Prospects have never looked brighter for a move towards democracy in Pakistan. The intense power struggle (as reflected in the events of the last few months) signals a realignment of forces as long held alliances give way to a repositioning of power centres for a new equilibrium. Worldwide, the private sector champions free market and tends to support democracy for the development of institutions that provide a level-playing field for business to compete, grow and prosper.
In Pakistan, however, the elite looks scared of a shift in that direction. The question is:
Why does corporate Pakistan detest democracy?
By By Afshan Subohi
In this special report the team of Business reporters of Dawn tries to glance through the mind of this supposedly most dynamic class to identify causes of its apprehensions. An attempt has also been made to identify who they are betting on in the coming elections.
KARACHI: The pampered, risk-averse private entrepreneurs of Pakistan do not share the people enthusiasm for democracy. They find popularly elected governments unstable, unpredictable and less business friendly. Yet, they say, they will extend financial backing to the leading political parties in case there is a general election in the country.
Their support has little to do with the political programme or ideological moorings of a party. It is dictated more by the prospects of a partys position in the next government. Sudden twists and turns in the countrys politics has taught them to keep base of their support as broad as possible to mitigate the risk of falling on the wrong side of the next government.
An informal survey by Dawn over the political positioning of the business class in Pakistan uncovered some interesting facts. The responses confirmed that the businesses, irrespective of size, are either hostile or indifferent to democracy. As a general pattern hostility matches the scale of business.
The elite of the elite, some 30 leading family business houses, felt no compulsion to share their opinion over the issue with the public. With the exception of a few most did not care to respond to our queries.
Medium and micro business owners were also reserved. Whatever their personal political leanings, they said, they prefer to keep out of the politics they termed dirty. They said they were too preoccupied with work-related challenges to spare time for politicking. They did complain of the governments insensitivity to their needs irrespective of its composition over the last two decades.
Many big entrepreneurs talking to Dawn, however, confessed to acting patrons during elections. They, generally, back all parties at the same time. They declined to substantiate their statement but said that there were cases when even opposing candidates in the same constituency fought with support of the same fancier.
Elections in Pakistan are an expensive exercise for political parties. Mohammad Mian Soomro, a veteran politician from Sindh, said the other day at a seminar, that one polling station for a national assembly candidate cost at least 25 to 30,000 rupees and there are more than 200 such stations in a national assembly constituency. This comes to about Rs60,00,000 spent on the polling day on one head alone: polling stations. Expenses on securing a ticket from the party of choice and pre election campaigning (flags, banners, leaflets, etc) are over and above this. According to a rough estimate a national assembly candidate spends nothing less than Rs30 million in one constituency.
In course of the survey Karachiites were more vocal in their support for the military-led governments. It is a fact that both leading political parties PPP and PML(N) do not view Karachi as their constituency. It could have been for this reason that even top notch Memon and Khoja business families find themselves sidelined during their rule. They said that during the PPP and PML(N) governments in 1990s their access to power corridors was restricted. They said for them it had been more comfortable during the past eight years.
There is no neat bifurcation between traders and manufacturers in Pakistan as they overlap. Still groups who have dominant interests in trading were found to be more inclined towards the military-led government than others.
Another interesting observation is the fact that businessmen in Pakistan prefer to make the funding process as personalized as possible. This is done, they said, so that they know whom to approach for a favour in the next government. Those with the right connections channel their support through their links in dependable quarters.
The big boys of the business community are arrogant, for beside huge fortunes that they attribute their success to their superior professional acumen. Many have branched out in services including finance and insurance. They produce their own energy, purify their own water, provide for their security and claim that they work independent of the state. Some own vertically integrated units. Some of them have even constructed roads and related infrastructure required for their business.
They feel they pay taxes over and above the huge hidden costs (bribes, bhatta and commissions) to countless government and non government actors but get nothing in return. The government in their view hardly walks the talk of being a facilitator. They were particularly critical of the rising credit rate. They are also uncomfortable with the governments handling of external trade affairs. Many a times trade partners shy away over issues of governance (fractured democracy or low scoring on international indices) beyond the control of a businessman, some said.
A woman publisher in Karachi mentioned problems that medium and micro businesses face because of weak institutional frameworks. She mentioned issues related to standardization, diversification, training etc., hindering the growth of the sector. She felt that by their behaviour businessmen and their associations promoted nepotism and resisted institutions that could provide a level playing field and reward merit over connections. Mrs. Rashid hailed the Musharraf government for encouraging women entrepreneurs. She, however, felt that an elected government was better equipped to respond to the needs of all segments of society.
