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| Rampant corruption causing collapse of govt organisations |
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Saturday, August 01, 2009
Reign of kickbacks, commissions, back room deals cost nation billions of dollars
By Kamran Khan
KARACHI: Government decisions, in total disregard to merit, fair play and transparency, based on personal monetary gains for a few individuals in the government have grossly compounded the economic miseries of Pakistan and turned several government organisations into insolvent corporate entities, according to an investigation during which dozens of well-placed and informed sources in the government and corporate sectors were interviewed.
Positioning of several handpicked corrupt and incompetent officials in key appointments at the government-run companies, in many cases without an active approval of Prime Minister Yousuf Raza Gilani, has left a trail of incredible cases of corruption never witnessed before.
Many policy decisions with financial implications in the government-run corporations routinely carry an imprint of a few individuals, who maintained close personal and business ties with some of the most important people in the government between 1997 and 2008.
One of them, who was probed for his most shady commodity deals struck during the last tenure of the PPP government, now appears to be the main motivating factor behind the loss making ventures of Pakistan Steel and the Trading Corporation of Pakistan. His reach now extends to the National Bank of Pakistan, where his former employee now holds a key position.
The consequences of former President Pervez Musharraf’s National Reconciliation Ordinance (NRO) and an absence of a potent anti-corruption organisation in the country seem to have contributed to this fearless unbridled corruption that now plague Pakistan’s economic and business edifice. Following examples illustrate reasons that require an anti-corruption crackdown before it is too late:
Crash of Pakistan Steel Pakistan Steel, a sheet anchor in Pakistan’s infrastructure development, had a reserve of Rs 11 billion and an inventory of products worth at least Rs 6 billion in June 2008.
By the second week of the current month, in space of only 54 weeks, Pakistan Steel has almost turned into a bankrupt state institution with current liabilities of Rs 21 billion.
Most shockingly, the Pakistan Steel management, which opened new annuls of corruption during this period, has already consumed the entire amount of employees’ gratuity and provident funds besides swallowing the earnest money deposited with the organisation by its contractors and suppliers.
Blast furnace, the backbone of Pakistan Steel, is running at 15 percent capacity in the absence of quality iron ore while its main production units of billet mill and billet caster are standing almost idle delivering a negligible output.
Reams of documents are available with this correspondent that prove how this national treasure was plundered through irrational spot purchases of raw material and equipment, grant of freight contracts at the price 20 times more than the running rate, the sale of Pakistan Steel products at an amazingly lower rate than the cost of production in the past one year.
Such was the invisible control of a crony of a government high and mighty in the affairs of Pakistan Steel that his personal office in Clifton became the place where the suppliers and buyers of Pakistan Steel would queue everyday to negotiate any sale or purchase agreement related to Pakistan Steel.
No wonder that three directors left their jobs as Director Finance of Pakistan Steel during these 54 weeks and the organisation is now being run without a functioning director finance and director commercial.
The quantum of corruption at Pakistan Steel was accidentally revealed last week when a major real estate dealer of Dubai met a senior Pakistani security official during a reception in Islamabad and informed him that a senior Pakistan Steel executive had asked him to invest Rs 60 crore in an apartment complex before Dubai property meltdown began in September last year.
PIA faces bankruptcy
Pakistan International Airlines (PIA) is another example where a prime national institution is facing financial and administrative collapse. PIA suffered a loss of Rs 13 billion in the year 2007 that rose dramatically to Rs 40 billion in the year that ended in December 2008.
A member of the board of directors of PIA, while talking confidentially with this correspondent last week, admitted: “PIA’s balance sheet is a fit case to declare bankruptcy and shut the company down.”
He went on to predict: “With these losses and present number of employees, PIA will not be able to make any profit in the next 50 years at least.”
While the company is struggling to run its day-to-day financial affairs with half-a-dozen of its aircraft grounded just last week, PIA’s Managing Director Captain Ejaz Haroon, another personal friend of government high and mighty, came up with an idea of Rs 160 billion purchase of new aircraft for the airline.
