June issue 2016
Cover Story: The Punjab’s Robber Barons
Punjab Chief Minister Shahbaz Sharif has awarded mega development projects worth dozens of billions of rupees in the province to Chinese companies without open international bidding. He has also provided interest-free loans from the provincial exchequer to certain private companies in flagrant violation of official rules and regulations. And still Shahbaz Sharif portrays himself as a paragon of virtue and honesty.
A majority of the Punjab’s high-profile development works, including energy plants and transport infrastructure, are shrouded in secrecy on the pretext that they are part of the China-Pakistan Economic Corridor (CPEC) and as such, any details pertaining to them cannot be made public without permission from the Chinese government.
In principle, all government contracts fall under the aegis of the Public Procurement Regulatory Authority (PPRA) and are subject to its rules, but the Shahbaz Sharif administration has found ways to bypass these rules. One of the means it employs to do so is to award contracts without international bidding to Chinese firms, which in turn hire local sub-contractors – who are mostly the Sharif family’s front-men – to execute these projects. Thus, Shahbaz Sharif awards lucrative contracts to his hand-picked men through a sub-contract system.
Another method of avoiding genuine competition among contractors and bidders is to frame terms and conditions in the tender that is floated which suit only a favourite company. This ‘rigged bidding’ is a practice that has been commonplace in Turkey for some time, and is now being replicated in Punjab.
Prime Minister Nawaz Sharif and Chief Minister Shahbaz Sharif maintain a close relationship with Turkish President Recep Tayyip Erdogan. The Turkish private conglomerate company, Albayrak, is a favourite company for both, the Sharifs and Erdogan. President Erdogan started favoring Albayrak with lucrative contracts when he was the mayor of Istanbul. According to Turkish media, when the Justice and Development Party aka AKP rose to power, Albayrak became the Turkish government’s favourite group for privatisation. The Turkish press is rife with stories of massive corruption in the privatisation of public assets during the Erdogan regime.
Against the backdrop of the brotherly ties between the two heads of state, Turkish companies have launched a number of projects in the Punjab, including solid waste management, power generation, transport, construction of low-cost houses in the province, and the setting up of theme parks in Lahore. Three major projects currently being executed by Turkish firms include the Lahore Waste Management Company, the Lahore Metro Bus service and a radio taxi service. The Lahore Waste Management Company has outsourced solid waste management in different zones of the city to two Turkish waste management companies – Albayrak and Ozpak. Albayrak has also been given the contract to run metro buses and a taxi service in Lahore.
The 1180-MW Bhikki power project being built near Sheikhupura since March 2015 is one example of Shahbaz Sharif’s arbitrary style of governance. In October 2015 Prime Minister Nawaz Sharif laid the foundation stone of the project to be built by a Chinese contractor. According to an official statement, the plant will be jointly set up by Harben Electric International of China and American General Electric at a cost of 55 billion rupees.
Ahad Cheema, a grade-19 DMG officer and known henchman of the Sharif family, was made the chief executive officer of the Quaid-e-Azam Thermal Power Company which is to execute the power project. This, although Cheema was serving as director general of the Lahore Development Authority (LDA) at that time. He was hired as CEO at the whopping salary of two million rupees, in addition to receiving a salary and perks as a DMG officer alongside. It was only when a petition was moved in the Lahore High Court challenging Cheema’s dual post after several months of his appointment, that he was finally relieved of his office at the LDA.
When the work started on the power plant in 2015, Ahad Cheema asked the provincial finance department to provide a 15 billion rupees interest-free loan – bridge financing in technical parlance – to Harben for the procurement of machinery from General Electric, USA for the power plant. The provincial finance department raised queries on the issuance of the hefty bridge financing as it was not part of the agreement, but Cheema refused to respond to the objections raised. CM Shahbaz Sharif intervened in the matter, convened a meeting and reportedly insulted the top officers of the finance department for not obliging Cheema. Resultantly, the provincial finance secretary Yousuf Khan immediately sought a transfer from the Punjab.
The 170-billion rupee Orange Line Metro Rail project in Lahore has also been awarded to a Chinese company without open international bidding. The provincial government told the Lahore High Court it could not provide the terms and conditions of the project without the consent of the Chinese government as it is part of the CPEC. It also said that one of the conditions of the CPEC financing is that all the projects related to it would be awarded to Chinese companies without open international bidding – up till now the norm in such projects.
