capitalism achilles heel

7/31/2019 Capitalism Achilles Heel

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*Extracted pages (from 76 to 88) from the original book, related to Pakistan.

Exposing the massive corruption of Benazir,

Zardari, Nawaz Sharif, and Military.

By Raymond W. Baker

PakistanArguablythemostdangerousnationonEarth,Pakistanisabubblingcaul-dron of corruption and crime,where grasping politicians, greedy generals,drugsmugglers,andterroristsintermixinavolatileweb,mademorethreat-ening by a nuclear bazaar operated as a national sideline. Corruption andcriminalityrunfromthetopdown,withthepoliticalclassconstantlyloot-


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DirtyMoneyatWork 77ingthenationaltreasuryanddistortingeconomicpolicyforpersonalgain.Bank loans are granted largely on the basis of status and connections.Therich stashmuch of theirmoney abroad in thosewillingwestern coffers,whileexhibitinglittleinclinationtorepaytheirrupeeborrowings.BanksfailandPakistanislosetheirmeagersavings.Atthebottom,wretchedandilliter-atemassesseethewithdiscontent,aperfectnurturinggroundforterrorism.

Itstartedalongtimeago:InthedistantpasttheEastIndiaCompanyusedtosiphonawayagreatdealoftheassetsandtreasuresoftheIndiansubcontinentorbuythematvery low prices and send them abroadwhen the British ruled thecountry.

ButinrecentdecadesitistherichandcraftyPakistaniswhohavesi-phonedawayalargepartoftheresourcesofthecountrywithunremit-tingvigor.Thatbeganwhenapartofourexportearningswasallowedto be kept abroad,with the practice of under-invoicing the exports orover-invoicingtheimports.Andthatwasfollowedbyretainingabroadan increasing part of themoney obtained as kickbacks during the im-portofmachineryfromthelate1950s.

Later,politiciansinoffice,seniorbureaucratsandtopmilitarycom-manders joined them by sending their illegally earnedmoney abroad.Subsequently, obtaining large bribes abroad and putting them in theirbank accounts there became the fashion. Some of the top rulers toojoinedthemmerrily....Thetotalwealthsiphonedawayinthismannerhasbeenestimated

tobebetween60billionand100billiondollars.51Pakistans recent history has been dominated by two familiesthe

Bhuttos and the Sharifsbothmerely tolerated by themilitary, the realpowerinthecountry.Whenitcomestoeconomicdestruction,theresnotalotofdifferenceamongthethree.Benazir Bhutto. Born in Karachi in 1953 and educated in privateschools,BenazirBhuttograduatedfromRadcliffeCollegeatHarvardUni-versityin1973.GoingontoOxfordforamastersdegree,shedisplayedherbudding political skills andwas elected president of the Student Union in1977.Meanwhile, her father had become primeminister of Pakistan in


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78 CAPITALISMS ACHILLES HEEL1971,wasoustedinamilitarycoupin1977,andwasexecutedin1979onchargesofconspiracytocommitmurder.Inandoutofprisonandhousear-rest,Benazirwas not allowed to leave the country until 1984 but then re-turned to lead the democracy movement two years later. Her fathersusurper,GeneralMuhammadZiaul-Haq,waskilledinamysteriousplanecrash in 1988,which also took the life of the U.S. ambassadorArnoldRaphel,andtheheadoftheU.S.militaryaidmissiontoPakistan,GeneralH.M.Wasson.Benazirwaselectedprimeministerthatyear,serveduntilherouster in 1990 on charges of corruption and nepotism,was reelected in1993,andoustedagainin1996,amidstmorechargesofcorruption.Duringher two terms in office and since,what has come out portraysBhutto andherhusbandAsifAliZardariasworld-classthieves.Upontakingofficein1988,Bhuttoreportedlyappointed26,000party

