In the first phase, the emphasis of government policies was on increasing the size of the cake, rather than trying to distribute it equitably among the different segments of the Pakistan. "Accumulate, accumulate, thy is Prophet, thy is Moses" was given currency and Pakistan was portrayed as a country on way to become an Asian Tiger. Bank credits and industrial licenses were monopolised by a privileged commercial class and industries set up by government were divested in favour of big industrialists.
The over-emphasis on GNP during Field Marshal Ayub Khan's Decade of Development (1958-68) divided the society into privileged and under privileged and it was the iniquitous economic and regional development of this era which led to the explosive situation of the 1970's culminating in the severance of Pakistan and induction into power os a socialist government of Z A Bhutto.
The second phase, (1971-77) under Pakistan People's Party was the era of dismantling monopolies, nationalization, hitting at the power base of industrial barons and clipping their wings while 11 years rule of Zia ul Haq that followed was a period of status quo for the economy. It came to an end in Aug 1998 with the C-130 crash that killied Zia.
During her first term, Benazir Bhutto took a small step towards privatization by setting up a National Disinvestment Authority which identified 14 units for privatization. Otherwise 1988-90 under Benazir was an inconsequential period for Pakistan's economy because in this period she could not come to grips with real economic problem and her interest in economy was only marginal.
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 privatization of state owned enterprises to big industrial groups. Nationalization was replaced by such a grotesque privatization that world reknown economist Dr. Mahboob ul Haq saw Pakistan ending up in Latin American quagmire.
The first Nawaz government was followed by second Benazir government which essentially continued same policies, only with the greater mismanagement and corruption.
Only 159 companies were incorporated in the area presently comprising Pakistan. The first industrial project launched in independent Pakistan was Dentonic Tooth Powder and inauguration of Pakistan's first bottled drink, Pakola was such a big event that it was performed by the prime minister of Pakistan.
But that does not mean that there was dearth of capital or Muslims lacked entrepreneurial skills since several Muslim families and groups were well entrenched in business and industry. Several entrepreneurs who came to be dubbed as 22 families in the 1970s apparently had considerable economic power at the time Pakistan was born. Just like the Marwaris who joined All India Congress, several of these Muslim businessmen either joined Muslim League or financed the struggle for Pakistan. This was particularly true of Memon business community which presented people like Sir Abdullah Haroon and Sir Dawood Adamjee, as rallying point for Muslim industrialilsts and businessmen.
The Indian books about the business communities of India have mentioned Sir Adamjee Peerbhoy who made his first millions in late 19th century as a shipbuilder. Sir Dawood Adamjee, the founder of present day Adamjee group had established a commodity trading company in Rangoon, Burma in 1894, followed by a big match factory and rice mills, also in Rangoon and a jute mill at Calcutta in 1937. Sir Dawood Adamjee, thus headed a big industrial set up and export trade of rice and jute which allowed him to play a Birla-like role in Pakistan Muslim League.
Haroons had migrated to Karachi from Gujrat towards the end of last century and made their fortune in second-hand clothing and sugar trading in the beginning of the 20th century, winning the title of Sugar King. The family launched its first indutrial project, Moti Sugar Mills in Bihar province in 1940. Haroon House in Karachi was the centre of meetings for Pakistan movement in Sindh.
Ahmad Dawood, another Memon businessman who was to emerge as the uncrowned king of Pakistani businessmen under President Ayub Khan, is reported to set up 26 offices and shops in various cities all over India and was on the verge of setting up a viscos plant as a joint venture with leading Hindu industrialist Nagin Das Phool Chand when Pakistan came into existence and he decided to migrate to Pakistan along " with his Chevy car".
Saigols had set up a Rubber Shoes Factory at Calcutta in 1930 and were planning their first textile mills, also at Calcutta, when Pakistan was born. The machinery was shifted to Pakistan to set up Kohinoor Textile Mills at Faisalabad on personal intervention of the country's founder Quaid-e-Azam Mohammad Ali Jinnah. Nasim Saigol of the Saigol group claimed in an interview with the author that the first Letter of Credit opened with State Bank of Pakistan was for the setting up of Kohinoor Textile Mills at Faisalabad.
