 Islamabad.

051-2852663, 2852665; Fax No: 051-2852662

SCANDALS &

CORRUPTION


2/101

STEEL MILL104 billions were being looted


3/101

Stealing the Steel Mill!

Introduction

The Supreme Court of Pakistan in its historic judgment delivered in a

public interest litigation has declared the sale of 75% shares of Pakistan Steel

Mills as void and of no legal effect as the process of privatization of PSMC

stands vitiated by acts of omission and commissions on the part of certain

state functionaries reflecting violation of mandatory provisions of law and

the rules framed hereunder which adversely affected the decisions qua pre

qualification of a member of the successful consortium (Mr. Arif Habib),

valuation of the project and the final terms offered to the successful

consortium with the initial public offering given through advertisement.

Pakistan Steel Mills Corporation (Pvt.) Ltd (the PSMC) wasinaugurated in 1985 with the technical and financial assistance of the formerSoviet Union and owns and operates an integrated steel manufacturing plantwith the design capacity of 1.1 million tons per annum.

The steel demand in Pakistan is approximately 4.5 million tones per

annum. PSMC meets approximately the domestic demand of steel products.The shortfall is met through a large number of small private sector units inPakistan and through imports. PSMC has a chequered history and has been plagued by mismanagement, corruption and overstaffing. It has beenfunctioning at a lower capacity and with heavy losses in some years.

First Plan of Privatization

The privatization of PSMC was taken up in 1998 but was dropped andinstead it was decided to undertake restructuring of the corporation. To

offload the excess regular manpower from 20533 to 15000, PSMCintroduced an optional Voluntary Retirement facility w.e.f. 25th May 2000.This scheme was funded by internal resources to the tune of Rs. 4.5 billion.A Memorandum of Understanding was signed with Russia, during the visitof the president of Pakistan to Moscow in February 2003, to enhance thecapacity of PSMC from 1.1 million tones to 1.5 million tones per annum.

The Change of Heart

Inclusion of PSMC in the privatization programme again came under

consideration of the Cabinet Committee on Privatization (CCOP) on 31-12-2004 and it approved the proposal of Privatization Commission to conduct


4/101

an Initial Public Offering of 10% of its shares to the general public. Withinmonths, the government changed its mind without any cogent reasons anddecided to sell it. The Board of Directors of PSMC was given indications forits privatization by sale (instead of IPO) to a private party but the Board

opposed it.

The government appointed a new Board which was summoned to thePrime Minister House on February 10, 2005 at 4:15 p.m. The Prime Ministerdisclosed that the purpose of the meeting was to inform the Board ofDirectors that: (i) the government wanted to privatize PSMC on a fast track;(ii) the schedule of privatization would be given by the Minister forPrivatization within a week; (iii) a Financial Advisor would be hired by thePrivatization Commission to facilitate the privatization process at theearliest.

Pursuant to this desire of the Prime Minister, the obedientPrivatization Division submitted a summary on Inclusion of Strategic Sale(i.e. 75% of its stake) of PSMC Corporation in the Privatization ProgrammeThe suppliant Cabinet Committee on Privatization (CCOP) considered the

Summary and approved the proposal on 11-04-2005.

The Assets

Let us now look at the assets of PSMC. Out of total 19000 acres of

land, the Government has offered 4457 acres of land for bidding purpose.The government hired M/S Sadar-ud-din Associates to evaluate the saidland. Itevaluated the price of the land at the rate of rupees 10-11 million per acrewhereas its actual market price is more than 100 billions rupees.

As per directive of Privatization Commission, PSMC prepared itsbalance sheet on 31-12-2005 according to which current and fixed assets (raw materials, work in process, finished goods inventory and spare parts) on

31-3-2006 are: (i) Raw Material & finished Goods & Spare Parts of Rs.12.40 billions; (ii) Book valued of Fixed Assets including plant butexcluding land of Rs. 13.04 billions. If we add the value of the 4457 acres ofthe land (Rs. 44.5 billions to 49 billions i.e. average amounts toapproximately 47 billions), the total value of the PSMC amounts to, as pergovernments own estimates, Rs. 72.5 billions. If we take the market price ofthe land, then it amounts to 125.5 billions rupees.

Payments of Undue Loans

PSMC loans were restructured. It was asked to pay, (as it is better topay off all due and undue loan before the death), its entire loan which was


5/101

even due for payment after year 2013. Interestingly, the post dated chequeswere issued to settle the bank loan amounting to Rs. 7.77 billion while theMinistry of Finance had agreed to bear the interest thereon. The said loanwas payable by 2020 in seven equal installments beginning from the year

2013. Why all this? Probably, the bankers do not like liability.

Profits

PSMC had also wiped out its entire accumulated losses by the year2004-05 and posted a net profit of rupees 3.938 billion. In the next year itrose to Rs. 6 billions. Hardly, any other state enterprise of its nature inwhole of Pakistan can boast of such achievements.

Valuation

The Privatization Commission commissioned Citigroup GlobalMarkets Limited (which associated A.F. Ferguson, Orr Dignam & Co. andCorus Consultant) in connection with the proposed sale of a 75% of stake inPSMC. The Citigroup submitted a report with a disclaimer that the report hasnot been prepared with a view to public disclosure. In preparing this report,City Group relied upon the accuracy and completeness of the informationreceived by it from PSMC or Corus Consulting without independentverification thereof.

The report further said, Such estimates, projections, targets orforecasts involved significant assumptions and subjective judgments which

may or may not prove to be correct and there can be no assurance that anyestimates, projections, targets or forecasts are attainable or will be realized.No representation or warranty, express or employed, is made by CGML as tothe accuracy, completeness or fairness of any information contained in thisreport and, so far as is permitted by law and except in the case of fraud bythe party concerned, no responsibility whatsoever is accepted for theaccuracy or sufficiency thereof or for errors, omissions or misstatementsnegligent or otherwise, relating thereto. This report should not be regarded asconstituting an opinion as to be fairness or otherwise of any offer for an

equity stake in PSMC, nor relied on as a basis to proceed, or not to proceed,with a formal offer for an equity stake in PSMC.

So this is the report on which the whole exercise of the determinationof reference price, bidding etc is based. It does not need a special knowledgeto declare that the report is not worth the paper on which it is written. Thistrash should have been put into a dust bin rather than making it the sole basisfor the sale of our invaluable and strategic family silver.

Reference Price

The Citigroup submitted its report to the Privatization Commission on

30-3-2006 based on cash flows forecast developed till FY 2015 and withoutvaluation of the 4457 acres of the prime land. On the same day, yes on the


6/101

same day, the PC examined the report ( 200 pages of detailed figure work)and submitted its summary to the CCOP on the same day. The minutes of thecabinet meeting dated 31-3-2006 reveal that Privatization Division informedthe CCOP that the Financial Advisor (Citigroup) has recommended a value

of US$ 375 million for privatization of PSMC on 100% equity basis.CCOP was informed that FAs valuation of US$ 375 million for 100%equity stake is based on the average of the following three valuation

methodologies [ (i) Discounted Free Cash Flow Analysis (ii) Public MultipleAnalysis (iii) Precedents Transaction Analysis] with a 10% discount.

CCOP was informed that the Privatization Commission hasrecommended a total value of US$ 500 million for 100% equity stake ofPSMC (also considering current market value of the total assets).According to this, the Reference Price for 75% equity stake (1,290,487,275shares) works out to US$ 375 million i.e. Rs.17.43 per share (calculated atthe rate of Rs. 60 per US$).

The CCOP ignored the recommendations of the PrivatizationCommission and approved the valuation of US$ 464 million based on DCFstakes. On the basis of the above, 75% equity stake worked out to US$ 348million i.e. 16.18 per share. The Committee in contradiction to the rule 4 (2)The Privatization (Modes And Procedure) Rules, 2001 (Upon selection of ahighest ranked bidder as specified in sub-rule (1), the Board shall refer the

matter for approval, or rejection of such highest ranked bidder with full justification, to the Cabinet) approved in advance (before the bidding) toissue the Letter of Acceptance (LOA) to the successful bidder if their pershare price is equal or higher than the reference price. And Pakistan Steelwas never consulted for the fixation of the reserved/ sale price.