hacks to state jobs, including positions in state-owned banks.An orgy oflendingwithout proper collateral followed.Allegedly, Bhutto and Zardarigaveinstructionsforbillionsofrupeesofunsecuredgovernmentloanstobegivento50largeprojects.Theloansweresanctionedinthenamesoffrontmen butwent to the Bhutto-Zardari combine.52 Zardari suggested thatsuchloansarenormalintheThirdWorldtoencourageindustrialisation.53Heused421millionrupees(about10million)toacquireamajorinterestinthreenewsugarmills,alldonethroughnomineesactingonhisbehalf.Inanotherdealheallegedlyreceiveda40millionrupeekickbackonacontractinvolvingthePakistanSteelMill,handledbytwoofhiscronies.AlongthewayZardariacquiredasuccessionofnicknames:Mr.5Percent,Mr.10Per-cent,Mr. 20 Percent,Mr. 30 Percent, and finally, in Bhuttos second termwhenhewasappointedministerofinvestments,Mr.100Percent.ThePakistangovernmentslargestsourceofrevenuesiscustomsduties,

andthereforeevasionofdutiesisanationalpastime.Isnttheresomewaytotap into thismajor income stream, pretending to fight customs corruptionandgettingrichatthesametime?Ofcourse;wecanhireareputable(ordis-reputable,asthecasemaybe)inspectioncompany,havethegovernmentpaythecompanyaboutaonepercentfeetodopricecheckingonimports,andgetmultimillion-dollarbribespaidtousuponawardofthecontracts.SocitGnrale de Surveillance (SGS), headquartered in Switzerland, and its thensubsidiary Cotecna, the biggest group in the inspection business, readilyagreedtothissubterfuge.Lettersin1994promisedconsultancyfees,mean-ingkickbacks,of6percentand3percenttotwoBritishVirginIsland(BVI)


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DirtyMoneyatWork 79companies, Bomer Finances Inc. andNassamOverseas Inc., controlled byBhuttoandZardari.Paymentsof$12millionweremadetoSwissbankac-countsoftheBVIcompanies.54SGSallegedlyhaspaidkickbacksonotherin-spectioncontractsaroundtheworld.Uponbeingaccusedintheinspectionkickback scheme, Bhutto sniffed, I ran the government to the best ofmyhonestability.AndIdiditfornothingbutacknowledgmentandlove.55Thentherewasthe1994dealtoimport$83millionworthoftractors

from Poland.UrsusTractors allegedly paid a 7 percent commission to an-otherofZardarisCaribbeancompanies,DargalAssociated.Bhuttowaivedimport duties on the tractors, costing the Pakistani government some 1.7billionrupeesinlostrevenues.UpondiscoveryofthisschemethePoleshas-tenedtoturnover500pagesofdocumentationconfirmingthekickback.56The Polish tractor dealwas just awarm-up for the French fighter jet

deal.AftertheU.S.governmentcancelledasaleoftwosquadronsofF-16s,Bhutto dangled a $4 billion contract forMirages in front of the FrenchDassaultAviation; Snecma, the enginemanufacturer; andThomson-CSF,producer of aviation electronics.Withoutmissing a beat they allegedlyagreedtopayaremunerationof5percenttoMarletonBusinessS.A.,yetanotherofZardarisBritishVirginIslandcompanies.57Thiswouldhavegen-eratedatidy$200millionfortheBhutto-Zardaricouple,butunfortunatelyforthemshewasdrivenfromofficebeforetheycouldcollect.Ah,butthegolddealgavesomecomforttotheseaspiringkleptocrats.

Gold is culturally important in theAsian subcontinent, in particular as awayforwomentoaccumulatewealth.Upwardsof$100billionisinvestedin this unproductive asset in Pakistan, India, and surrounding countries.Smugglingisbigbusiness.Ostensiblytoregulatethetrade,aPakistanibul-lion dealer inDubai,Abdul RazzakYaqub, asked Bhutto for an exclusiveimportlicense.In1994,yetanotherZardarioffshorecompany,M.S.Capri-cornTrading,wascreatedintheBritishVirginIslands.Laterintheyear,JensSchlegelmilch,aSwisslawyerwhowastheBhuttofamilysattorneyinEu-ropeandclosepersonalfriendformorethan20years,58openedanaccountfor CapricornTrading at theDubai branch of Citibank.According to a1999 U.S. Senate report: Mr. Schlegelmilch did not reveal to theDubaibankerthatMr.ZardariwasthebeneficialownerofthePIC[privateinvest-mentcompany],andtheaccountmanagerneveraskedhimtheidentityofthebeneficialowneroftheaccount.... ShortlyafteropeningtheaccountinDubai, Mr. Schlegelmilch signed a standard referral agreement with


