The rise of the militant tycoon

Having spent most of the last four decades in the shadows, the country's businessmen have finally come out in the open. Adopting an increasingly tough public posture vis a vis the government, the businessmen have generated a new phenomenon, aptly termed by one observer as 'the rise of the militant tycoon." The protests are part of a well organised nationwide campaign aimed at drawing attention to the deteriorating law and order situation. What are the underlying factors that have led the business community to display such an unprecedented level of aggression? And has the political clout of the businessmen been reduced since the present government came to power?

A Herald special report…

Braving the oppressive heat of a May afternoon, with placards in their hands and their gleaming Accords waiting on the sidelines, Karachi's big businessmen march to the Governor's House before heading towards the chief minister’s official residence. The reason why such a normally sedate community feels the need to take to the streets is to register its indignation at the breakdown of law and order in Sindh.

Later in the month the scene is re-enacted before Parliament House in Islamabad, where a placard waving crowd comprising some of the country’s top businessmen make their displeasure known to those in the corridors of power.

Having spent most of the last four decades in the shadows, the country's big businessmen have finally come out in the open. Adopting an increasingly tough public posture vis a vis the government, the businessmen have spawned a new phenomenon, aptly termed by one commentator as "the rise of the militant tycoon.”

The protests are part of a well-organised nationwide campaign on the part of the business community aimed at drawing attention to the threat that the deteriorating law and order situation pose to their interests. Coinciding with the protests, a high-pitched campaign has been launched in the media, urging the government to wake from its slumber and asking the president to carry out his “constitutional duty".

While the businessmen's current agitation is aimed at drawing attention to the law and order situation in both Sindh and the Punjab, there is little doubt that Sindh in general and the city of Karachi in particular are at the centre of the businessmen's worries. Although the law and order situation in Sindh has affected each and every individual in the province for a number of years, it is only during the last two years that it began to hit the business community directly. The last straw, perhaps, was the outbreak of widespread kidnappings, in which over two dozen tycoons or members of their families had to secure their release from kidnappers after paying huge amounts as ransom during this period.

In the vanguard of the present campaign is the influential All-Pakistan Textile Mill Owners' Association (APTMA) which later surrendered the task to the Federation of Pakistan Chambers of Commerce and Industry (FPCCI).

The FPCCI, the apex body representing 107 trade associations and 26 chambers in the country, is presently in control of the campaign, and the Anjuman-i-Tajiran (small traders bodies) of Sindh and Punjab, though not affiliates to the FPCCI, also decided to support it.

Such is the defiant mood in the world of trade and commerce that the small traders, who have had very rocky relations with the FPCCI in the past, have thrown in their lot with big business. Omar Sailya, president of small traders association, says: "We provide the soldiers for the movement." He adds that small traders are the most vulnerable to threats, whether it is from dacoits, police excesses or the actions of the excise department.

Explaining the rationale behind the campaign, Raja Abdul Rehman, the president of the FPCCI, says: "Business and economic activity have been rendered impossible by the law and order situation. If it is a matter of our survival, we'll go to any extent

The list of complaints cited by the business community paints a truly alarming picture. Aftab Ahmad, a textile tycoon currently associated with the Sindh Citizens for the Restoration of Law and Order (SICORLO), gives the statistics of kidnappings up to June last year. Among those recently abducted, according to Aftab Ahmad, were Mian Aftab A. Sheikh of Sunshine Cotton mills and Hasan Aftab Textile mills in Punjab, Chowdhry Rasheed Ahmad, technical manager of Shahryar Textile mills in Kotri and his son Mahmud, who are still not traceable, Ayub, general manager of Suraj Cotton mills, Dewan Abdullah Farooq of Dewan Textile mills, Ziaullah, production manager of a dry battery cell factory in Kotri, Naseer Shakoor of Muslim Textile mills, Nazeer of a textile mill, two small children of a well-known local business family, including a minor girl of four years, Sikander Africawala, a Iocal car dealer, and at least half a dozen senior executives of big textile groups.

