The Military’s Long Reach

Military Inc.: Inside Pakistan’s Military Economy
By Ayesha Siddiqa
304 pages, London:
Pluto Press, 2007

In 2002, I visited Okara, Pakistan, to report on a peasant protest movement. The farmers, many of whose families had toiled there as sharecroppers for generations, were suspicious of a new land tenure agreement that the military, which owns and runs the farm, was imposing on them. To ensure the farmers signed up, hundreds of paramilitary Rangers laid siege to the farm’s 22 recalcitrant villages. The resulting violence claimed eight lives. By the time I showed up, a Pakistani lieutenant colonel and several of his armed men were standing guard as one of the last groups of largely illiterate farmers put their thumbprints and X’s on the new documents. "We are being forced to sign," one farmer dared to say.

What would the powerful, nuclear-armed Pakistani military have to gain by riding herd over a 16,000-acre dairy, meat, and grain farm in the heart of the fertile Punjab plain? It’s zealously protecting its growing economic empire. The farm at Okara is peanuts compared to the military’s other expansive interests that include sprawling urban housing developments, rice and sugar mills, cement and fertilizer factories, banking, insurance, breakfast cereals, and road and bridge construction, to name just a few. Two so-called welfare institutions for Pakistani servicemen, the Fauji Foundation and the Army Welfare Trust, are the country’s largest business conglomerates. Yet the military holds onto Okara as if it were a jewel in its economic crown. No slice of the armed forces’ extensive agricultural, business, industrial, and real estate holdings that reach into the billions of dollars is too small to protect, it seems. Pakistani President Pervez Musharraf may lament the plight of his country’s 30 million landless peasants, but he doesn’t talk of land reform at Okara.

In Pakistan, the military almost always has its way. Military-run regimes have ruled the country for half of its 60 years. And each successive military regime seems to tighten the armed forces’ grip over the state even further. The past eight years of Musharraf’s government have been no exception. Under him — a four-star general and the Army’s chief of staff — the military has accumulated more political power than ever. And with the generals’ increased political clout have flowed ever more perks, privileges, and economic benefits to the 650,000-strong armed forces. "All countries have armies, but in Pakistan things are reversed," says Pakistani nuclear physicist Pervez Hoodbhoy. "Here, it is the Army that has a country."

Until recently, few had a clue just how true that was. Like the military’s nuclear weapons program, the scope of the armed forces’ economic domain has been a closely held secret. Now, with the May publication of Military Inc.: Inside Pakistan’s Military Economy, by Pakistani defense analyst Ayesha Siddiqa, the world is finally getting a glimpse of the military’s massive holdings. By poring over new public documents, interviewing captains of the military’s industries, all retired senior generals, and finding a few gutsy whistle-blowers, Siddiqa has done an admirable — indeed courageous — job by delving into this important and largely taboo subject.

Not surprisingly, Pakistan’s military didn’t take the publication of Military Inc. lightly. For her book’s launch, Siddiqa thought she had secured the elite Islamabad Club, a favorite retreat for senior officers. But when the military hierarchy got wind of it, they scuttled the event. The generals also ensured that no premier hotel or restaurant would host the book launch, either. Siddiqa settled for a more discreet location in the offices of a sympathetic nongovernmental organization. But the military’s effort to limit publicity only served to whet the public’s appetite. For a book that is largely a dry, academic, and somewhat repetitive read, it is selling out at bookstores across the country, precisely because Pakistanis want to know if the armed services are as fat and privileged as they suspect.

They certainly are. As Siddiqa points out, the $4.6 billion defense budget is astounding enough — especially considering that its budget isn’t debated by parliament, and that lawmakers simply rubber-stamp what the military-controlled government proposes. But what really sets the military apart are its mushrooming economic stakes, which have made the armed forces, especially the pampered officer corps, a financially independent, elite ruling class that enjoys benefits far beyond the usual perks of free housing, healthcare, education, clubs, and recreational facilities.

Land is arguably the military’s biggest business and most lavish perk. Siddiqa offers an inside look at how the military’s land grabs have made it the country’s largest real estate developer and one of its biggest landlords. Using its political leverage, the military acquires both public and private lands at a fraction of market cost. It then develops the land, frequently using military-connected contractors, turning the projects into housing estates or commercial ventures such as shopping plazas. Senior officers are often allowed to purchase and quickly turn over several plots, making them overnight millionaires. Sometimes, the military simply takes what it wants. The paramilitary Rangers have seized fishing rights to more than 20 lakes in Sindh Province, further marginalizing hundreds of poor fishermen.

Siddiqa has also uncovered for the first time how deeply the military’s tentacles run into the private sector. The military’s four foundations have holdings in more than 700 companies. The addition of its extensive real estate holdings to that stake gives them at least a 10 percent share of the country’s private-sector assets, and significant economic leverage. Of the 96 enterprises run outright by the four welfare foundations, only nine are publicly listed and subject to public scrutiny, she says. Under Pakistani law, the foundations are not obliged to open their balance sheets to either the public or Pakistan’s auditor general.

Siddiqa also explodes one of the myths that military leaders have long promoted: that military businesses are as, or more, efficient than those in the private sector, and that critics are simply envious of that success. Musharraf and other generals have always claimed that military entrepreneurship is a plus for the economy. Siddiqa proves otherwise. Retired officers heading up the military-controlled firms are largely to blame for the companies’ poor management and faulty investment strategies. And military ventures, whether successful or not, regularly benefit from generous government subsidies and bailouts. The profitable Fauji Fertilizer complexes, for example, receive subsidized natural gas; their competitors don’t. In 2001, the government shelled out some $93 million to cover a long list of the Army Welfare Trust’s loss-making projects producing everything from shoes to cement to pharmaceuticals. And even the military’s Frontier Works Organization, the country’s largest road contractor, lost $70 million in 2000.

The military tenaciously defends its economic ventures, saying it provides for the welfare of 9.1 million people, including retired soldiers and their dependents who would have a tough time making ends meet on their modest pensions. That’s fair enough. Fauji runs 276 military welfare operations, 11 hospitals, and 90 schools. The Army Welfare Trust provides jobs to 5,000 military retirees, as well as to thousands of civilians.

But the real philosophical basis for the military’s sprawling interests stems less from a concern for soldiers’ welfare, Siddiqa argues, and more from the same arrogance that is used to justify military coups: that only the military possesses the discipline, training, and efficiency to run a country and a company, or indeed a civil service or university. To an increasingly cocksure military, she says, these economic privileges are seen as well-deserved tribute for defending the country. Of course, this predatory attitude only widens the yawning divide between the military and civilians.

Worse yet, the military’s enormous vested interests in the economy are driving it to maintain and expand its political influence at all costs, thus lessening, if not foreclosing, the possibility that the generals will ever return to the barracks and allow democratic institutions to grow and flourish. As she rightly concludes, that’s the heaviest price that Pakistanis are paying for their military, inc.