From Borders to Banks: The Infinite Spectrum of Pakistan Military’s Profiteering Enterprise

On 12­­ July 2019, when the World Bank’s International Centre for Settlement of Investment Disputes (ICSID) announced a massive award of US $5.976 billion against Pakistan, to be paid to Tethyan Copper Company (TCC), a multinational mining giant; the news sent shock waves through Pakistan. Many wondered how their country had managed to land up in such a perilous situation, with the fine amounting to about two per cent of Pakistan’s annual gross domestic product and 40 per cent of its total liquid foreign reserves. TCC, which had discovered gold and copper deposits after acquiring the mines at Reko Diq, Balochistan, in 2006, had claimed US $8.5 billion in damages for rejection of its mining lease application by the Mining Authority of Balochistan, in 2011.

Following the ICSID award, Prime Minister Imran Khan directed a commission to be constituted “to investigate reasons as to how Pakistan ended up in this predicament and who was responsible for making the country suffer such a loss”.

Prime Minister Khan does not have to look too far to fix responsibility, he simply has to ask the people who anointed him to the throne – the top brass of Pakistan’s military. Though the odds are, he won’t get straight answers.

Pakistani scholar and former ambassador to the US, Hussain Haqqani, now Director, South and Central Asia at the Hudson Institute, Washington, DC; avers that in 2011, with the military’s backing, Pakistani nuclear scientist Samar Mubarakmand demanded ejection of foreign companies from Reko Diq. Pakistan’s Supreme Court, then headed by activist Chief Justice Iftikhar Chaudhry, ordered the cancellation of the Tethyan Copper Company contract in 2013. Subsequently, Mubarakmand’s company attempted mining and smelting operations. Some of the Reko Diq mines were turned over to the Metallurgical Corporation of China (MCC), again with military’s backchannel involvement. However, both ventures were not able to score commercial success, for varied reasons.

Notwithstanding the imposition of gigantic fine which Pakistan is grappling with, the Reko Diq fiasco is unlikely to make any dent to the roaring business empire which the Pakistan military has created over the last seven decades. Famously called the Pakistani MilBus, there are over 100 independent businesses operated by subsidiaries of five Foundations of the military, viz. Fauji Foundation (run by the Ministry of Defence), Army Welfare Trust (run by Pakistan Army), Shaheen Foundation (run by Pakistan Air Force), Bahria Foundation (run by Pakistan Navy), and Pakistan Ordnance Factory Board Foundation (run under the Ministry of Defence).

A Gargantuan Empire

The range of the cumulative business empire is mind-boggling. From cement to cereals, general insurance to gas, fertilizers to fish farms, seeds to stud farms, apparel to aviation, meat to medical equipment, name what you like – the Milbus in Pakistan markets a variety of products with little or no connection to its core duties of defending the borders.

The Foundations operating these commercial enterprises are registered as charities or societies, and not as companies, under the laws of Pakistan. The Fauji Foundation, Shaheen Foundation and Bahria Foundation are registered under the Charitable Endowment Act of 1890. The Army Welfare Trust was established under the Society Registration Act of 1860. Each Foundation is administered by a Committee of Administration, Chaired by the Chief of one of the three Defence Forces. Together, the Foundations constitute Pakistan’s largest industrial and trading complex, however, none of them is covered under the Companies Act of 2017, which is applicable for profit-making enterprises.

The Pakistan military also runs the Special Communication Organisation (SCO), the National Logistics Cell (NLC) and the Frontier Works Organisation (FWO). The three organisations are commanded by serving senior officers of Pakistan Army, just like the Pakistan Water & Power Development Authority (WAPDA). Earlier, the National Highway Authority (NHA) was also being headed and managed by senior military officers but the military had to cede space to the civilians in recent years, due to instances of serious corruption by senior uniformed officials. SCO was established in 1976 to create communication networks in Northern Areas and Pakistan Occupied Jammu and Kashmir.

NLC was established in 1978, as a cargo company and owns a large fleet of trucks and seagoing vessels. FWO was established in 1966, to construct the Karakoram highway connecting China with Pakistan. SCO, NLC and FWO have serving officers of the Pakistan military working in key positions, on attachment or deputation. These are seen as lucrative appointments, with multiple opportunities to make money and develop ‘connections’ with the commercial sector.

Originally conceived as strategic demi-military organisations, SCO, NLC and FWO have steadily diversified into civilian domains with the objective of making profits. Theybid for government contracts, for which they often receive preferential treatment in the selection process. For example, FWO was the Army’s natural choice for the civil works of the Kartarpur Corridor project proposed by Pakistan for connecting Gurdwara Darbar Sahib, Kartarpur, to the border with India. The inferior quality of civil works undertaken by FWO in 2019became evident when eight domes of the renovated Gurudwara fell apart during a thunderstorm, in April 2020.

More recently, the contract for the construction of the Diamer-Bhasha dam in Gilgit Baltistan was awarded to a joint venture between Power China and Frontier Works Organisation. The dam could constitute a violation of the Indus Water Treaty between India and Pakistan; however, such concerns have seldom bothered Pakistan’s business-minded military elite.