According to Aftab Ahmad, "most of these people were released after payment of ransom money ranging from 2 million to 7.5 million rupees. The amount is probably more in one case." Apart from kidnapping, there has also been a sharp increase in the number of daring dacoities in recent years. Omar Sailya claims that there have been as many as 1177 dacoities in Karachi in the last three years, and yet no one has ever been arrested for these crimes.

The long bouts of curfew and violence in Sindh have had a profound effect on productivity. The continued I strife has resulted in production cuts at most units, as frequent imposition of curfew has led to shut-downs because labour has been unable to reach their work places.

The Nooriabad Industrial Estate, set up with much fanfare a few miles out of Karachi on the Super Highway during the Junejo period, is in complete shambles as industrialists are increasingly afraid of travelling to the estate. Those who have set up units there also complain bitterly about the bhatta (protection money) that they have to pay practically every month to area 'notables'.

While a large and influential section of businessmen has spearheaded the new aggressive campaign as a response to the state of affairs, some members of the community have decided to address the issue differently. The example of Nazim Haji and Jamil Yusuf best illustrates this alternative approach. The two city businessmen are the moving spirits behind the concept of the Citizens Police Liaison Committee at the Central Reporting Cell at the governor’s house, the brainchild of Sindh Governor Fakhruddin G. Ebrahim. "It is very easy just to sit back and criticise.

Some of us thought that we could make a positive contribution in improving the situation. beyond the realm of rhetoric," says Jamil Yusuf.

Although the efforts of Haji and Yusuf, who are backed by some 'positive thinking' industrialists, may amount to only n drop in the ocean given the rampant lawlessness In Karachi, they have brought relief and succour to a number of families who have been victims of the situation. The CPLC and CRC not only effectly liase between citizens and the police, but have also made some headway in introducing modern technology to battle crime. Their proposal for the installation of computers at the police headquarters, the Crime Investigation Agency and the motor vehicle registration department has reportedly been accepted by the government and is in the pipeline.

Their efforts have resulted in the recovery of some stolen or snatched vehicles, and the release, sans ransom, of some kidnap victims. The CRC was also responsible for promoting the idea of a two-digit police emergency telephone number to be manned round the clock, and the installation of computerised record-keeping which will help eliminate negligence on the part of the police in responding to distress calls.

The CRC is currently embarking on an advertisement campaign to apprise the people about measures to battle crime, and this drive will be launched entirely through funds collected by donations from the private sector. In fact, as a CRC member says, "Except for 30,000 rupees that we get for staff salaries, from the government, all our activities are funded through our own resources. This is in addition to the time we spend on this work on a voluntary basis. "

However, in its present angry mood, the FPCCI can hardly be appeased by the actions of this tiny organisation. In the words of Raja Abdul Rehman, "the present set-up has failed miserably to run the show of government."

The community's mood can be gauged from what Raja Abdul Rehman says of the government: “The leadership today is young and inexperienced and, therefore, incapable of running a government." He also suggests the formation of a national government comprising all sections of society, including I businessmen and intellectuals, and adds, 'politics is not the sole domain of the feudal lords". In the process, he gives a clue about the other more deep-rooted causes behind the agitation.

But can these comments - particularly if shared by the whole community - implicitly be read to mean that trade and industry will not be satisfied with anything except a new set-up in Islamabad? Raja Rehman reacts quickly when posed a question about martial law as a solution: "We do not want martial law. What did we get during martial law anyway?"

To keep up the pressure, the federation has reportedly not only resolved to keep away from all government functions, and decided not to invite any government figures to its functions, but also delivered a serious rebuff even to the president as part of its protest.

When President Ghulam Ishaq Khan was in Karachi recently, a feeler was sent to the FPCCI seeing a dinner invitation for him – something that is traditionally arranged for the visiting head of state as a matter of routine. However the federation rejected the request in no uncertain terms. What are the underlying factors that have led the business community to display such an unprecedented show of militancy? Looking beyond the question of law and order, some analysts find an explanation in an overall shift in the balance of power between industry and agriculture over the years. Businessmen increasingly view parliament, and consequently other key decision-making institutions, as being under the control of the influential feudal lobby - traditional rivals within the power structure of the business community.