Habib and Sons, the principal company of the House of Habib was incorporated in 1920 and was leading in metal business including gold bricks with the " Loin of Ali" embossed on it. An advertisement in daily Dawn of August 15, 1947 boasted that Habib Bank has a paid-up capital of Rs 5 million and deposits of Rs 122 million. Yet it was considered as " the least of several projects the Habibians had developed in India".
Bawanies had set up their first hosiery mill at Rangoon in Burma, in 1931. They were first among the Memons to open a purchase office in the Japanese city of Kobe and contribute in the construction of Japan's first mosque. Ahamd Karim Bawany, founder of the Bawany dynasty, also financed the first Pakistani delegation to United Nation in 1950, under the leadership of Dr Amanullah Khan.
In 1947, Mian Mohammad Ismaeel of the Colony group was operating a chain of 14 ginning factories and four flour mills while work was in progress on Colony Textile Mills which was to become the first textile mill to be commissioned in independent Pakistan.
Hashwanies slated to join the rank of the 22 families in the 1990 had migrated to Karachi from Gujrat in 1885 and were representing Raleigh Brothers, in a joint venture with two Hindu partners who left in 1947, leaving the business to Hussain Hashwani, father of sadruddin Hashwnani who incorporated Hassan Ali and Company.
The 1970 edition of the Biographical Encyclopedia of Pakistan, 1970 published by international Publisher ( Pakistan) Ltd, Lahore included sketches of several Muslim industrialists who were running business in India before Pakistan was born. For example the Encyclopedia describes Abdul Sattar Ahmad son of Seth Ahmad Abdul Karim of Jetpur, as one of the very few families who took to industries before independence. When Pakistan was born, Abdul Sattar and his family migrated to Pakistan " leaving behind vast moveable and immovable property". Sattar himself moved to Dhaka where he set up Sattar Match Factory at Shampur, 4 miles from Dacca, Karim Jute Mills, Dacca Jute Mills and Karim Commercial Company.
Another remarkable person mentioned in the Encyclopedia is Khan Rahim Baksh Khan who was " the first Muslim industrialist to venture into manufacture of paint industry, by setting up a paint plant in Hyderabad, Deccan, India, in 1933 which was to provide nucleus of five industries in a new industrial township called Rahimabad near Hyderabad Deccan. On migration to Pakistan, he set up a paint manufacturing factory at Karachi in 1949, added two more, one in Karachi and one in East Pakistan. He set up a joint venture in Lebanon, managed by Buxlay Paints, became the biggest exporter of paints from Pakistan in 1970 and was reported to have set up Khan Rahim Paint Research Institute in Karachi. Nothing is known today about Khan Rahim Baksh or his institute.
Amir Sultan Chinoy who died in Karachi on January 21, 1998 was famous for interest in horse racing and the famous Manjri Stud Farms Ltd. After migrating to Pakistan he founded Pak Chemicals Ltd, the first major chemical industry to be established in the country. His father, Sir Sultan Chinoy is reported to have introduced Shell Petrol, Chevrolet cars, wireless telegraphy and broadcasting equipment in India.
Other industrialists of considerable means and repute who streamed to Pakistan at the time of independence included Ahmad Jaffer, Mohammad Ali Rangoonwala, C M Latif of Batala Engineering Company, Dost Mohammad Haji Monnoo and Habib Ahmad Haji (Aragwala) of Batava, Kathiawar, who was running grain and oil seed business in Calcutta with 50 branches all over India.
Syed Maratib Ali was a well known name in the undivided India and his mansion Ashiana in Lahore was counted among the wealthiest houses in th region. Tabanis had set up their offices in Singapore, Japan and London as early as 1916.
A microscopic business community from Chiniot in Central Punjab became a dominant industrial force in the 1990. At the time of creation of Pakistan they were exclusively engaged, with the exception of Colony / Maula Baksh group, in trade of hides and skins.
A few Muslim industrialists stayed back, prospered and flourished in India. For example the Monopoly Commission of India in 1965 identified one House of Amin, as one of the leading industrial groups of India. It was trilateral venture by B D Amin, an agriculturist from Gujrat, with partners T K Jaggar and A S Kotibakshkar. The descendents of the two Hindu partners however, claimed that no group with this name ever existed.
But the names mentioned above were random success stories of Muslims in the Indian Sub-continent. It was the creation of Pakistan in 1947 which gave the opportunity of life time to people who were to grow into the 22 families in the 1960.
