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Benazir Bhutto and Hashwani

In a meeting with Financial Writers Association in Islamabad on April 16,1996, Asif Zardari regretted that bureaucracy had not allowed businessmen to grow in Pakistan and stunted their growth by heavy taxation, regulations and controls.

With Commerce Secretary, Salman Farooqi sitting on his right, he remarked " Our bureaucracy behaves as if it is criminal to make money" and went on to narrate how he had argued with Petroleum Secretary only the previous evening about the proposed sale of Burmah Castrol's share in PPL to Hashwani which was to become a major controversy involving Asif Zardari and his wife's govt.

Zardari was irritated by the argument of Ministry of Petroleum that Hashwani had his hands full and therefore, he should give up the idea of acquiring the company for which he had struck the deal but required a NO OBJECTION CERTIFICATE (NOC) from the Ministry. He was completely unmindful of the stories that in 1989 Hashwani had to flee the country because of pressure to transfer the management of Pakistan Services Ltd operating a chain of five-star hotels to a Zardari nominee or face prosecution for recovery of a Rs 120 million loans he got Zia-ul-Haq to write off.

Hashwanis are Khoja Ismaeelis from Gujrat in India who migrated to Karachi in 1890 where Hussain Hashwani, father of Sadaruddin Hashwani became partner in a company, representing Releigh Brothers, one of the leading buyers of cotton worldwide. In 1947, when the two Hindu partners departed, Hussain Hashwani incorporated Hassan Ali and Company, in the name of his eldest son. The three Hashwani brothers were reigning as the Cotton King when cotton export business was nationalized in 1972, by Z A Bhutto.

Sadaruddin Hashwani is SADRU to friends and a corporate raider and social climber to others. He had started as small time trader in 1960, became a big name in the 1970 and 1980's and was ranked 20th in June, 1990 list of Pakistan's super rich by Monthly Herald. During three years of Benazir govt, it emerged as one of the fastest growing group whose real value is difficult to assess and can only be guesed.

Nationalization was the turning point for Hashwanis who acquired Kotri Textile, New Jubilee Insurance adn PICIC interests of the Fancy family, another Ismaeeli conglomerate who, jilted by nationalization were planning to shift business to the Middle East. The nationalization of banks by Z A Bhutto turned out to be another blessing for Sadaruddin Hashwani because his name and social contacts gave him an advantage in extracting loans from the nationalized commercial banks. While all big business families were out to condemn the nationalization of banks, he was the lone voice singing sweet melodies in favour of nationalized commercial banks.

" No one should be allowed to open a private bank in Pakistan. I am sorry, I do not see any credit-worthy Pakistani that you can allow to open a bank and even take a deposit.......From my personal experience, I can say that I was victimized when banking was in private hands because of of the conflict of interest. Whenever I approached a bank whose directors were involved in trading, they would not finance me. As far as I am concerned that nationalization of banks was a blessing in disguise" he declared in an interview with the monthly Herald in Jan 1985.

As part of its tourism policy, Z A Bhutto govt declared hotel as an idustry for securing bank loans. Sadaruddin Hashwani who was also active in real estate decided to build a hotel on a piece of land that he owned in busy Sadar area in Karachi. He applied for for a loan and sought allotment of land in Islamabad for a 5-star hotel. Bhutto who had planned Asian Games in Islamabad went out of the way to sanction the loan.

The White Paper on Economy released in 1979 by Zia ul Haq accused Bhutto of sanctioning a loan to Hashwani Hotels despite objections by the Pakistan Banking Council that Hashwani brothers were already defaulting in an earlier loan from United Bank Ltd, in respect of another of their trading concern. But Bhutto decided that the UBL should not link up the default of the other concern of the sponsors with the underwriting of shares of Hashwani Hotels. A loanof Rs 19.8 million was sanctioned by Investment Corporation of Pakistan.

Few years later, it was Zia ul Haq govt that sanctioned a loan facilitating Sadaruddin Hashwani to purchase Pakistan Services Ltd. That catapulated him the top of the hotel industry in Pakistan.

In 1985, when PIA decided to sell its 51% shares in Pakistan Services Ltd operating Pearl Continental Hotels, Hashwani walked away with the spoils with financing obtained from ICP. It was this Rs 120 million loan which was written off by Zia ul Haq that landed him in trouble with Zardari in 1988-90.

Benazir had compaigned against the practice of rescheduling and writing off loans and promised to recover the amount but did nothing to recover the written off loans, once she came to power. However pressure was put on Sadaruddin Hashwani to hand over his hotels to a nominee of Asif Zardari. Hashwani has denied that but lived out the first Benazir govt, in exile, in Europe. He denies even that any loan against was ever written off. "There was a dispute about the rate of mark-up and the matter was resolved", he said in an interview with the author. He also discounted reports that he had gone into self-exile, claiming that he had gone to Europe because he was feeling depressed after the death of his mother, Zaver Hashwani in 1989.

