Finance and power
The Nawaz Sharif Government is determined to create a world record of sorts in effecting the quickest privatisation in history. While the determination in the maintenance of their AIM is commendable, there is definite doubt about whether this policy of haste has been well thought out before being put into implementation.
To start the process, the present Federal Government took advantage of the homework done earlier in the denationalisation process by the PPP regime with respect to MCB and went ahead with that sale within 60 days of the IJI forming the Government. While criticism was levied at the seemingly hasty fire-sale to a Consortium of those believed to be the favourites of the PM, there is sufficient reason to believe that among the bids made, the offer accepted was the most responsive. Conceded that the price was low, it was after all the first open tender offer and potential investors were very conservative in their bids, the benefit of doubt should go to the Federal Government.
The subsequent offer for ABL was a much more elaborate affair. Stung by accusations of nepotism and a seemingly callous attitude towards the existing public sector management and labour, the Government went to the other extreme and was pleased to accept the offer of the Allied Management Group (AMG), a Consortium of existing Management and Labour belonging to ABL, very ably put together by Khalid Latif, the senior most executive of ABL. The dynamism and acumen of Khalid Latif aside, the loyalty of the ABL workers to him personally was a significant reflection of above-par man-management. The ABL sale was a photo-opportunity for the PM to show that his attitude towards the working class was not as heartless as made out by the Opposition. In any event, despite the hoopla of self-congratulations, this signalled the finest act of the present privatisation process insofar as public sector management and workers combined together to take their future in their own hands, opening a new chapter in entrepreneurship at the basic level, keeping pace with the nuances of social commitments and obligations. From an observer’s point of view it opened up a three-way competition between the public sector, the private sector and the newly emerging professional sector. This triangulation further tends to enhance the efficiency and service of the banking sector. We have had an era of privatisation followed by rampant nationalisation, both extremes were not suited to the genius of our people. This third method has the potential of arousing genuine competitiveness that was lacking in the pure form of either sector, public or private.
Such platonic thoughts aside, one must face reality, which is that the acquisition of power is the end game in real life and finances are means to that end from time immemorial. In the olden days, any king who could disburse the greater largesse had the larger retinue, in turn the vastness of his host allowed him to invest his neighbours, friend and foe alike, as long as they had treasures that could help this “golden circle” along. Nations still aspire for territory, Saddam Hussain showed the recent equivalent (to the detriment of the Iraqi people) by coveting his neighbour’s oil wealth. Within the parameters of the country, the political candidates financial clout invariably dictate his/her success rate at the electoral hustings. Charisma and public emotion do give a lie to this theory from time to time, but these are exceptions to the rule. Real-politik dictates that those interested in acquiring political power must have a financial lode to rely on. Nowhere is this more apparent than in the world’s greatest democracy, the United States of America, where a candidate’s winning potential is judged from the contribution made to his political campaign, his war chest dictates his success potential. The liquid power of money is specifically available in financial institutions, the misuse thereof has driven many socialist governments to bankruptcy. With denationalisation process under way, more than the control of industries, it is the financial institutions that will be the source of future political power.
Around 1986, elements within the Junejo Government came to this conclusion, but instead of trying to take over an existing financial institution in the public sector, the force of argument was in favour of opening of new investment banks in the private sector. No one seriously worked on the concept of privatisation/denationalisation of the nationalised banks, on the contrary steps were taken to strengthen the hold of the Pakistan Banking Council (PBC), political patronage being disbursed through ill-advised loans and credits, a fair percentage of which turned up sour. With the advent of the PPP Government and their experience with traditional corruption insofar that it left quite a trail, financial institutions came within the ambit of corruption, being used to spread political patronage, which proliferated with greater frequency. While the rumours of takeover of MCB by political favourites was never really substantiated, speedy work done on the process of privatisation of MCB, one of the better if not the largest, of the nationalised public sector financial institutions, seemed rather suspicious. In any case, before such an eventuality could become a fact, the Benazir Government had fallen and the new beneficiaries were the favourites of the Nawaz Sharif Government. The suspicion became more tangible when the present incumbents benefited from the machinations of their predecessors.
While Zahid Sarfraz is embarked on a one-man tirade against the IJI Government, his fulminations about the ABL takeover being fronted by the AMG for Shahbaz Sharif smacks of fantasy and creates doubt about his credibility on more tangible issues. Zahid Sarfraz aside, the recent announcement that the rest of the banks in the nationalised sector, Habib Bank Limited (UBL), National Bank of Pakistan (NBP) as well as the Development Finance Institutions like IDBP and NDFC, came as a profound shock. With the type of financial clout available to this who gain control over these financial institutions, political power will be in their hands for a long time to come, at least until a revolution originating in the streets sweeps the land or a coup d’etat takes place. As the case of Gen Manuel Noriega has shown, Panama became a Nation Inc, with the Armed Forces bought over lock, stock and barrel, cutting out the possibility of coups to throw out the greedy and the un-Godly. Within 24 hours of the media announcement, the Federal Government back-tracked on the issue of the NBP, stating that control would remain in the hands of the Federal Government. While the decision to sell UBL is quite correct, one believes that Habib Bank, IDBP and NDFC should be disinvested only partly and like NBP, kept under State Control. Third World countries with low literacy have to have a modicum of public sector-private sector in financial dealings to protect the interests of the ignorant and the gullible. If anything, the success of fake investment companies should be taken as an indicator of the mass innocence.
Habib Bank is the largest of the nationalised banks and has an excellent coverage for the benefit of the masses. It is highly unlikely that the private banks will give the salaried class or the small entrepreneur any measure of support. Since IDBP and NDFC are Development Finance Institutions (DFIs), we should have first seen the effectiveness of those who have been given permission for private investment banks to function in competition to the DFIs rather than hand over profitable financial institutions into the hands of interests with vested political leanings, likely to influence future patronage of a particular favourite clientele in exclusion to the masses, particularly those who have contrary political views.
If the issues were confined to political patronage only, it would be bad enough. Unfortunately such power is usually misused for a closed club of family-friend patronage, a gross form of nepotism that is endemic in South Asia and the Third World. There is a blatant greed syndrome apparent here and it behoves the Nawaz Sharif Government to not only keep its hand clean but to have their hands be clean also, to ensure that after the Coop Scam it does not get mired up in another financial controversy. Even as one writes this one realises the futility of giving such advice to anyone in Government anytime, greed is usually blind and deaf to any sane counsel. The history of the Nawaz Sharif Government will begin and end with economics. Economics is the present Government’s strongest prop and yet the weakest link lies in a loss of conscience in the Government in implementing its own decisions honestly. Finances are absolute in its inherent power, unfortunately absolute power corrupts absolutely.
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