Cowasjee Articles

'Corruption '

1st January 1996

ON AUGUST 11, 1947, three days prior to the birth of Pakistan, Mohammad Ali Jinnah, the Father of the Nation, addressed the Constituent Assembly of Pakistan: "... the first duty of a government is to maintain law and order ... The second thing ... one of the biggest curses from which India is suffering ... is bribery and corruption. That really is a poison. We must put that down with an iron hand and I hope you will take adequate measures as soon as it is possible for this assembly to do so." I write this three days after the nation celebrated his birthday "with the usual fervour," a birthday which this secular man of liberal thought decreed be celebrated with that of Jesus of Nazareth so that the Christians of Pakistan would for ever, together with most of the rest of the world, have a holiday on December 25.

This Father bequeathed to us a house in which to peacefully live and prosper. Within twenty-four years, the house split, we were left with half. Now, forty-eight years down the road, the remaining half is tottering, crumbling but instead of concentrating on propping it up, we still hold symposium, seminars, debates, and argue why he built and left us a house.

One of the last priceless pieces of the family silver, United Bank, stolen by the government in 1974 in the name of the people, is now on the block, and in order to appraise this distress sale one must look at how the nationalised Muslim Commercial Bank and the smaller Allied Bank were privatised and sold.

What our corrupt governments do is to first decide to whom the cake is to be given, and it is then suitably baked. In the case of MCB, Tawwakal was the highest bidder for the controlling shares at Rs 56 per share, followed by Adamjee’s, then Crescent. Mansha came in fourth at Rs 43.49. Lower still was Saeed. Nawaz wanted Mansha to have the bank, so his government manoeuvred a bid raise for Mansha to match the highest, and he was given control. Adamjee, Crescent and Saeed backed out. Abdul Qadir Tawwakal fought for his rights. He petitioned the court, wherein he filed an affidavit from which I quote: "Let it be stated that in his (finance minister Sartaj Aziz's) office (and with him were the governor, SBP, and chairman, PBC, and with me were Sirajul Haque, a senior advocate and his two other colleagues who will vouch the veracity) ... the petitioners were bullied and threatened with dire consequences if they challenged the government decision." (SHC, CP 60/91, Abdul Qadir Tawwakal and Others Vs The federation of Pakistan & Another). The Tawwakals were subsequently harassed and chased by the 'hounds' and faded out of the picture. The impresario who stage-managed Mansha's performance was banker Hussain Lawai, formerly of the United Bank of the Middle East and the Faysal Islamic Bank, who was appointed to manage the MCB after its control was vested in Mansha.

Enter Benazir for the second time. Impresario Lawai fell in with the new production team and things were made so hot for Mansha that he exiled himself to the tundras, where he remains. Lawai continues to work loyally for the leadership.

Benazir has been instructed by the IMF to get on with the UBL privatisation, with which the government has been fiddling for the past two years. The Privatisation Commission (PC), headed by Naveed Qamar (who has been known to appoint the same legal advisers and experts to advise the PC as employed by the bidders) was ordered to ensure 'transparency' and 'accountability' in the sale.

The statement of qualification (SOQ) was issued. The PC's avowed intent on accountability and transparency can be gauged from: (1) the note it appended to 'Basis for Disqualification': "Commission can reject any SOQ without assigning any reason whatsoever", and (2) the note appended to the 'Eligibility Criteria': "The Privatisation Commission reserves the right to reject any bid without assigning any reason whatsoever."

Eight applied: Foreigners A1-Faysal Bank of Bahrain and Basharahill Group of Saudi Arabia, and the home-grown Global Group, Dewan Crescent Unigem, Lahore Motors, Asset Investment Bank, and Haji Saifullah Bangash. All six Pakistani groups have been disqualified for one reason or another.

The Marketing Memorandum (MM) was issued by the PC, describing what is on the block. Our born-again Abedi, Hussain Lawai, backed by the government, again came into play. UBL is a fine bank. The significant sales pitch printed in the MM tells us that:

* "UBL is a large commercial bank with approximately 20 per cent market share ranking it second in Pakistan which is a large country by any measure, and is an exciting market in which to operate."

