Tuesday, August 20, 2013

Pakistan’s business barons – their role in economic prosperity

Majyd Aziz

Jinnah’s clarion call for Muslims to leave their estates, jobs, and businesses and swear allegiance to the nascent nation motivated millions to chant, “Here we come”. Among the millions were businessmen who left their ancestral abodes and income sources, bundled up families and whatever possessions they could lay their hands on, and crossed the border. Many left thriving businesses and were compelled to working for others. The enterprising among them did not lose heart and immediately got their act together and were open for business.
In those days, trade between Pakistan and India was not subject to Non-Trade Barriers or religious discrimination. Businesses blossomed, opportunities were galore, and inspite of many handicaps, the entrepreneurial spirit continued to flicker. The Korean War presented the momentum to strike gold. Pakistan started developing the industrial base ever since Jinnah laid the Foundation Stone of the first textile mills in SITE Karachi in 1948.
Come 1958 and a military revolution changed the dynamics of the motherland. Though democracy was still decades away from taking revenge, the Ayubian era ushered in an Industrial Revolution across the nation’s landscape. This was also the age of licenses, permits, and sanctions. The centralized economy gave rise to the first stage of cronyism and enabled certain families to maintain a stranglehold on the economy. Gradually, their hold became formidable and it seemed that the rules of business were designed exclusively for the selected few.
Lo and behold! The power and influence of this blue-eyed elite discouraged many budding entrepreneurs to enter the field and so, sadly, many business families and newcomers were not able to enjoy the fruits of this Industrial Revolution. In 1968, Dr Mahbub ul Haq alleged that 22 industrial family groups had come to dominate the economic and financial life of Pakistan and controlled about two-thirds of industrial assets, 80 percent of banking and 79 percent insurance. His allegation at a time when Pakistan was witnessing a superb GDP growth rate of over 6% and exports growing by 8% bewildered the government and came on like a drone attack on the privileged minority, the so-called 22 families.
It is true that monopolies and oligopolies are anathema to a democratic economic order. Notwithstanding this premise, it is pertinent to mention that there are periods when strong-spine entrepreneurs are imperative to develop certain industries, primarily because they have the critical mass to sustain fall-outs. Dr Haq’s comments were not properly understood. He did mean control over, not owning, the assets. Moreover, instead of properly comprehending Dr Haq’s allegations, the social activists started targeting individual families rather than dissecting the whole obsolete economic regime. Instead of demanding change in various laws that encouraged, directly or indirectly, cartels, managing agencies, trusts etc, instead of demanding abolition of antiquated laws on the statute books, and instead of calling for pragmatic and enlightened reforms, whether land reforms, worker reforms, or reforms that may end blatant government patronage, their focus centered on families.
The two consecutive Martial Laws and the 1971 war led to a different political culture.  Z A Bhutto, a man with aristocratic taste and with a superb command over demagoguery, galvanized the peasants, industrial workers, and the downtrodden and used the 22 families mantra with distinction. Nationalization became the hallmark of this regime. It was entirely another story that the nationalization process devastated years of economic progress. Big business was the culprit, they said. Business tycoons were the enemies. The 22 families must be destroyed.  This brouhaha was capitalized by Bhutto and his minions and the dark days of Pakistan’s progress were the manifestation of the economic massacre committed by the pseudo-socialist policies of the regime.
Sanity in Pakistan’s economic development process became apparent when General Zia and his team put into motion certain policies that would remove the cobwebs that had surrounded investment and industrialization. Although his tenure has been branded as one of religious zealotry or draconian decisions, the fact is that businessmen and investors were encouraged.
The fateful plane ride ushered in the tenures of Nawaz Sharif and Benazir Bhutto, each doing two half-baked terms. Sharif talked business opportunities and mega infrastructure projects while Bhutto wanted to shed the stigma of her father’s socialist policies. The 22 families became 2200 families after the elimination of most of the regressive policies of licenses, permits, and sanctions. Privatization became the buzzword, although how it was done left many people with heartburns. Privatization and de-nationalization resulted in the re-emergence of the big boys of business and many units were dropped in their laps since they had clout and influence in the corridors of power.
The Musharraf tenure further emboldened businessmen and the big brokers in stock exchanges too became a potent force. They had cash and they played the stock exchange to their own personal advantage.  The Karachi Stock Exchange became the darling of investors and there was a deluge of foreign funds. The economic managers further vitalized the economy with favorable policies and soon 22,000 families were among the community of business barons. Later, in the regimes of Chaudarys of Gujrat and Zardari clan from Nawabshah, economic policies were formulated amateurishly, haphazardly and, in many cases, detrimental to the common man. The Sharif brothers are back in command and their economic managers are trying to get their feet on the ground.
So, what does this narrative tapers down to? Are there any links between it and the role of big business? What has been the end result? The answers may sound preposterous and maybe far-fetched, but they are evident. Over the past many decades, the business barons dictated many economic policies but these were mostly self-centered rather than universal. However, these policies did introduce capitalization of resources and enabled the country to move forward. But, when the barons were neglected by any ruling junta, the ensuing result was economic disaster. When the tide turned and the barons become the preferred ones, the country again inched towards economic prominence. Still, the question remains not fully answered. What about mainstream business community? What about shop keepers who have shutter power? Do they have any voice? This here then lays the contradiction. The barons and the small business leadership are not on the same page in lobbying for their common interest. It is very much reflected in the divergent views of Pakistan Business Council, a body of 40 mega businesses, and the contention of FPCCI or other Chambers.
There are no easy or laid-back solutions to Pakistan’s economic malaise. A pragmatic approach is for Sharif to convene a two- day Economic Convention where apart from business community, leaders of all political parties, economists, stockbrokers, bankers etc would deliberate and decide on a five-year economic policy that would be owned by all. Business community is the largest stakeholder and it is the businessmen who have the power to provide employment, earn foreign exchange, and be the real ambassadors in the global marketplace. Not just 22 or 2200 or 22000, but each one of them. But then, John D Rockefeller once said: "Just so the wealth of the country, its capital, its credit, must be saved from the predatory poor as well as the predatory rich, but above all from the predatory politician."

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