FROM CITIBANK TO PM HOUSE

With Musharraf gone soon dust will settle and historians will decide where to place Musharraf in history. A lot has been said about Musharraf and lot more will be said but at the moment it’s crucial that we analyze the destructive role that Shaukat Aziz played in wrecking the backbone of Pakistan’s economy.

Aziz was not someone who came out of the blue he was the most lethal economic manager that was sent to Pakistan by our masters in the West. When Pakistan’s experiment with democracy started again in 1988 former executives from IMF, World Bank and other shady organizations started flying into Pakistan and taking over Finance and Economic affairs into their hands. Shaukat Aziz was not just another finance minister of the Bank or IMF he was an EHM (Economic Hit Men).John Perkins was economic hit men for the National Security Agency and now has come clean and wrote the details of his working career into two bestselling books. This is how he explains what an EHM is “Economic hit men (EHMs) are highly paid professionals who cheat countries around the globe out of trillions of dollars. They funnel money from the World Bank, the U.S. Agency for International Development (USAID), and other foreign "aid" organizations into the coffers of huge corporations and the pockets of a few wealthy families who control the planet's natural resources. Their tools include fraudulent financial reports, rigged elections, payoffs, extortion, sex, and murder. They play a game as old as empire, but one that has taken on new and terrifying dimensions during this time of globalization. I should know; I was an EHM.” (Confessions of an economic hitmen by John Perkins)

The people who think that Aziz did wonders for Pakistan’s economy are totally mistaken. Sustained economic growth does not take place unless there is investment in research and development, expansion of industrial base, expansion of social economic projects, and real development of rural and urban areas. What Aziz did was totally different he started expanding the economy at the macro level resulting in increase demand of luxury goods from foreign countries. This resulted in widening the gap between the rich and the poor. The economy of Pakistan is in utter chaos. Inflation, trade deficit, sky rocketing fuel prices, shortage of power generation, and weakened Pakistani rupee have caused the economy of Pakistan to go into a whirlpool. On the surface the issues of inflation, trade deficit, fuel prices looks simple yet inside look at these issues reveal a different story. The economic managers have masterfully planned and executed economic policies that have turned out to be total disaster for the country. Pakistan’s economy was in chaos when General Musharraf took power; there were sanctions on Pakistan which were imposed after 1998 nuclear test. IMF had cut off aid to Pakistan; this aid started flowing again when Mr. Shaukat Aziz was installed as finance minister of Pakistan by Gen. Musharraf. Once he was installed the ball was set rolling for big corporations to come and invest in Pakistan at their own terms. Monetary policies were liberalized and investment was encouraged. For example all the international companies that have invested in Pakistan got huge tax benefits from the government. Then they were allowed to take all their profit out of the country and were not required to invest any amount in research and development. What we see all around us is that Telenor, Warid, and other companies are setting up cellular networks in our country. But what are the costs associated with it? For example the only country in the world where Telenor has 100% ownership is Pakistan. This in itself is extremely flawed policy that the government approved. All these companies and their associated cell phone manufacturing companies did no investment in Pakistan resulting in Pakistan importing over $1 billion of cell phones. This surely is a unique statistic for a third world nation like Pakistan. During the first three years of Shaukat Aziz’s tenure as finance minister, many macro-economic indicators recorded downward trend for three consecutive years in a row. Even after 9/11 econimc situation was not good. Once Pakistan became the frontline state in war against terror and strategic partner of the United States the economy showed signs of improvement due to financial support of US including cash grants, re-profiling of external debt of $ 12.5 billion, fresh loans from International Financial Institutions (IFIS) on soft terms and market access. Post 9/11 also saw huge quantities of remittances pouring into Pakistan from overseas Pakistanis. The total remittances to Pakistan in post 9/11 era from September, 2001 up to December 31, 2005 stood at over $ 16 billion. This resulted in Pakistan foreign currency exchange to increase sufficiently. These are only macroeconomic level gains and they don’t trickle down to 80% of the population. Today trickle down economic theory has been discredited and thrown away for good by all first world industrialized nations of the world. It is no surprise that those policies are still continued in countries like India, Pakistan, Argentina, Central Asian republics, and other countries.