Bidding

On the same day i.e. 31-3-2006, the bidding took place. Its process isalso intriguing. In pursuance of request for Expression of Interest, 19 parties

applied for pre-qualification out of which, nine were qualified.Out of these nine, the following six pre-qualified parties formed two biddingconsortiums ( rest lost interest or were compensated) ) and took part in thebidding:

1. Al-Tuwairiqi (Saudi Arabia), Arif Habib Securities (Pakistan) andMagnitogorsk ( Russia).

2. Noor Financial Investment Company (Kuwait), Government of Ras

Al Khaimah, (UAE), Industrial Union of Donbass (Ukraine) andAljomaih Holding Company, (Saudi Arabia)


7/101

Under the law, these consortiums could not take part in the bidding on the

following two reasons: (i) as per Instruction to Bidders issued by thePrivatization Commission on March 11, 2006, consortiums could be formed

before submission of Statement of Qualifications (SOQ) whereas these socalled consortiums were cobbled after the SOQ; (ii) actually the winning/first consortium was made on 20th day of April 2006 i.e. 20 days after the

bidding. But the Privatization allowed this consortium to participate in the bid rather it had already got approval from the CCOP to issue LOA to it.Why? Only God knows.

There is another interesting fact that the name of the constituentscompanies of the bidding consortium is different than the actual consortiumlater formed on 20-4-2006. Now Al-Tuwairiqi was replaced by Al-Ittefaqand two following offshore companies were added into it: (i) ATG HoldingsMauritius Limited (ii) MMK Holdings (Asia) Limited. Despite the courtsrepeated instructions, the legal documents of these companies were neversubmitted in the court.

Letter of Acceptance

Further to the bidding held on 31st March 2006, the Commissiondeclared, on the same day, the consortium to be the successful bidder byaccepting the bid of Rs.16.80 per share at the aggregate sale price of Rs.

21,680, 186,220.00 (Rupees twenty one billion, six hundred and eightymillion, one hundred and eighty six thousand, two hundred and twenty). Onthe same day, the Commission issued the Letter of Acceptance (LOA) to theauthorized attorneys of individual companies forming the biddingconsortium. Three things deserved to be noted:(i). Under section 4 of the Privatization (Modes And Procedure) Rules, 2001,upon selection of a highest ranked bidder, the Privatization Board shallrefer the matter for approval, or rejection of such highest ranked bidder withfull justification, to the Cabinet. It was not done. After the bidding, the

letter of approval of bid was issued and LOA was also issued;(ii) the said letter was not issued in the name of the consortium, rather LOAwas issued to individual constituent companies;(iii) the representatives attorneys of all the three constituent companies aretwo Rizviz: Mr. Zaigham Adil Rizvi, Mr. Ahsan Zahir Rizvi, and again, Mr.Zaigham Adil Rizvi. (Is it a strange coincidence or a deliberate scheme? Letthe readers judge! )(iv). In the bidding process, Al-Tuwairiqi was part of consortium but theletter was issued in the name of Al-Ittefaq which was replaced later in the

consortium agreement dated 20-4-2006; how the Commission knew it inadvance that this replacement will be done after 20 days


8/101

(v). under our law, a company can only do business in Pakistan if Board ofInvestment gives permission and the said company is registered withSecurities and Exchange Commission of Pakistan under section 451 of theCompanies Ordinance 1984; in this case, only Arif Habib Securities was

registered here; so why such letter was issued to these unregisteredcompanies?.

And about Arif Habib, an application was moved in the apex court onthe accounts of pending money suits ( Rs. 12 billons) against him in courts inSindh and his role in the alleged crash of Karachi Stock Exchange in 2005wherein he made about Rs 5 billion in one day by manipulation as perenquiry committee appointed by the Securities and Exchange Commission ofPakistan. ( the report is available on SECP web site)

Purchaser different than Bidder?

The bidder consortium consisted of(i) Al-Tuwairiqi(ii) (ii) Arif Habib and(iii) (iii) Magnitogorsk

But the Share Purchase Agreement was executed between the Pakistan and(i) PSMC SPV (Mauritius)(ii) Arif Habib Securities

(iii) Arif Habib s/o Habib Haji Shakoor.

The following became the guarantors of the agreement: (iv) ATG HoldingsMauritius (v) Al- Ittefaq (vi) MMK Holdings (Mauritius) (vii).Magnitogorsk.

The following points are worth consideration:(a) Why and under what law, companies were changed? Why bidders weredifferent and agreement was made with different parties?

(b) one person signs on behalf of first five parties (i to v) and another personsigns for (vi) and (vii);(c) PSMC SPV was registered as a special purpose vehicle offshorecompany with capital of four dollar just to avoid tax. It also means that incase of a problem, its liability will be limited to four dollars(d) Privatization Commission did not check the documents of threeMauritius companies and did not submit these in the Court;(e) It appears that, like consortium, these have been registered after thebidding;


9/101

(f) How come Arif Habib s/o Habib Haji Shakoor became buyer in its personal capacity as he neither figure in EOI and bidding nor in theconsortium, actual or dummy?

Judgment of Supreme Court of Pakistan!The nine member special and larger bench of the Supreme Court of

Pakistan heard the case for 16 days from 9 am to 1.30 pm. The

government/buyers were represented by a team of the senior most lawyersincluding Syed Sharif-ud-Din Pirzada, Mr. Hafeez Pierzada, Mr. KhalidAnwar, Mr. Waseem Sajjad ( i.e. four former Law Ministers)and theAttorney General. The honorable court announced its short order on 23-6-2006 wherein the Letter of Acceptance (LOA) dated 31st March 2006 andshare purchase agreement dated 24th April 2006 were declared as void and ofno legal effect. I quote hereunder a few lines from the judgment to confirmthe story:

On the very next day, CCOP determined the reference price of the share @

Rs.16.18 less than the value suggested by Privatization Commission @

Rs.17.43 per share, whereas final bid was accepted @ Rs.16.80 per share.

It may also be noted that as against the above price, the GOP as well as

Privatization Commission has extended following benefits to the purchaser:i) The stock in trade in the Unit worth about Rs.10 billion, to be

handed over to the purchaser,

ii) The cash worth aboutRs. 8.559 billion lying in its account, out

of which post dated cheques of about Rs. 7.67billion have

already been issued to clear the liability of loans, which were

due form the year 2013 to 2019.

iii) The Tax of Rs.3 billion has already been paid, out of whichRs.1

billion will be refunded to the purchaser on taking the

possession of the Unit.

iv) Total loss to Government in this way works out toRs.18 billion

(net) (10.00+7.67+1.00)

v) Above all, the Government has accepted the liability to pay

compensation of aboutRs. 15 billion to the worker as Golden

Hand Shake Scheme, which will be another loss to the State.


10/101

Conscious of the mandate of Article 153 and 154 of the Constitution, we

hold that the establishment and working of the Council of Common Interest

(CCI) is a cornerstone of the Federal Structure providing for protection of

the rights of the federating units. Mindful that the important institution isnot functioning presently, and taking note of the statement made by the

council for the federal government Mr. Abdul Hafeez Pirzada that the

process for making it functional is underway, we direct the federal

government to do the needful expeditiously as far as possible but not latter

than 6 weeks. -------by way of propriety it would be in order if the matter is

referred to the counsel of common interest CCI for consideration.( EDITORS NOTE: Article 153 deals with the constitution of the CCI.Article 154 mandates the CCI to formulate and regulate policies in relationto matters in Part II of the Federal Legislative List. The Part II of the FederalLegislative List includes Development of industries, where developmentunder Federal control is declared by Federal law to be expedient in the public interest; institutions, establishments, bodies and corporationsadministered or managed by the Federal Government ----all undertakings, projects and schemes of such institutions, establishments, bodies andcorporations, industries, projects and undertakings owned wholly or partially by the Federation or by a corporation set up by the Federation. In otherwords the privatization of PSMC should have been placed before CCI.)

The process of privatization of PSMC stands vitiated by act of omission andcommissions on the part of certain state functionaries reflecting violation of

mandatory provisions of law and the rules framed hereunder which

adversely affected the decisions qua pre qualification of a member of thesuccessful consortium (Mr. Arif Habib), valuation of the project and the final

terms offered to the successful consortium which were not in accord with the

initial public offering given through advertisement.

Conclusions

It is not difficult to judge that the deal has been managed from the day oneto benefit certain people. Leaving aside acts of omission and commission,out of which some have been mentioned and the rest will be preciselydocumented by the highest court of the land in its detailed judgment, let uscalculate the final figure.

a) The Steel Mills has been sold for 21.68 billions.b) The buyers have been given benefits of 17.67 billions.c) If half the employees take or are sent on golden hand shake (PSMC

Chairman is on record that 50% employees will opt for this scheme),


11/101

government will further pay Rs. 7.5 billions. If all opt for the scheme,then it will pay Rs. 15 billions.

d) In other words, the buyer(s) are paying Rs. 21.68 billions whereasgovernment is giving then Rs. 25.17 ( if half employees) to 32.67 ( if

all employees) billions.e) The net transfer of national resources to the buyers would be Rs. 3.49to 10.99 billions.

f) Let me remind you, this simple calculus does not include the humbleprice of the 4457 acres of prime land which is of 100 billions rupees.

g) All put together, the clean government serving the poor toilingmasses of the Islamic Republic of Pakistan has gifted, as a token oflove, Rs. 103. 49 to 110.49 billions to one of its poorest citizens inthe larger interest of the nation.

