Sacred Conglomerate

Photo: Zubair Khawar

On 5th August 2018, news reads ‘China’s Military asked to cease its kindergarten businesses’. China’s military had established businesses in the 1970s, when the country was struggling with a shortage of funds. In the later years, questions were raised over the corruption and effectiveness of the army. The demands of separating military from business had started in 1998 but was  only three years ago that President of China Xi Jinping promised to stop the paid services of the army. One year following this announcement, many businesses were closed. “The armed forces and armed police have not been allowed to run a business since 1998, but were permitted to use surplus resources to provide paid services to the civilian in the 15 fields, as China’s service industry was weak at the time,” Jiang Luming, professor at the National University of Defence Technology, had told Xinhua.  The reason and motive behind all this activity was to overhaul world’s largest army and ask them to focus on war preparedness. The Chinese president had quite emphatically stated that there will be no compromise and no one will be exempted.

The Pakistan Army had only one business by the name of Fauji Cereals, set up in 1954, until they came into power in October 1958, just eleven years after Independence. Army stayed in power for thirteen years till the breaking up of Pakistan in December 1971. During that time no new business was set up and the army was somehow managing itself within the budget, which was of course under its control and fought two wars as well.

Then came General Zia ul Haq in 1977 and with him came the surge in business. Ten new companies were set up and the trend continued. More than sixty two percent of the private businesses run by armed forces was launched when they were ruling Pakistan. This should in some form explain why they keep getting out of the barracks into the administration. The largest three foundations namely Fauji, Shaheen and Bahria control more than hundred commercial entities involved in everything from cereal to cement production. All these businesses are controlled by army, air force and navy. And the more appalling fact is that only few companies have ever published their financial accounts.

Fauji Foundation is by far the largest of the industrial conglomerate estimated to worth several billion pounds according to Ayesha Siddiqa. It operates a security force, an oil terminal and a phosphate joint venture. As per the 2017 annual report published on the Fauji foundation’s website, the annual turnover is USD 1,692million with the net profit of USD 307 millions. No wonder, it is a jewel in the army’s crown. Askari bank, Shaheen Airline, a travel agency, stud farms all come under the Army Welfare Trust set up in 1971. Then there is National Logistic Cell, Frontier’s Work Organisation, Askari Fuels, Askari seeds, and Defence housing society in four cities, Askari cement, Askari general insurance and many more. In short, you name it and military owns it. Pakistan army also owns Mari Gas, its own Liquified Petroleum Gas (LPG) marketing and distribution company, Foundation Gas. It also operates country’s largest petroleum handling facility Fauji Oil terminal and Distribution Company, which is capable of handling nine million tons of oil per annum.

“A large part of the military’ internal economy remains invisible,” writes Ayesha Siddiqa in her book Military Inc: Inside Pakistan’s Military Economy.

Elliot Wilson says Pakistan’s economy is dominated by a ruthless conglomerate that owns everything from factories and bakeries to farmland and golf courses: the army.

With all these businesses, you don’t have to be a genius to know why the military loathes disclosing its commercial operations. This financial autonomy the military got involved in while ruling the country has given them a dangerous sense of entitlement, whereby they think they own Pakistan. As soon as an attempt is made by a premier to limit the army’s power, they slap him down. In 1990, Benazir Bhutto during her first tenure made a concerted attempt to secularise the army by installing non-army personnel at the highest level. Shortly afterwards, her government was forced out. When Nawaz Sharif tried to domesticate the army, he was shown the door as well. So, the million dollar question here is that who amongst the civilian will be able to put the army in its place- barracks?

Absolute power, of course, corrupts absolutely. The military has also begun to act like feudal landlord. For this the political parties are to be blamed too, because they succumb under pressure and to save their respective governments and parties, they adhere to the military’s demands. In 2005, Punjab government handed over 30 acres of prime rural land, then worth £600,000 to build 18-hole golf course. In 2004, the Sindh government gave military land worth £35 million just because they wanted it. In 2001, the landless peasants in central Punjab complained that the army had changed the status of the land on which they depended for their subsistence by forcing them to rent in cash rather than working on share cropping basis. The army cracked down, beating many and leaving eight dead. Dr Siddiqa in her book quotes a naval officer who questions why landless peasants should have any rights in relation to the land they till? ‘They do not deserve land just because they are poor,’ he says.

In the given circumstances, it is hard to imagine someone circumscribing the economic power of Pakistan’s army. The biggest threat to the existence of military’s business empire is democracy in letter and spirit, because it would jeopardise its proliferating commercial interests. More political power leads to greater control and profits and vice versa. They have remained in power for about 33 years out of the 71 years of Pakistan’s existence. And when they were not in power, they still tried to control and manoeuvre things. In another world, they might but in this country they just cannot relinquish power and stay back in the barracks to concentrate on military related matters only. It is often said as a joke that all countries have a military, but Pakistan’s military has a country, which it runs at a tremendous profit.

Shuja Nawaz in his book, Crossed Swords, has written about the land grabbing propensities of Pakistani generals. “Late 1980s, a dictator fatigue set in during the Zia period, many army officers refrained from going into the public in their uniforms as there was much resentment against military for their over-indulgence in economic activities. Later, in 2007, “the country saw the jarring banners carried by lawyers who were protesting the removal of a Chief Justice by the military ruler, ‘aey watan ke sajeeley jernailo, saarey ruqbey tumharey liye hain’ (o handsome generals of the homeland, all the plots are just for you).

