Global Geopolitics Net Sites
by James Crickton
Billions of dollars flying out of Pakistan, due to growing fears of terrorism and worsening economic situation are finding their way into London’s slumped property market. According to property dealers, Pakistan politicians and military officers have been investing in areas around the prestigious Park Lane and Mayfair in central London, which are historically the most sought after areas by the rich and famous Pakistanis. Shortage of land in these areas has opened up adjoining residential districts, which are being lapped up by Pakistanis, who consider investments in the UK are a safe bet in these days of meltdown back home.
Many Pakistanis living in the UK see ‘nothing wrong’ with investing where returns are safe and guaranteed but agree that large amounts of cash are slipping out of Pakistan in transactions which are of ‘questionable’ nature. Most of these land deals by politicians as also senior military officers employ `reliable and dependable’ friends for the transactions. The acquisition of land therefore raises suspicions, they say.
Rehman Malik, Advisor to the Prime Minister on Interior Affairs, said in Gilgit (November 10) that the government has taken measures to prevent illegal transfer of funds abroad. Head of the country’s largest foreign exchange company, `Khanani and Kalia International’, was arrested on charges of illegal transfer of billions of US dollars abroad. More than 10 billion dollars were reported to have been transferred by this company till October.
Pakistan’s foreign exchange reserves nosedived from $ 16.5 billion in October 2007 to 6.75 billion in November this year.
Observers opine that Pakistan doesn’t have a proper corporate structure to handle international money transfers and this has enabled underground operators to reap benefits.
The State Bank of Pakistan (SBP), the central bank of the country, is the licensing authority for money changers but it appears to have failed to check illegal transfers through what is locally known as hundi and hawala transactions. For instance, the Bank issued orders in May, 2008 to stop Exchange companies from sending cash abroad in Dollars, Sterling, Euro and UAE Dirham in an effort to stabilize the local currency, Rupee. The arrests of some of the `money changers’ show that the apex bank’s diktat had no effect and illegal transfers continued to be made.
Pakistan watchers aver that when politicians and senior military officers themselves were involved, it is difficult for the Central Bank to do anything to stop the flight of capital.
Politicians and senior army generals siphoning off huge funds and buying property abroad is not a secret. British papers carried reports of President Zardari and slain former Prime Minister Benazir Bhutto owning palatial buildings in London, equipped with best Polo Courts. Many cases against him in Switzerland were dropped only recently. Another former Prime Minister Nawaz Sharif is also accused of mercurial rise through questionable means.
According to London’s Observer newspaper, the Sharif family acquired properties in the British capital through two companies, Nescoll and Nielson Enterprises, both registered in the British Virgin Islands and linked to a bank account in Lahore in the name of a fictitious person: Sulman Zia. The four flats bought by the Sharifs in Avendale House, Park Lane, are said to be worth at least £ 750,000.
Dr. Shahid Qureshi, a respected Pakistani journalist based in London, estimates Pakistanis’ wealth stashed in foreign banks at over $ 200 billion. Only 45 Pakistanis have deposited $ 23 billions in foreign banks. Quoting an analyst, he wrote recently: “Zardari’s financial advisor Tareen, Shahid Javeed Burki, Shaukat Aziz, Salman Shah, and Mian Mohamad Somor are the pimps of the international financial mafia”. The article said late Benazir Bhutto’s assets were worth more than $ 2 billion, according to Saifurahman and around $1.2bn (£ 830m) according to the National Accountability Bureau (NAB). President Musharraf had set up NAB to put politicians inimical to him in the dock.
The Military officers, says Shahid Qureshi, are “no angels” and are “equally plundering” the country at the cost of common people. “The personal wealth of Musharraf’s key generals is estimated at £3.5m a head. And Musharraf himself, who has a combined salary of £700 a month for his jobs as president and army chief, has acquired a real-estate portfolio worth £5m”, reports The Guardian’s in its July 21, 2007 despatch, ‘ The Plot To Bring Back Benazir’.
