Make your own free website on Tripod.com

THE ETHNIC DIVIDE OF BIG BUSINESS

As early as 1960 and 1970, Prof Gustav Papnek of Bostan University and Soviet scholar Sergi Levin took great pains to establish the ethnic background of Pakistan's leading business elite, evidently because they foresaw that ethnicity of the insiders ( the sons of the soil) and migrants was to play a central role in the economic and social well being of the people of Pakistan. The clash between the insiders and outsiders was slated to have a disastrous effect on the psyche of Pakistani businessmen and economic development of the country.

Papanek established that almost all the major industrial families of the post-indepenent Pakistan belonged to five ethnic groups i.e Memons, Dawodi Bohras, Khojas, Punjabi Sheikhs and Chiniotis. The top 42 industrial groups ranked by him included only six, Hoti, Premier, Packages, Ghulam Farooq, Colony and Noon having roots in areas that now constitute Pakistan. All other were migrants and were active on the other side, in pre-independent India.

The morale of these business communities was to become critical to Pakistan's economic development or lack of development in post-Bhutto era. It continued to be so even in 1977. Three of the five communities identified by Papanek i.e Khojas, Bohras and Memons had their roots in the Indian port city of Gujrat and made Karachi their home in post-independence Pakistan. Ironically, of all the Karachi-based businessmen only Razak Dawood shifted to Lahore when others of the flock preferred to shift abroad during the adverse days of Zulfikar Ali Bhutto.

Razak Dawood-A Memon in Lahore.

Razak Dawood presently heads Pakistan's biggest construction and engineering conglomerate known as Descen group with an estimated turnover of at least Rs 4 billion and a roaster of impressive clients. Descen has won contracts in Abu Dhabi, Saudi Arabia and Iraq and is perhaps the biggest Pakistani company abroad employing over 1,000 people.

Razak is a scion of Dawood family which was ranked first among the 22 families in 1970. In the wake of Bhutto's nationalization Ahmad Dawood and Sadiq Dawood left Pakistan and established their business in USA and Canada respectively. The family split in 1981 into what is now known as the Dawood, BRR, Descen groups of three Dawood brothers and a relatively unknown Ghani group based on the share of in-laws of Ahmad Dawood. Razak's father Suleman Dawood inherited Transpack and United Refrigration and Razak, a mining engineer from Newcastle University, UK decided to make Lahore his home and concentrate on developing Descen Engineering, then a small family business launched in 1978. During last ten years, Descen has completed jobs at some of the biggest projects in Pakistan like Hubco, ICI, PTA Plant, Fauji-Jordan Fertilizer and AES Lalpir Power Plant.

Razak believes that big business failed to face the challenge of anti-business policies of Zulfikar Ali Bhutto by running away from Pakistan and ultimately resorting to division of assets and splits. " Normally when there are external problems, families get united. Here they did not . They just went away", he said in an interview with the author.

He thinks that Pakistan is rapidly becoming a nation of traders since nobody wanted to play for long-term in Pakistan. " Politicians want short cut to power, industrialists want short cut to money and bureaucrats want short cut to top. The govt. policies are revenue-oriented rather than development-oriented. When everybody is playing for the short term, how can you have long-term investment projects?", he asked.

In September 1994 when Benazir Bhutto govt constitueted a Committee for the Engineering goods Industry, Razak was a member of the committee and was asked to prepare an inventory of both the short and long term problems of the engineering industry. More recently he has been appointed a member of the Engineering Development Board, by Nawaz Sharif govt.

At the round-table conference in Lahore in September 1994 presided by U.S Energy Secretary Hazel O'Leary, Razak spoke about the need to provide protection to the engineering industry and particularly referred to a deletion programme for power plants that had been in place for several years and for which large capacity was set up in the public and private sector. He was snubbed by O'Leary who said without mincing words that in the event Pakistan insisted for deletion the American investors will go elsewhere.

Karachi vs Punjab.

The nationalization of key industries by Bhutto robbed Memons of the confidence and security that is vital for making long-term investment decisions, particularly because several of them had been dislocated and uprooted more than once. For example Adamjee had migrated from Gujrat in India to Rangoon returned to Delhi, shifted bulk of their business after partition to East Pakistan. Thus the losses suffered in East Pakistan and nationalization made these communities and their leaders bitter and insecure, with the result that in the post-nationalization era they resigned themselves to milking the existing units rather than risk new investment.

During the post Bhutto era of Zia ul Haq, Sindh remained politically volatile and old Karachi-based businessmen, with the exception of one or two felt themselves officially discriminated against the Punjab-based group.

In interviews with the author, Yusuf Haroon and other business leaders like Farooq A Sheikh, Mian Habib Ullah, Nasim Saigol and Razak Dawood representing rival business groups and communities have talked about the effect and "scars" that Bhutto's nationalization inflicted over psyche and thus investment decisions of Pakistan's industrial barons. Yusuf Haroon bitterly accused Zia of step-motherly treatment to the Karachi businsessmen particularly the Memons who had led the first wave of industrialization in Pakistan under Ayub Khan. Farooq Sheikh conceded that the flight abroad of the Memons and their reluctance to make long-term investment became a windfall opportunity for the Chiniotis who dominate Pakistan's economic and industrial landscape today.

Apart from the statements of these business leaders, statistics also reveal a major shift of investment from Karachi to Punjab in the 1970's that can be attributed to the nationalization of Zulfikar Ali Bhutto but was compounded by a bloody confrontation between the urban and rural Sindh, in which the people of rural Sindh were totally alienated from the military govt of Genral Zia. His policies fostered a sense of deprivation among the natives which further deteriorated the climate of investment in the province. Among other things this shifting of industrial activity from Karachi to Punjab, while people from all over Pakistan continued to flock to the port city, turned Karachi into the social and demographic quagmire that it has become today.

Since the creation of Pakistan in 1947, the no. of companies incorporated in Karachi, every year, was far greater than in Punjab till 1978, the first year of Zia when 273 companies were incorporated in Punjab against 275 for Karachi. For three years Karachi and Punjab were neck to neck but there was no looking back for Punjab after 1982 when for the first time in Pakistan's history, the annual incorporation of companies in Punjab exceeded that of Karachi.

The geographic location of the companies listed on the stock exchange also confirms the trend of shift of manufacturing industries from Karachi to Punjab, specifically to Lahore and Faisalabad. On January 1,1997, only 184 if the 550 listed companies engaged in manufacturing activities were located in Karachi and Sindh, of which 91 were incorporated before Bhutto era. On the other hand, only 44 of the 250 listed companies engaged in manufacturing in Punjab belonged to the pre-Bhutto era.
 
 

Memons-The Sailor Businessmen of India

Table of Contents

Big and Beautiful

Robber Barons of Pakistan.