The NLC’s massive fleet of trucks, originally organised in the late 1970s to clandestinely transfer American material assistance arriving at Karachi port to the mujahedeen fighting the Soviet Army in Afghanistan, was effectively used after 1996 by the Inter-Services Intelligence (ISI) Directorate, to supply the Afghan Taliban with weapons, fuel and food. In recent decades, NLC’s fleet of trucks have been pressed into service on government contracts, to sustain the movement of cargo from Pakistan to Afghanistan, including cargo related to the NATO/ISAF military campaign in Afghanistan. It is an open secret that such trucks are rampantly used for narcotics smuggling from Afghanistan to Pakistan. The ISI plays a key role in facilitating this unholy nexus between narcotics and logistics.

Profits over Principles

The military’s Foundations professedly claim that their primary focus is the welfare of orphans, widows of battle casualties, disabled soldiers, rehabilitation of ex-servicemen etc., however, in reality, the Foundations have far exceeded their philanthropic mandate and have become profit-driven crony capitalist entities. A study conducted in 2017 by Paul Staniland, Adnan Naseemullah, and Ahsan Butt found that 33 of 141 former Pakistan Armed Forces corps commanders, or 23.4 per cent, were given plum posts by the Fauji Foundation (FF) after they retired from the military.It is estimated that the FF provides employment to about seven thousand retired military personnel. In effect, it provides additional income to the retired military brass and other personnel, whose salaries as employees of the Foundations are over and above their pension, which is paid by the government.

Shaheen and Bahria Foundations too follow similar models, accommodating former officials from the Pakistan Air Force and Navy in their operations and management. The obvious conflict of interest between serving senior military officials on the Committee of Administration of these Foundations, and their commercial activities, including contracts awarded by the Defence Forces, does not seem to bother anyone in Pakistan.

On the whole, the Milbus in Pakistan constitutes a huge chunk of the country’s economy – about 70 per cent, by one assessment. Dr Ayesha Siddiqa, who worked as the Director of Naval Research at Pakistan Navy’s War College, estimated in her acclaimed book Military Inc: Inside Pakistan’s Military Economy that the military’s net worth was more than £10 billion in 2007— roughly four times the total foreign direct investment generated by Islamabad in that year. The book, which is banned in Pakistan, exposes the rampant commercialism pervading every aspect of Pakistan military, and the corrupting effect it has on the military’s rank and file.

Pakistan’s military brass and officers of the ubiquitous Inter-Services Intelligence (ISI) frequently interfere in their nation’s economic and foreign policies with a sense of entitlement, believing that they are better positioned to define and defend Pakistan’s national interest. At the heart of this belief is a strong self-interest of their tribal wellbeing and collective welfare. Profits from scores of enterprises run by the five Foundations, FWO, NLC and SCO helps sustain their high perks, the exclusivity of cantonment facilities and relatively luxurious quality of life, entailing expenditure that cannot be billed to the public exchequer. It also helps in patronising a gratified network of consultants, many former men in uniform, who willingly offer their services in conducting shady dealings, establishing foreign liaison for arms imports and in return, bagging contracts for the MilBus from the military, directly or indirectly. For e.g., the Aviation Maintenance Repair Overhaul business of Shaheen Foundation gains from Pakistan Air Force’s aviation imports and exports and boat building and repair yards of Bahria Foundation benefit from contracts awarded by Pakistan Navy for maintenance of imported high-speed boats, and manufacture of new ones.

Feet of Clay: Dubious Antecedents of Top Brass

In his book Judges and Generals in Pakistan, Vol II, Inam Sehri recollects that South Asia Tribune (Issue No. 54, dated August 10-16, 2003), had published a petition that was filed in the Lahore High court in 2003, listing numerous allegations of corruption involving top brass of the Pakistan Military.

Notable mentions were about Air Chief Marshal Abbas Khattak (Retd) having received Pakistani Rupees (PKR)180 million as kickbacks in the purchase of 40 old Mirage fighter jets, General Pervez Musharraf has acquired a commercial plot worth PKR 20 million at Defence Housing Authority (DHA) in Lahore for just PKR 100,000 (payable in 20 years), and General Jahangir Karamat (Retd) having pocketed kickbacks of more than US $ 20 million from a Ukrainian tank company for the purchase of 300 Ukrainian tanks for Pakistan Army, through a middleman. There were numerous other embarrassing details, making the petition so explosive that the High Court kept it pending for administrative action, and since 2003, it has remained that way.

It is a well-known fact that there are scores of former Generals, Air Marshals and Admirals in Pakistan who have become millionaires in their ‘second innings’, as consultants, corporate honchos or businessmen. Retired Admiral Abdul Aziz Mirza, former Chief of Pakistan Navy, who steered his organisation through the damaging fall-out of the ‘Karachi Affair’ scandal (involving kickbacks in the purchase of Agosta 90-B submarines from France), is now the CEO of The Centaurus, a mixed-use real estate project in Islamabad. The Centaurus projects have been under scrutiny by the Federal Investigation Agency for major irregularities.