There are some issues which need to be pondered upon:(i) The honorable court has earned the laurels of the common citizens.

It may lead to the restoration of confidence of the people into ourjudicial system as without proper dispensation of justice, we cannotsurvive as a nation.

(ii) Does this damning judgment of the nine lordships of the highestcourt of the land will lead to the rolling of some heads? And it must.

(iii) The government always claims corruption free good governanceand alleges corruption on part of the previous governments led by

Benazir Bhhutto and Nawaz Sharif. At the most, there are still mereaccusations that are still under trial in lower courts. Here the highestcourt of the land has given a final judgment of acts of omission andcommission. Will the Goebbles of the present savior governmentexplain to the nation about their tall claims?

(iv) There is rule of cartels in Pakistan: cement cartel, oil cartel, sugarcartel, bank cartel, land cartel, stock exchange cartel, drug cartel,steel cartel etc. Have these cartels been created in larger nationalinterest or it is a mere coincidence?

(v) The whole Pakistan appears to be on loot and boot sale. Previousgovernments sold dead and sick units of lesser importance. Thisgovernment is selling very profitable and strategic corporationswithout any clear cut policy considering national interests. Shouldthere be a national privatization policy and legislation after a fairand thorough debate?

(vi) National Accountability Bureau hounds petty officials on allegationsof small corruptions. What would be the attitude of NAB about thisproved corruption of not very small amount i.e. Rs. 103.49 billions?

Let the NAB start action not only against the culprits involved in the


12/101

Steel Mill but also in other case like Habib Bank of Pakistan whichhas been sold at an amount equal to its just two years profits.

( Barrister Zafarullah Khan)

What a Steal?

Dr Farrukh Saleem: June 11, 2006: the News

Pakistan Steel Mills Corporation (PSMC) on the auction table. PSMC goingfor Rs21.68 billion. PSMC going for Rs21.68 billion. PSMC going forRs21.68 billion. PSMC gone for Rs21.68 billion. Pakistan Steel MillsCorporation sold for Rs21.68 billion (75 per cent shares for an equivalent of$360 million). What a deal! What a steal?

Our treasury now expects Rs21.68 billion in return for selling 75 per cent ofPak Steel's shares. Of the Rs21.68 billion, the Government of Pakistan (GoP)has agreed to pay a maximum of Rs15 billion in 'golden handshakes', 'special

golden handshakes' and a voluntary separation scheme (VSS). According toLieutenant-general (retd.) Abdul Qayyum, Chairman of Pakistan Steel MillsCorporation, around 50 per cent of the some 13,000 employees would"accept golden handshakes." If the chairman is right then the GoP will payback an amount of Rs7 billion, leaving the treasury with Rs14.68 billion. Ofthe Rs14.68 billion left with the treasury, the GOP has already deposited apost-dated cheque in the amount of Rs7.67 billion to clear off past liabilities.That leaves the treasury with Rs7.01 billion. Of the Rs7.01 billion, thecentral board of revenue (CBR) has waived off taxes in the amount ofRs1.82 billion leaving -- mathematically speaking -- the treasury with Rs5.19billion.

For the benefit of the buyer, PSMC has an inventory of 'stores and spares'valued at Rs.1.86 billion. For the benefit of the buyer, PSMC has 'stock-in-trade' valued at Rs9 billion. For the further benefit of the buyer, PSMC has a bank balance of Rs8.880 billion (as of Balance Sheet dated December 31,2005). Its total current assets are valued at Rs21.78 billion; a wholesomeRs100 million over and above the price paid by the buyer (remember, the buyer has acquired 75 per cent shares).

Wait there is more. Privatisation-related documents claim that PSMC sits on


13/101


14/101

HABIB BANK


15/101

HBL is Pakistans second largest commercial bank, havingcountrywide and international branch networks. The bank has fullservice license including commercial, retail, consumer andinvestment banking activities in Pakistan and most of the othercountries where it has branches

HBL has a domestic network of 1,425 branches with a market

share of approximately 20 percent and an international

network of 48 branches in 26 countries spread over Europe,

Middle East, Far East, Asia, Africa and the United States.

It operates three wholly owned subsidiaries namely Habib

Bank Financial Services (Pvt.) Limited, Karachi; Habib

Finance International Ltd. (Hong Kong) and Habib FinanceAustralia Ltd., Sydney.

It has two joint ventures namely Habib Nigeria Bank Ltd. (40

percent) and Himalayan Bank Ltd. (20 percent).

HBL owns 90.5 percent shares in Habib Allied International

Bank Plc. incorporated in United Kingdom.

HBL has two representative offices in Iran and Egypt.


16/101

ISLAMABAD: Ahsan Iqbal Secretary Information Pakistan Muslim

League (PML-N) said that the Supreme Court of Pakistans verdict on the

privatization of the Pakistan Steel Mills proves corruption in the

privatization process demanding that the Prime Minister Shaukat Aziz and

President General Pervez Musharraf must submit their resignations onthis bogus privatization.

Speaking at a joint press conference on Saturday Senator Ishaq Dar andInformation Secretary PML-N Ahsan Iqbal said here that the Apex Courtverdict validates the oppositions point of view and the adjournment motionthat the opposition forwarded in the Senate and the National Assemblyregarding the privatization.

They said, "We will abolish the National Security Council after coming into power as it has no constitutional status and will launch nationwide protestdemonstration against governments lavish spending".

They demanded the apex court to take suo motto action on the privatizationof Habib Bank and Stock Exchange Scandal as well.

Senator Ishaq Dar said, "I have expressed similar reservations regardingHabib Bank on the floor of the Senate. $ 382 million is not the price value ofHabib Bank. The Banks one-fourth price was Rs 12 billion. The price

should have been $ 600 million. I said it at the Senates floor".

Giving details he said, "Due to adjournment of the Senate the approval letterwas issued in a hurry. After receiving lesser price from UBL, Habib Bankwas privatized. We have seen in the form of tax refund Habib Bank receivedRs 9 billion and 800 million last year still the bank was privatized at a throwaway price".

Referring to misuse funds generated through privatization he said, "For

covering up the budget deficit the government utilized Rs 54 billion gainedthrough privatization from the year 2001 to 2005. During 2005-06 Rs 90


17/101

billion were used for the similar purpose. Government assets are being soldat throwaway prices. Government has set aside Rs 75 billion from theprivatization programme for covering up the next year budget deficit".

Reflecting on the lavish government spending he mentioned, "Governmenthas asked for Rs 100 million for foreign trips. An additional amount of Rs150 million have been sought for the Prime Ministers foreign trip. Anamount of Rs 577 million were spend on Presidents and Prime MinistersVIP aircrafts redecoration and Rs 330 million were facilitated in terms ofduty for the purchase of Mercedes cars. The governments economicgovernance has turned worse".

Lamenting on the situation he said, "There is no concern for masses facingprice hike. There is no change in prices after the budget speeches. Masses are

being suppressed and on the other hand they (government) is spending billions on luxuries. Thanks God! That the Supreme Court by deliveringjustice has proven the oppositions stance as correct".

Criticizing the government, he maintained, "For 2006-07 Rs 1 billion and Rs396 million have been allocated for transport. Ishaq Dar said that anyunanimous decision taken by ARD would be implemented upon. The July2nd London meeting is very vital and we will launch drive for democracy inthe light of any decision taken in that meeting".

Drawing a comparison he said, "In 1997 meeting of Council of Interest tookplace and its last meeting took place in December 1998. The governmentsclaims are false that there was a meeting only in 1997. In the previous sevenyears government doesnt bother to conduct a single meeting".

"In the 52 years till 1999, $ 1926 billion were the total amount of loans andin the last seven years the present government has taken loans amounting to$ 814 billion", he added.

"We will monitor the privatization process considering it a matter of nationalinterest. This is not about personal accountability. Suo motto action must betaken against the privatization of Habib Bank. Pakistan has been turned intoa private limited company. National assets are being distributed. During theQarz Utaro Mulk Sanwaron" drive foreign loans worth $ 356 million weretaken. In this regard the government tried to mislead the masses all theseloans have been repaid. Our privatization programme was aimed at givingownership rights to the masses so that the asset remains within the country.Through our privatization programme we tried to give shares to the masses

through the stock exchange. National Security Council has no role in theparliamentary system of government", he said categorically.


18/101

Ahsan Iqbal said that Nawaz Sharif government in 1990-91 established agood reputation through transparent privatization programme in theinternational circles.

