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The Unholy Nexus-Economy, Corruption and National Security

A confidential informal note about Pakistan dated May 22, 1996 being circulated in the World Bank asserts that there will be, quote “a significant shortfall in government revenues this year of around Rs 13 billion (0.6% of GDP), and financing of the budget deficit has been far in excess of target (indicating a larger fiscal deficit than targeted under the (IMF) Stand-By Arrangement (SBA). Meanwhile, the level of official reserves has been kept from falling below $1.5 billion (7.4 weeks of imports compared to 13 weeks last June) by short-term borrowing and build up of foreign currency accounts, a sudden outflow could in turn result in serious problems in the banking sector. It is critical that the government move immediately to take the necessary revenue and expenditure measures to reduce the fiscal deficit and accelerate the pace of structural reforms in the context of 1996/97 budget” unquote, far removed from the rosy picture being painted by the likes of VA Jafarey and Qazi Alimullah.

People generally fail to comprehend the full co-relation between economy, corruption and national security, an unholy nexus that needs constant monitoring by responsible functionaries, concerned citizens and a free Press. Siphoning of funds from contracts, either in form of kickbacks or by lowering of the quality of work, commissioning white elephant projects at exorbitant prices, this is the domain of interests that have only greed as a motivation. Commission agents in the field of defence purchases are only exceeded in their disservice to the nation by the manipulations of “consultants” in league with corrupt individuals in the international finance institutions. The objective of foreign manufacturers is (1) to make a sale (2) at the highest price (3) to keep on selling more equipment and spares. To achieve their objectives foreign manufacturers employ local commission agents who help in making the sale by (a) using their influence with decision makers (b) ensuring the highest price and (c) acting as conduits for illegal gratification whenever necessary. An important chain in the link is the friendly banker who arranges the transfer of these illegal funds to safe havens without attracting attention. This money laundering role was previously supposedly the domain of the now defunct BCCI, supposedly facilitating the illegality of corrupt leaders and drug barons, visibly this role has been taken over by foreign banks in Pakistan, the lead being taken by one bank of US origin. The so-called consultants lobby against any indigenous production as this would terminate the gravy train of their recurring commissions. The amount of commission depending upon the volume of sales, local agents and their functionary collaborators actively work towards this objective. To acquire information about the requirements of their potential clients as well as their competitors, these agents also do intelligence work of sorts for their Principals, which can be very dangerous as this may come to the attention of those who may or may not be in love with Pakistan. Precious foreign exchange is diverted in sectors without as high a priority as others despite alternatives being available at much less cost. Project construction for every MW of electricity is roughly less than US$ 1 million. When privatising Kot Addu we are receiving about half that amount (US$ 800 million for 1600 MW) but why are we paying almost double the amount (US$ 1.8 billion for 1200 MW) for the Ebrahim Elawan-sponsored Hub River project, adding to the compound indebtedness of the people of Pakistan? The proposed purchase of Mirage 2000-5s can be taken as a real situation to explain the ramifications to readers.