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80 CAPITALISMS ACHILLES HEELCitibankSwitzerlandprivatebankguaranteeinghim20percentofthefirstthreeyearsofclientnetrevenuesearnedbythebankfromeachclienthere-ferred to the private bank.59 In otherwords, Citibankwas contracting topay a finders fee formillions brought in from dubious sources. Citibankwent on to open three accounts in Switzerland for Zardari, withSchlegelmilchasthesignatory.InOctober1994,Citibankrecordsshowthat$10millionwasdeposited

intoCapricornsDubaiaccountbyRazzakYaqubscompany,A.R.Y.Interna-tionalExchange.60InDecember,RazzakYaqubreceivedanexclusiveimportlicenseandproceededoverthenextthreeyearstoshipmorethan$500mil-lion in gold to Pakistan.Additional deposits flowed into theDubai andSwiss Citibank accounts, and funds alsowere shifted to CitibankChannelIslandsubsidiaries.Theoriginalceilingontheaccountsof$40millionwasreachedquickly.61Towardtheendofhersecondterm,theBhuttocasetookabizarreturn.

RepresentativesofthePakistanMuslimLeague,anoppositionparty,metin1995withprivateinvestigatorsinLondonwhooffereddocumentaryprooffromanunnamedsourceofBhuttoscorruption,inreturnforamodestfeeof $10million.That dealwas not consummated, but two years later,withBhuttooutofofficeandunderinvestigation,theofferwasreportedlycon-cludedfor$1million.62ThedocumentsappearedtohavebeentakenfromtheGenevaofficeofJensSchlegelmilch.63In 2000 PakistansNationalAccountability Bureau,with the thankless

task of investigating corruption, drew upon these documents and othersourcesandreleaseddetailsofassetsandaccountsbelongingtoBhuttoandZardari. Even to jaded observers, the scale of their holdingswas stunning:hundredsofproperties,dozensofcompanies,anddozensofbankaccounts.ApartiallistingofonlyforeignholdingsreportedbytheNationalAccount-abilityBureauisprovidedinTable3.4.64Summarizing this and other documentation, theNew York Times re-

ported that thematerial included ... letters from executives promisingpayoffs,withdetailsofthepercentagepaymentstobemade;memorandumsdetailingmeetings atwhich these commissions and remunerationswereagreed on, and certificates incorporating the offshore companies used asfrontsinthedeals.... ThedocumentsalsorevealedthecrucialroleplayedbyWesterninstitutions.Apartfromthecompaniesthatmadepayoffs,andthenetworkofbanksthathandledthemoney... thearrangementsmadeby


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DirtyMoneyatWork 81TABLE3.4 FOREIGNASSETSALLEGEDLYBELONGINGTOBHUTTOANDZARDARICountry Properties/Companies BankAccountsUnited RockwoodEstate,Surrey,20 BarclaysBank,3accounts;Kingdom roommansion,355acres,polo NationalWestminsterBank;

grounds;4Londonflats HarrodsBank;MidlandBankFrance Normandychateau,in CrditAgricole,3accounts;

Zardarisparentsname; BanqueNationaledeParis;BanqueCannesproperties LaHenin

Switzerland UnionBankofSwitzerland;BarclaysBank(Geneva);Citibank(Geneva);BanqueNationaledeParis;SwissBankCorporation;CreditSuisse;PictetetCie;BanqueFrancaiseduCommerce;CantradeOrmondBurrus;BanquePasha