Insiders maintain that China’s EXIM Bank will provide the proposed loan for the project on interest rate of six per cent. Ironically, the Asian Development Bank (ADB) was willing to finance an underground mass rail transit project in Lahore at an interest rate of 0.5 per cent. That did not transpire. Meanwhile, the Chinese Bank approved a loan of 30 billion rupees as late as May, 10 months after work on this project started.
To make up for the shortfall, until the EXIM loan kicked in, the Punjab government started diverting funds from the health and education sectors to the Orange Line Metro Rail project for procuring land and civil works. The provincial government also obtained a loan of 15 billion rupees from the Bank of Punjab at an interest rate of eight per cent for this project. So the Punjab government has not merely spent at least 30 billion rupees from the provincial kitty to date on the metro project, it has also undertaken the project in contravention of the obligatory Public Procurement Regulatory Authority (PPRA) rules and regulations, which stipulate that all contracts like the metro should be awarded to contractors such as the Habib Construction Company only after open bidding.
It has, in fact, become routine in Punjab for the provincial government to use official funds in the name of bridge financing under the cover of Chinese and Turkish investment.
That Shahbaz Sharif is a man in a hurry can be gauged from how he has undertaken various projects. In 2009, CM Shahbaz Sharif decided to set up Danish schools in certain districts of the province and spent five billion rupees on building these schools without even preparing a mandatory PC-1 for the project. The funds were spent from the non-development funds earmarked for the construction of schools in violation of the rules.
Similarly, when Imran Khan’s popular showing in Lahore in October 2011 created ripples in Punjab politics, Shahbaz Sharif rushed to launch a metro bus project in Lahore. The work on the 30-billion rupee project was started in haste without even doing the requisite soil testing for the pillars of the elevated track. The provincial Planning and Development Department raised 11 objections to the project, but it was executed without addressing them.
The provincial government spent an additional 20 billion rupees in acquiring land for the metro bus project and building the roads that had been dug up for the metro track. This cost was not, however, shown as part of the project, clearly to escape criticism. Similarly,the real, exorbitant cost of building the metro track between Rawalpindi and Islamabad – which the Punjab government claims cost 45 billion rupees – has also been kept under wraps.
And currently history is being repeated in the laying of Lahore’s metro rail. If the purchase of land for the project, repair of the excavated roads and streets, sewers and water lines etc on the track is taken into account, the real cost of the project is no less than 200 billion rupees. That means the Lahore Orange Line project will cost around 6.0 billion rupees per kilometre – and that’s by official accounts – making it the most expensive transport project in the country’s history.
Then there’s the case of Lahore’s Multan Road, a major city artery. It was remodelled and widened in four years starting from 2010, at a cost of 11 billion rupees. This year, the LDA excavated the newly-built road to instal the pillars for the metro train.
The bottom line: official funds worth tens of billions of rupees have been squandered in Lahore at the whims of Shahbaz Sharif, while the countryside is thirsting for even a small amount of funds for the maintenance of village and town streets, clean water and schools. Hundreds of basic health units in the province are without doctors, schools without classrooms and people sans even basic amenities such as drinking water.
Shahbaz Sharif’s obsession with metro bus and rail projects is understandable given the highly inflated cost of these projects at home. Compare these to similar projects in other parts of the world and the picture becomes clear. In Beijing, China, for example, a metro bus project was built in 2013 at a cost of 4.8 million dollars per kilometre and in Paris a similar project cost 7 million dollars. Lahore’s project was built the same year at more than double the cost, i.e. 11 million dollars per kilometre. In 2014, Shahbaz Sharif’s government built the Rawalpindi metro bus project at a cost of 20 million dollars per kilometre. Now Lahore’s metro train project is underway at a cost of more than 55.5 million dollars per kilometre.
Senior civil engineers in Punjab say that the rulers receive at least 30 per cent in kickbacks and commissions if an official civil works project is completed on ground according to specifications. In case of defective construction, the kickbacks can go up to 50 per cent. No surprises then that the rulers are more interested in building roads and buildings than investing in the education and health sectors. And under cover of China and Turkey, where companies are notorious for massive corruption, it has become much easier to hide kickbacks and stash the funds in foreign banks and real estate.
The metro bus services in Lahore and Rawalpindi are running on a government subsidy, but they are nonetheless touted as a big achievement.The Punjab government provides a subsidy of more than two billion rupees per year for the Lahore Metro bus and 1.2 billion rupees per year for the Rawalpindi Metro Bus. Additionally, the federal government pitches in with a 800-million-rupee subsidy for the Rawalpindi-Islamabad Metro Bus.