First and foremost Pakistan started taking structural adjustment loans from IMF and World Bank. Banking sector was the first to be reformed. Interest rates were lowered first, and then money supply was increased to the public. Increase in remittances, allowed the banks to make liberal advances even at lower interest rates. It was the first time in history of Pakistan that banks allowed financing at rates lower than the inflation rate. The GDP growth rate of 7%, 8% during 2005, 2006, and onwards was consumption-led growth rather than real industrial production. Banks started issuing loans to consumers for auto financing, home financing, and other such schemes. Most importantly credit cards were handed out to middle class and lower middle class people as well. The biggest problem with banking operations in Pakistan is that banks throughout the world operate on a profit margin between 8 – 10 %. Banks in Pakistan are allowed to operate at a very healthy profit margin of 30% or even 35%. The result of increasing the money supply was that the lower and middle class now had access to small loans and credit cards this resulted in sudden increase in demand for air conditioners, televisions, microwaves, washing machines, and refrigerators. This in turn put tremendous burden on the national electricity grid. There was a plan which involved constructing the Thar Coal Power Project which could have generated 5000MW of electricity. An American company was interested in pursuing this project but the project was vetoed by Shaukat Aziz, later on a Chinese company was interested in the same project but it was again vetoed by Shaukat Aziz, who by now was also the Prime Minister of the country. A review petition was also filed by the Chinese company to President Musharraf but to no avail. Thar Coal power project was deliberately put aside so that in future the energy crisis in Pakistan could worsen. Indeed it has worsened, as right now there is shortage of at least 3000MW. Now Pakistan is going to import 1000MW electricity from Iran. Kalabagh dam has been ready for construction since 1985 but no sign that the dam would be built anytime soon. This increase in demand of electricity based goods resulted in increased demand for import of more technical products. Pakistan is unfortunately a country where assembly of most goods takes place but manufacturing is not done. For example, air conditioners are made but compressors are imported, similarly motors, chassis for cars, engines for small and large vehicles, generators, copper wiring, machine tools, and many other products are imported. The textile sector which is the biggest exporter of Pakistan was hit very badly by the power crisis. This has resulted in decline of exports from textile sector. The textile sector and the agricultural sector was badly ignored and left to rot.

Privatization was another important goal of Shaukat Aziz, he sought to privatize, Pakistan State Oil (PSO), Steel Mills, PTCL, among many other banks and corporations. PSO is our economic backbone it has 80% of our oil carrying and refining capacity. PSO supplies oil to PIA, Pakistan armed forces and all government related institutions. Aziz did not get adequate time to sell off PSO. The plan was to get Chief Justice Chowdary out of the way and then go after PSO. Steel Mills privatization was stopped by Supreme Court Chief Justice Iftikhar Chowdary after the news leaked that it was sold for a value less than the cost of the land on which the mill is located. We should keep in mind that at the moment Steel is a hot commodity and it is in high demand in emerging economic giants like China and India. Well renowned Indian industrial tycoons are buying steel mills in other countries, for example, England, Brazil. It is no wise decision to allow foreign investors to buy the nations steel mills, and allow the investor the luxury to sell it in future to any buyer who may even be an Indian National.