No doubt the Mirage 2000-5s is a credible force-multiplier substitute to the F-16s being denied to us by the Pressler Amendment. However, when many other aircraft of similar capabilities are available from different countries, why are we so anxious to negotiate a deal for 36 Mirage 2000-5s worth over US$ 4 billion, a total which in the next several years along with spares, etc could well go up beyond US$ 10 billion? What is the mystery of the price jumping 3 times in 4 years to an unbelievable US$ 90 million per copy ? As late as last year the Indian Air Force Chief scuttled the deal as being too expensive at US$ 40 million per aircraft. This “deal of the century” will continue laying golden eggs into the far future for the manufacturer and their commission agents. For gentleman farmers intending to settle abroad, this will make a very nice pension plan. Unfortunately for Pakistan the cost of this particular dowry will be an unbearable burden on the economy. Having bought this aircraft, will the government be able to even pay salaries of defence personnel? Even at one-third the price in 1992, the PAF fleet planners were not too keen to acquire the aircraft. Various options were discussed, including one that involved indigenous co-production with China. Debate swirled around three camps in the PAF, viz (1) a minuscule minority of one individual for the Mirage 2000-5s (2) a significant portion of the hierarchy for other commensurate alternatives (from reliable sources) or for (3) indigenous co-production. For the first 2 options, commission agents (or consultants as they now call themselves) went into action, the Government’s main effort vis-a-vis F-16s being redirected to get back the money already paid for (the F-16s) in order to finance the Mirage 2000-5s purchase. With the change of the Naval Chief in November 1994 to a very accommodating persona, the immediate purchase of three French submarines worth US$ 1.2 billion, (a deal which Admiral Sirohey, when he was Chairman Joint Chiefs of Staff Committee had put on the back-burner in supersession by other defence priorities), has created an “anything goes” environment of possibility for opportunists without any opposition by “Conscientious Objectors”. As regards the cost-effective alternative of indigenous co-production, the aggressive “Consultants” pursuing this option and their collaborators in government ensured that even the basic tooling at PAF Kamra would be delayed (well documented in a well-researched recent article written by Air Marshal (Retd) Ayaz Ahmed Khan). The inordinate rise in the Mirage 2000-5s prices persuaded the present PAF hierarchy to have second thoughts about the deal, particularly in relation to (a) effect on other PAF priorities and (c) cost to the economy. Thus while the USER service, the PAF is opposing it, surprisingly, of the concerned decision-makers the Prime Minister’s Secretariat, the Ministry of Defence and the Chairman JCSC seem to be firmly for the deal. The Army, which desperately needs (at one-fourth the cost) to replace 600 battle tanks, is supporting the PAF stance. One is a little non-plussed as to why, when the USER service is having second thoughts in the greater national interest, what is the special motivation that makes others so interested in making this deal come hell or high water? The only conclusion is that the commissions involved are so vast that the supporters of the deal of the century have had to perforce come out into the open. The pointed questions asked from the Chairman JCSC by senior defence officers under training at the National Defence College (NDC) about possible corruption in the Mirage 2000-5 deal shows how all-pervasive the smell of underhand deals is. Mr Dassault, the manufacturer of Mirages, is already under investigation for paying bribes for equipment sales to Belgium. With not many other real buyers for the Mirage 2000-5s, the Pakistan sale may be crucial for the survival of this French conglomerate. Will not Mr. Dassault spend money like water to achieve his objectives ?

Here lies the nexus between the economy, corruption and national security. While our economy desperately needs IMF support, only available as “battlefield surgery” (in IMF Chief Camdessus’ words), by forcing the government to increase the taxes on the people we are ready to spend US$ 4 billion without the bat of an eyelash, unbelievably putting enormous additional burden on the people. There is something definitely wrong, the evidence being in the shady intent of various people. Why not make public the explanation written by the now sacked DGDP Rear Admiral Khaled as to why he paid over the installment for the used Mirage-3s despite the direct instructions of the Defence Minister? Maybe many things of how corruption affects national security will come to light. Obviously someone somewhere stands to make a lot of money and obviously that someone has so much influence (and access to extremely confidential information) that professional officers have been bent to his (or her) will despite the consequences of public exposure and despite knowing that it is far from the national interest. Obviously also that someone has enough clout to interfere in other affairs of national security. If the price is right, what are the limits that he (or she) can go to? This affair shows up the dangerous consequences for the nation when someone with an unquenchable thirst for money is placed at the very epicentre of the affairs of government (and of State). Unfortunately for Pakistan that is not a mirage (no pun intended) but a nightmarish reality.

Agreed that the affairs of the government do not concern those who are not in the “chain of cognizance” of such misdemeanours, but if not as senior army, naval or air force officers, if not as senior civil servants, if not as Chief Justices of the Supreme Court or of the High Courts, if not even as the President of the country, have they abrogated their responsibility as citizens of this country to take suo-motu cognizance before a catastrophe befalls us if the economy goes bust? And bust it will if corrupt individuals can compromise national security and influence the decision-makers in gross indifference to the consequences to the economy. Can we continue to allow individuals whose only motivation is endless greed to endanger national security by corrupting even the last sacred bastions whose mission is the physical defence of the State?

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