"We envisioned securing public interest through our privatizationprogramme", he said further.

Highlighting past PML governments privatization scheme outcome he said,"We turned laborers into factory owners through privatization of Millattractors. We never used privatization for looting public wealth. Governmenthas committed such big dacoity that has forced the Supreme Court to takeaction and has damaged countrys reputation globally".

Criticizing the government he maintained, "Present government is the most

corrupt, inefficient government of Pakistan. Stock market scandal is a biggerscandal than the steel mills scandal".

"Keeping these scandals in view a decision has been taken in the parliamentary board that on June 28 protest day would be observednationwide", he said.

"Protest camps would be erected in front of press clubs", he added

(July 24, 2006: Pakistan Tribune)


19/101

PTCL


20/101

Government of Pakistan and Etisalat reached an agreement Tuesday towardssuccessful completion of the privatization process of the PakistanTelecommunication Company Limited (PTCL) with the respect to Etisalats

acquisition of 26 percent shares in PTCL along with management control,says a message received from Abu Dhabi.

It may be recalled that Etisalat had been declared successful bidder after itoutbid China Mobile and Sing Tel by offering US$ 2.6 billion for acquisitionof 26 percent stake of PTCL.

Then bidder backed out. The government secretly negotiated the deal.

Many concessions wee given to new management/bidder. One such

unfair concession is that payment will be made in next five years rather

than in one years as agreed earlier.

The details are still secret in the larger national interest.

Privatisation of PTCL challenged in SC

ISLAMABAD, May 25: PTCL employees union on Thursday moved theSupreme Court challenging the telecom giants privatisation. A petition,drafted by Ibrahim Satti, was filed under the apex courts origional jurisdiction on fundamental rights by Haji Khan Bhatti, president of thePakistan Telecommunication Company Limited (PTCL) Lions Union. Iturged the Supreme Court to set aside the sale of 26 per cent shares of PTCLin the national interest.

It terms the entire process of privatisation and handing over of its

management illegal and against constitutional provisions.


21/101

Respondents include the federal government through its cabinet committeeon privatisation, secretary of the ministry of information technology, thePrivatization Commission, chairman of the PTCL, secretary of thePrivatisation Commission, Abdul Rahim Al Nooryani of Etisalat

International Pakistan, President Mohammad Addullah Bamakhrama president PTCL and Salem Al Akebary, Senior Vice-President of PTCL.

The petition also questioned the legality of the Privatization CommissionOrdinance, terming it to be against the Constitution and said that the entire procedure without proper legal backing. It also contended that thecommission had no legal authority to offer PTCLs shares for sale.

The petition terms PTCLs privatisation non-transparent and alleged thatsecret deals had been struck to sell the profitable entity at a throwaway price which, too, was not paid in accordance with the agreement.

Instead of cancelling the bid, it argued, the commission rescheduled thepayment in a questionable manner.

(May 26, 2006: Dawn)

Critical issues in privatization

By Irfan Shahzad

WHAT is going to be the fate of Pakistans much hyped privatization programme? This question is boggling many a minds in concerned circles

both at home in Pakistan and abroad these days.

With each and every passing day that is taking us closer to the end of thismonth, the clouds of uncertainty are darkening over the possible take-over(or in the worst case otherwise) of Pakistan Telecommunication CompanyLimited (PTCL) by Etisalat, the UAEs telecom giant that gave the highestbid for it in June bidding. The extended last date given to the company fordepositing remaining 90 of the bid money is October 28.

What a difference a quarter of a year can make! Everybody at the helm ofaffairs in Pakistans Privatization Commission (PC), including Dr Abdul


22/101

Hafez Sheikh, Federal Minister for Privatization and Investment were seenin jubilation on June 18, when Etisalat offered $2.59 billion for 26 per centshares of PTCL along with its management control.

Huge claims were being made and people were being convinced to believethat it was an historic moment. It really was. Though still signed just on paper, the deal was single largest in history of Pakistan.

Concluded on initial time framework by last month, it could well have beenthe largest transaction ever made in Pakistan. However, it has notmaterialized yet. The result is that privatization authorities, again includingthe minister himself, are reportedly trying their best to avoid therepresentatives of media. Why? The answer is not hard to come by. Theydoubtlessly have little to tell and explain.

Etisalat says there are some serious issues to be discussed, before puttingthe seal on the deal. It is being argued by some that it will be least possiblefor Etisalat to let the deal fall flat, citing good relations between UAE andPakistan, and its outward longer term expansion plans. One should alwayshope for the best, but it is needless to stress that in economic deals, profitsand capital gains are the real decisive force.

In fact, it has not been a smooth sailing since the bidding was held and the

second thoughts of sheikhs are an open secret. As such, full payment byEtisalat and handing over and taking over of Pakistans largest companyshould have been completed by August 28, 2005. The final date kept movingahead. And after its CEOs meetings with higher ups in Islamabad recently,the company has now been given the date of October 28 to deposit theremaining money and take over PTCL.

Despite this extension one can not say for sure what is going to follow onthis regard. This is thus becoming second similar episode after Kunooz al-

Watan Group of Saudi Arabia disappeared after bidding highest price forKarachi Electric Supply Corporation, apparently because of some differenceson billing system of corporation.

The finalization of PTCL deal, whichever way it goes, holds a lot ofimportance for the economy, privatization process in particular. And this isbecause telecom, a rapidly expanding sector is closely linked with almost allsectors of economy. Specially two-third of next years FDI inflow target set by the government is directly dependent on PTCL deal.

The uncertain environment caused by it is already taking its toll. KSE index


23/101

and investors of PTCL shares have been hit. It is however good to note thatPC has been able to move ahead with privatization of Musthkam Cement,Bolan Textiles machinery and 17 EoIs have been received for Pakistan SteelMills.

Secretary PC was quoted as explaining that the deal with Etisalat was a bigone and some issues may arise in such big deals. He seems absolutely true.

But even if the process comes to finalization after the delay that has alreadybeen caused, by one reason or other, the near repetition of Kunooz episode by Etisalat poses some critical questions.

The foremost is that what really creates doubts in minds of internationalinvestors, even after biddings and paying initial amounts that too come inhefty sizes as has been the case with Etiselat. Are the procedures leading to privatization of sate enterprises not transparent enough? This is alreadyunder extensive debate in the country, including in the parliament.

Do we create hurdles in the way of buyers, intentionally or un-intentionally,even after the deals are made? And finally, did we overplay the bid ofEtisalat, way ahead of second runner up, giving signals that we have fetchedtoo good a price and warning the buyers that it was not a right bargain forthem?

Privatization has always been riddled with problems and controversies, be itsale of a cement plant, bank or now an infrastructure company. What peopleare concerned about is the ways it has been carried out so far. All the abovementioned questions demand satisfying answers and indicate that we surelyneed to put our house in order if the intention is to run this processsuccessfully in the longer run. It is time to ponder and act wisely.

(October 17, 2005: Dawn)


24/101

LAND MAFIA


25/101

The New Land Barons?

Ayesha Siddiqa , Newsline, July 2006Abdul Karim waited in the heat outside the Supreme Court for his case to be

heard. Sitting miles away from his village in Bahawalpur, the poor peasantwas contesting his right over three kanals (0.375 acres) of land that hadalready been awarded to him through an administrative decision. He hadtilled the land for years and he was deemed to be the rightful owner.

However, the land was subsequently transferred to Brigadier (Retd.)Muhammad Bashir, through another administrative order. The transfer ofland to the army brigadier was part of the 33,866 acres of land given to theArmy GHQ in 1993 in Bahawalpur by the provincial government. ThePunjab government had transferred the land without checking its title. Out ofthe total land given to the army, the said brigadier got 396kanals (49.5 acres)

of land, out of which about three kanals belonged to Abdul Karim.Brigadier Bashir contested Karim's ownership in the High Court, but

the court upheld Karim's title. Not satisfied with the court's decision, Bashir

filed an appeal with the highest court in the land. The Supreme Court ofPakistan also upheld Abdul Karim's ownership.

The Supreme Court admonished the district collector for actingcapriciously and for arbitrarily transferring land that was marked as land notavailable for allotment. While upholding Abdul Karim's right to cultivate theland, the court also reproached the retired brigadier for impinging upon the

rights of a poor peasant. In a historic judgment passed in September 2003,the Supreme Court bench warned against greed and forcibly and illegallydepriving poor people of their rights.

Amazingly, Abdul Karim received justice not because he had themeans to take legal action, but because Brigadier Bashir wanted his land andtook the case to court. It's unlikely that this historic judgment will help manyother poor villagers, though, as the only way for them to benefit from thislandmark judgment would be to initiate expensive legal proceedings.