Sometimes in 1990, Sadaruddin Hashwani incorporated Zaver Petroleum, after his mother's name. In September 1993 he blocked the sale of Burma Castrol shares in Pakistan Petroleum Ltd to Prmier Oil, by obtaining a stay-order from Baluchistan High Court against the deal.

The Petroleum Policy announced by Benazir govt in January 1994 was tailor-made for Zever Petroleum since it provided that in the event of discovery, local companies included in an exploration consortium will be provided an additional 2.5% share out of govt's working interests, provided they have invested a minimum of five percent during exploration. Zever Petroleum was the only Pakistani Company active in the oil and gas exploration business at the time.

On August 7,1994, Zever Petroleum announced it has acquired the entire capital stock of Occidental Pakistan Inc (OPI) which was producing an estimated 10,000 barrels per day of crude from Dharnol oilfield in Potohar. A report in the daily Dawn from its Washington correspondent said Occidental of USA did not disclose the price in the document it submitted to the United States Security and Exchange Authority.

According to a detailed report in weekly Takbeer, Karachi, January 23,1997, the acquisition of Occidental Petroleum which operates Pakistan's second biggest oilfield at Dharnol in Potohar was facilitated by Asif Zardari who arranged a package of four loans from the Habib Bank and United Bank. The story is corroborated by the fact that the defaulters list published by caretaker Prime Minister Meraj Khalid listed Pak Company of Tempa, Florida, a Hashoo group company to be defaulting in the payment of loans worth Rs 264 million.

For long, the Corporate Law Authority (CLA) has been asking Hashwani to convert Hashwani Hotels into a public limited company, as required by the 1984 Company Law. He balked at the move on the plea that he was involved in litigation with his brother Akbar Hashwani. However, despite the litigation, CLA cleared the deal between Zever Petroleum and Occidental based on the mortgage of his equity in Hashwani Hotels and other companies.

According to the article in weekly Takbeer, ten percent equity in Occidental Pakistan International is owned by Hashwani Hotels, 30% by Pakistan Services Ltd, adn balance by Zever Petroleum. Under the company law, approval of 51% shareholders of a listed company is required before an investment can be made in an associated company. At no annual general meeting, approval of shareholders of Pakistan Services Ltd was sought to invest in Occidental.

Like Mansha and his associates who made a chain of inter-corporate investment to acquire privatized cement units, Hashwani painstakingly invested and divested in associated companies to reach the present heights. The controversial ICP loan which facilitated the take over of PSL provided him the bedrock on which he started building his empire.

In 1990, PSL decided to invest 1.5 million pound sterling (Rs 60 million) in a foreign subsidy named Pearl Continental Overseas Ltd which in turn set up another wholly owned subsidy called Pearl Continental Inc. It was Pearl Continental Inc which acquired 75% shares in Pak Properties of Tempa operating 200-room Embassy Suites Boca, Raton, Florida. It was against this hotel in Florida that Hashwani negotiated a loan from United Bank to acquire Occidental Pakistan.

Meanwhile the PSL management has paid only three dividens to shareholders, 20% in 1986, 10% in 1990 and 15% in 1993, although huge amounts were transferred abroad and new assets acquired by pledging PSL shares. Money was also being siphoned off quite openly to other companies of Hashoo group.

For example, PSL is being managed by another group company, Hashoo Holding Ltd, which is being paid Rs 4 million as management fee. Rent-a-car service at Hashwani Hotels and PSL is being provided by Pearl Tours and even the mineral water is supplied by an in-house company.

Hashwani family business currently stands split in three groups namely 1) Hashoo group headed by Sadaruddin Hashwani, 2) Hashwani group of Akbar Ali Hashwani and 3) Hassan Ali Hashwani group which was mainly been put together by Sadaruddin Hashwani " for my sons" i.e. children of late Hassan Ali Hashwani. These three groups comprise at least 40 companies.

Hahsoo group named after great grandfather is the biggest of the three and comprise of 27 companies, of which only three are listed on the stock exchange. The major non-listed companies include Zever Petroleum, Hashwani Hotels, Occidental Pakistan Inc bought for at least 50 million dollars and two subsidiaries in Europe and USA.

Hashwani and PPL

A brief background of the controversy that surrounds Pakistan Petroleum Ltd is appropriate to give the perspective of what Hashwani was bidding for, and why Asif Zardari was keen to that the deal got the required NOC from the Ministry of Petroleum.