United WellingtonClubEast,Florida; BarclaysBank,NewYork;States IndiaMound,Florida; Citibank,NewYork;

3residentialproperties, UBS,NewYorkFlorida;LapworthInvestment,Florida;IntroFood,Florida;DynatelTrading,Florida;A.S.Realty,Florida;BonVoyageTravel,Florida

British BomerFinance,MaristonVirgin Securities,MarletonBusiness,Islands CapricornTrading,Dargal

Associated,FargaritaConsulting,MarvilAssociated,PenburyFinance,OxtonTrading,BrinslenInvestment,ClimitexHolding,ElkinsHolding,MinterlerInvest,SilvernutInvestment,TacolenInvestment,TulerstonInvest,MarledonInvest,DustanTrading,ReconstructionandDevelopmentFinance,NassamAlexander


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82 CAPITALISMS ACHILLES HEELthe Bhutto family for theirwealth relied onWestern property companies,WesternlawyersandanetworkofWesternfriends.65

EventheSwissfinallyhadhadenough.SeventeenbankaccountslinkedtoBhuttoandZardariwerefrozen.Thetwowerechargedwithmoneylaun-dering in connectionwith bribes received from the inspection companySGSandwereconvictedbyaSwisscourtin2003,withfinesandsuspendedprisonsentences.Thiswasshort-lived;thedecisionwasoverturnedandre-ferredbacktocantonalprosecutorsuponappeal.Meanwhile,ZardariwasinprisoninPakistanfrom1996to2004onassortedcharges.Bhutto,withherfatherexecuted,twobrothersassassinated,hermother

anamnesiac,herhusbandstilltroublesome,andshelivinginexilebetweenLondonandDubai,portraysherselfasthevictim:Ineveraskedforpower.Ithinkthey[thePakistanipeople]needme.Idontthinkitsaddictive.Youwant to run away from it, but it doesnt let you go.... I think the reasonthishappensisthatwewanttogiveloveandwereceivelove.66Save your tears. In the global collection of displaced leaders, Benazir

Bhuttomaybetheleastsympatheticcharacterofall.NawazSharif. WhileBenazirBhuttohatedthegeneralsforexecutingherfather,Nawaz Sharif early on figured out that they held the real power inPakistan.His father had established a foundry in 1939 and, togetherwithsix brothers, had struggled for years only to see their business nationalizedbyAliBhuttosregimein1972.ThissealeddecadesofenmitybetweentheBhuttosandtheSharifs.FollowingthemilitarycoupandGeneralZiasas-sumptionofpower,thebusinessIttefaqwasreturnedtofamilyhandsin1980.Nawaz Sharif became a director and cultivated relationswith seniormilitaryofficers.ThisledtohisappointmentasfinanceministerofPunjabandthenelectionaschiefministerofthismostpopulousprovincein1985.During the 1980s and early 1990s, given Sharifs political control of

Punjab and eventual primeministership of the country, Ittefaq Industriesgrew from its original single foundry into 30 businesses producing steel,sugar,paper,andtextiles,withcombinedrevenuesof$400million,makingitoneofthebiggestprivateconglomeratesinthenation.Asinmanyothercountries,when you control the political realm, you can get anything youwantintheeconomicrealm.With Lahore, the capital of Punjab, serving as the seat of the familys


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DirtyMoneyatWork 83power, one of the first things Sharif did upon becoming primeminister in1990wasbuildhislong-dreamed-ofsuperhighwayfromtheretothecapital,Islamabad. Estimated to cost 8.5 billion rupees, the projectwent throughtwobiddings.DaewooofKorea,strengtheningitsproposalswithmidnightmeetings,was the highest bidder both times, so obviously itwon the con-tractanddeliveredthejobatwellover20billionrupees.Anewhighwayneedsnewcars.Sharifauthorizedimportationof50,000

vehicles duty free, reportedly costing the government $700million in lostcustoms duties. Bankswere forced tomake loans forvehicle purchases towould-betaxicabdriversuponreceiptofa10percentdeposit.BorrowersgottheirNawazSharifcabs,andsome60percentofthempromptlydefaulted.Thisleftthebankswith$500millionorsoinunpaidloans.Vehicledealersreportedlymadeakillingandexpressedtheirappreciationinexpectedways.