The people of the small fishing village of Mubarik were not as

fortunate as Abdul Karim. Situated near the Sindh-Balochistan border, theirvillage adjoining the sea was once their territory. For over five years now,they have watched as their land has been slowly pulled away from undertheir feet. Generations of their families have lived there peacefully asfishermen, but no longer. A few years back, the villagers found that theycould no longer move freely on their own land. The Pakistan Navy (PN)ordered the residents of Mubarik village to limit them selves to a small area.But that wasn't the only restriction. They were also told not to constructhouses on the land because the adjoining land fell within the range of thenavy's target-practice range.


26/101

However, one thing is clear: over the years, the armed forceshave become major players in Pakistan's real estate business.

Since the early 1950s, the military has acquired millions ofacres of land throughout the country for distribution to serving and retired

armed forces personnel. According to one estimate, the armed forces controlabout 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 anestimated worth of Rs700 billion. Interestingly, only about 100,000 acres aredirectly controlled by the armed forces and its subsidiary companies, theFauji Foundation, the AWT and the Bahria Foundation, and distributedamongst serving and retired personnel. The remainder was given (at highlysubsidised rates) to army personnel as awards to be used for their personalgratification.

Granting agricultural land as a reward to individuals is a traditioninherited from the British. Following the principle of rewarding the 'faithful,'the Alienation of Land Act specifically stipulated allocation of 10 per cent ofcolonised land to the armed forces. This process of land development wasincorporated later in another law known as the Colonisation of Land Act,1912, which was updated by the Pakistan government in 1965.

For decades, land has been transferred to military personnel under the

aforementioned law. The military was given 10 per cent of theapproximately nine million acres of land reclaimed due to the construction ofthe Kotri, Guddu and Ghulam Mohammad barrages in Sindh. Thegovernment also gave land to some senior civil bureaucrats, who were themilitary regime's partners. Some of the prominent beneficiaries of the landreclamation scheme from the armed forces included General Ayub Khan(247 acres), General Muhammad Musa (250 acres), and Maj. General UmraoKhan (246 acres).After the military's takeover in October 1958, more land was allotted to army

officers in the Guddu Barrage area. Also, agricultural land was given in thePunjab. What is even more important, however, is the fact that the landallotted to military officers was developed with foreign aid - military andeconomic aid from the US. Reportedly, the finance minister of Punjab, Nawab Iftikhar Hussain Mamdot, justified the use of foreign aid for landdevelopment because the money was meant for the army.

The military's control of land feeds the largest social injustice in thecountry: widespread poverty. Like the feudal class, the military has beenknown to use its power to redistribute land amongst its own without any

regard for the country's poor ethnic populations. In Bahawalpur, there areinstances when land developed through years of hard work by landless


27/101

peasants has been snatched away for distribution to the military bureaucracy.In the tehsil of Nawazabad, the government awarded about 2,500 acres tovarious military personnel. Hundreds of landless peasants were evicted fromstate lands after occupying it for years without incident. In an interview,

these peasants protested against being evicted from the land they had partially developed and reclaimed from the desert without even a fairhearing. When the peasants took their case to court, junior military officers

threatened them, ridiculed the law and advised the peasants that even thecourts could not save them from the army's authority. To the villagers ofNawazabad, there was no difference between the dominant feudal lords andthe praetorian military. One local woman bitterly demanded, "If there is noplace for us here then [the authorities] should put us on a truck and drop usin India."

The case of Nawazabad is not an anomaly. Other places and peoplehave also experienced the use of force by the military to obtain land for personal or operational purposes. In Yunisabad, near Karachi, the PakistanNavy took forcible possession of the floating jetty - and the land on which itwas built - that belonged to the village and was used to transport locals,especially the sick. For villagers from nearby Shamspir, the jetty was theironly access point to land. A writ petition was filed with the Sindh HighCourt against the "illegal act of the navy" and several letters were written tothe district administration highlighting human rights abuses by the PN.

Across the country, there are many examples of the military

wielding absolute authority to suppress landless peasants in areas where theydirectly control the land. In Okara, a conflict ensued between local tenantsand the army that had unilaterally decided to change the terms of contractfrom share-cropping to rent-in-cash. While share-cropping pertains to anarrangement whereby the tenants share both the input and the output with theowner or whoever controls the land, the rent-in-cash arrangement dictatesthat land is cultivated in exchange for money, or rent. The additional benefitof share-cropping to the tenant is that his right over the land is recognised bylaw. The Okara farm tenants, who had resided on the land and were

responsible for tilling it, feared the new system of contract would empowerthe army, who were not even the owners of the land, to displace the poortenants from their homes.

The Okara farms are part of the military farms group, Okara andRenala, which comprise 16,627 acres of land consisting of two dairy farms,seven military (oat-hay) farms and 22 villages. The prime proprietor isevidently the Punjab government, which leases the land to other people orinstitutions. In this particular case, the army had changed the terms ofcontract 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, theRangers besieged the villages twice, imposed curfew, restricted freedom of


28/101

movement, stopped supply of medicine, food and vegetables, and usednumerous other pressure tactics. The report of Human Rights Watch hasdetailed testimonials of villagers victimised by the military authorities thatwere generally dismissive of the protest. Army personnel claimed that, rather

than being a human rights issue, this was a local law and order issue incitedby some NGOs.Commenting on the Okara farms case, the Director-General, Inter-

Services Press Relations (ISPR), Maj. General Shaukat Sultan, said, "Theneeds of the army will be decided by the army itself, and/or the governmentwill decide this. Nobody [else] has the right to say what the army can dowith 5,000 acres or 17,000 acres. The needs of the army will be determinedby the army itself."

However, the Okara incident was not an issue of how the armydetermined the usage of its land. This, like many other cases, is about theillegal use of military authority to change the legal nature of the land underits control. The army follows the practice of changing the usage of A-1 landspecifically meant for operational purposes, to profit-making or for personalgratification of the officer cadre and other elite. In the Punjab, farm land has been turned into golf courses and residential housing schemes. Debates inParliament over the past couple of years have shown that some campinggrounds that the army had arbitrarily turned into golf courses were notdesigned for public use, but only to please a select few.

In its official response to parliamentary questions regarding the misuse

of state land by the military, the Ministry of Defence (MoD) did notchallenge the army's authority. The ministry upheld the army's jurisdictionover land under its control. This was done in other cases as well, such as theconversion of the firing range in Nowshehra into a citrus farm. The armyvociferously defends its power over these assets and even controlsinformation regarding these agricultural assets.

Since 9/11, there has been a noticeable boom in the value of urban realestate in the country. One of the largest beneficiaries, of course, is themilitary, which has engaged in the practice of converting land titles from

state land to private property. It does this via two methods.Firstly, there is the conversion of state land for private usage. A large

amount of state land designated as A-1 land in various cantonments isdistributed to military personnel. Here, it must be mentioned that thebeneficiaries are the officers and not the soldiers. The 27 housing schemesbuilt on state land in different parts of the country are reserved for the officercadre, not the jawans.

According to a report submitted by the MoD to the Senate,about 78,292 square yards, or16.3 acres, totalling 130 residential plots, were

given to an equal number of officers in different cities in a period fromOctober 1999 to 2003.


29/101

The report highlighted a series of cases where residential plots were carvedout of state land meant for operational purposes. The cities included Karachi,Lahore and Rawalpindi, as well as smaller towns such as Kharian andJhelum. The ranks of the beneficiaries varied from a full general to a captain.

Quantitatively, the distribution was fairly even, with senior, middle-rankingand junior officers getting 46, 36 and 48 plots respectively. However, the plot sizes for senior officers were much bigger than what junior officers

received. Generals of all categories received plots of 800 square yards, whileplot sizes for captains were less than 500 square yards.

The cantonment area in Lahore, which, up until the early 1980s,comprised a large segment of army training grounds and firing ranges, wasalmost entirely converted into a residential area. In effect, army exercise andtraining grounds were converted from public to private use without theconsent of the government or the public for whose safety the land wasinitially provided. This was, of course, done through an internal decision-making process rather than through consultations with the government. Infact, a major complaint is that decisions involving major military housingprojects are always made when Parliament is not in session.

Such arbitrary redistribution raises concerns about misuse of stateland, especially cantonment land. Major cantonments include Lahore(12,000 acres), Karachi (12,000 acres), Rawalpindi (8,000 acres), Kamra(3,500 acres), Taxila (2,500 acres), Peshawar (4,000 acres) and Quetta(2,500 acres). The fear is that most will ultimately be commercialised. In

fact, Lahore, Karachi, Rawalpindi and Peshawar cantonments are no longerrestricted army areas. Much property has already been resold to civilians. InLahore, officers were given ownership of large residential properties in thecantonment area. A conservative estimate of the worth of the cantonmentland in Karachi, Lahore, Peshawar and Quetta is approximately 300 billionrupees.

