KARACHI: Pakistan has seen significant increase in the number of wealthy people as compared to a total of approximately 22 families during the era of Field Marshal General Ayub Khan in 60s, experts told The News.
According to a study of a financial think-tank from Switzerland, there are 415 people in Pakistan, who own more than $30 million each as compared to 310 last year, registering an increase of 33.9 percent, which is a record in Asia. Collective income of these people remained around $50 billion, the study revealed.
Only seven to eight business groups of the 22 families continue to operate their businesses significantly and the remaining families have either closed their businesses or have shifted abroad.
Dr Ishrat Husain, former governor of the State Bank of Pakistan (SBP), and a renowned economist, said only Dawoods, Adamjees, Sehgals, Shaikhs, Nishats and a few others have survived the economic ups and downs during this period, while Haroons, Batlas, Valikas, Isfahanis, Noons, and Rangoonwalas, have disappeared from the economic scene.
The nationalisation process in 70s also affected their economic position, he said, adding that some of the families went abroad and later shut their businesses due to one reason or the other. “Disputes and rivalries within the family and group also forced them to wind up their businesses,” Dr Husain said.
In 1947, the first budget projected a revenue of Rs150 million and the government had to borrow Rs80 million from the Habib Bank Limited to pay salaries to its employees and meeting other contingencies.
Likewise, Dentonic tooth powder was the first industrial project launched in the country followed by the inauguration of the first soft drink, Pakola, which was launched by the then prime minister.
Dr Riaz Shaikh, head of Social Sciences at Shaheed Zulfikar Ali Bhutto Institute of Science and Technology (SZABIST), said that several well-established individuals and families had emerged after the nationalisation process initiated by Zulfikar Ali Bhutto. “Now the number of such individuals and families has increased to hundreds, if not thousands,” he said.
Families of Agha Khan, Kasuri that owns a school chain, Patel family that owns hospitals and Malik Riaz, top real estate developer, along with several others are some of them.
“Change is inevitable but there should be transparency and check on financial resources,” Shaikh said. “Media houses, educational institutions, hospitals and non-government organisations are minting millions of rupees but the majority of them are not listed.”
A few top families in the list included Sehgals, Habibs, Dawoods, Adamjees, Crescent and Valikas.
The separation of East Pakistan was proved a last nail in the coffin of some of the business houses, as some of them were completely wiped out from the corporate horizon. Sixteen major houses lost heavily in East Pakistan, with Dawoods, Adamjees, Isphanis, Abbas Khaleeli, Bawany and Amin being the major victims.
Keeping in mind the negative impacts of family businesses on the citizens of the country, Bhutto initiated nationalisation process, but during his last two tenures Nawaz Sharif restarted the privatization process of public sector entities.
Khan Rahim Baksh Khan was a the first Muslim industrialist to venture in the manufacturing of paint industry, by establishing a paint manufacturing plant in Hyderabad Deccan, India in 1933, which was to provide nucleus of five industries in a new industrial township called Rahimabad.
After migration to Pakistan in 1949, Khan set up a paint manufacturing factory in Karachi, and later established two more plants, one in Karachi and the other one in East Pakistan.
He also established a joint venture in Lebanon, managed by Buxly Paints and became the biggest exporter of paints from Pakistan in 1970. He also set up Khan Rahim Paint Research Institute in Karachi.
“Nothing is known today about Khan Rahim Baksh Khan or his institute,” Shahid-ur-Rahman said in his famous book “Who owns Pakistan”.
Rahman wrote that nationalisation retarded Pakistan’s growth in many ways but its worst consequence was the scars inflicted on the psyche of the big businesses, which were flourishing even after passage of two decades. “It alienated the industrialists from the economic mainstream and, as if by a collective decision, several of the original 22 families who pioneered development in Pakistan switched off investment in the long gestation projects,” he wrote.
The Pakistani businessmen who were planning mega projects in 1971 and are still capable of setting up mega projects resigned to remain spinners, sugar manufacturers or at best cement manufacturers.
Field Marshal Ayub Khan’s decade of development (1958-68) divided the society into two categories, privileged and underprivileged, which led to the explosive situation of the 1970’s, culminating in the severance of Pakistan and induction into power of a socialist government of Bhutto.
The second phase, (1971-77) under Pakistan People’s Party was the era of dismantling monopolies, nationalisation, hitting at the power base of industrial barons and clipping their wings, while 11 years rule of General Zia-ul-Haq was the period of status quo for the economy.
Nawaz Sharif’s three years (1990-93) saw a tactical retreat to the 1970’s by massive concentration of wealth and reincarnation on monopolies, by opening up state sectors to the private sector and privatisation of the state-owned enterprises to big industrial groups. Nationalisation was replaced by such a monstrous privatization process, Rahman said.
The first tenure of the Nawaz government was followed by second Benazir government, which continued same policies, only with the greater mismanagement and corruption.
Dr Riaz Shaikh said that General Zia patronised political power and those people got loans and government support who obliged Zia and also returned the nationalised factories to their former owners.
“Zia did not promote industries but bureaucracy and general gathered larger amounts of money,” he said. “Those feudal lords who were closed to Zia got licences for smaller industries such as petrol pumps, etc.”
Besides, industrialisation in the country and the continuity of Afghan war gave boom to the real state in Quetta and Peshawar where people earned huge amounts by selling their properties. This resulted in more rich individuals and families.
During the last 40 years, the cottage industry has also witnessed significant growth in Punjab.
There are more than 550 families listed at the Karachi Stock Exchange, while there are around 70,000 companies and organisations in the country that are listed with the Securities and Exchange Commission of Pakistan. The size of these companies varies but the majority of them are larger companies.
“Other than stock exchange there are several other industries also where individuals and families earned billions of rupees.” Kaiser Bengali, an economist, said that the then government helped these 22 families by providing them businesses at lower rates, only because of contacts in the bureaucracy.
Nawaz Sharif and all the military dictators have always opted privatisation over nationalisation, which resulted in depreciation of the rupee, as investors collect their profit in the local currency but have to send it to their home countries in dollars, creating pressure on the local currency,” he said.
Unfortunately, Bengali said, the two previous governments of Sharif and that of Pervez Musharraf had privatised those firms, which were earning profits.