DAWN - Cowasjee Corner; 19 July, 1998

The meltdown

By Ardeshir Cowasjee

WHEN that intrepid dictator, President General Zia-ul- Haq, fell from the skies in 1988, he had reigned and ruled over this country for longer than any other man or woman. On his disintegration, Ghulam Ishaq Khan, then Chairman of the Senate, constitutionally took over with the avowed intent of restoring democracy

With army approval, he selected for the task Benazir Bhutto, daughter of his erstwhile president and prime minister, the martyred Zulfikar Ali Bhutto, and handed to her on a platter her first job - prime minister of the Republic of Pakistan. In twenty months, excessive greed, an insatiable appetite for power and pelf, her husband, her inexperience and immaturity brought about her downfall, leaving her and her family far richer and the country far poorer.

To replace her, another young budding politician was selected by the selection committee, a rising star who since 1981 had developed a taste for the political game. In stepped avaricious ambitious Mian Nawaz Sharif.

To sum up Nawaz Sharif's background, I quote (using the obligatory adjective) an 'eminent' columnist, who on December 15, 1990, wrote in The Nation: "If the President, the Prime Minister and the top army brass [crafty General Aslam Beg with his claim that Pakistan then had 15 bombs] are all smiling at each other and are thus encouraging the bureaucracy to abide by the rules of the game, should we not all applaud? Might it not be better for the belaboured 'larger national interest' if Nawaz Sharif resists for as long as possible the natural tendency of an ambitious politician to test his clout and power?

"....... Nawaz Sharif's father, Mian Mohammed Sharif, was one of seven brothers, the eldest and the only one educated to matric standard. The seven started off in 1940, after pooling their resources, with a modest cast-iron parts business in Lahore city........By the end of the decade they were well on their way to success and all seven moved into Ittefaq Manzil on Brandreth Road. Somewhere in the 1950s they bought their first car, a Chevrolet, into which the seven piled each morning and drove off together to work.

"They progressed and prospered during Ayub's rising '60s. Then came the PPP government [ZAB] and with it a total change of attitude and of Ittefaq's fortunes. The foundry was nationalized.

".......... The family moved to Dubai where they installed a steel plant which never really took off. There Zia met the brothers in 1979 and asked them to return to Lahore, take back their battered and bruised family industry which he would denationalize and, in return for various concessions and administrative support, restore it to its former glory."

The martial law authorities were duly befriended, and in 1981 Nawaz Sharif was appointed finance minister in their Punjab cabinet.

Business flourished, expanded and diversified. In 1985, Nawaz Sharif won seats in both provincial and national assemblies - and that was that. From chief minister of his home province (re-elected in1988) onwards to prime minister of the Federation in 1990.

He chose not to tread the straight and narrow. He and his government made no serious effort to bring back what had been robbed by Benazir Bhutto and her cronies to convict the guilty of their crimes. And for good reason. He and his men went on the rampage, consolidating power, giving away what was not theirs to give, using their clout to bankrupt the cooperative banks and societies, and to borrow money from the nation's banks and DFIs without adequate security.

Finally, not because Nawaz Sharif had robbed and plundered, but simply because he had dared to challenge his authority and his Pathan honour, Ghulam Ishaq Khan removed him. Nawaz went to the Supreme Court. The then Chief Justice, Dr Naseem Hasan Shah, and his brother judges, wrote a 'historic' judgement judicially restoring Nawaz Sharif to power. The Doctor still retains the sense of humour for which he was famous when on the Bench. When I asked him how he now feels about his 'historic' judgement, he sighed and answered, "Well, we could have done worse."

Ghulam Ishaq and Nawaz Sharif were shot out two months later by The Man who came to Dinner, COAS General Wahid Kakar. Moeen Qureshi, Benazir Bhutto and Farooq Leghari followed in turn and compounded the rot.

Both Benazir Bhutto and Nawaz Sharif, their cronies and henchmen, have robbed. The former lot had a straight forward approach. They took kickbacks, they stashed money abroad. Some say they have robbed up to $2.5 billion. Nawaz Sharif is believed to have also whisked money abroad, but being a failed businessman, his concentration has been on borrowing beyond his means at home and extending his industrial empire. As of now, he and his family are owners of 26 large industrial units. According to the CIB State Bank figure, they are in default to the tune of some Rs.5 billion (500 crores).

This most influential of defaulters has resorted to a unique method of repaying a portion of the amount owed. Before me lies a copy of an agreement dated June 30, 1998, on Ittefaq Foundries letterhead, drawn up by the debtors' lawyers, headed "The terms of the arrangements under Section 284 of the Companies Ordinance 1984 between the Ittefaq Foundries (Pvt) Ltd ...... and the creditor banks namely, (1) the National Bank of Pakistan, (2) Habib Bank Ltd, (3) United Bank Ltd, (4) Agricultural Development Bank of Pakistan, (5) Muslim Commercial Bank Ltd, (6) Pakistan Industrial Credit and Investment Corporation, (7) Bank of Punjab, (8) First Punjab Modaraba."

It has been signed by the Company, and sent to the eight banking concerns, which have also signed it, without making any reference to the principal creditors involved, i.e. the sovereign Government of Pakistan, the ministry of finance, the State Bank of Pakistan, or the directors on the boards of the creditors.

Normally, neither creditor nor debtor rushes to the court unless one or the other is aggrieved. In this case, the agreement makes it mandatory "that the creditor banks shall move the Lahore High Court, Lahore", to sanctify the agreement, failing which "the Company will also be at liberty to apply to the High Court in this behalf."

The agreement was sanctified on July 8, 1998, by Justice Malik Muhammad Qayyum, the experienced High Court banking and company judge. It envisages, inter alia, the appointment of "a Board comprising a representative of the Banks and a nominee of the Court. The Board, shall be empowered to manage the property during the interregnum, if need be to develop the same through a development scheme, or otherwise, and take all necessary steps, as deemed fit by it, to secure the maximum sale price. The Board shall have the authority to dispose of the property in such manner as considered proper by it. The Board may seek guidance from the Court on any issue. Any difference of opinion between the members of the Board shall be resolved by the Court. All sales shall be subject to confirmation by the Court."

The agreement is loaded in favour of the debtors. Ironically, the creditors, the sovereign people of Pakistan, having relinquished voluntarily most of their rights, according to the agreement, agree "that this arrangement is without prejudice to the rights of the creditor Banks and the Company under the law."

The agreement does not mention the fact that the debtor company, Ittefaq Foundries, is claiming Rs.5 billion from the Government of Pakistan, i.e. UBL and the other banks. This newspaper of record, in its issue of July 9 has rightly front-paged and reproduced the full text of the agreement made by "the insolvent concerns."

Although the prime minister promised the nation, in one of his televised addresses, that he and his family would hand over their assets in repayment of their defaulted loans, none of the assets of the lucrative units have been handed back. Referring to the philanthropic activities of the family recently fanfared at Raiwind, an independent citizen remarked, "Who does the PM think he is, the Robin Hood of Raiwind? He does not pay back to the people what he owes, he doles out charity at their expense."

To stay in power and out of fear of being bankrupted by a succeeding government, the ruling party will do what is right by it, not what is right by the people. To quote from the front-page of Dawn of July 18: "The government has given up its plans to arrest defaulters and utility bills defaulters as it is meeting growing opposition to the plan from within its own constituencies. The imposition of General Sales Tax as defined by the IMF is also said to have been deferred indefinitely because of pressure from within the PML."

Likewise, the ruling party will continue to give in to the unjustifiable demands of its coalition partners, disregarding the safety of life and property of the people of Karachi. The meltdown has begun.