Let No One Write UBL’s Epitaph — Yet!
The Federal Government has handed over the management of United Bank Limited (UBL) to the State Bank of Pakistan (SBP) by invoking Section 41, Sub-section A, B and C of the Banking Companies Ordinance. At the same time it is rumoured that the deal with Saudi Basharahill whereby UBL was being privatised has been cancelled. For its part SBP has with immediate effect changed the management of UBL in order to stop the run on the bank that has seen depositors withdraw their money in droves. To protect the interests of the Clients the Government of Pakistan guarantee is being doubly backed by SBP guarantee.
Ms Benazir’s Government is to be congratulated for having taken strong action after months of vacillation. Instead of allowing UBL to go down the drain in the hands of inept, corrupt management, alternately guided by remote control from Islamabad or from a strongly entrenched Union, the Government of Pakistan’s (GoP) stern measures will go a long way in shoring up UBL’s crumbling corporate profile. A change of leadership will act as a strong shot in the arm which may well see this bank regain the confidence of the public and be privatised in the future in a more orderly manner, not as the fire-sale of the century. UBL has very good assets, particularly its credit lines and arrangements with foreign correspondent banks, its profitable network of foreign branches, its real estate holdings, a loyal customer-base, etc. If Muslim Commercial Bank (MCB) and Allied Bank Limited (ABL) could be turned around by pure Pakistani management after privatisation, why not acquire the same type of management team to do the right thing by UBL before privatization ?
A number of pertinent questions have been raised about the deal with Saudi Basharahill. When a well run bank like Faysal Islamic drops out of the race, prudence should have dictated searching questions to find out why. Moreover the Bank of England (BoE) had also made some relevant enquiries when it was revealed that Saudi Basharahill was registered only as a ú 2000 company in a tax-haven off-shore. It was then reported that Prince Nawaf Bin Abdulaziz Ali Saud, a brother of the Saudi monarch, was interested in coming in as a Basharahill partner, but when this does not seem to have materialised, the writing was very much on the wall. In the meantime, it seems the management of UBL declared open season on the bank and the quantum of questionable loans increased manifold. When news of the chaos percolated to the depositors, they naturally reacted with their feet in putting maximum distance between their deposits and UBL’s vaults. GoP did well in moving positively to stem the rot.
Leadership has a primary role in the health of any institution. In the realm of corporate leadership, the bottom line is a reflection of the quality of leadership, better dead than red. A couple of months ago, Malik Nawaz Tiwana was brought back as MD to replace Air Vice Marshal Farooq Umer in PIA. Farooq Umer’s period can really be adjudged as the “Dark Ages” in PIA. The former MD managed only 10% of his time attending his office, most of the time he was flying off somewhere, like Stephen Leacock’s hero “jumping on his horse (in this case a PIA aircraft) and galloping off in all directions”. Without intrinsic knowledge of PIA in the manner of hard-core executives like Tiwana and others (see “A Case for a Mired Economy”), Farooq Umer successfully brought the once-vaunted airline to its knees. Blame should also be laid at the “remote control” operating from Islamabad though one daresays if Umer had some spine he could have mitigated some of the excesses. In the same manner as for UBL, GoP is to be congratulated for replacing Umer with an executive who has spent his life in the airline. Like it is prescribing publicly for UBL, GoP should give freedom of action to the new management in PIA in order to revive the airline. While it is understandable that political patronage requires that some appointments within the PIA cadre may be made on the Client-Patron basis, these have to be limited and the excesses that were in vogue mainly due to Umer’s weakness should be avoided. Leadership requires that one also accepts responsibility, Umer had made “passing the buck” fashionable in PIA. That GoP has entrusted Malik Tiwana with the responsibility again means they realise that things badly need rectification in PIA and he represents the type of superior executive from within the ranks of PIA who can achieve this. In the same manner as for PIA, UBL management must be given a free hand to clean house and carry out its corporate functions without constant prompting.
Both PIA and UBL were brilliant Pakistan models of management in the 60s and 70s respectively but they fell by the wayside because of interference by public sector functionaries who converted this corporate success into a gravy train that had to be sucked dry. The Ms Benazir regime has realised the bankruptcy of such policies and by making the new appointments in PIA and then UBL, it has reversed policy, to its credit. Both PIA and UBL now need sustained support, first for survival and then to regain their lost glories. This can only be done by allowing the appointed corporate executives to function without interference.
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