Haroon met the PIA board members in June last to break the news of this mammoth purchase and desired that his early negotiations with the Airbus industry and Boeing to buy 27 narrow body aircraft be kept “secret” from PIA shareholders and, of course, the media.
Ignoring the fact that the airline was not able to foot its most essential bills, Captain Ejaz Haroon revealed that he had an understanding from “someone” in the government that the Government of Pakistan could provide a sovereign guarantee (another US$2 billion in national debt) if the Ex-Imp Bank and a major European bank were ready to lend PIA US$2 billion for this ambitious purchase.
Both Boeing in America and Airbus in France are facing an immense financial crunch and are seeking clients like PIA to keep their operations going.
Although, international prices had some contribution in tripling PIA’s losses for the year 2008, but the situation worsened, as documents available with this correspondent revealed, following a long trail of gross irregularities in purchases such as Rs30 crore worth of Zamzam water for Hajis at the cost of Rs 450 per can, a price around five times more than the previous purchases of Zam Zam water by the PIA.
Manipulations of ticket sales and cargo handling through travel agents in Pakistan and abroad left PIA with more losses that run into tens of crores of rupees.
PIA’s woes are aggravating as the management appointed on political reasons continues to oblige their masters by letting the PIA’s payroll to swell. While facing a record financial crunch and ever rising losses last year, PIA managing director obliged the PPP government by inducting 6,000 workers in the airline, which already had the highest employees per aircraft ratio in the world.
By adding 6,000 persons to its list of permanent employees, the PIA set a unique example in the airline industry worldwide because that was the period when even the most profit making airlines of the world were either laying off their staff or negotiating salary cut agreements with its employees.
“This was the last nail in PIA’s coffin,” said a member of the PIA Board of Directors, who had vigorously opposed the idea of fresh induction into the airline.
Merit has no play in either postings or transfers or even roster setting for flight crews in the airline but the worst display of flouting of transparency, rules and regulations was displayed when the PIA decided to induct fresh air hostesses a few weeks ago and inducted 12 air hostesses at the recommendation of PPP office-bearers of interior Sindh.
In total disregard to discipline and fair play, some of the employees who were thrown out of PIA on criminal charges were graciously reemployed and offered foreign postings.
TCP jolt exchequer
Unprecedented and fearless corruption plagued the Trading Corporation of Pakistan (TCP) and with it the national exchequer as the country lost billions of rupees when an influential federal minister, along with the same friend of the government high and mighty, manoeuvred the appointment of an income tax officer as the TCP chairman in the second half of last year.
This appointment preceded a well-hatched strategy to plunder the government’s trading activity such as procurement of fertilisers, sugar and wheat from international market and a blatant attempt to re-nationalise export of rice from Pakistan by procuring rice locally at an inflated price.
Simultaneously, the new handpicked chairman introduced non-transparent procedures, mostly through backroom deals, to import commodities and their shipping at grossly inflated rates and these imports were timed as such that the local markets could also be played for maximum profits.
To further maximise the profits to the loss of Pakistani national exchequer, new contracts to handle cargo (stevedoring) at ports were awarded at a price that was often thrice the price paid by the TCP for the similar job in the previous year.
Inland transportation agreements with private transporters were so lucrative that they some time hired the government’s own National Logistics Cell (NLC), which incidentally failed to win the TCP work, for transportation of commodities from ports to destinations all over the country.
“These contracts were so lucrative that the favoured contractors some times outsourced their work and still made hefty profits notwithstanding the profit they shared with the TCP top management and their masters,” a well-informed TCP source said.
The situation took such a serious turn last year that Prime Minister Gilani had to intervene to stop the TCP, aided by a friend of high and mighty also the central figure in Pakistan Steel corruption, from an attempted informal re-nationalisation of the rice export from Pakistan by procuring rice from the local market at an inflated price.
“The rice operation alone cost the country about Rs 3 billion,” according to a TCP insider. But several TCP sources confirmed that an estimated loss of about Rs 20 billion was caused to the national exchequer by engineering ill-conceived, non-transparent import of Urea in the country last year.