Birmah Castrol Oil of Britain owned 63% interest in PPL which was operating Pakistan's biggest Sui gas field. It also held 8.5% interest in the country's second biggest Qadirpur gas field. PPL itself owned 7% shares in the Qadirpur field. Since 1985, Burmah Castrol has been trying to divest its shares in PPL since and Pakistan govt had torpedoed two bids to sell its shares to Shell International in 1986 and to a consortium of Al-Barka of Saudi Arabia and Premier of UK in 1992, by refusing to issue the required NOC.

In 1992, when the fedral govt was inclined to issue the required NOC for deal between Burmah Castrol and Premier-Albarka, it was challanged by Hashoo group in Baluchistan High Court on the plea that such a strategic interest ought not to be sold to a foreing firm. The Court directed the Ministry of Petroleum to reconsider the whole issue after listening to the parties concerned. However, Burmah Castrol decided to withdraw its offer to Premier Oil and the matter came to a standstill.

Once Burmah-Premier deal was called off, Hashoo group approached Burmah for the said sale but without success because Burmah viewed Hashoo to be reponsible for scuttling its deal with Premier Oil. However in 1995, Hashwani succeeded in striking a trilateral deal, through an intermediary, BHP of Australia. This is how it happened.

Hashwani has claimed that BHP was interested in acquiring the equity in Qadirpur Gas Field and thus, it was agreed by BHP and Castrol that BHP would preferably find a Pakistani buyer for the PPL and therefore, it approached Sadaruddin Hashwani and an agreement was reached. The agreement envisaged that BHP will acquire Burmah Castrol and PPL share in Qadirpur gas field and Hashoo will have the PPL interest in Sui and other fields. Thanks to Asif Zardari and Minister for Petroleum and Natural Resources, Anwar Saifullah, the deal was approved by Ministry. But a hue and cry in press adn group of nationalist Pakistanis led by former Finance Minister Dr. Mubashar Hassan led to an intervention by President Farooq Leghari and cancellation of the deal.

The PPI deal was cited by President Farooq Leghari as an exemple of corruption of Benazir govt in both his dismissal order and later in the detailed document presented to the Supreme Court.

The trilateral deal between Hashoo, BHP and Burmah can be interpreted or read in many ways, but it can be best explained by reproducing President Leghari's comments in the reply to Banazir Bhutto's petition filed in the Supreme Court, against the dismissal of her govt.

" The conduct of Hashoo group, which enjoyed full support of petitioner's (Benazir) govt, was clearly malafide. A gas field whose intrinsic value runs into billions of dollars was being allowed to be passed on to Hashoo group and the shadowy individuals behind the group whose identity can be easily guessed. It (Hashoo) had opposed the deal between Burmah Castrol and Premier on the plea that natural gas reserves should not be allowed to pass into the hands of a foreign company, yet it sought NOC for the same deal without divulging the fact that two companies, one of them foreign (BHP) were proposing to take over the share"

For Asif Zardari, Anwar Saifullah, Hashwani and likes, it was an ordinary commercial deal between a buyer and a seller and therefore, the Governement of Pakistan ought not to have intervened in the deal. It appeared a valid argument, but those peddling this argument would have ended up reaping billions of dollars in windfall at the cost of the common man in Pakistan.

The following facts were unknown till Khaild Anwar, the present Law Minister appearing on behalf of President Farooq Leghari gave details of a 15-year old deal between Pakistan Government and Burmah Castrol.

Khalid Anwar said that intrinsic value of Sui Gas field was 6 billion dollars and under the trilateral deal between Burmah, BHP and Hashoo, Sadaruddin Hashwani was getting the management of PPL for 24 million dollars.

But why was the Burmah Castrol keen to divest ite equity in Pakistan Petroleum Ltd? he asked and went on to provide the answer himself.

According to the Khalid Anwar, Burmah Castrol was keen to find a buyer for its PPL shares because it was receiving a paltry return on equity held in the company which had been restricted to Rs 60 million per annum, under a Gas Purchase Agreement (GPA) signed between Pakistan Government and Burmah Castrol in 1982.

" This was one of the few agreements in which Pakistani bureaucrates succeeded to extract a good deal visa vis a multinational " Khalid Anwar said. An official of Ministry of Petroleum later told the author that the said GPA was a cost-plus agreement under which Burmah was allowed a repatriation of 25% return on its equity of Rs 240 million held in PPL.

Pakistan is already paying an unbearable price for the thermal policy of Benazir govt. If PPL deal was bulldozed through the Ministry of Petroleum and Natural Resources, it would have played havoc with gas prices, landing the people of Pakistan in the clutches of national and international Shylocks, because those negotiating the purchase of PPL had their eyes fixed on the year 2002 and beyond when the PPL ifrastructure will be used to store and market imported gas.

Who Owns Pakistan

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Robber Barrons of Pakistan