When discussing trust deficit in a democratic set-up many businessmen mentioned the nationalization programme of the seventees and freezing of foreign currency accounts after the 1998 nuclear tests. They felt such accesses by democratic governments hurt the country and dealt a blow to investors confidence.
Thirty years of post-1977 business-friendly policies privatization, liberalization and deregulation seem to have helped them overcome their fears but not enough to revive their trust in elected governments.
Experts claim that the private sector in Pakistan prefers a military-led government over a democratic one because they enjoy preferential treatment in return for their support for an unpopular disposition. Who benefited most from economic expansion during Musharrafs eight years in power? Beside military bureaucracy, real estate operators, stock brokers, commercial traders and business tycoon made most of this period. They made much above their share by manipulating markets while the government chose to look the other way, an analyst said, adding, They committed day light robbery in the countrys capital markets, retail market and the real estate sector and robbed people of their hard earned money. It came out in the press but the government ignored their excesses. Sugar, cement, wheat flour, stock market, real estate scams can be recalled here.
Experts contacted for their comments endorsed the findings of Dawn survey with some reservations.
Dr A R Kemal, a senior economist rejected the view that defends military rule for being pro development citing high growth rates achieved during General Ayub, Zia and Musharrafs periods. This is a superfluous analysis. How can anyone forget Seato, Cento (US-Pakistan military alliances) in 1960s, Afghan War in 80s and September 2001 attacks on the twin towers in the US when discussing the economy of Pakistan during these periods, he said. He defended democratic periods that in his view undertook all major infrastructural projects such as Terbella Dam and PSM of 1970s and IPPs of 1990s that provided basis for growth later. He felt that military governments in Pakistan actually floundered the opportunities that came our way.
Another social scientist who wished not to be named considered Pakistani business class short-sighted and ready to forego a promising future for petty immediate gains. Unlike the Indians, who are eying a share in many sectors globally, Pakistani businessmen have yet to realise their true potential to strategise accordingly. Political positioning to an extent depends on the vision and the level of understanding of a segment. As long the business class of Pakistan hinges their future on governments patronage they will continue to prefer government set ups that are willing to accommodate them even at the cost of public interest.
Dr. Faisal Bari, an independent economist, felt that there were segments within the class who might not be visible but would support democracy from a purely business standpoint. He emphasised the need for a detailed study for an insight on how the class itself perceived business related problems and solutions. He cited the example of smaller cities of Punjab that he said seem to have entered the election phase with political parties flags fluttering all around. He felt that like other segments medium and small businesses have a stake in fairer business environment in the country.
Dr Asad Saeed, who has done a number of studies on industrialization in Pakistan and is currently working on the ethnic dimension of the business class in Pakistan observed: The bigger the business greater the hostility towards democracy. He felt that compared to businessmen from Punjab, the tycoons of Karachi had a stronger bias against democracy.
Kaiser H. Naseem, Manager, Pakistan Corporate Governance Project, IFC, saw hostility on the business class towards democracy rooted in its overall character that needs more time to mature. He said the third generation of foreign qualified entrepreneurs were keen to transform inherited businesses into modern establishments to make them compatible internationally. Hopefully it would help them mature politically as well.
Sakib Sheerani, Chief Economist, ABN Amro Bank agreed that the business class does not share the popular sentiments and business of Karachi is spiritually more alienated from the democratic current.
Dr Nasir Afghan of LUMS felt that the business class of Pakistan is showing some signs of transformation. The third generation educated entrepreneurs are more enlightened. They know that the current business patterns will have to be changed to compete and win globally. They are more inclined towards democratic order than their fathers and grandfather.
Samir Amir, a researcher with Pakistan Business Council emphasised the need of broadening the domain of public debate on business issues. This he said could be better managed in a democratic environment. He also mentioned downgrading of the countrys rating by international rating companies for not being misgoverned.
The fact is that with success stories of countries such as Singapore, Malaysia and China under autocratic authoritarian rule there seems to be no proven correlation between democracy and market economy. Democracies are perceived to be more predictable by investors (the level of investors interest in India as compared to China is often quoted as a proof).
Many development economists believe that transparency, accountability and public participation in political decision-making will have a direct effect on the level of market fairness.
In Pakistan transparency and participatory decision making would certainly help in improving the countrys image abroad and could contribute to an improvement in the investment climate.
http://www.dawn.com/2007/08/05/ebr1.htm
