Debts due for moguls of Pakistan
Nov. 16 deadline to pay bad loans is also a test for Musharraf'scorruption crackdown.
ISLAMABAD, PAKISTAN — Well-known Pakistani business mogul Sadruddin Hashwani owns five-star hotels and oil and textile businesses. After the military coup Oct. 12, one of Mr. Hashwani's pastry chefs sent a cake, reportedly the size of a dinner table, to new leader Gen. Pervez Musharraf. The general sent back the gift untouched. And days later, rather than pay back loans to the state bank worth millions of dollars, Mr. Hashwani fled Pakistan.
As a Musharraf-imposed deadline for payments on more than $4 billion in bad bank loans passed Nov. 16, all of Pakistan is waiting to see how many of its rich elite will pay up, or be arrested and go through an expected series of show trials.
The deadline is the first test of the credibility - if not viability - of a new regime. It will also largely decide whether Pakistan's current "friendly" military government will take a harsh turn, perhaps further suspending constitutional laws, and even setting up a modified type of martial law. Some experts say Musharraf has already missed his chance, and must now crack down after "D-Day," or default day.
"He needed to get at least half of the 210 billion rupees ($4 billion) owed; right now he will be lucky to get 5 billion ($96 million)," says Shahid-ur-Rehman, an Islamabad-based writer and author of "Who Owns Pakistan?"
A decade of exploitation of public funds has created huge reservoirs of ill feeling among the impoverished 100 million in this country of 140 million people - feelings that may soon have political consequences. Already, the corrupt use of public money is the main source of tinder for a still soft and fluid Islamic revolution now under way in Pakistan.
The magnitude of that corruption is staggering by any account. For more than a decade, the worst offenders, some 1,500 persons and companies, have used the banks of Pakistan like magical cash machines that give loans without collateral: $1.54 billion in unpaid loans by 1992, a figure that doubled by '95. In a country where $200 per month is a good salary, the amounts seem astronomical. The money taken by a cadre of wealthy families, referred to as "faceless billionaires," is rarely paid back, and is often written off. No one knows how much has been written off over the past 20 years.
If Musharraf does not seem to win the battle to collect bad loans, it is felt, the regime will seem to follow the pattern of so many others that promised grand reforms - most recently that of former Prime Minister Nawaz Sharif - but never delivered.
So far the harvest appears small. Critics say the selection of the former bank chief M. Yakub to the new National Security Council itself bodes ill, since Dr. Yakub was responsible for overseeing the loans in the first place.
"If he had moved quickly the defaulters would have to take him more seriously," says Muhammad, a carpet salesman in Islamabad. "But now it looks like those on the list have figured out how to avoid paying."
However, there may be a method here. Musharraf may use nonpayment of loans as a rationale for a crackdown that will make life slightly easier for the military regime. In a post-cold-war era where the appearance of liberal democracy is important, Western governments do not want to be seen supporting a harsh dictator. But if Musharraf transparently fails to clean Pakistan's Augean stables through civil means - the international community may "understand" if he tries to do so through extraconstitutional ones.
Democracy vs. sharia?
Either way, Pakistan, whose civil cohesion is disintegrating, faces a stark choice. Increasingly, that choice is being articulated this way: The military regime restores some semblance of democracy in the next two years. Or the nation will be reconstructed as an Islamic state run by the sharia, the law of the Koran.
"If the present dispensation fails to deliver, the mullahs waiting in the wings can rise to power," says Ross Masood Husain, a diplomat and head of a security research center in Islamabad.
Last year, in a nod to the street power of the Islamic fundamentalists, then- Prime Minister Sharif attempted to set up the sharia as a kind of alternative legal system. The Senate nixed the controversial attempt. But the lower house passed it. Insiders say Mr. Sharif would have eventually passed the bill - en route to declaring himself "the leader of the faithful," making him both a spiritual and temporal leader.
For now, the coup has ended the two main political dynasties that have run Pakistan for more than a decade: the Bhutto dynasty centered in Karachi, and the Sharif dynasty centered in Lahore. Parliament is suspended, and it is likely that in time, Musharraf will dismiss it permanently. Sharif's party holds a majority there.
One drama now playing out, in fact, is the prosecution of Sharif. The former prime minister is accused of treason and may end up, ironically, in front of a new type of court he himself set up. The courts are designed to administer "speedy justice" to troublemakers. Executing the former prime minister is not off the table. In a country where ordinary people are eager to see retribution of some kind, any kind, against the elite, such a move might even be popular.
But even normal prosecution of the defaulters may be difficult. Take the first name on the alphabetical list - Mian Aftab Amid. Mr. Amid is an owner of a firm called Fazalsons. When the first list of bad loans was published in the newspaper Dawn in 1992, Fazalsons was charged with $65.5 million in unpaid loans. Amid fled to London.
Since then, Amid has purchased four hotels in London, which he reflagged as a well-known Western hotel chain. The most recent purchase, in 1997, was a hotel costing $9 million. Last year, Fazalsons was listed as the third-largest defaulter in Pakistan - owing $54 million. Yet legally recovering the money may be difficult since borrowers can blame the company shareholders as equally responsible.
"They can tie it up in court, and spread the blame," says Mr. Rehman, the writer.
One other reason it may be difficult to prosecute is that many defaulters may simply choose to go to jail rather than pay. They can threaten to shut down their industries, which now employ many thousands of Pakistanis - creating a backlash against the government and further anger in the population.
Public calls for faster action
With the Islamic community unhappy with Musharraf's call for a moderate Islam, and with the business community upset that its leaders may face trial or jail, the new Pakistani leader is under attack by the press for not acting faster and more decisively. "Its going to be a very bumpy ride," said a recent front page editorial in the independent Friday Times. "It would be a good idea for the junta to formulate objectives, mission statements, tactics, and strategy before a siege mentality takes hold of the generals, and they become short-tempered and repressive."
In early December, Pakistan must make quarterly payments to the International Monetary Fund, World Bank, and the Asian Development Bank of about $500 million. Whether Musharraf was able to borrow funds from any of the four countries he has visited - especially Saudi Arabia, is unclear. That is the next major test.
(c) Copyright 1999. The Christian Science Publishing Society