The transfer of one portion of Karachi's National Stadium to theKarachi Cantonment Board is a prime example of military land-grabbing.The Corps Commander Mangla, Lt. General Tauqeer Zia, who was also the

Chairman of the Pakistan Cricket Control Board (PCCB), was responsiblefor transferring the said land during his tenure as head of the PCCB. Thefinancial dividends were superb. A minimum investment of 600,000 rupeesnetted a profit of about 15 million in a quick 60 to 90 days. Suchmanipulative capacity is only available to the most influential institutions orindividuals in the country.

President Pervez Musharraf, however, claims that all is fair in realestate and military governance: "So, what is the problem if they [the armedforces] are contributing to town development here, or anywhere in Pakistan,

for that matter? In Lahore, in Rawalpindi - their output is the best. Thedefence societies everywhere are the top societies of Pakistannow, why


30/101


31/101

Urban and rural real estate is one sector used for personal gratification.The military's perspective is that it uses a system of merit to reward lands toindividuals. This might be true, but the system does not explain how mostsenior officers end up piling up numerous properties worth millions of

rupees.

* There are hundreds of thousands private housingsocieties/schemes which are ripping off thousands ofbillions of rupees from the general public. There is no landavailable with these societies but these are selling fictitious plots. There is no NOC available from any government

department but the functionaries of this government arepatronizing these greedy traders of the land. No authority isthere to check this extraordinary fraud of unimaginableproportions.


32/101

How much is a general worth in real estate terms?

By Ayesha SiddiqaNewsline, July 2006

According to an assessment based on the value of rural or urban plots, the

worth of a general in the army in real estate terms is anything from a hefty150 to 400 million rupees. And that is a conservative estimate. Many seniorgenerals 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 policyof 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 gallantary award is accompanied with a piece of urban orrural property.Subsequently, service chiefs were given the option of getting a plot of landin the city of their choice. This provision is traced back to General Zia-ul-Haq's era. As such, many senior officers obtained prime properties. The listincludes: General (Retd.) Shamim Alam Khan, Chairman, Joint Chiefs ofStaff Committee (allotted a 1,066-square-yard plot in the costly F-7 sector on

June 11, 1994), former chief of Army Staff, General (Retd.) Abdul WaheedKakar (allotted a 1,200-square-yard plot, number 6 in sector G-6/4 on

September 7, 1996), Air Chief Marshal (Retd.) Farooq Feroze Khan (allotteda 1,033-square-yard plot, number 13 in sector F-7/2 on January 29, 1995),former Naval Chief Admiral (Retd.) Saeed Muhammad Khan (allotted a plotmeasuring 1,066 square yards in sector F-7 on June 11, 1994), former NavalChief Admiral (Retd.) Muhammad Saeed (allotted an 800-square-yard plot,number 19 in sector F-8/1 on August 30, 1987), and former Naval Chief,Admiral (Retd.) Yasturul Haq Malik, (allotted a 800-square-yard plot.number 551 in sector F-10/2 on November 4, 1991). The current marketvalue of these plots varies from Rs. 70-100 million each.

However, there is no limit to the land acquired by some other officers.For instance, according to a list of land awards to officers, eight plots wereallotted in the name of the DirectorGeneral, ISI. The list placed before theSenate shows that five plots were allotted in the name of the DG, ISI onApril 15, 1994 in sector F-11/2. The plots measuring 666 square yards,included plot numbers 193, 194, 261, 262 and 263. The DG, ISI was alsoallotted two more plots on November 16, 1994 in sectorF-7/4 and F-7/2,each measuring 1,600 square yards. Another plot, measuring1,244 squareyards, was allotted in the name of the DG, ISI in sector F-7/1 on October 26,1994.


33/101

Apart from the officially allocated plots, senior military officers getland in the defence housing schemes at concessional rates. However,developed, these plots add another Rs. 50-100 million each to the general'stotal worth.

According to Lt. General (Retd.) Moinuddin Haider, the DHAs paymarket value for the land. However, the concept of market rate is debatable.The market rate is charged for agricultural land, which is phenomenally

cheaper than urban property. The profit earned on property converted fromrural to urban by the DHAs is much more than what would have beenobtained had the real estate been sold as rural property. While the price of600square yards of agricultural property would be around Rs30,000-40,000,the same piece of urban land is worth approximately Rs50-100 million


34/101

Is cheap land for pricey Mercs a fair deal?

ISLAMABAD, July 21: The Punjab government, on the instructions of thecentre, is all set to acquire by force about 1,200 acres of prime agriculturalland in the Sheikhupura district at a much lower than the market price for aMercedes-Benz assembly plant by a locally-registered but hitherto unknownfirm under licence from the German manufacturer, Daimler-Chrysler.

Discussions with officials in the federal and Punjab governments andcompany officials tell interesting stories of vested interests beyond statedobjectives, unfair handling and even contradictions at all levels that revealmore mysteries associated with the project than proving it a pure automobileinvestment.

The project that would necessarily result in the eviction of about 250families who were allotted this land in Kot Pindi Das in Sheikhupuraagainst their lost property in India as a result of their migration in 1947 isa classic example of overstretching of the Punjab Land Acquisition Act of1894 in the name of public interest. The law allows the government to takeover private land for public use against compensation at market rates but notfor private business, lawyers said.

Informed sources said the area under acquisition was beyond the needs of anautomobile plant because it also involved 57 acres for a golf course, 50.5acres for a five-star hotel, a 478-acre race track and 99 acres for expansion.

A legal document of the Sheikhupura revenue department did mention thesefacilities as objection raised by the landowners but did not address the issuebeyond that. There is no precedent of the government acquiring land for aluxury hotel, racing track or business venture on behalf of a private

investor, one of the landowners said.

The District Revenue Officer, Sheikhupura, notified in the Punjab gazette onFebruary 7, 2006 that the land is likely to be required to be taken by Coastal(Pvt) Limited for the construction of assembly plant of commercial andmilitary trucks and cars, it is hereby notified that land in the locality is to be required for the above company and purpose.

Subsequently, on June 19, the board of revenue (Punjab) approved land

prices recommended by the District Price Assessment Committee for the1,200 acres and fixed Rs125,000 for 64 acres, Rs300,000 for 430 acres,


35/101


36/101

its plant and the government had no role in that. The total cost of the piece ofland purchased by Honda was Rs12 million at a rate of about Rs2 million peracre and that too a couple of years ago, he said.

Safdar Javed Syed, senior member revenue, Punjab, confirmed that thedistrict price assessment committee had approved a price that has beenchallenged by some of the owners. The committee is led by the District

Officer Revenue and detailed comments from the committee have beensought. He would not comment when asked if 1,200 acres were reallyrequired for an automobile plant.

A senior revenue official, however, said the requirement of 1,200 acres wassought by the Chief Ministers Secretariat on the request of the federalgovernment and the relevant provincial authorities were required todetermine the price and complete the acquisition process. The physicalacquisition would start upon the receipt of Rs484 million from Coastal-Mercedes joint venture, he said.

Nobody in the board of investment (BOI) a federal agency responsible forinvestment promotion is ready to discuss or defend the project. Seniorofficials contacted by Dawn said the whole file on Daimler-Chrysler projectwas not available with the BOI. A senior officer said: The file is in thepersonal custody of Minister of State Umar Ghumman, who has been in the

United States for more than a month where he has family business interests.Dawn was informed that Mr Ghumman would be back on July 15 but he isyet to return.

On July 19, this correspondent once again contacted the BOI secretary,Jehangir Bashar, and asked about the whole size of the investment, itscomponents including the hotel, golf course, etc and the land requirement.He promised to provide the relevant information and said one of his officerswould get back with the information. An official did subsequently establish

contact but only with the information that the minister of state was expectedto return in three to four days and a meeting would be arranged then. Heexpressed his inability to be of greater help.

On June 15, Mr Ghumman had announced that Daimler-Chrysler andCoastal Group would invest $5.85 billion in Pakistan by starting productionof Mercedes-Benz trucks, both commercial and military, buses andMercedes cars of various types to create a vendor industry.

The group would set up its plant on 1,200 acres near Sheikhupura provided by the government. The investment would create 5,000 jobs directly and


37/101

indirectly, said Mr Ghumman at a press conference.

Hafiz Mohammad Taqi Rehman Lakhvi, a local representative of CoastalLimited, when contacted, said the company had been stopped from issuing

any statement in the press about the Mercedes-Benz project. He, however,said President Musharraf was personally pushing the project and hadinformed the company officials during a meeting on May 10, 2006 that he

would himself inaugurate the plant on completion perhaps in April-May nextyear.