PTCL is another organization which was sold to Etisalat. PTCL was sold for less than its real value. When the bid was filed by Etisalat for the purchase of PTCL there initial offer was low. The irony was that there offer was accepted. Etisalat defaulted on timely payments of their installments. At this moment the bid should have been cancelled and Etisalat should have been reprimanded according to the procedure. Instead a summary was sent to President Musharraf by Shaukat Aziz asking him to allow PTCL to be sold to Etisalat at a new price and new terms and conditions. Shockingly this was accepted by President. The result was the disaster that we all are facing right now. Since Etisalat took over PTCL they have fired many technical staff through the golden shake hand scheme. They have increased the local call rates exorbitantly that has caused difficulties for the local caller. Local calls are generally free within the city in most parts of the world. But in Pakistan local call rates have been increased a lot. Rates for dial up internet have also been increased resulting in per hour cost to be around thirty rupees. The results of PTCL privatization are now coming clean as for weeks thousands of its employees were on strike. Privatization of Karachi Electric Supply Corporation was another disaster. The biggest disastrous law was the exemption of capital gains tax on stock market investment. For all his tenure stock market was exempt from capital gains tax. This resulted in billions of rupees being invested by the elite 0.5% and in return they made more money and in the end paid no taxes. They invested this money in real estate throughout Pakistan. They did this because there is no real estate investment tax. This resulted in property prices being jacked up by the elite class who holds houses and plots for investment purposes, artificially increasing the prices. This is not all during his time as finance minister and prime minister more than Rs. 600 billion of loans were written off. The burden of all this was and still is suffered by the people of Pakistan. The oil prices and 16% general sales tax (GST) are an example. There is no place in the world where the government collects 16% GST. It has to be world record of some kind that a third world country charges 16% GST from its citizenry. The government did this because it was unable to impose agriculture tax and get tax money out of the filthy rich elite.

The list of economic disasters that were deliberately carried out by Shaukat Aziz are long and good enough to fill a book but these are just some examples of what he did and what he tried to do. Irony is that right after coming into power this government has carried on exactly where Aziz left. As per instructions from IMF they have agreed to end all subsidies by December 2008. Subsidies on oil, gas, electricity, and agriculture will be finished. This will result in 100% increase in prices of all these commodities. The GST was 15% during Aziz’s time now its 16%. The parliament (house of crooks) has passed a law which states that Kalabagh dam will never be build. This is a real shocking decision that will destroy Pakistan’s water resources and our agriculture sector but not surprisingly none of the political parties even bothered to talk about it. No NGO, Lawyers, media, no private enterprise none what so ever raised their voice. Without Kalabagh dam Pakistan will become a land where there will be severe food and water crisis within the next decade.

Late finance minister of Pakistan Dr. Mahbul ul Haq (who is also known as father of modern development economics, and was roommate of Amartya Sen at Cambridge) said in 1985 that Pakistan is heading towards becoming Congo no one believed him but we are still heading in that direction.

Talha Mujaddidi
Aug 19th 2008

GAME SET MATCH

Pakistan army has ruled the country more than the politicians. The last of the dictators is President Musharraf. When Musharraf came into power he had a golden opportunity to change Pakistan’s troubled past and set it on the path of becoming an Asian Tiger. Since Bhutto no one has been greeted in a manner similar to the reception that Musharraf got from the nation when he successfully cooped into power and ousted the corrupt incompetent Nawaz government. People distributed sweets all across the nation. Musharraf started well and did some things that no other Pakistani leader had done in a longtime. He made the Indian nation accept that dialogue with Pakistan is only possible if it pertains to Kashmir issue and confidence building measures will only follow after resolution of Kashmir dispute. Musharraf had with him a team of generals, like General Aziz, General Yusuf, General Amjad, General Mahmud, General Naqvi, General Usmani and others, who were considered passionate and nationalist. Something dramatic happened after 9/11 and that was immense political pressure from America on Musharraf regime. The problem for Musharraf was that he was a military dictator of a nuclear weapon Muslim country that served as the backbone for Taliban regime, that just happened to host the most notorious terrorist of the world ‘Osama bin Laden’. This was definitely the worst fix that any Pakistani leader has been in a long time.

Under pressure Musharraf shifted his focus from internal affairs to America’s War on Terror. This also required changing his team members some of whom did not agree with his thoughts about American war on terror. This allowed breathing space for the local corrupt politicians. The vast majority of the people of Pakistan did not support war on terror and they never have and never will support War on Terror. To create a viable environment Musharraf made the mistake of bringing back same corrupt politicians and establishing a puppet parliament. Then there is a trail of blunders that Musharraf committed during the next five years and we all know about them very clearly.

