Almost a billion dollars loans written off!!!

Although it is a slightly stale news item, given the season of elections and that all parties in Pakistan are vying for power and presenting themselves as the champion of the poor, it may be the right time to analyze this gigantic write-off allowed (Pak Rupee 54 billion – http://www.thenews.com.pk/top_story_detail.asp?Id=10768 ) and sanctioned by the State Bank of Pakistan  (SBP) under a banking circular to all national banks struggling with these outstanding loans. (http://www.sbp.org.pk/bpd/2002/C29.htm)

And an interesting fact is……….. there is no… repeat no penalty / black listing / and even naming and shaming of the defaulters.

What makes Pakistan perhaps unique is that there is no bankruptcy law and the authority to write-off a loan rests with the financial institutions who exercise it by simply assuring themselves that the loan is not recoverable. The beneficiaries are often quite thriving and the write-off only adds to their net worth..
(http://www.dawn.com/2007/12/10/ebr19.htm)

I came across a paper submitted by Dr Shamshad Akhtar, Governor SBP at Bank of International Settlements, titled Pakistan – changing economic and social paradigm ( http://www.bis.org/review/r070115e.pdf )which states that by writing off a billion dollar worth of loans, the banking industry was restructured and asset quality improved – excellent.. what a way to do it…what a big joke!!! She comes from what .. Asian or World Bank and this is her output… what a shame!!!

The banking industry buoyant on operating at one of the world’s highest margins 9% to 12% (doing no duty to the majority of their depositors) could definitely absorb it but writing off loans of politicians and businessmen several times in the history of this country .. and I mean of the same person / same family …. is definitely no service to the banking industry and no service to the nation.

A total of around 50,000 persons including politicians, civil and military business concerns and business tycoons of Karachi, Lahore and other areas were the direct beneficiaries of this massive favour. 

Those who benefited from the write-off include the Admajee Group, Ghazi Construction and politicians like Balochistan Chief Minister Jam Yousaf and Senate Deputy Chairman Mir Jan Muhammad Jamali. In certain cases, some individuals had taken loans in the name of two or three companies and then had them written-off.

(http://www.pal-c.org/BillionRupeeNationalBankofPakistanloanwrite-off.html)

Unfortunately, the government and the SBP both have decided not to disclose the full list of individuals who received the write-offs with details of how many times these individuals and business groups have received write-offs over the last 60 years. There is no Freedom of Information Act…  (On second thought, I think there is.. but when fundamental rights are suspended.. what can we make of this piece of paper which really is a non-issue and when judges who can enforce the law are kept under virtual house arrest, it is just another moot point)

Here are some interesting facts/figures:

a sugar mill set up with tax payers money at an estimated cost of Rs.300 million is sold for a token price of one Rupee,

the government majority shares in Pakistan’s biggest chain of hotels are dished out free to a crony, by giving him a loan to facilitate the purchase and then writing the loan off,

a business shark manages to secure 38 loans totaling Rs 3.5 billion through fake collateral, escapes when found out and is living happily abroad,

an unknown entity is granted a loan of Rs. 1.18 billion without any collateral on a telephone call from Islamabad and the banker who sanctioned the loan ends up as a federal minister instead of ending up in prison,

all five loans worth Rs.500 million of an enterprising businessman heading FPCCI Committee for Revival of Sick Industrial Units, are written off,

12 foreign currency loans of an industrial tycoon, amounting to Rs. 672 million are converted into a rupee loan and rescheduled so that repayment starts in 2002 instead of 1990. When the matter is raised in the Supreme Court, the tycoon who has expanded his business abroad is granted another loan to repay the rescheduled loan,

80 industrial units including 32 biggest units set up by public and private sector in the last 50 years are sold for a paltry amount of Rs.10 billion. New owners are defaulting in the payment of Rs. 4 billion to the Privatization Commission and liabilities of the privatized units worth tens of billions of Rupees in local and foreign currencies are being paid by the Government of Pakistan, i.e. the tax payers,

1,500 individuals and firms make use of 80 per cent of the total bank credits; Rs. 130 billion are stuck up in bad loans and Rs. 8.2 billion have been written off: while the public demands recovery of stuck up loans, the government has come out with schemes to reschedule the loans and grant new loans to the same defaulters,

the common man bears the burden of 100 different taxes prevalent in the country but the super-rich are provided escape routes of exemptions and tax holidays, 180 of them in the payment of income tax alone.

(http://www.pakistanlink.com/hussaini/09-10-99.html) 

An interesting link on google groups kind of rounds up the corruption picture. ( http://groups.google.com/group/reportpress/browse_thread/thread/fd6b1574d1d31a1f)

So now I will end up this post, with the list of 22 families that own Pakistan…. this has been one of the recurring stories over so many generation and I am afraid this list is a bit stale but most of the names and groups are the real beneficiaries of these loan write-offs over the history of this country …. Shame ! Shame ! Shame !

S.No	Name	Manufacturing Assets	Fianancial Assets (Rs. million)
1	Nishat	27,792	165,145
2	Saigol	15,202	9,004
3	Crescent	10,586	12,353
4	Dewan	10,113	–
5	Ittefaq	10,000	–
6	Chakwal	9,264	5,530
7	Habib	7,612	4,657
8	Saphire/ Gulistan	7,583	4,657
9	Gul Ahmad/ Al-Karam	5,220	915
10	Packages	5,168	12,822
11	Chakwal	4,592	5,530
12	Atlas	4,359	2,555
13	Hashwani	4,251	382
14	Bibojee-Saifullah	3,806	637
15	Dawood	3,780	1,605
16	Monnoos	3,605	–
17	Fecto	3,542	–
18	Lakson	2,876	–
19	Gatron	2,870	–
20	Fateh	2,843	–
21	Sargodha	2,743	–
22	Al-Noor	2,573	–
23	Ghulam Farooq	2,465	–
24	Ibrahim	2,333	336
25	United	2,237	3,644
26	Bawany	2,189	53
27	Zahoor	2,178	–
28	Schon	2,038	2,259
29	Dadabhoy	2,016	151
30	Jehangir Elahi	2,038	–
31	Fazalsons	2,000	–
32	Rupali	1,910	12,833
33	Servis	1,707	–
34	Yunus Bros	1,689	997
35	Tawkkal	1,678	644
36	Sitara	1,619	–
37	Colony	1,620	94
38	Premier	1,501	–
39	Shahnawaz	1,299	–
40	Sunshine/ Sunrays	1,265	–
41	Fazal/ Fatima	1,263	–
42	Calico	1,235	–
43	Tata	1,060	102
44	Raja	1,020	–
45	Nagina	1,013	–

 (http://richpaki.tripod.com/table1.htm) 

This list does not include the Zardaris, Bhuttos, Jatois, Jamalis, Legharis, Bugtis, Mazaris, Zehris and other big feudal families in whose estate even today they say you can walk for days and still be on their estate…….. fascinating but it does make you sad.

India did its land reforms immediately after partition .. and behold their progress!!!! And Pakistan didn’t … what a Shame!!!