"For the first time in many years, trade and industry finds itself isolated from the decision-making process and I feels itself deprived of the benefits that accrue from such I activity," says a business analyst. One businessman complains bitterly about the manner in which political patronage has swiftly replaced all other criteria for the allotment of licenses for setting up industries. "Today, you have to be a cabinet I minister, an MNA, or someone who is recommended by sources close to the prime minister to get permission for I setting up anything." The community finds this state of affairs very hard to accept, particularly given the kind of sway it has held over the I economy all through the country’s existence - with the notable exception of the Bhutto years and perhaps to some extent in the Junejo period.

In a paper on industrial concentration, independent economist Shahid Kardar, argues that since its inception the country's policies have been biased in favour of the industrial sector to the detriment of the agricultural sector. In the early years, he says, the country could hardly boast a developed sector. The handful of entrepreneurs did not have sufficient capital and the feudals were virtually bankrupt because of their ostentatious lifestyles. The section that was taxable was small, foreign assistance was not available, and domestic institutions not well-developed.

In Kardar’s view, a rapid accumulation of investible surplus for the acceleration of economic growth could only come from the agricultural sector, which was squeezed to create the surplus that was subsequently transferred to finance economic growth.

Among the tools employed to squeeze the agricultural sector were the over-valued exchange rate, low support price structure of agricultural products and the decision to allow industrialists to market their products at whatever price they could extort from the consumers.

The participation of the business community in the decision-making process was so active from the outset that, as early as 1950, import, export and taxation policies were being drafted in active consultation with chamber representatives. Due to the “doctrine of functional inequality”, the early phases of development were controlled by a handful. The rationale was that resources generated by the development process would be saved rather than consumed, as would be the case if the gains were well spread.

As a result, the industrial sector, although in the hands of a few, grew in influence during Pakistan’s formative years. Businessmen such as the Habibs, Ispahanis, Rahimtoolas, Adamjees and others enjoyed close ties with the Quaid-i-Azam Muhammad Ali Jinnah, having generously funded the Pakistan movement. Many of them came primarily from the same linguistic and cultural community as Mr Jinnah himself. Subsequently, some of the influential families cultivated strong ties with the Ayub regime through Finance Minister Shoaib and Comemrce Minister Waheeduzzaman.

The prominent families secured a greater say in government policy formulation and, in the process, came to assume monopoly control over credit, licenses, and other sanctions and concessions. Side by side, they established a strong rapport with the bureaucracy using the age-old tactic of “you scratch my back, I’ll scratch yours.” Representatives of the agricultural sector, meanwhile, were so involved in internecine tussles that they gradually became marginalised in the decision-making process.

Dr Mubashir Hasan, first Finance Minister in Zulfikar Ali Bhutto’s cabinet, agrees that big business, particularly in the Ayub years, grew mainly at the cost of agriculture. He cites the abysmal three to four rupees per maund increase in the price of wheat over the period stretching from 1958 to 1971 as an example of this bias. According to him, this policy was framed under the direction of the famous Harvard group, which propagated capital accumulation from the agricultural sector. “In fact, it was part of US strategic objectives,” alleges Dr. Mubashir. “The US was supplying wheat under the PL-480 and other schemes simply because there was no better way to control a nation than through its essential food supplies.”

By the ‘60s, a great deal of popular resentment had set in against the industrialists, and Dr. Mubashir Haq, subsequently the financial linchpin of the Zia regime, invented a new catch-phrase — “the 22 families.”

