December issue 2006

The role of the army in Pakistani politics has received much attention. However, the army has over the years also acquired other vast and varied economic interests. While reports of the extensive land-holdings of the army have featured in the press (including this magazine), the army is also into other businesses — from leasing and dairy farms, to breakfast cereals. While virtually an entire generation of middle-class Pakistanis have grown up having Fauji Cornflakes for breakfast, few perhaps have focused on its parent company, the Fauji Foundation, a quintessential army concern. Another umbrella army organisation is the Army Welfare Trust (AWT). The mission statement of AWT declares: “It is a major obligation of the army to look after the welfare and rehabilitation of retired members, who have devoted the best part of their lives to the motherland.” The website of the AWT (www.awt.com.pk) further declares that looking after retired army personnel is “regarded by the army as sacrosanct and a bounded duty.”

It is interesting how the army has evolved for itself a comprehensive system to look after its own, which is sadly missing in the civilian sector. However, is this system run by public or private companies? If they are private companies, then public money and other resources cannot be used for their operations. If they are public corporations, their chief executives are accountable to public representatives and the public at large.

The parliamentarians themselves contend they are not clear whether the Fauji Foundation and the Army Welfare Trust are public or private concerns. In the Senate, Senator Farhatullah Babar questioned the workings of the Fauji Foundation. The Federal Education Minister, Lt. General (r) Javed Ashraf Qazi, responded to his query by stating the official position: Fauji Foundation is a private entity. Earlier, in 2005, when a parliamentary committee had summoned the Managing Director (MD) of the Fauji Foundation, he refused to appear before them saying he was not accountable to the committee as Fauji Foundation was a private company. The government took the same stance. On November 22, 2005, the federal education minister declared on the floor of the house that Fauji Foundation was not given any public money. The minister stated: “It (Fauji Foundation) has been given no money. This [perception] is not correct. If at all, only a guarantee [was] given to the Army Welfare Trust, not to Fauji Foundation.”

However, on December 28, 2005, while giving a written reply to a question of compensation, Minister of State for Finance, Omar Ayub Khan declared, “The government of Pakistan agreed to compensation for the losses incurred by the Fauji Jordan Fertiliser Company, renamed Fauji Fertiliser Bin Qasim Ltd. in the wake of non-implementation of the provisions of the Fertiliser Policy, 1989. The total amount of five billion rupees was agreed to be disbursed to the company over a period of seven years, starting from the year 2002.” The payment of this compensation made Fauji Fertiliser the only fertiliser company in the country to be compensated.

Given this backdrop, the education minister was asked why he had declared that Fauji Foundation had not benefited from any public funds. He replied that there was no contradiction between what he had stated in the Senate and what the finance minister had said in reply to a question about the compensation paid to the Fauji Jordan Fertiliser Company. General Qazi also said that the Fauji Jordan Fertiliser Company was an independent entity and the Fauji Foundation was only a partner in it.

The homepage of the foundation’s website (www.fauji.org.pk) describes the foundation as a “self-supporting entity in the private sector.” It further declares, “The Fauji Foundation has been generating financial resources to meet its welfare obligations through its own industrial and commercial projects.

Today, it covers nine million beneficiaries spending over Rs 16 billion (on welfare) since its inception.” The website further goes on to describe the foundation as “being the largest welfare and industrial group in the country.” The natural conclusion based on this assertion would be that the Fauji Foundation is a private concern, and certainly one of the “largest industrial group(s) in the country,” considering its purported spending of 16 billion rupees on welfare causes.

However, on the same page the foundation also asserts: “The Fauji Foundation is a charitable trust for the welfare of ex-servicemen and their families. Its corporate operation began in 1954 when the Post War Services Reconstruction Fund was reactivated under the control of the Pakistan army.” The foundation is run by the administration committee and the board of directors. The chairman of the central board of directors is the secretary, ministry of defence of the government of Pakistan. The administration committee’s chairman is also the defence ministry secretary, and its members are chief of the general staff, Pakistan army, adjutant general, Pakistan army, quartermaster general, Pakistan army, chief of logistics staff, Pakistan army, deputy chief of the naval staff, Pakistan navy and the deputy chief of air staff, Pakistan air force. In other words, there are several public servants, including generals, serving on the administrative committee of this “self-supporting entity in the private sector.” The question is: are public servants allowed to be members of the administrative committees of private corporations?

The Fauji Foundation also declared that it “disburses annual grants to service headquarters for the welfare of destitute and disabled ex-servicemen.” Figures for 2005 were not available, but in 2004, according to the foundation’s own website, 21.39 million rupees each were given to the general headquarters of the Pakistan army, the naval headquarters and the air headquarters. This generous grant raises certain questions, such as: (a) If the Fauji Foundation is a private corporation, then why is a private corporation giving 64.17 million rupees to the three services of Pakistan, and (b) If the foundation is in a position to contribute this amount, then why did it need bailing out — i.e. the compensation it received for its fertiliser company — from public money?

The Fauji Foundation has seven affiliates, namely, Marri Gas Company Limited, Fauji Cement Company Limited, Fauji Fertiliser Company Limited, Fauji Fertiliser Bin Qasim Limited, Foundation Securities, Fauji Kabirwala Power Company Limited and Fauji Oil Terminal & Distribution Company Limited. The minister of state for finance, Omar Ayub Khan declared that Fauji Fertiliser Bin Qasim Limited, formerly known as Fauji Jordan Fertiliser Company Limited, was given the compensation from a public company. However, the federal education minister maintains that this is not correct and “only a guarantee was given to the Army Welfare Trust.” It is not clear why the education minister deems it within his obligations to dispute a statement of the finance ministry given that this is surely a matter for this ministry’s purview, not the education ministry’s.