UnderSharif,unpaidbankloansandmassivetaxevasionremainedthefavoritewaystogetrich.Uponhislossofpowertheusurpinggovernmentpublishedalistof322ofthelargestloandefaulters,representingalmost$3billionoutof$4billionowedtobanks.Sharifandhisfamilyweretaggedfor$60million.TheIttefaqGroupwentbankruptin1993whenShariflosthispremiershipthefirsttime.Bythenonlythreeunitsinthegroupwereopera-tional,andloandefaultsoftheremainingcompaniestotaledsome5.7bil-lionrupees,morethan$100million.67

LikeBhutto,offshorecompanieshavebeenlinkedtoSharif,threeintheBritishVirginIslandsbythenamesofNescoll,Nielson,andShamrock68andanotherintheChannelIslandsknownasChandronJerseyPvt.Ltd.69Someof these entities allegedlywere used to facilitate purchase of four rathergrand flats on Park Lane in London, atvarious times occupied by Shariffamily members. Reportedly, payment transfers were made to BanqueParibasenSuisse,whichtheninstructedSharifsoffshorecompaniesNescollandNielsontopurchasethefourluxurysuites.70

Inhersecondterm,BenazirBhuttohadPakistansFederalInvestigatingAgencybeginaprobeintothefinancialaffairsofNawazSharifandhisfam-ily.TheprobewasheadedbyRehmanMalik,deputydirectorgeneraloftheagency.Malik had fortified his reputation earlier by aiding in the arrest ofRamziYousef,mastermindofthe1993WorldTradeCenterbombing.Dur-ing Sharifs second term, the draft report of the investigationwas sup-pressed, Malik was jailed for a year, and later reportedly survived an


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84 CAPITALISMS ACHILLES HEELassassinationattempt,afterwhichhefledtoLondon.TheMalikreport,fiveyearsinthemaking,wasreleasedin1998,withexplosiverevelations:The records, including government documents, signed affidavits fromPakistaniofficials,bankfilesandpropertyrecords,detaildealsthatMr.MaliksaysbenefitedMr.Sharif,hisfamilyandhispoliticalassociates: Atleast$160millionpocketedfromacontracttobuildahighwayfromLahore,hishometown,toIslamabad,thenationscapital.

Atleast$140millioninunsecuredloansfromPakistansstatebanks. More than $60million generated from government rebates onsugarexportedbymillscontrolledbyMr.Sharifandhisbusinessassociates.

At least $58million skimmed from inflated prices paid for im-portedwheat from theUnited States and Canada. In thewheatdeal,Mr. Sharifs government paid prices far abovemarketvaluetoaprivatecompanyownedbyacloseassociateofhisinWashing-ton,therecordsshow.Falselyinflatedinvoicesforthewheatgen-eratedtensofmillionsofdollarsincash.71

ThereportwentontostatethatTheextentandmagnitudeofthiscorrup-tion is so staggering that it has put thevery integrity of the country atstake.72 In an interview,Malik added: No other leader of Pakistan hastakenthatmuchmoneyfromthebanks.ThereisnoruleoflawinPakistan.Itdoesntexist.73What brought Sharif down in his second termwas his attempt to ac-

quirevirtually dictatorial powers. In 1997 he rammed a bill through hiscompliant parliament requiring legislators tovote as their party leaders di-rected.In1998heintroducedabilltoimposeSharialaw(Muslimreligiouslaw)acrossPakistan,withhimselfempoweredtoissueunilateraldirectivesinthe name of Islam. In 1999 he sought to sideline the army by replacingChief of Staff PervezMusharrafwith amore pliable crony.He forgot thelessonshehadlearnedinthe1980s:ThearmycontrolsPakistanandpoliti-cians are a nuisance.AsMusharrafwas returning from Sri Lanka, Shariftried to sack him inmidair and deny the Pakistan InternationalAirwaysflightwith 200 civilians on board landing rights inKarachi.Musharraf ra-dioedfromtheaircraftthroughDubaitohiscommanderinKarachi,order-


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DirtyMoneyatWork 85ing him to seize the airport control tower, accomplished as the plane de-scendedalmostoutoffuel.Musharrafturnedthetablesandcompletedhiscoup,andSharifwasjailed.