" It was like gold rush of United States", G M Adamjee observed in an interview with the daily Dawn in 1995 while talking about the opportunities created by the creation of Pakistan, as an independent state on the world map.
Majority of 22 the families of the 1970's Pakistan, started as traders and exporters and only 17 of 100 people at the top in industry interviewed by Gustav Papanek in the 1960 reported to have experience in indutry prior to 1947. First and Second five years Plans also noted that it were people in the trading who had surplus capital and, therefore, they should diversify in manufacturing and industry. The Korean boom of the early 1950's helped these traders in reaping fortunes and enter manufacturing.
Signals about a massive concentration of wealth started emitting from the economy as early as 1959, when a Credit Inquiry Committee of State Bank of Pakistan, revealed that 222 depositors were making use of 2/3rd of the total credit facilities offered by the banking system. It was around this time that Papanek in his first study established that of the nearly 3,000 individual firms in the country, 24 individuals, firms and companies controlled nearly half of the industrial assets.
But the question of monopolies exploded wth full force when in his famous speech, Dr Mahboob ul Haq, Chief Economists, Planning Commission, told a meeting in Karachi that economy of Pakistan had come to be dominated by 22 families who owned 66% of the total industrial assets, 70% of insurance and 80% of banking. His list of the top seven included Saigols, Habib, Dawood, Colony, Adamjee, Crescent and Valika.
Prof Lawrence White who, at that time was working at the USAID office in Pakistan, measured the concetration of wealth on the basis of firms listed on Karachi Stock Exchange and found that 43 families or groups controlled 98% of 197 non-financial companies, accounting for 53% of the total assets. According to White, the top four (Saigols, Dawood, Adamjee and Amin) controlled 20% of total assets, the top ten families controlled one third of the total while the top 30 owned over half of the listed assets.
The concentration of wealth and iniquitous regional development was to become the breeding ground for separatists of East Pakistan and Bhutto's nationalization.
Dawood lost Karnaphuli Paper Mills, Karnaphuli Rayon, a most modern jute mills, Dawood Shipping and host of trading and warehousing facilities. Adamjee lost six tea gardens in Sylhet and six industrial units including their biggest jute mills in Asia while Jalil, ranked fourth by Lawrence White lost five units and was left with only one unit in West Pakistan.
Bawany lost Latif Bawany Jute Mills, Habib Ahmad Haji (Aragwala) lost Arg Ltd Chittgong and a splinter Monnoo group lost Olympia Textile Mills at Tongi. It must be purely for nostalgic reasons that fifteen years after their return to Pakistan, Monnoos incorporated a company with the same name, now listed on Karachi Stock Exchange.
Atla group lost Honda Motorcycle Plant in East Pakistan " reducing me to pauper overnight and forcing me to shift from a Bunglow to a Flat ", group chairman Yusuf Sherazi said in an interview.
Economic history books and researchers have talked only about the impact of East Pakistan debacle on big business while, in fact thousands of small and medium sized businessmen were affected by the seperation of East Pakistan.
After the seperation, the Bangladesh govt nationalized 260 units belonging to non-Bangalis, and with assets exceeding Rs 105 million each while several hundred smaller and medium sized units abandoned by the people of West Pakistan origin were sold to the natives. But, a remarkable feature of nationalization in the newborn state was that the industrial undertakings of Khojas and Bohras were not touched.
" Not all foreign non-Bangali bourgeois's were affected and state control was not extended to enterprises which belonged to dealers from merchant Muslim class of Khojas and Bohras", according to Yuri Gangsovak in an article " Social structures in Bangladesh".
The seperation of East Pakistan was preceded by years of social and political unrest during which several leading industrialists, foreseeing the coming events, moved lock stock and barrels to West Pakistan. In less than two decades some of them, like Saphire-Gulistan, Fecto, Monnoos, Chakwal and Rupali were to join the fraternity of the top industrial families.
" My brothers realized many years before 1971 that East Pakistan would one day be independent. From 1968 onwards they had stopped living there (and investing) and had concentrated their investment in West Pakistan", said Jehangir Monnoo in retrospect in an interview with the weekly, The Friday Times.