* "The State Bank in its capacity as the owner and regulatory body will provide adequate support to the management... State Bank is a majority shareholder (94 per cent), government institutions hold the remaining 6 per cent."

* "The government which is committed to the principles of equity and transparency has adopted a two stage process for the sale ... the bidders will be pre-qualified... the bidders must submit their SOQ by November 12,1995 ... pre qualifying bidders will be invited for due diligence and for subsequent submission of price bids ... the government expects to award the contract by end December 1995." (the bidding has since been extended to Jan 7).

* "Pakistan is the world's ninth most populous country with GDP increasing on average by over 6.4 per cent over the last ten years ... Deposits for the banking sector have grown at an average of over 18 per cent for the last five years... The banks have been very profitable with returns on equity shown in excess of 50 per cent .... The issue of banking licences is tightly controlled. It is very difficult to obtain a licence... UBL has no such restrictions in terms of geographical coverage ... UBL represents a good entry point to the banking sector in Pakistan."

* "UBL has investments and subsidiaries throughout the Middle East, UK, USA and Switzerland. The prevalent regulatory regimes operating and the difficulty of obtaining licences in many of these countries has made these assets of significant strategic value."

* Page 8 of MM: "UBL's profitability performance is poor as a result of several factors, including the failure to provide a wide range of services (e.g. credit cards) ..." But, on page 13: "The credit card scheme—UNICARD—was introduced in 1970 ..."

* Overseas branches (28): UK 11; USA 2; Switzerland 1; UAE 7; Bahrain 3; Yemen 2; Egypt 1; Qatar 1. Joint ventures (2): Saudi Arabia and Oman; (not mentioned in the fact that the joint ventures are extremely profitable and the profits for last year shown by the UAE branches in the region of Rs 0.4 billion. And, it should be emphasised that since the BCCI fiasco, it is most impossible for Pakistani banks to now obtain banking licences abroad.)

Local branches (1670): Sindh 372; Punjab 908; NWFP 211; Balochistan 58; Azad Kashmir 121;

* Grand total 1,700. "UBL's real estate which includes many valuable sites in prime urban locations has not been revalued’ (since the 1960s?).

Compared to the MCB, whose controlling interest was sold to Mansha at Rs 56 per share five years ago, and to the very small bank, Allied Bank, whose controlling interest was sold to its employees at Rs 70 per share, about three years ago, UBL, "Pakistan's second largest bank with approximately a 20 per cent share of Pakistan's commercial banking market" and with 30 strategically situated outlets abroad is a gold-mine.

Taking into consideration the depreciated value of the rupee since 1990, UBL's assets, liabilities its profitability and potential, insiders estimate the correct value per share at the end of 1995 to be substantially in excess of Rs 100, whereas knowledgeable sources indicate that the only two foreigners in the field, jockeyed by the impresario, jointly or severally, will acquire the controlling interest at the give-away price of between Rs 20 to Rs 30 per share. And, there is a built-in 'finder's' or 'fixer's' fee of 10 million dollars. Losers: The acquiescent cowardly (thus rendered helpless) people of Pakistan. Winner: The sole beneficiary.

To lighten our burden as we ring in the New Year, I recite my discussion with a yuppie economist trained at Yale who has returned to serve his country as a financial expert, a security expert, currency trader, stockbroker, etc., etc. After projecting a dismal analysis of our economy, he said, "Magar, kuch ho jayaga". When I asked, "Keya hoga?" he replied, "Allah bachaiga." My retort "Allah ke darbar me insaaf hai?'' "Bilkul, bilkul. Wahan nahin, to kahan?"

My only reaction to this was that Allah would punish us. He gave us a country, with plains and forests, with rivers and enough flowing water to generate all the electric power needed and much more (for which we successfully negotiated the Indus Water Treaty), a long cyclone-free coastline, a good climate, millions of resourceful people, etc.

In totol, a viable country. But what have we done with it? The Yale yuppie's answer was that Allah is merciful and beneficent and raising his eyes heavenward, he proclaimed that we have no cause to plead, that we can only file a mercy petition before Him.

Why has this man been appointed, and to deliver what to Islamabad?

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