The issue of accumulation of wealth by a mere 22 families became one of the rallying cries of the PPP in the 1970 elections. Dr Mubashir points out that as a result, not only the urban poor and the middle class supported the party but the small trader and the small entrepreneur also rallied to its call, as did the middle-level landlord. “It was the first political awakening of the small trader and the urban poor. Therefore, we swept the cities,” he adds. Since the PPP was supported strongly by the rural areas as well, it proceeded to correct what it saw as an imbalance in favour of industry and against the agricultural sector. “Wheat prices, which had registered an increase of barely four rupees in 13 years from 1958 to 1971, jumped from 17 rupees a maund to 48 rupees a maund in the Bhutto years. While the sugarcane support price went up six-fold, cotton prices increased four-fold in the same period,” he points out.

As a result, Dr Mubashir says, crores of rupees went into the rural sector, but as the elasticity of absorption was very low, the money was quickly spent and found its way into the cities. As a result, “small traders and industrialists became very rich very quickly,” he adds. However, he concedes that this class remained politically suppressed during the Bhutto years and rose in agitation against its policies in 1977. “They had no leadership of their own, therefore, they gathered around the mullah. Where the PPP feudals had disillusioned them in the Bhutto years, the mullah soon began to disappoint them and they started looking inwards for leadership.”

The turning point for this class came when it forced the Junejo government to retreat over the issue of an across the board defence tax. The realisation of their power hit them at this point, argues Dr. Mubashir and is reflected in the increasing political content of the resolutions of the chambers and the federation.

But how this realisation of power evolved can only be examined in the backdrop of events in the Bhutto years. The period also provides the key to the relationship that subsequently developed between big business and the military regime that followed. Where the takeover of basic industry in 1972, due to the ideologically-motivated socialist policies of the PPP, had let to tremors in the business community, the 1974 natioanlisation of shipping an banks, mainly owned by the big business families themselves, shattered them. While what the community perceived as deadly blows in the form of takeovers were being inflicted on the one hand, legislation was being ushered in to protect the rights of, and give additional concessions to, organised labour on the other. For obvious reasons, neither of these moves went down well with the industrial tycoons.

The overvalued rupee, out of which businessmen had made millions over the years, was also suddenly devalued.

But perhaps the factor that alienated the smaller industrialists and entrepreneurs totally from the PPP government, pushing them into rebellion, was the 1976 nationalisation of hundreds of cotton grinding and rice husking units all over the country. The takeover of an industry controlled by mainly small entrepreneurs was viewed not only as an attack on the business community but at the very concept of private enterprise.

When the military took power after the coup of July 1977, this class saw in the new rulers a natural ally, and a lasting, mutually beneficial relationship developed. The Zia years not only saw the denationalisation of the rice husking and cotton ginning units but also saw members of the business community being appointed in key positions in the government.

A member of the Habib family remained the military ruler’s adviser on foreign trade, an industrialist and former leading light of the FPCCI, Ashraf W. Tabani, became governor of Sindh, the young and politically unknown tycoon Nawaz Sharif grew from strength to strength and the family of Chaudhry Zahoor Elahi grew in power and wealth. The bigger names flourished on account of their relations with the military rulers. But even the smaller businessmen who had emerged in the seventies due to a number of factors such as trading and small construction contracting in the Middle East as well as home remittances, established their lines of communications with the bureaucracy through time tested methods and not only survived but thrived.

The coming to power of the Junejo government altered this cosy relationship. Unlike the elections of 1970, which were fought on ideological grounds, the 1985 partyless polls ensured a fairly large feudal representation in parliament. The story of the 1988 elections, despite being held on a party basis, was no different. Even the PPP awarded tickets to what Ms Bhutto described at the time as “sure horses.” Translated into plain English, this meant feudal lords, who could spend a lot of their personal wealth on elections. This strategy, the PPP felt, had become essential on account of the trend set by the 1985 elections and the rise of the Nawaz Sharif brand of politics.

One city industrialist describes the post-election scenario in this way, “As the feudal who had spent considerable personal wealth in the elections started to recoup his losses, political patronage became the sole criterion for the securing of loans for industrial projects. As a result, our credit lines were totally choked.”

In fact, in one of its first acts, the new government posted a favourite in the finance ministry only to ensure a flow of capital in one direction only, he charges. He adds that while the agriculturists have grown very affluent over the years, talk of imposing agricultural income tax has been banished from the agenda, given their hold in parliament.