In 2016, Pakistan’s former Army Chief Gen Ashfaq Pervez Kayani(Retd) was accused by Lt. Colonel Tariq Kamal (Retd), a former official of the DHA, of being involved in a major land scam in a defence housing scheme to benefit a real estate company linked to his businessmen brothers. It has been reported that former ISI Chief Lt. General Ahmad Shuja Pasha owns many commercial plazas in the twin cities of Rawalpindi and Islamabad.

The Social Cost of MilBus Corruption

All this has had a corrosive effect on the organisational culture of Pakistan’s military, and a disastrous fallout on the country’s economy and social development. The monopoly commanded by MilBus companies has prevented civilian businesses from flourishing in key sectors like power, cement, fertilizers, etc. The preponderance of former military personnel in hundreds of businesses in the civilian commercial sectors practically serves to deprive thousands of more needy civilians of getting those jobs.

A typical retired military person in Pakistan gets a decent pension from the government, apart from other perks in kind, like plots of land and reserved vacancies for civilian jobs in government departments. Additionally, if a pensionable ‘ex-serviceman’ acquires a job offered by commercial enterprises run by the Foundations, he gets a surplus regular income, which could have gone to a needier unemployed civilian, in an ordinary business. Thus, the military’s ‘welfare’ entrepreneurship is actually a self-serving racket, which harms the common man in Pakistan.

Some years ago, noted Pakistani scholar Shuja Sharif brought out extensive details of the military’s unholy nexus with moolah and mullahs in his articles,‘Pakistan: Military Corruption Robs Country’s Poor (2004) and Pakistan: Islam, Radicalism and The Army (2007). Sharif avers that Army officers are allocated plots in affluent localities for throw-away prices, and their children get the best education for free. Their families receive excellent health services at little or no cost, in addition to furnished bungalows, domestic help and rations at negligible cost. To ensure these luxuries, resources are often diverted from the social sector to the military through hidden avenues. The military brass prefers to remain unaccountable to civil institutions and the public at large.

American journalist Elliot Wilson, in his 2008 essay, ‘The military millionaires who control Pakistan Inc’, noted that the military has frequently displayed feudal tendencies in protecting its properties. In 2001, when landless peasants in central Punjab protested that the army had changed the status of the land on which they depended for their subsistence, forcing them to pay rent in cash, the army cracked down, beating many peasants and leaving eight dead.

Staring in Oblivion

Indeed, excesses by the MilBus have led to deeper difficulties for Pakistan. In October 2019, Askari Bank Limited, part of the Milbus, was one of the banks penalised by the State Bank of Pakistan for non-compliance of regulatory requirements. This came at a time when Pakistan’s anti-money laundering and counter terror-financing laws were to be reviewed for compliance by the Financial Action Task Force.

Occasionally, such external pressure has forced Pakistan to make some cosmetic attempts to erode the stranglehold, which the military enjoys in Pakistan’s politics and economy. Internal efforts have mostly failed. In 1990, a public interest lawyerHabib-ul-Wahab-ul-Khairichallenged the use of military insignia by the military-linked Foundations in the Supreme Court of Pakistan. He submitted a petition arguing that the businesses of Foundations were in contravention of the Companies Ordinance of 1984 and Trade Mark Act of 1940, and the Foundations should cease their commercial activities. The petition, was, however, not entertained by the Court on technical grounds.

In the long list of Milbus chronicles, it is noteworthy to mention the present-day military establishment’s brazen display of rank favouritism and nepotism at the highest level – how Pakistan International Airlines (PIA) is being referred as “Bajwa Airlines”.  The PIA is run by the family members of the present Chief of Army Staff (COAS) General Qamar Javed Bajwa. Former Vice Chief of Air Staff, Air Marshal Arshad Malik is the President and CEO of the PIA, who is a brother of the brother-in-law of Army Chief Bajwa. Former HR Chief of PIA, Asma Bajwa is the sister-in-law of COAS. Gen Bajwa’s two brothers are senior functionaries of PIA posted in Birmingham, UK. The PIA was in news recently for an unfortunate plane crash in which 97 people were killed near Karachi airport on May 23.

It seems highly unlikely that the current ‘selected’ government of Imran Khan would be able to pierce a hole in the Milbus net, which has been cast wide by the military-intelligence establishment. Pakistan’s only hope is its resilient but courageous civil society, and a small but gutsy cadre of journalists, which has risen in the past to unsettle and dislodge military dictators like Musharraf and Ayub Khan. MilBus in Pakistan is analogous to the topical Chinese Coronavirus pandemic. Its infection is ubiquitous and debilitating but has no established treatment. It is only through innovative and holistic external and internal curative measures that Pakistan will be able to overcome the malignancy of Milbus which afflicts its political economy.

Team Bharatshakti