However, a company official, who requested anonymity, said the totalinvestment to be made over a period of five years would amount to $1 billionand not $5.8 billion as announced by Minister of State Umar Ghummanand this would include the Mercedes-Benz plant for the production of trucks,buses and cars in addition to the whole vendor industry. The units would beimported in CKD form under the prevalent automobile import policy andassembled locally without application of a deletion programme.

He said 100 per cent investment, and all this is foreign investment, would bemade by the Coastal Private Limited and Daimler-Chrysler had no directinvestment. The German giant, he said, would provide engines and technicalknow-how of the plant and the costly Mercedes trucks, buses and E and Cclass cars would be marketed by Coastal under licence from the German

firm.

He confirmed that Coastal and Mercedez firms have not yet signed any finalagreement but have exchanged feasibility studies and initial MOU. He saidthe first truck would roll out from the plant latest by April next year andPakistan armys National Logistic Cell, Frontier Works Organisation and thearmy itself would be the major clients. NLC alone has committed topurchase about 300-400 trucks every year for the next five to six years, hesaid, adding the plant would produce 1,000 trucks on a yearly basis with a

single shift that could be increased to 2,000 or more with double shifts.

He said the company would achieve 50 per cent localisation in two years andwas expected to start production of cars after three years. He said adelegation of Daimler-Chrysler was expected to visit Pakistan later thismonth. He said Coastal Private was registered locally with majorityshareholding of Sheikh Yousaf Mohammed Najibi of the UAE, whoseCoastal Trading & Contracting Company LLC, Dubai, is a big company ofthe Gulf.

He claimed that in addition to a number of real estate, stock market and other


38/101

investments, Sheikh Najibis investments in multi-billion-dollar DubaiSports City (DSC) were higher than Abdul Rahman Bukhatirs. This,however, could not be verified through an examination of the DSC website.About the debt-equity ratio, he said the whole $1 billion would be foreign

direct investment with no local financing and hence it did not matter whetherthe amount was raised through foreign banks in the form of loan or equity.

The source confirmed that Coastal had also heard about the golf course,housing and hotel facilities, but claimed that his company could not do sounder any agreement with the provincial government or the German auto-firm. He said the process for acquisition of about 1,050 acres was about to begin but agreed that his company would not need more than 600 acres.

Official documents of the District Officer Revenue, Sheikhupura, claimedthat acquisition of land was taking place under section 4 of the landacquisition act of 1894 that made wishes of the public irrelevant in terms ofcompulsory land acquisition.

Raja Shafqat Abbasi, a senior lawyer and member of the Punjab Assembly,said the government could not acquire land for private commercial projectsor private housing societies under the land acquisition act. However, thePunjab government had adopted it as policy to forcibly take over 20 per centland for housing societies provided such societies already possessed 80 per

cent of land (By Khaleeq Kiani; 22.7.6 Dawn)


39/101

RAILWAY ENGINES


40/101


41/101

When the irregularity was first brought to its attention in 1991, the services'headquarters approached the government for post facto approval forretention of the amount. The AG however refused to accept this saying that

even the government was not competent to permit withdrawal and retentionof unutilised funds, as it was a violation of constitutional provisions.

When the sub-committee took up the case the defence ministry admitted thatrules had been violated but insisted that the violation was in 'good faith'. Thesub-committee however did not agree and refused to accept the 'good faith' plea. The chairman of the sub-committee Riaz Fityana, a non-serviceman,deserves to be commended for refusing to settle the case but this did notdiminish the audacity of the defence ministry to invoke once again 'goodfaith' and seek exemption.

The NAB law is applicable only to political leaders and civilians accused ofcorruption. Serving military officers are exempt from it because, it isclaimed, the military has its own internal accountability mechanism. "Welive in sweet prison because of the manual of the Pakistan Military Lawduring our service" is how a former NAB chairman, a three-star general aswell, stoutly defended exemption to military officers in an interviewpublished in this newspaper on June 20, 2005, after he had retired both from NAB and the mil

The civilians and politicians hauled by NAB for real or imagined crimes arealso promptly sent to jail. Investigations and proofs follow later at a pacedetermined by NAB. The accused has to prove his innocence. In aninterview with The News on April 24, 2000 the then chairman justified the'onus of proof' with great relish thus: "Yes, it does mean that the corruptshould prove himself innocent".

But five years later in June 2005 as chairman of the Fauji Foundation, the

same former NAB chief was directed to appear before the defence committeeof the Senate to answer serious allegations in the sale of Khoski Sugar Millsthat had come to light in the National Assembly in reply to a question askedby a female MNA belonging to the treasury benches. He refused saying thatthe Fauji Foundation was a private concern and that the Senate body had no business to ask him any questions. The yardstick of proving innocenceappeared to have changed now as the hunted was a former senior militaryofficer. "Judge not so that ye shall not be judged".

Retired military officers, though not exempt from NAB, have also beenexempted from effective accountability through the device of unending


42/101

investigations. In reply to a Senate question on December 5, 2003, NABnamed fourteen uniformed officers working in civil departments that alsoincluded one ex-lieutenant general as being 'under investigation foraccumulating assets beyond means'. Three years later when NAB was asked

again about the status of the case it replied: "Investigations are stillcontinuing". Meanwhile the accused roam free.

To these familiar devices has now been added yet another device, 'goodfaith'. True, that 'honest mistakes' and 'good faith' must be recognised asbasic to the concept of justice with compassion or 'adl bil ihsan'. But it seemsthat in the Islamic Republic only former generals are entitled to 'adl bilihsan'.

Those who seek reprieve on grounds of 'honest mistake' and 'good faith' mustpossess very high standards of morality. In 1995 a scandal broke out aboutthe American chief of naval operations, Admiral James Boorda. The casewas about whether the admiral should have won a small bronze star that costless than a dollar. His supporters said he was entitled to wear it. Hisdetractors however insisted that technically he was not entitled to wear it.Appearing before inquiry committee Boorda called it an 'honest mistake'.The inquiry committee agreed that Boorda had made a mistake in wearingthe medal even if it was an 'honest' one. The admiral who had a great senseof honour saw a personal shame and dishonour in it and shot himself with his

service gun.

As I juxtaposed and placed together the admiral and the generals on myminds canvas, an anguished cry leapt from the depth of the heart and it said:

"Weep Pakistan, weep".: (Farhatullah Babar: The news, June 11, 2006)


43/101

ISLAMABAD: The bosses of the Ministry of Railways apparently used onFriday the 9/11 terrorist attacks as an excuse to get a clean chit from the sub-committee of the National Assemblys Public Accounts Committee (PAC)regarding a $100 million scam in the purchase of 69 defective locomotives

from China.

The multibillion-rupee scam was finally buried when the sub-committee

members concluded that the concerned people, retired army officers, hadtaken the decision to strike the deal in good faith; therefore, it should not be pursued

Even the auditors of the Auditor General of Pakistan, led by Zafrullah Khan,Rashed Ahmed Saleh and Sheikh Naseer, who otherwise never spare politicians at the time of their accountability by the PAC, remained silentand disinterested in the meeting while the scam was being settled.

The swindle was first blown wide open in the Senate and later discussed inthe PAC of the National Assembly. It was reported in the Senate thatPakistan had imported defective locomotives from China. An audit reportalso confirmed the allegations of senators and the issue was finally referredto the PAC, which constituted a sub-committee to decide the issue.

Federal Railways Secretary Shakeel Durrani, who appeared before the sub-

committee, got the whole scam settled within half-an-hour into theproceedings. However, he did not mince words when asked to tell the namesof those who were actually responsible for the faulty multibillion-rupee deal.

Sir, Lt-Gen (Retd) Javed Ashraf Qazi was railways minister, Lt-Gen SaeedZafar was secretary railways and Gen Butt was GM Railways at that time. Ifyou are serious about further probing the issue, please summon them and proceed as you like, said Durrani.

But the two members of the PAC sub-committee, MNA Lt-Col GhulamRasool Sahi and MNA Asia Azeem, did not have the courage to accept thesecretarys offer to summon these top guns to hear their versions on theissue. They also remained silent when Durrani admitted that the deal struckwith China in 2001 was not an ideal one.

Durrani also admitted that there were many lapses in the deal and had he been the secretary in 2001 when the deal had been cut, he might have re-advertise the tender to get more viable bids for the import of railway engines.

But he too justified the deal with China on the grounds that after 9/11 thingswere quite different as no country was prepared to help Pakistan. He said


44/101

that in the given situation the only option left with Pakistan was to seek aloan from China to buy engines, as the condition of the railways engines wasvery bad.

Surprisingly, not only did the PAC members get convinced about thisunusual plea, the auditors remained tightlipped and did not point out that thedeal with China was struck much earlier than the 9/11 incidents.