Chakwal group moved to West Pakistan from East Pakistan in 1971 and machinery ordered for a proposed textile factory in East Pakistan was delivered to West Pakistan and onward to Chakwal for a spinning factory. This textile mill was to become the nucleus of an empire that now embraces in its fold 14 companies including seven textile mills, a big fibre plant and a cement factory.
Both Pakistan Peoples Party (PPP) of Z A Bhutto and Awami League (AL) of Mujeb-ur-Rehman, which emerged as the biggest parties in the 1970 elections in West Pakistan and East Pakistan respectively had promised nationalization. The 20,000 worded manifesto of PPP had clearly declared that " all banks and insurance companies will be nationalized and all major sources of production will be placed in the public sector.
The manifesto specifically referred to the need for the elimination of monopolies and said that " the concentration of wealth ( in Pakistan) is so excessive that the benefits of industrialization are being passed on neither to the wage-earners nor even to greater part of the middle class". It identified Iron and steel, non-ferrous metals, heavy engineering, machine tools, chemicals, shipbuilding, motor assembly and manufacturing equipment for electric power production, distribution and use, electronics, production of arms, ammunition and armaments, cement and paper industry to be placed in the public sector.
However, the transfer of power was delayed because of the procrastination of President General Yahya Khan and the friction between the two main political parties. That gave ample time to the national press and the business community to debate the merits and demerits of nationalization and its consequences.
Nawab Haider Naqvi, in an article published in the daily Dawn of February 2, 1971, forcefully argued against the nationalization of banks on the ground that it would create an administrative nightmare. He rebutted the argument that banks had facilitated the concentration of wealth in few hands and pointed out that the size and composition of credit, flowing from the banking system is determined by the fiscal, investment and commercial policies of the govt and it were these policies rather than the banks which promoted concentration of wealth in few hands.
" The important point to note is that the govt has stretched every nerve to cause resource flow in industrial sector to trigger growth, while a virtual freeze has been imposed on wages. The industrialists have been drugged with extra strong incentives like accelerated depreciation allowances......We should not nationalize banks for the wrog reasons. The nationalization should be positive one. The economic rationale behid such a move should be clearly spelt out. We should settle for the second best i.e the banking system in private hands regulated by the State Bank, because nationalization is administratively infeasible", he concluded prophetically.
Private sector, used to pampering by govt did not view the threat of nationalization seriously and like an ostrich burying its head in the sand, kept denying the obvious. Advertisements were placed in the newspapers trying to disprove that bulk of the banking and isurance business was controlled by the 22 families. A supplement on insurance business in daily Dawn of February 19, 1971 said that " the advocate of insurance's nationalization believe that insurance is in hands of the 22 families and it was not true". Nothing could have been farther from the truth than this statement, because even today, in 1998, the general insurance business which was not nationalized is in the hands of the 22 families.
It was to pacify growing social unrest and resentment against the big business that General Yahya Khan promulgated the Monopolies and Restrictive Trade Practices, Control and Prevention Ordinance, February 1971, providing for the setting up of Monopoly Control Authority to " take measures against undue concentration of economic power and restrictive trade practices". This was a comprehensive law, clearly spelling out the situation which shall be deemed to constitute under concentration of economic power, monopoly power and unreasonable trade practices.
The explanatory note with the ordinance defined the monopoly situations stating specifically that " creation or maintenance of unreasonable monopoly power in any market has been prohibited". Market was defined to " mean the geographical region i which competition in the production or sale of such goods or provision of services take place.
The law empowered the Monopoly Control Authority to ask the management of a private limited company to go public if its assets exceeded Rs 50 million. Similarly all such dealings were prohibited with an associated undertaking which benefited or were likely to benefit the shareholders of such undertakings, to the prejudice of another associated undertaking.
Acquisition by one
person or undertaking, of the stocks or assets of any other person where
the effects are likely creation of a monopoly power were prohibited. The
law also prohibited financial institutions and insurance companies from
making loans to firms associated with them on terms more favorable to than
those to unrelated firms. The law hit at the various methods which have
been instrumental in the accumulation of capital in few hands. Ironically
the key provisions of this ordinance remained unenforced except during
1972-77, with the result that caretaker govt of Moeen Qureshi in 1993 had
to reincorporate some of its provisions in another ordinance. This ordinance
was also allowed to lapse.