ButSharifhadlittletofear.This,afterall,isPakistan.Musharrafneededtoconsolidatehispowerwiththegenerals,andSharifknewdetailsaboutthecorruption ofmost of the brass.Obviously, it is better to tread lightlyaroundtheedgesofyourpeergroupsownthievery.SoMusharrafhadSharifprobed,tried,convicted,andsentencedtolifeinprison,butthenin2000exiledhimtoSaudiArabia.Twenty-twocontainersofcarpetsandfurniturefollowed, and, of course, his foreign accounts remainedmostly intact. En-sconcedinaglitteringpalaceinJeddah,heisdescribedaslookingcorpu-lent amidst opulent surroundings.74 Reportedly, he and Benazir Bhuttoevenhaveanoccasionaltelephoneconversation,perhapstogetherlamentinghowunfairlifehasbecome.Military,Inc. ThePakistanimilitarycontrolssomeofthelargestbusinessconglomeratesinthenationandhasmonopoliesinseveralareasofproduc-tionandservices.Aschiefofthearmy,Musharrafheadsavastempireofin-dustrial, commercial, and real estate interests worth an estimated $5billion.75A principal function of these businesses is to serve as a privatepiggybankfortheprivilegedmilitaryhierarchy.

Four foundations, originally created to providewelfare for retired sol-diers,arenowbloatedenterprisesemployingtensofthousandsandgenerat-ing hundreds of millions in annual revenues. The largest is FaujiFoundation,faujimeaningmilitary.Eachofthearmedserviceshasitsownindividual foundation:ArmyWelfareTrust, underArmyGHQ; BahriaFoundation, underNavyHQ; and Shaheen Foundation, underAir ForceHQ.Thevastscopeofthesefoundationholdingscanbeseenintherangeoftheirsubsidiaryoperations,asshowninTable3.5.As for the rest of the commanding heights of the economy,what the

militarydoesnotownitcontrols.ActiveorretiredofficershaverecentlyorstillnowheadtheNationalHighwayAuthority,thewaterandpoweragency,the tax collection agency,Karachi Electric Supply, the EmployeesOldAgeBenefit Institution, the Federal Public Services Commission, theNationalAccountability Board, and much more.76 Musharraf reportedly has ap-pointedsome500officerstopositionsaschairmen,directors,agencyheads,and commissioners, permeating every aspect of the economy.You cannot


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86 CAPITALISMS ACHILLES HEELTABLE3.5 PAKISTANIMILITARYFOUNDATIONHOLDINGS

Foundation HoldingsFaujiFoundation FaujiCereal,FaujiPolyPropyleneProducts,FaujiSugarMills,

FaujiOilTerminal,FaujiCement,FaujiCornComplex,FaujiKabirwalaPowerCompany,FONGAS,FaujiJordanCompany,FaujiFertilizerCompany,MariGasCompany

ArmyWelfare ArmyWelfareSugarMill,AskariHousingScheme,ArmyTrust WelfareShoeProject,AskariWelfareRiceMill,ArmyWelfare

WoolenMill,AskariWelfarePharmaceuticalProject,ArmyWelfare

Hosiery

Unit,

Askari

Stud

Farms,

Askari

Commercial

Bank,AskariFishFarm,AskariCommercialEnterprises,AskariWelfareSavingScheme,AskariPowerLimited,AskariAssociateLimited,AskariInformationService,AskariLeasing,MagnesiteRefineriesLimited,AskariAviation