In Lahore, a passenger pays Rs. 20 for one-way travel. The government, meanwhile, has to pay a subsidy of Rs.40 per passenger to the private Turkish company, Albayrak Holdings, which operates the bus service. Under the agreement, a subsidiary company of Albayrak provides the buses for the service, and oversees their maintenance and operations. According to the agreement, the government pays 362 rupees per km for the Turkish company buses for mutually agreed upon mileage covered daily, and whether the buses ply this distance or not, it receives the price fixed in the agreement. The company has provided 52 buses for the metro bus service and is responsible for their operational expenditures and their fuel.
The Punjab government meanwhile, pays the expenditure of all supporting staff at stations, electricity bills and other costs. Due to this favourable arrangement, the Turkish company has reportedly recovered its investment within a year
Real estate in the Punjab is proving another goldmine for some of the PML-N’s top guns who are raking in millions by misusing their official authority. PML-N supremos are on a buying spree of lands in the vicinity of Lahore city with the help of police officers who coerce poor farmers to sell their agricultural lands at throwaway prices to political heavyweights. Once the lands are bought, the provincial government starts building roads and laying other civic infrastructure in those areas, pushing up the value of the land manifold.
A case in point: tens of billions of rupees were spent from the public kitty to build expressways, lay trunk sewerage and other amenities on Raiwind Road where the Sharif family bought hundreds of acres in the 1990s at a rate of 600,000 to 800,000 rupees per acre. Now the same land is priced at 70-80 million rupees per acre, thanks to the massive development on or around it by the government. And chances are this will multiply manifold once the under-construction ‘Alaska Barrier,’ a four-foot thick wall duly fortified by iron mesh, is constructed around the 350-acre perimeter of the Sharifs’ private Jatti Umra estate on Raiwind Road. So far 40 crore rupees have already been spent on the wall, and it is estimated it will cost another 30 crore rupees to complete – if it does not exceed the planned budget. As for funding for this “high-sensitivity, high-security” project, the money has been taken from the non-development funds of the Punjab police department.
OtherPML-N leaders have, meanwhile made fortunes by occupying and forcibly buying lands near the Lahore airport terminal. These days, Burki Road and the River Ravi vicinity close to Sharqpur are the targets of the PML-N land mafia.
How reckless Shahbaz Sharif is in spending public funds can be assessed by the fact that he has in just this tenure as Punjab CM, spent more than 25 billion rupees from the provincial exchequer on publicity campaigns in the print and electronic media proclaiming his achievements. Civil servants in the Punjab Information Department told Newsline that the provincial government’s advertisement budget has gone up astronomically since Shahbaz Sharif became chief minister in 2008.
“During 10 months of the ongoing fiscal year, political advertisements worth about five billion rupees have been dished out to the media, all aimed at building a good image of the Shahbaz Sharif government. Also, equally important, the government uses the lure of attractive advertisement revenues to keep the mainstream media in line,” says a civil servant in the Punjab Secretariat.
No wonder, Urdu-language newspapers particularly, publish three-column headlines of Shahbaz Sharif’s propaganda statements on the upper half of the front pages of the newspapers every day. The CM’s statements are published verbatim with the headlines, sub-headlines and words that are issued from the provincial Directorate General of Public Relations (DGPR). Publicity drives using banners, flyers and posters on the walls of buildings on the streets of Lahore, announcing even the smallest achievement (in most cases still just on paper) of the provincial government, are part of the junior Sharif’s penchant for self-promotion.
An ensemble of pliable junior civil servants posted to senior positions, including Tauqeer Shah (principal secretary to Shahbaz Sharif till 2013 and posted out after the Model Town massacre in 2014), Ahad Cheema, Usman Anwar, Fawad Hasan Fawad (former secretary health, Punjab and now principal secretary to the prime minister) are said to be the Sharif family’s regular abettors and enablers in their financial shenanigans.
Shahbaz Sharif is a showman who rules the Punjab as much through media stunts and propaganda campaigns as he does through his administrative abilities. But even with all the spanking new roads, the metros, the publicity campaigns and the tall promises, it is hard to ignore the fact that not one day passes when one child or more does not die for want of oxygen and ventilators in one or other of Punjab’s government-run hospitals.