A Merchant Army

Besides ruling Pakistan and controlling its nuclear, defense and foreign policies, the military is also that country's largest and most profitable business conglomerate. This is at least part of the reason why its stranglehold over the country's politics and its vested interests in the nation's continuous militarisation, will not cease. Pakistan, it is useful to recall, expends over a third of its annual budget on the Defense, and its military has historically defined the country's direction and destiny through periods of both democratic and military rule, to the detriment of civil governance.

Today, nearly 1,200 serving and retired military officers - mostly from the army - run a web of banks, transport, road building, communication and construction businesses worth billions of dollars, which comprise

More specifically, the 'Fauji' or solider foundations also own and operate a private airline, countrywide transport corporations, hundreds of educational institutions, power plants, steel, fertilizer and cement factories, and even produce consumer goods like sugar, electronic items and breakfast cereals. Some of these commercial operations have also been directly involved in gun-running and drug smuggling, generating huge hidden resources for Pakistan's campaigns of terrorism and subversion in Afghanistan and India.

Security sources disclose that personnel drawn from these Foundations worked with the Inter Services Intelligence Directorate (ISID) and the extremist Islamist organizations training, arming and motivating Mujahideen cadres to fight the Soviet occupation of Afghanistan through the 1980's. A few years later they raised and installed the Taliban in Kabul, providing the Islamic militia financial and logistic support till it was displaced by the US in 2001.

Analyst Satish Kumar who edits India's National Security Annual Review said the Pakistan Army is not only the largest real estate owner, but also the country's 'biggest' commercial player. "It is not just a defense force, but a ruling class oligarchy with substantial economic interests to safeguard" Kumar stated, adding that it is unlikely that the military will relinquish this role in the foreseeable future.

Military juntas have ruled Pakistan directly for more than for half its life after independence in 1947, appropriating large tracts of hugely expensive urban land at throwaway prices to establish grandiose housing colonies. During Pakistan's erratic experiments with democracy, the Army headquartered at Rawalpindi, the garrison town adjoining the capital Islamabad, has exercised thinly veiled control over the civilian administrations, significantly strengthening its financial empire. Pakistani's joke that if every serving and retired military officer protects his own property, their country would be one of the best defended in the region.

The Army's business interests broadly fall into three categories: those controlled directly by the Chief of Army Staff; the formalized military sector, like ordnance and state-owned armament factories managed by the defense ministry; and the four 'charitable trusts' (Fauji Foundations) that operate autonomously like private corporations in which serving and former Servicemen run factories and manufacturing units producing a range of goods and services.

The first group includes the National Highway Authority (NHA) and Frontier Works Organisation (FWO), each headed by a two-star General; and the Special Communications Organisation amply supported by the Signal Corps and the National Logistics Cell that operates a significant, if seldom discussed, country wide trucking operation.

Aided by the Army Engineering Corps, the army's road building conglomerate constructed the precipitous Karakoram Highway in the 1980's connecting Pakistan to military and nuclear ally China, besides laying down roads across the country. And while the Communications Organisation, working with the Signals Corps, wires up the country, especially Pakistan-administered Kashmir to the mainland, the Logistics Cell is possibly the army's most profitable operation. Established by Pakistan's former dictator, General Mohammad Zia-ul-Haq in the late 1970's, the Cell's trailer trucks would pick up armaments and ordnance, including assault rifles and Stinger missiles, the Soviet Union's eventual bete noire in Afghanistan, from the southern port city of Karachi. These armaments were offloaded from ships chartered by America's Central Intelligence Agency, which backed Kabul's 'unholy war' against Moscow. These convoys ferried their lethal cargo to the North West Frontier Province and neighbouring Balochistan, bordering Afghanistan, to Mujahideen groups fighting the Soviet Army.

After 1996, this massive fleet of trucks, controlled mostly by Pashtun tribesmen, was effectively used by the Inter Services Intelligence (ISI) Directorate to supply the Taliban with weapons, fuel and food. The trucks and their plucky drivers played a major role in establishing Taliban control, an operation that has been only sparsely documented.

Intelligence sources said these trailers also transported heroin from numerous laboratories in several of the tribal Agencies along the Pakistan-Afghan border to various cities like Karachi, from where the narcotic makes its way to the West. Pakistani sources reveal that the heroin-loaded convoys were provided unprecedented security and were rarely, if at all, checked en route. But the Fauji or Solider Foundation, the largest industrial conglomerate with an annual turnover of $ 500 million and profits of over $ 41 million is the 'jewel' in the Army's crown. Headed by a three-star General, it provides ' womb to tomb ' facilities for nearly nine million retired servicemen that include re-settlement and re-employment schemes in military-run cement, power, fertilizer and sugar factories. It also grants retired soldiers land in villages along the line of control (LoC) strung across Pakistan's eastern frontier with India, providing the disturbed region with a trained reservoir of manpower in the event of hostilities.

Having retired soldiers in the border regions also makes it easier for the Pakistani Army to infiltrate armed militants across the LoC into Kashmir to fuel the ongoing insurgency. The Army Welfare Trust, managed by General Headquarters (GHQ), employs around 6,000 former soldiers and runs the Askari Commercial Bank, one of Pakistan's most profitable Banks. Like his predecessors, the Chief of Army Staff General Pervez Musharraf who also doubles as President, heads the Bank 's governing board, which comprises senior officers. The Trust runs around 25 other projects worth around Rs. 17 billion ($ 354 million).

Former Pakistan Air Force officers run the 26-year old Shaheen Foundation, with an annual turnover of Rs. 600 million, that operates Shaheen Airways, the country's profitable and only 'private' airline. Naval officers are in-charge of the Bahria Foundation that manages around 20, mostly civilian, projects also at great profit.

This is, at least in part, why the Pakistani Army is reluctant to make way for a civilian administration. Its economic and, by extension, political interests lie in perpetuating the bazaar they control. Beyond internal supervision, moreover, there is no public accountability for the moneys the Army controls. Worse, private enterprise and overseas investment is also hostage to military diktats. Though Pakistan's Gross Domestic Product (GDP) has, over the past year, registered a six per cent growth, this has mainly been due to the inflow of American money funnelled to Islamabad for its 'help' in the global war against terrorism, or other financial relief packages from international lending institutions. This is an aspect that strategists need to take into account while dealing with 'Pakistan PLC'.

Rahul Bedi is Delhi Correspondent, Jane's Defence Weekly. Courtesy, the South Asia Intelligence Review of the South Asia Terrorism Portal