The railways secretary claimed that the deal was struck in good faith bythese concerned gentlemen who were then running the show at theRailways Ministry. The PAC members by accepting his plea about theretired military generals, who took the faulty decision, said: OK gentlemen,we accept your plea in good faith and settle the whole scam.

The AGP auditors also did not raise any objection, which they usually dowhen such kinds of words are said in the committee by other ministries.Although there are serious lapses in the deal as admitted by the secretary,we are still ready to accept the plea in good faith and settle this scam once

and for all, remarked Lt-Col Sahi. (Courtesy: Rauf Klasra, 27 May2006: the News)


45/101

CARTELS


46/101

Public money for private pockets; consumer rip-off on an unprecedentedscale. First came the oil companies cartel. Then the automobile cartel

followed by the cement cartel, the sugar cartel and the stockbrokers cartel.Where will it all end? Pakistan's oil cartel has ten members; Shell, Caltex,Attock Petroleum, Total, Bosicor, PSO, Attock Refinery, National Refinery,Pak-Arab Refinery and Pakistan Refinery. The cartel's original platform: OilCompanies Advisory Committee (OCAC). Under pressure, our policymakershave replaced the OCAC with OGRA (Oil & Gas Regulatory Authority). Todetermine oil prices OCAC used an overly biased formula tilted in favour ofthe OCAC members. OGRA now determines the price of oil but uses thesame formula.

As is always the case with cartels, the members are all interlinked throughcross-ownerships. Attock Group of Companies owns Attock Refinery,Attock Petroleum and National Refinery. Shell, PSO and Caltex jointly ownPakistan Refinery. Total and Pak-Arab Refinery are partners. The cartel

supplied the Pakistani market with inferior quality diesel and charged ahigher price. Under OCAC, oil marketing companies commission, retailersmargin and inland freight were all jacked up. Ten of Pakistan's richestcompanies managed additional inflows amounting to Rs38 billion a year.

Ten are making tons of money. The other 165 million are getting ripped off.

A post-September 11 liquidity and lease bonanza has made Indus MotorCompany, Honda Atlas Cars and Pak Suzuki Motors laugh all the way to thebank (the Maruti 800 sells for Rs191,146 in India). Policymakers providedthe cover and a few enriched private pockets with public money.

Then came Attock Cement, Bestway Cement, Cherat Cement, D.G. KhanCement, Dandot Cement, Fecto, Gharibwal, Javedan, Kohat, Lucky, MapleLeaf and Pioneer. The cement cartel managed to jack up the price of cementfrom Rs260 per 50 kg bag a few months ago to over Rs400 per 50 kg bag (anumber of foreign suppliers had offered to sell at Rs125 per 50 kg bag). As aconsequence, after-tax profits of listed cement producers have gone up bywhopping 86 per cent.

The deadly sugar cartel made its debut a mere few months ago and managedto take sugar from Rs20 per kg to over Rs40 per kg. Intriguingly, the sugarsector has an installed capacity to produce 6.7 million tons of sugar while thetotal annual demand for sugar stands at no more than 3.8 million tons. Our

policymakers have a vested interest in the price of sugar and, once again, thecartel is making tons of money and the other 165 million consumers are


47/101

getting ripped off.

Where in the world can stockbrokers cough out enough cash to buy steelmills and banks? Answer: only in Pakistan. Arif Habib Securities, Jehangir

Siddiqui & Company and Aqeel Karim Dhedi Securities now have morecash than the worth of Pakistan's steel mills and banks put together. Incollusion with policymakers, they are the regulator as well as the regulated.

It is certainly true that we are not a command economy. As a matter ofrecord, we are inching towards a system whereby prices are to be determinedby the forces of demand and supply. It is a recognised fact that free markets'fail' (market failure is a "case where free markets fail to efficiently provideor allocate goods and services"). In order to keep free markets from failing,leading free markets have 'competition commissions' and 'competitionregulators' that regulate competition laws, prohibit cartels and provideconsumer protection. In the US, there is the Federal Trade Commission andDepartment of Justice (Antitrust Division). In the UK, there is the Office ofFair Trading and the Competition Commission.

To be sure, we also have the Monopoly Control Authority (establishedAugust 17, 1971, under the Monopolies and Restrictive Trade PracticesOrdinance). The ordinance was promulgated to "provide for measuresagainst undue concentration of economic power, growth of unreasonable

monopoly power and unreasonably restrictive trade practices." TheMonopoly Control Authority hasn't achieved a thing. Maybe, it wasn't meantto. OGRA has, for instance, replaced the now-defamed OCAC butinterestingly OGRA continues to use the same formula for the determinationof the price of oil that OCAC did. Is the government on the side of thecartels or is it on the side of the consumers?

On May 29, 2006, Dr Salman Shah, adviser to the prime minister on finance,announced that the Monopoly Control Authority was being "transformed

into a 'Competition Commission' to be effective from the fiscal year 2006-07." The 'competition commission' is aimed at "promoting competition invarious sectors of the economy and will have legal authority and teeth so thatwhen it acts, it makes a difference." Monopoly Control Authority or acompetition commission -- what's the difference? OCAC or OGRA?

Our real problem is conflict of interest -- our regulators are the regulated.People in positions of trust have competing personal interest. Policy makershave personal business interests and policies are made to serve those

interests. Public and private interests have collided. The two must now beseparated.


48/101

Conflict of interest can be avoided in two ways -- disclosure anddisqualification. A model to be followed is the Political Reform Act and theFair Political Practices Commission (FPPC) of California. Under the

Political Reform Act, elected public officials must disclose personal intereststhat "might be affected while they are performing their official duties."Additionally, a politician "may not take any part in a governmental decision

in which he or she has a disqualifying conflict of interest." Under one of itssections, no "public official shall make, participate in making or in any wayattempt to use his official position to influence a governmental decision inwhich he knows or has reason to know he has a financial interest".

The FPPC "investigates alleged violations of the Political Reform Act,imposes penalties when appropriate, and assists state and local agencies indeveloping and enforcing conflict-of-interest codes."

Ever wondered why our president sees prosperity all around? It's the cartelsthat have accumulated mountains of wealth (all at the cost of the consumer).And, cartels have direct access to the presidency, the consumer doesn't.

Ever wondered why prosperity is not trickling down? Answer: the cartelshave kept all the prosperity to themselves. Every wondered why our macro-economic indicators are on a high but micro aren't?

Ever wondered why a few cartels have managed to enrich private pockets atthe expense of 165 million consumers? Here is why: Our military-ledgovernment is dependent on a democratic facade within which there aremembers out to make tons of money. There clearly is conflict of interest.The government is clearly being blackmailed. The consumer is clearly beingripped-off. It's the Rule of Cartels.

Ever wondered who is really ruling the country? Ever wondered who our

real rulers are? ( Dr Farrukh Saleem: July 9, 2006, the News)


49/101

Per capita income has doubled in the past four years. Last year, of the 184member countries of the IMF, Pakistans rate of economic growth wassecond only to China. The rate of growth in our large-scale manufacturingsector is at a 30-year high. Construction activity is at a 17-year high. In

Islamabad, a kanal of land has gone from $100,000 to $1,000,000. Theaggregate value of the KSE-listed shares has gone up from $7 billion in 2002to $50 billion.

Is Pakistan richer now than ever before? Price of shares has gone up and the price of land has gone up. Yes, Pakistanis who own urban land are richernow than ever before. Yes, Pakistanis who own KSE-listed stocks are richertoday than ever before. Remember, Pakistan does not become rich based onurban land prices going up or the KSE-100 Index breaking all records.Pakistan will only become rich when the real price of labour goes up(nominal wages minus inflation). And, that hasnt happened.

The other thing that hasnt happened is the trickling down of wealth andprosperity (trickle down economics, according to one definition, advocatessupport of businesses that allows them to flourish and that this willeventually benefit middle- and lower-income people, in the form ofincreased economic activity and reduced unemployment).

Ever wondered why the wealthy in our economy have become even

wealthier but that wealth hasnt trickled down? Here is why? Free marketsfail. Market failure occurs when market forces do not serve the perceivedpublic interest. Market failure results in undue concentration of economic power, growth of unreasonable monopoly power and unreasonablyrestrictive trade practices. Similarly, government failure is when agovernment fails to keep the market from failing.

Leading free markets, for reasons to keep the market from failing, have putin place elaborate infrastructure composed of competition regulators,

competition commissions and fair political practices commissions. Thesecompetition regulators regulate commercial activity, prohibit cartels,enforce competition laws and provide consumer protection. Fair political practices commissions keep elected public officials from taking part in agovernment deci

mega scandals & corruption of general pervez musharraf government

Documents