The thing to understand is where Musharraf is coming from. Primarily Pakistan has been ruled by leaders who posed themselves as Islamic or tried to mend laws that were in some way or form or at least on paper Islamic. Benazir had her tasbi (beads) in her hands and her dupatta on her head to hide her very secular youth and lifestyle of her time spent in Western world. Nawaz was always seen to be too cozy with the Tableegi Jamat. General Zia, well we all know about him. Before Zia, Bhutto implemented different Islamic laws. Musharraf is the first true secular leader that we have had since Ayub Khan. Musharraf was educated in Turkey and his all time favorite leader is Ata Turk. The Americans saw this as a great opportunity to create lot of trouble in Pakistan. The disgruntled and banned religious outfits were pitched in a battle against Pakistani law enforcement agencies. This ensured that Musharraf would be completely enraged and would start a war between the two that would be used to promote the ulterior motives of the enemies of our country.

Musharraf made two fatal U-turns during his rule. First was the forced gun point U-turn of Pakistan’s Afghanistan policy. The second was Pakistan s U-turn on Kashmir and India policy. The results have been disastrous to say the least. The real hidden ruler during all this time was Shaukat Aziz. Musharraf should not have allowed him unquestioned access into our highest decision making. But alas, such are the connections and strings that former Citibank Executives can pull. Musharraf should have realized the dirty game that Shaukat Aziz was playing in his capital city and he should not have sacked Chief Justice Iftikhar Choudary. This and the brutal operation against Lal Masjid was a huge blow to Musharraf’s presidency. But Musharraf also did something’s that no other leader could have done. Musharraf really infuriated the American leadership on several occasions. First and foremost he kept Pakistan’s nuclear program rolling just like previous leaders had done. It should completely clear to all Pakistanis that President Zia and Prime Minister Bhutto both were assassinated by Americans and their allies because they kept Pakistan’s nuclear program going. Musharraf kept nuclear program going and his refusal to hand over Dr. Qadeer Khan to American interrogators really made them go bizerk in anger. Why does the CIA want to interrogate Dr. Qadeer? The main reason is that he is one of the few men who know inside details of North Koreas nuclear program. China has intelligence about North Koreas nuclear program but they are not going to share with anyone else. Musharraf also maintained relationship with Iran something which the Americans did not want. Musharraf also made an initiative to improve relationship between Iran and Saudi Arabia and other countries in the region. This resulted in Ahmedinejad going to Saudi and then Iran’s foreign minister meeting Turkish counterpart, etc. Musharraf also killed the American plan to sent Pakistani, Turkish, Bangladeshi, Malaysian peace keeping troops into Iraq. And last but not least he kept supporting Taliban through back channels.

This impeachment movement that has started has only begun after it has received green light from Washington D.C. Americans are done with Musharraf, they have better people to work for them more diligently then Musharraf. Bush’s hijack of the American presidency is also coming to an end. The Pakistani parliament, interior ministry is completely in the hands of the American puppet masters. Once Musharraf is gone then Zardari can become president then the Presidency too will be in the hands of Uncle Sam. The prized possession is the ISI. They made an attempt against it a few days ago but failed. There will be more attempts soon. Oh yea, since the new government has come into power they have drastically cut funding for Research and Development of Strategic Plans Division, this will directly hinder our nuclear program. What other bunnies this government is able to pull out of their hat remains to be seen. The people of Pakistan are not interested in impeachment of president or restoration of judges, their prime interest is that someone for god’s sake check inflation that is touching 30%, and this was clearly stated by poll conducted by Geo television network.

For Musharraf this is almost the end of the road. The Americans have ditched him as was said recently by former Director CIA that the new Pakistani government has promised to work more closely with America on war on terror than president Musharraf. He could either resign or take on everyone else around him and put up a fight. If there are some secrets that this nation needs to be told then so be it. No point being like Ghulam Issaq Khan (former President of Pakistan, who was supposed to know most intimate secrets of Pakistan but never disclosed them until he died). How will Musharraf be regarded in history? Alone he could be acceptable to people but with Shaukat Aziz his rule was a disaster apart from the few notables mentioned. But as Quaid-e-Azam said “every successive government of Pakistan will be worst than its predecessor”. We should all lighten up and be prepared to see worst rulers rule us and bring forth more misery and injustice for us.

Talha Mujaddidi

Aug 14^th 2008