Much before the nuclear tests were ordered by Nawaz Sharif, we exhorted Mr Sharif to shun destabilising power plays and start concentrating on the economy (“Mayday! Mayday!” TFT December 19, 1997). But he didn’t listen to us. We argued against an opportunist alliance with the MQM in Karachi (“Impose Governor’s Rule in Sindh” TFT March 27, 1998). But he didn’t listen to us. We advised him to change his “vendetta-driven” IPP policy (“IPP policy is misplaced” TFT May 22, 1998). But he didn’t listen to us. Then, after India tested its bomb in May, we urged Mr Sharif to postpone testing in exchange for a multi-billion dollar package from Washington (“The road not taken” TFT May 15, 1998 and “It’s not now or never” TFT May 29, 1998). But he didn’t listen to us. After the tests, we argued in favour of a quick agreement with Washington on the question of the CTBT in exchange for an economic package and a waiver of the sanctions (“Wake up Nawaz Sharif” TFT June 5). But he didn’t listen to us. At no stage did we suggest anything which would have undermined our nuclear deterrent. Indeed, all our efforts were geared to a rational and realistic response to the multi-dimensional crisis of national security facing the country.
In the event, the last few months have been pretty depressing. Even as the bleeding economy and crumbling civil society have cried out for emergency aid, Mr Sharif has continued to embroil himself in “expediency-driven” policies (Kalabagh Dam, alliance with the MQM, Shariah Bill, IPP policy). In so doing, he has pushed Pakistan over the precipice. The economy has crashed. Pakistanis have seen billions of dollars in foreign currency accounts disappear without a trace. The country has already defaulted on its foreign payments by over US$ 1.4 billion and is on its knees begging for a “grace” period from our international donors. And now, after there is precious little left to salvage of the economy, and after having made the country hostage to Washington, Mr Sartaj Aziz, the foreign minister, says that Pakistan is ready to sign the CTBT and the NPT as well as impose a voluntary freeze on the production of fissile material much before the Fissile Material Cut-Off Treaty has actually been hammered out in Geneva. To all intents and purposes, therefore, it is clear that Mr Sharif is all set to go to Washington, with bated breath and whispering humility, and beg for a grand reprieve. How will he fare?
The run-up to Mr Sharif’s pilgrimage to Washington should indicate a measure of what lies ahead. At the very least, he must scrape the barrel to survive the “graces” extended to him until then. This means a “settlement” with the IMF and World Bank on a host of tough issues before he kneels before the lone superpower on December 2. Among other things, this implies a reversal of Mr Sharif’s “populist” policies on the IPPs and GST as well as a painful and urgent restructuring of WAPDA, KESC etc. Is he ready to do the needful?
The evidence at hand is not reassuring. Mr Sharif’s sudden decisions to reduce power rates by 30% for residential consumers and launch a blistering public attack on Hubco and the other IPPs have stunned everyone by their audacity and forced a last-minute cancellation of the IMF team’s visit to Pakistan. Is the prime minister hooked on to “nationalism”, as he proudly claims, or is he protecting his crooked “business” interests, as the opposition has doggedly charged? Consider the circumstances of the case in question.
On the face of it, it seems that Mr Sharif has simply had cold feet over agreeing to an increase in power rates under World Bank/IMF pressure. In fact, it is said that Mr Sharif’s popularity had hit such depths that he was left with no choice but to strike a populist stance and reclaim some legitimacy in the eyes of the people. But the truth may be stranger than this fiction.
Mr Sharif’s volte-face, we believe, could be linked to the fate of another important power project, Liberty Power (235 MW), which has been hanging fire for over two years now. The Bhutto government’s contract with Liberty Power in 1994 was seriously suspect for four major reasons. One, the government had broken its rules by guaranteeing pipeline quality gas to Liberty from the Qadirpur fields 40 km from the plant; two, the tariff of US$ 1.76 per mmbtu which the government agreed to charge Liberty for the gas was much lower than the equivalent tariff for less efficient furnace oil-fired plants which was estimated at US$ 2.4 per mmbtu. Three, the project was approved after the government’s cut-off date for approving new power projects; four, Liberty’s financial closure was suspected to be fraudulently contrived by the Bhutto government. It was alleged by the press during Ms Bhutto’s time that Mr Asif Zardari had secretly obtained a 20% stake in the project in exchange for giving the gas allocation concession to Liberty.
When Mr Sharif’s government came in, it announced its intention to cancel the contract with Liberty. But when construction work at the Liberty Power plant continued uninterrupted, it was thought that the government might be reconsidering the issue on the understanding that Liberty would not only pay a higher tariff for gas supplies by the government but also agree to a significant reduction in its power tariff charged to WAPDA. In the event, no such thing happened. Enter Mr Ibrahim Elwan, the major stake holder in Liberty Power.
Mr Elwan, of Egyptian origin, is a former World Bank employee who was head of the World Bank’s South Asia 3 Energy Division for many years before he was transferred to its Private Sector Energy Development Division in 1987. He put together the financial package for Hubco in 1990 but was forced to resign from the Bank in 1994 for alleged corruption. He then emerged as the main financier and stake holder in Liberty Power and, as chairman of Liberty Power, clinched a controversial amendment of the Hubco contract with the Bhutto government in late 1994.
Mr Elwan resigned as chairman of Liberty last year. But he is alleged not only to have secretly “renegotiated” the Liberty contract with Mr Sharif’s government without any benefit or concessions to the government of Pakistan, press reports (which have not been denied so far) also say that he has been acting as an unofficial advisor to the Ehtesab Bureau on the matter of the other IPPs. Mr Elwan was recently reported by The Washington Post to be under investigation again by the World Bank for alleged “corrupt practices” while working for the Bank earlier.
The story now acquires an interesting twist. Mr Ishaq Dar, the federal commerce minister who is at the centre of the corruption and money laundering allegations recently made by the British press against Mr Sharif, was a member of the Pakistani team sent to Washington under Mr Hafiz Pasha early October to negotiate a package with the IMF\World Bank. When The Washington Post story about fresh investigations by the World Bank into Mr Elwan’s earlier conduct broke, Mr Dar abruptly abandoned the negotiating team and rushed back to Pakistan. A day later, Mr Sharif unexpectedly launched his attack on the IPPs, including Hubco, for corrupt practices and announced his decision to reduce power rates by 30%. The Ehtesab Bureau now backed up the prime minister’s harangue against the IPPs by immediately lodging corruption cases against Hubco’s executives as well as against Mr Elwan. Meanwhile, it is learnt that the gas pipeline from Qadirpur to Liberty’s site has been completed and a gas connection has been readied for the plant which is expected to go into operation in the near future. Mr Elwan remains a major shareholder of Liberty.
The implication in this account is clear enough. After having cut an unsavoury secret “deal” with Mr Elwan, Mr Sharif may have now moved to protect his flank in anticipation of a potentially damaging fallout from the World Bank’s investigations against Mr Elwan.
Clearly, Mr Sharif’s track record is littered with broken promises and monumental blunders. Worse, his legitimacy has been swept away by an avalanche of corruption charges, all of which belie the feeble denials emanating from Raiwind. He has no credibility. The IMF, World Bank and the G-7 countries have got him by the short and curly. How can such a fatally flawed “leader” who has singularly dragged Pakistan to this tragic pass put up a spirited defence of Pakistan’s interests in Washington?