Given the political upheavals it would cause, agricultural income tax is no longer a viable proposition for a government with a precarious majority. However, the crisis of revenues remains, and businessmen fear that they will be singled out by the second PPP government as a convenient scapegoat again. Their misgivings are exacerbated by the fact that the donor agencies are exerting pressure to cut the budgetary deficit and the government was giving broad hints of increasing defence spending. “They can’t go on taxing us alone, they’ll have to broaden the tax base,” is how a cotton textile mill owner reacts.

For those who are neither fuedals nor industrialists, the power struggle between the two giant lobbies is particularly irksome. One banker, who works for a foreign bank, and has had experience of working in the West, puts the point of view of many salaried persons: “I don’t understand what the problem is. The tax rates in this country are perhaps the lowest in the world. If people in business and agriculture are finding even these unacceptable, they must be very shortsighted. Even if it’s plunder that they seek, it ought to be sustainable in the long run for their own survival. This can’t go on for long.”

There is also suspicion in certain quarters that the recent agitation by businessmen may have broader political undertones than a mere concern for the deteriorating law and order situation. While conceding that the political leadership in Sindh has miserably failed in controlling the situation, an Islamabad based analyst harshly comments: “The concern shown by big business is belated, as things started to deteriorate in 1983. Then, they were hand in glove with the martial law regime and gave no indication whatsoever that things were bad. Thus, they abetted in a crime that now amounts to murder.”

The analyst, who specialises in economic and business affairs, is scathing in his criticism of the community. “There motives are highly suspect, and the current agitation appears to be politically-motivated. Their main purpose seems to be to discredit the government and democracy,” he adds. “The private sector normally plays a healthy role in democracies. But many of our businessmen are not entrepreneurs in the real sense of the word but have thrived on manipulated import and export policies and quotas, creating a greenhouse for themselves. Leave them in a competitive environment, and they will be wiped out. Tax evaders, in any case, have no right to make any demand, even if it’s for the provision of security.”

The business community vehemently rejects these charges, especially the widely held stereotype of the businessman as a tax evading scoundrel who can only thrive under an authoritarian order. Most businessmen respond by contrasting themselves with the agriculturist lobby, and resent the hands-off policy adopted by the government towards them. “There can never be a justification for the ostentatious life and, in many cases, totally debauched existence of the feudal who is making no financial contribution to society,” says one industrialist. A young political activist describes the situation in this way: “The businessmen at least pay whatever taxes they do, and work all day long. But the feudal gets up at noon nursing a hangover, only to plunge into a fresh bout come early evening — all tax free.”

Apart from feeling sidelined from the corridors of power and unfairly victimised whenever there is the need to increase taxation, there are other bitter irritants in the businessmen’s relationship with the government. For both Karachi and Punjab-based industrialists, the emergence of the Gadoon-Amazai industrial estate is a major new source of anxiety. “The grant of holidays and concessions there are leading to all sorts of irregularities while we are being squeezed dry,” says a Lahore industrialist.

The ascendency of foreign capital, as Dr Mubashir Hasan puts it, is another cause of concern for the local investor. “While foreign ambassadors act as agents and secure favours for their compatriots due to their influence in Islamabad, the locals are left helpless.”

What is also being viewed with considerable alarm within the business community these days are rumours of bulldozed takeovers of certain units by members of the prime minister’s family.With the budget round the corner, businessmen are also beginning to flex their muscles to counter any potentially harsh measures. Talk of a proposed General Sales Tax has provoked a wave of anger within the community, leading some observers to see a link between the current agitation and the looming budget. However, Frooque Sumar, chairman of the APTMA, vehemently denies this charge.

Given the current defiant mood of the business community, one thing is clear: the government will have to deal sensitively with the “militant tycoons” and their soldiers. One wrong move could bring economic activity, at least in the private sector, to a grinding halt.

This article was published in the Herald's June 1990 issue. To read more subscribe to the Herald in print.