Bahria BahriaConstruction,BahriaBakery,BahriaHoldings,BahriaFoundation CateringandDecoration,BahriaDredging,BahriaSecurityand

SystemsServices,BahriaCoastalServices,BahriaTravelandRecruitingAgency,BahriaDivingandSalvage,BahriaComplexes,BahriaShipping,BahriaTownandHousingSchemes,BahriaShipBreaking,BahriaFarming,BahriaHarborServices,BahriaUniversity,BahriaDeepSeaFishing,FalahTradingAgency,BahriaPaints

Shaheen ShaheenAirportServices,FM-100radiochannel,ShaheenAirFoundation Cargo,ShaheenKnitwear,ShaheenAirInternational,

ShaheenSystem,ShaheenAerotraders,ShaheenComplexSource:AyeshaSiddiya-Agha,Power,Perks,PrestigeandPrivileges:MilitarysEconomicAc-tivitiesinPakistan,paperpresentedattheInternationalConferenceonSoldiersinBusiness,Jakarta,Indonesia,October1719,2000.Also,interviewwithAyeshaSiddiya-Aghabytheauthor,Washington,D.C.,September7,2004.turn around in Pakistanwithout puttingmoney into service coffers.Withwhat is almost certainly the largest holdings on theKarachi Stock Ex-change77 andvast holdings outside the exchange, themilitary owns, con-trols,anddirectstheeconomyofthecountryandisnotabouttogiveitup.Andwhatdorichgeneralsdowiththeirmoney?Why,theytakeitoff-

shore, just like rich politicians and rich businesspeople.Court papers havelisted innumerable generals, other officers, and their familymemberswith


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DirtyMoneyatWork 87substantial foreign bank accounts.This is part of the reasonwhyNawazSharifwas allowed to go into exile in SaudiArabia; he knew their foreignholdingswell.

Pakistans pursuit and attainment of nuclearweapons and transfer ofbomb-building components provides a frightening example of themanyfailingsofthePakistanistate.A.Q.KhanstolecentrifugeblueprintsinEu-ropeandthenreturnedhometobuildasecretnuclearlabnearIslamabad,supportedbythenotoriousBCCI.AccordingtoathoroughNewYorkTimesreport,Dr.Khanboasted,MylongstayinEuropeandintimateknowledgeofvariouscountriesandtheirmanufacturingfirmswasanasset.

Business executives and merchants, including German, Dutch andFrenchmiddlemen,flockedtoPakistantoofferpricelistsforhigh-tech-nology goods and learnwhat Pakistan needed.ThemultilingualDr.Khanledtheacquisitioneffort.Hisshoppingspreespannedtheworld.Africawasimportantbecauseofthematerialsneeded.... Europewascrucialforbringinginhigh-techmachinesandcomponents.Dubaiwastheplaceforshipmentsandpayments.78When Khan purchased components from his willing suppliers, he

boughtmuchmore than needed by Pakistan alone, apparentlywith theearlyintentofsellingnuclearmaterialstoothercountries.Bythelate1980shewassupplyingIran,by1991NorthKorea,andatleastasearlyas1997wasinnegotiationswithLibya.TheLibyandealleaked,causedaninterna-tional uproar, andKhanwas forced out of the lab bearing his name.HemadeapublicconfessionandwasimmediatelypardonedbyMusharrafandallowed to keep themillions in property and cash he had accumulated inPakistanandabroad.ReportssuggestthathisdaughterhastenedoutofthecountrywithdocumentsandavideotapeinwhichKhanclaimsthatallthechiefs of army staff since 1977, includingMusharraf,were aware of hisactions.79ThebottomlineonPakistanisthatrulingeliteswereandcontinueto

bethoroughlycorrupted,andwesternbusinessandbankingsectorshaveinthe past and continue today to service their corruption. Billions of dollarshavebeensiphonedabroad,millionsofpeoplearedeprivedanduneducated,drugs move freely, terrorism finds accommodation, and nuclear salesthreatenglobalstability.

capitalism achilles heel

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