The TCP sources pointed that the race to make quick money was so fast early this year that the TCP chairman routinely ignored objections of Transparency International Pakistan and parliamentary committees in awarding contracts to handpicked that had formed a cartel to monopolise the TCP work in blatant contravention to the government rules governed under the PPRA.
The corrupt TCP management apparently hit a jackpot when the government instructed the TCP to energise the Gwadar Port by ordering some commodity imports at the new port.
“A cursory examination of cargo handling contracts awarded for wheat imports at the Gwader Port will show that sums allowed for the work was five times more than the market price,” a knowledgeable TCP source said, while giving documentary evidence of incredibly low offers that were available to the TCP for the same job.
The stocks available with the TCP and import orders were manoeuvred with the sole idea of benefiting the vested interest with no remorse for the suffering of population. That’s why people of Pakistan are these days forced to buy sugar at an all-time record high price of about Rs 50 per kg. This price situation on sugar would run well into the month of Ramazan.
As the pie of corruption keeps expanding, so was the greed of the top TCP official and his masters until April this year when Minister for Commerce Makhdoom Amin Fahim in consultation with the prime minister decidedly removed the TCP chairman but without ordering probe into his actions.
National Bank jolted
The National Bank of Pakistan (NBP) is another national institution facing doubts about its health and deals concerning government linked individuals, companies and projects.
“On the face of it, the National Bank of Pakistan is seen as financing government backed projects or troubled public sector entities but at the back influential, politically-linked individuals and contracts benefit from this financing,” said an informed NBP official.
For example, a recent decision by the NBP-led consortium to provide an emergency financing of Rs 10 billion to corruption ridden Pakistan Steel may eventually benefit private individuals who are calling shots in Pak Steel affairs from their private office.
The National Bank’s role and interest in enhancing its exposure and affairs of some sugar mills of Sindh and their links with powerful political individuals has left many questions unanswered.
The NBP, which also serves as the treasury for Government of Pakistan, is being curiously watched for its role and growing interest in controversial rental power plants scheme of the government.
The bank, it seems, is ready to take a big exposure in the scheme and had already agreed to finance at least two of the projects.
A whopping Rs 21 billion worth rental power projects have already run into controversy because of the government’s mysterious inability to fully utilise the already-installed electricity generation capacity in Pakistan and armtwisting of other Pakistani banks to finance the shady scheme.
It remained no secret that all top bankers of the country were summoned to the State Bank of Pakistan head office in Karachi early this month. There they had taken the impression that they had no choice but to finance the rental power scheme.
Port Qasim sinks
The Port Qasim Authority (PQA) is a prime example of influence peddling by politically-linked people in getting posted to lucrative positions. A few weeks ago, an intense controversy swirled around Afsar Talpur who was made PQA’s acting chairman. The port authority was already in the middle of charges regarding illegal allotment of land and huge corruption in contracts on port related work.
As it surfaced that the acting chairman, already an official at the PQA, was himself at the centre of many of the charges, the top offices of the government were told that though posted on the orders of the elderly father of an influential personality, the case may create a major embarrassment for the government.
For several days, in the month of May this year, several directors jockeyed for lucrative assignments as the alleged corrupt acting chairman was asked to resume his previous assignment. An intense battle to win the most lucrative positions at the port authority continues to date.
But there was no substantial inquiry to probe the charges involving the allotment of Port Qasim lands through non-transparent procedures and into questionable contracts that have the Port Qasim as one of the most “lucrative” government departments.
A senior government official, however, termed the reports about the malpractices in Pakistan Steel, PIA, TCP, NBP and Port Qasim a mere propaganda. He said such kind of information was totally wrong and politically motivated. He said opponents of the present government were out to level allegations against the present set-up without any foundation. He said in all the above mentioned organisations, merit was followed as part of the government policy. However, detractors of the government continue to raise baseless objections.
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ISSN 1563-9479 