According to Transparency International UK, the Ministry of Defence has no control over military business operations. The profits are used to fund the respective services directly and do not contribute in any way to the overall military organisation. The foundations are reported to have received a far greater portion of government subsidies than the private sector. Ayesha Siddiqa estimates that between 2004 and 2006, the Fauji Foundation had received USD 65 million in subsidies, a sum no private sector business has ever received.

In July 2016, the Pakistan Senate was informed that the armed forces run more than fifty business entities worth over USD 20 billion. More than £ 10 billion was quoted by Dr Ayesha Siddiqa in her book in 2007, which was subsequently banned in Pakistan. It is also a fact that these numbers cannot be verified as the institute and the pillar of the state which finds it insulting to explain where the annual budget is spent will never allow this to happen. They have given the details in the Senate; it should be more than enough. It is rather unfortunate, but that’s the way it has been and will continue to be so unless someone can put an end to it.

Even if we take into account the figure of USD 20 billion for all practical purposes, then it is still more than the annual Defence budget. The current fiscal year allocation is Rs. 1.1 trillion, which comes to approximately USD 9 billion and it is whooping 18% more than the last year’s Rs.920 billion. This allocation does not include Rs.260 billion for pension and Rs.45 billion for security enhancement. The pension is dealt separately in the federal government’s total pension bill. Only the Fauji Foundation’s profit in 2017 is USD 307 million (Rs.38 billion). The military representatives argue that these businesses help them manage the expense of pension and looking after the soldiers in service and those who have embraced martyrdom while in service. But if anything, to be believed the pension is paid, by the government and it accounts for the 76% of the total pension bill. So where is this money being spent? Why must they need these, many business entities in the first place?

To expect something like China happening with Pakistan military is nothing more than a dream and wishful thinking. If there will be even a hint of it, they will revolt. It is impossible in simple words. But one thing can be worked out which is logical and reasonable as well. If these business entities are there to support the army men then so should be. The military should sustain the burden of pension and relieve the national exchequer from it. Also army should self sustain some part of the total budget be it 10%, 15% or 25%. It is quite legitimate way of returning the benefits earned from tax payers money. And this by no means is a sacrifice, but in a way a moral responsibility which stands unfulfilled. Just imagine the relief which can be provided to the national exchequer and ultimately to the common man by utilising it in the sectors where monetary beef up is required.

Let us assume defence will contribute 25% (even though it is higher percentage to begin with but to get an idea it is fine), which comes around to USD 2.25 billion based on the 2018- budget. This amount can be on health, education and human development. The three most neglected areas in our country. In the recent past, there has been an increase in the allocation of the three important areas, but making grass root level changes require more cash influx. And for the moment it can only happen by reducing spending on defence budget in order to reach at a certain level of national development education is a must. No country or nation has ever made progress without improving literacy rate and for that the investment in education is required. There was a time when the government schools were talk of their respective towns, but now they stand nowhere. We need to put a lot more concerted effort to bring them back on track. Nothing is free in this world and to achieve this mammoth task money is what this sector needs. And it can only come by reducing the defence budget and that is if they want to self sustain.

Health is another important and highly ignored sector in Pakistan. Everyone deserves at least the basic level health facilities, but for that we need more clinics, hospitals and efficient doctors. Again to achieve all this money need to be injected in the sector this will be a great service to the people of Pakistan. Many people lack basic health facilities, especially the one living in the suburbs and villages and no easy access. The situation a appalling and we must address it urgently. This does not mean we stand at nothing in terms of health facilities, but we are lacking in achieving grass root level improvement. Unfortunately, Pakistan is handicapped by resources as the major chunk of the budget goes to the military and we as a nation are not willing to pay the right amount in terms of taxes and levy duties. On top of that we have debt servicing looming on our heads all the time. We need resources and something got to give to get them and there is no other than defence at the moment. The run businesses which have been established using the hard earned money of the people of Pakistan so they should get some benefit from it as well. And what better way it could then foregoing a percentage in the budget allocation to be spent welfare of the people of Pakistan.

Sources:

http://www.ecns.cn/news/military/2018-06-13/detail-ifyvfaqz8675558.shtml

50 commercial entities being run by armed forces https://www.dawn.com/news/print/1272211

Pakistan army’s ‘$20bn’ business https://www.aljazeera.com/focus/pakistanpowerandpolitics/2007/10/2008525184515984128.html

https://www.dawnnews.tv/news/print/1084138

https://www.dawn.com/news/1404337

https://www.thenews.com.pk/print/136789-Army-launched-most-business-ventures-during-dictatotships-Senate-told

https://www.spectator.co.uk/2008/01/the-military-millionaires-who-control-pakistan-inc

https://www.irishtimes.com/news/military-do-not-just-run-pakistan-they-own-it-too-1.1211510

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10746321

https://qz.com/india/1134516/inside-pakistans-biggest-business-conglomerate-the-pakistani-military

Transparency International UK’s Defence & Security Programme

Ayesha Siddiqa-Agha, Military Inc: Inside Pakistan’s Military Economy, Pluto Press, London
http://ti-defence.org/wp-content/uploads/2016/03/2012-01_MilitaryOwnedBusinesses.pdf

http://www.fauji.org.pk/fauji/investors/financial-highlights

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