Let us examine the education minister’s statement that merely a “guarantee” was given to the Army Welfare Trust, but no money was given to Fauji Foundation. The Army Welfare Trust was founded in 1971 and according to its website (www.awt.com.pk), “AWT’s mandate is restricted only to the generation of funds for welfare and rehabilitation without undertaking welfare activities itself.” The homepage further goes on to assert, “The Army Welfare Trust essentially operates as a business house.” Thus, if one was to paraphrase what the education minister actually said, while it is true that no public money was given to Fauji Foundation, a guarantee of five billion rupees of public money was given to an entity, which “essentially operates as a business house.” Is this legal? It is important to mention that no other business house was given any guarantee or compensation out of public money for the losses it suffered for the non-implementation of the provisions of the Fertiliser Policy 1989.

The composition and status of the Army Welfare Trust (AWT) also raise certain questions.

The adjutant general (AG) branch of the army, based at the general headquarters, oversees the welfare of retired and serving personnel. The Welfare and Rehabilitation Directorate (W&R) at the AG branch is directly involved in that welfare, and the AWT comes under the W&R Directorate. It is here that the story becomes interesting, as the AWT is actually the corporate and money-generating wing of the army.

The website of the AWT (www.awt.com.pk) itself declares that the AWT, established in October 1971 under the Societies Registration Act, “essentially operates as a business house.” In other words, the AWT through its various divisions generates profit and then makes it available to the W&R Directorate for welfare activities. The website clearly declares: “AWT’s mandate is restricted only to the generation of funds for welfare and rehabilitation without undertaking welfare activities itself.” It is interesting that an organisation registered under the Societies Registration Act is operating as a profit-making business house. The figures certainly indicate its profit-making abilities. The AWT was started with a modest capital of 700,000 rupees in 1971, but now, according to the website, its assets are in excess of 50 billion rupees. Citizens might be interested in knowing that the initial seed money of 700,000 rupees was public money.

The AWT has seven divisions, namely ‘army projects,’‘corporate development,’ ‘farms,’ ‘finance,’ ‘industries,’ ‘real estate’ and ‘technical.’ The army projects division consists of four projects, i.e. shoes, woollen mills, Al-Ghazi Travels and Services Travels. The last two are travel agencies which, according to the website, provide services to civilians and foreigners.

The army shoes project, with an industrial estate at Kot Lakhpat, supplies shoes to the army and foreign markets. The corporate development division in turn consists of seven profit-generating business houses, namely Askari Commercial Bank Limited, Askari Leasing, Askari Insurance, Askari Guard, Askari Associates, Askari Aviation and Askari Mobil. All these seven business houses generate good profit, while the Askari Commercial Bank has been declared the best commercial bank for 1994 and 1996.

The farms division consists of the sugar mills at Badin and the five agricultural farms of AWT at Multan, Okara, Pakpattan and Badin. The finance division looks after the financial matters of AWT as a whole. The industries division consists of Askari Cement Factory, Wah, Askari Cement Nizampur and Askari Pharma at Lahore. The real estate division consists of AWT-owned commercial plazas, housing projects, lands and even restaurants. The technical division consists of Askari Information Systems, the computer section and, most interestingly, the Askari Commercial Enterprises that is mandated to “help retired army personnel and selected civilians to minimise infrastructural investment by prospective entrepreneurs.” The Askari Commercial Enterprises provide “furnished office accommodation, free guidance, loan and leasing facilities through AWT financial institutions, and many other facilities to get the prospective entrepreneurs off the ground.” Thus, in a nutshell, from shoes to wedding halls, insurance, leasing, lands to furnished offices, all are provided by the AWT, which by its own admission operates “as a business house.”

This business house, which is registered under the Societies Registration Act meant for non-profit organisations, has a board of directors and an administration committee. Interestingly, the administration committee consists of the adjutant general Pakistan army, the chief of general staff, Pakistan army, the quarter master general, Pakistan army, master general ordinance and the managing director of AWT. Except for the latter, all the other members of the administration committee are serving generals. The board of directors consists of the directors of the seven divisions, the managing director of AWT and, of course, the adjutant general.

So, is the Army Welfare Trust (AWT) public or private? It can be termed public as it falls under the AG Branch of the Pakistan army and was set up initially with public money. However, the Army Welfare Trust itself declares that it operates as a whole, as well as through its seven divisions, as a profitable business house designed to generate funds. If it operates as a business house, then can serving army personnel be on the boards of business houses or connected in any way with a profit-generating body? Why did the government, as admitted by the federal education minister, give a “guarantee of five billion rupees to AWT” from the public kitty to a business house? More interestingly, how is it that a business house is registered under the Societies Registration Act that is for non-profit organisations? These are one set of public interest questions.

Another question one may ask is, what about the civilian sector of the population? In spite of their confusing public-private status, etc., the Fauji Foundation and the AWT ensure that an individual even remotely associated with the army has a comfortable living. The defence budget and the corporate interests of the army ensure that it has enough resources at its disposal to address the needs of its personnel. However, public servants not associated with the army do not enjoy such advantages. One fails to understand why this discrimination exists between uniformed and un-uniformed public servants? If the welfare of army personnel is a “sacrosanct duty,” then what about the needs of the public servant who has served all of his life in the railways, gas, education or health departments? While desisting from advocating a welfare state, one cannot help but demand, at the very least, that all public servants be respected and treated equally, and furthermore, that all the “business” concerns of the forces be made public.