Pakistan’s military runs a huge commercial empire worth billions of dollars, observes Ayesha Siddiqi, noted columnist and author. Her book, “Pakistan’s Military Inc” gives a graphic account. “This is a peculiar kind of military capital that is used for the personal benefit of the military fraternity, especially the officer cadre, but is neither recorded nor part of the defence budget… Since this military capital is hidden from the public, it is also referred to as the military’s internal economy…. Although it is not possible to give a definitive value of the military’s internal economy, because of the lack of transparency, the estimated worth runs into billions of dollars.”
The establishment of the Askari Commercial Bank (AWT) in 1992 was a major development designed by the Army to legalize such questionable funds and safely siphon them off to foreign accounts. Nawaz Sharif’s finance minister, Sirtaj Aziz, said that the bank was General Mirza Aslam Beg’s idea, says Ayesha Siddiqi.
Why the Pak army thought of entering the banking sector? Experts like Peter Lock are of the notion that it is natural for militaries to enter the banking sector, especially for money laundering.
According to the book, Pakistan’s Military Inc, “the timing of the establishment of the bank was certainly critical: the early 1990s was a time when rumours were afloat of a lot of drug and corruption-related money in the financial markets. The ballooning of the black market had, in fact, started under Zia and continued through the 1990s.”
Says to Ayesha Siddiqi: “What is certain is that the Askari Bank signified the army’s financial autonomy, as in other countries such as Thailand where a powerful military operates a bank as well.
In his book `Whiteout’, Alexander Cockburn, a columnist for The New York Times, accused a senior General of Zia army, General Fazle Haq, who was also the governor of the NWFP, of being part of the drugs trafficking racket.
English daily, `The Nation’ (of Lahore) reported on 16 April 1997 the arrest of a Pakistan Air Force (PAF) officer in New York on charges of heroin smuggling. The officer and his accomplices had used a PAF transport aircraft, the daily said.
Adds Hassan Abbas, a former police officer, “NAB’s hands were tied in investigating the alleged corruption of senior military officers, such as Generals Aslam Beg, Hamid Gul, Zahid Ali Akbar, Talat Masood, Saeed Qadir and Farrukh Khan, and Air Marshals Anwar Shamim and Abbas Khattak. Abbas worked in the National Accountability Bureau (NAB) during the early days of Musharraf regime. He gives a graphic account of the prevailing milieu in his highly readable book “Pakistan’s `Drift into Extremism”.
A shining example of `Pakistan’s Military Inc’ is ventures like the Varan Transport Company. Owned by the daughter of the former head of the intelligence agency, ISI, Lt. Gen. (retd) Hamid Gul, the company show cases how a military-oriented patronage system benefits its clients. “Varan was given preferential access to bus routes between the twin cities of Islamabad and Rawalpindi, and the company’s management and drivers behaved with impunity,” says Ayesha Siddiqi.
Given the history of military’s direct and indirect say in matters business, the hawala transactions resulting in London land deals donot come as a surprise, according to a local commentator. The effect of the latest `capital flight’ is a big push to inflation and high interest rate regime. The Central Bank has been forced to increase the interest rates from 10 to 12 percent.
Some leading Pakistani businessmen in the UK feel that the environment in their country is less than conducive for doing business at present. According to them, law and order, growing terrorist menace, political uncertainties, corruption and economic downturn are just a few factors. The overall situation is of ‘paranoia’ and ‘fear’ and ‘in such a situation, Pakistan is the last thing any investor will be interested in’.
Meanwhile, both ethnic Pakistani and British construction companies in the UK are reaping all the benefits. The most attractive offers for average British Pakistanis are the housing schemes in major cities of the UK. Satellite TV channels, owned by ethnic Pakistanis, have been putting out attractive advertisements luring these investors with slogans like `higher margins for investments in London than in Lahore or Islamabad’. The going rate in prime localities like Hyde Park, Bayswater and Sussex Garden has zoomed. Now with the advent of Pakistani elite, it ranges from about 500,000 to many millions of Pounds a piece.
It is a tragedy that billions of dollars are finding their way out of Pakistan when remittances from expatriate community have almost dried up. Forex reserves with State Bank of Pakistan were down to
$ 5.4 billion at the beginning of November, 2008, according to economists.
© Copyright 2008 James Crickton. All rights reserved.
The author is an analyst with a MNC in London
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Karachi Downtown
Author: Asjad Jamshed
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