Zubair Umer’s appointment as Sindh Governor consolidates the rule of crony capitalism in Pakistan

The reason why Pakistan has been unable to see the change in its fortune is because the elite is interconnected and has taken a shape of large fraternity of common interests

The appointment of Zubair Umer as the new governor of Sindh, again, consolidates the narrative that the ruling class is here to facilitate crony capitalism in Pakistan. Someone who was in charge of the prime minister’s privatization programme, who was so viciously and passionately trying to cover up the blatant corruption of ruling party, will surely be expected to promote and ensure the protection of the vested interests of these crony capitalists, now as a governor.

Zubair Umer, an advocate of free market, certainly has strong credentials as he worked at senior positions in IBM successfully for decades. Being a corporate man he brought a big chunk of investment into the country, but his role as a technocrat in the current government has been controversial as he attempted to defend the absurd claims of the government in the Panama Papers case. He proved through his actions that having talent and using it for the betterment of the society are two different things altogether.

By the late 1960s Pakistan was still a primitive capitalistic society, where economic feudalism prevailed and decision making rested in few hands; the system worked with alliance among the landlords, industrialists and bureaucrats. With the passage of time, feudalism has taken a backseat and a more dominant role of capitalists has emerged. In the first term as the Prime Minister, Nawaz Sharif had taken an initiative to privatize the colossal loss making public entities.

Pakistani businessmen, historically, have a very strong relationship with the politicians and have cashed in on it by crafting legislation to their fancy. This has resulted in a humongous disparity within the society as the rich continued to make gains at the cost of the poor. 

Pakistan is the country governed by elites who marry their children to one another and control key positions in the government, banking industry, business and media corporations.  The same phenomenon is witnessed in India where business of marriages is key to control assets and keep wealth concentrated in few families.

The reason why Pakistan has been unable to see the change in its fortune is because the elite is interconnected and has taken a shape of large fraternity of common interests.

The capitalists in Pakistan are using privatization as a political weapon to benefit grossly. In an effort supposedly to liberate the fortune of ailing Pakistani companies, Nawaz government looks more likely to again benefit the capitalists of their choice. The objective of the government seems more to facilitate its class. As Neomi Klein has described, it seems far from opening the market, the capitalists and political elite are going to merge and trade favors to secure the rights to appropriate the precious resources in the public domain.

The helping hand also comes from the International Monetary Fund (IMF), which is a proven champion in securing the benefits from derailed economies. The IMF has a classical formula to force the ailing economies to bow down to its feet. Its basic three trademark demands are; privatization, government regulations and deep cuts to social spending. This is exactly what IMF has done in its latest program. Post completion, it boasted of Pakistan’s accomplishment in finishing the program in style, by accepting and implementing austerity.

Nawaz and co. appear to be advocates of the Chicago school policies, which results in powerful alliance between the class of extremely rich politicians and big corporates. According to Naomi Kelin, in his book, The Shock Doctrine: The Rise of Disaster Capitalism, in Russia the billionaire private players in the alliance are called ‘oligarchs’, in China, ‘princeling’, in Chile the ‘piranhas', in the US - 'Cheney campaign pioneers’.

There was no specific event which paved the way for disastrous capitalism, but this special class of families is termed as “elite”. Mehboobul Haq had identified the 22 families which were controlling big stakes in Pakistani industrial businesses and in particular the banking industry, which works as a kingpin, as it extends massive loans to such families to continue their dominance. The list has certainly grown and according to analysts, the rich families controlling the bulk of Pakistani industry has escalated to 44 families – but there is no concrete research to prove this claim.

After Suharto & Sons, in Indonesia, we have our very own Sharif & Sons. It will not be a surprise calling Nawaz a democratic dictator; he uses the iron fist in allegedly verbalizing national institutions to work in his favor, whether it’s NAB, FIA or the ECP. Whether Panama Leaks are going to work as watershed remains to be seen, but it is very much clear that it has certainly created a Catch 22 situation for PM Nawaz.

Since the vested interests of the businessmen are attached with that of politicians, therefore, the system can only be cleaner if there is disparity between the two parties. As over the years Pakistan has failed to counter such practices, institutions became weaker, individuals became stronger, which flourished cronyism.  Liberation from this quagmire is very difficult as crony capitalists seem to control most of the economic resources. As long as this system prevails and continues to flourish, political connections will continue to make few people hugely rich. There is much more to be done: institutional reforms and regulation of monopolies, promotion of competition and ensuring that sales of public entities and assets is absolutely transparent. Since Pakistan is a developing country expected to boom in the next few years, as per leading economists, all the efforts must be vested by opposition parties to force government to strengthen institutions to avoid wealth accumulating by a handful of elite.

Presently, the system – which they create and amend to their liking – seems to favor them. The appointment of the most trusted individuals in key positions is what works for them (elite), who play every card at their disposal to stay in complete control.

Waqas Shabbir

Waqas Shabbir is a Derby Business School graduate in Finance, currently working as a freelance writer having interest in South Asian and European economics. He previously worked as a study advisor at University of Derby

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