Daily Times Editorial May 21, 2015

Shameful scandal As the storm around The New York Times revelations regarding Axact’s business of fake degrees gathers force, the paper has come out with an editorial on the issue. The most damaging assertion in the editorial is that it is difficult to believe the Pakistan government knew nothing about the scam. Although The New York Times may be laying too much stock in our government’s capabilities, raising the question itself could prove disastrous for Pakistan and its businesses, especially IT, which Axact asserts is its main business. The report outlined an extensive network of fake university, college and high school websites issuing fake degrees for cash without the recipients required to attend any study courses. Coercive marketing using a wide array of ‘persuasion’ techniques helped Axact milk innocent or willing customers out of millions of dollars. Some sources say it is the biggest such scam in the history of the IT business. While the interior ministry and the Federal Investigation Agency have belatedly swung into action against Axact, reportedly on the instructions of Interior Minister Chaudhry Nisar, their efforts are being described in mixed terms. For example, the initial ‘raid’ on the company’s Karachi office yielded little except a polite exchange with its officers. In Islamabad however, latest reports say 42 servers and other record was seized and 27 employees arrested for further investigation. Notices to appear and assist the investigation have been issued to the directors of the company. The Federal Bureau of Revenue has been asked to provide the tax records of the company since there are reports about its absurdly low reported income and tax, considering the amounts it was scamming out of people worldwide through its fake education degrees rip off. Chaudhry Nisar in a press conference on Wednesday said it would need technically competent people to conduct a forensic investigation of the company’s servers/computers, etc, a task that could consume at least a month. Other cyber crime experts think Pakistan will need the help and services of international experts to unravel this complex web. Meanwhile the Chief Operating Officer and head of Axact, Shoaib Sheikh, has been put on the exit control list and possibly all the directors will suffer the same. Axact’s response to the allegations and accusations against it has shifted the responsibility for the scandal onto rival media houses but failed to answer any of the charges. To the other charges has now been added the additional charge of possible money laundering. The New York Times report did point to cash transactions through dubious and circuitous routes all over the world, which could attract such an investigation. The embarrassment that has been heaped on Pakistan’s head because of this scandal echoed in the Senate on Monday when Leader of the Opposition Chaudhry Aitzaz Ahsan drew the attention of the house to the issue, calling it a matter that made every Pakistani’s head hang in shame. He asked rhetorically why Pakistanis seemed to be so expert at such frauds. Chaudhry sahib may not know or remember the milieu that has emerged in Pakistan over the years. A society in which the corrupt are no longer thought of as bad people, in some instances even admired for their wealth, is not a society in which such scandals should cause one to wonder at them. The other side of the coin is the obvious incapability of our law enforcement agencies to keep abreast of the latest technologies, including IT, and therefore be in a position to monitor and clamp down in timely fashion on such crimes. Even the belated Cyber Crimes Bill currently under discussion in parliament betrays its misdirected thrust against dissenting opinions rather than cyber crimes. Such being the state of knowledge and expertise in these contemporary fields, The New York Times’ wondering how the Pakistan government could remain unaware of the scam turns into a rhetorical question. If anything, had the government been aware and acted against the scam earlier, that would have been the surprise. What has actually transpired is exactly according to the script and capabilities of our governments and the law enforcement institutions under them. The ignominy that will now be heaped on Pakistan and its citizens’ heads could end up isolating perfectly honest citizens along with the crooks in our society and reducing us all to pariah status in the world. A sad day indeed.

Daily Times editorial May 17, 2015

Finally on Everyone in Pakistan knows the importance of the Zimbabwe cricket team’s tour of Pakistan. Since the 2009 attack on the Sri Lanka cricket team in Lahore, no international side has considered it safe to tour Pakistan. As a result, Pakistan has had to make do with ‘home’ series played on the ‘borrowed’ grounds of the UAE. Useful as these ‘home’ series have been in keeping the Pakistan cricket team engaged in international cricket (apart of course from foreign tours), these makeshift arrangements cannot be said to have added much to Pakistan’s stock. The decline in the standards of Pakistan’s cricket can be traced at least partially to the absence of home advantage. Zimbabwe may be considered by now to have been reduced because of their own Board’s problems to one of the minnows of international cricket, but as the forerunner of what was hoped would become a turnaround in the fortunes of Pakistan, their tour assumed both a symbolic as well as practical importance. Symbolic because a team had actually taken on the risks, practical because if the tour went off without incident, it would help to alleviate other cricket playing countries’ anxieties. It came as a big shock therefore to cricket fans to hear that Zimbabwe had had second thoughts after the massacre of Ismailis in Karachi the other day. The incident of course reflects the ongoing terrorism threat in Pakistan. All the hard work of the Pakistan Cricket Board (PCB) to persuade Zimbabwe therefore seemed doomed to disappear down the same sinkhole without a trace. However, if the latest reports and PCB chairman Shahryar Khan are to be believed, Zimbabwe, after lots of hesitation and reported extensive discussions, conveyed verbally to Shahryar Khan that the tour was definitely on. The latest reports also speak of a written confirmation having been received from the Zimbabwe Cricket Board (ZCB). All cricket lovers would earnestly hope that the news of salvage of the Zimbabwe tour despite the latest atrocity that shocked Pakistan and the world are true. And if indeed that is the case, the Pakistani cricket and law enforcement authorities better get their act together to ensure a trouble-free tour. The security team of the ZCB that visited Pakistan recently seemed fairly satisfied as to the arrangements for security made by our PCB and the authorities. Let us hope they too have not changed their minds. It should be noted that the PCB agreed with the ZCB that all the matches, T20 as well as ODIs, would be played in Lahore. This has produced ire amongst the cricket fans in other centres, but presumably our PCB thought it could better control things in the Punjab capital, despite the fact that it was Lahore where the fateful attack on the Sri Lankan cricketers took place six years ago. Now if the reports of the tour finally being on are correct, the authorities must ensure tight security for the visiting team. The future of Pakistan cricket hinges on it.

Daily Times Editorial May 11, 2015

Collateral damage The Securities and Exchange Commission of Pakistan (SECP), the regulator of the country's stock exchanges, has finally jumped into the fray surrounding the KASB Bank's merger with BankIslami (more accurately a very hostile takeover if not swallowing whole). The SECP has written to the State Bank of Pakistan (SBP) on behalf of equity investors to review the deal. Considering that the issue of KASB Bank's future has been on a lot of people's radar for some time, including the just concluded six month moratorium on the bank imposed by the SBP pending the restructuring/merger with some other bank (BankIslami, it now turns out), it seems surprising that the SECP has suddenly woken up after the merger is a fait accompli. The legitimate question to be asked is what has roused the seemingly asleep SECP now? It appears that it is the clamour of equity investors that has compelled the SECP to finally intervene, albeit it remains to be seen how efficacious this late entry may prove. To the earlier relatively muted voices of the ignored and abandoned shareholders of KASB therefore, has been added the much louder and vociferous chorus of equity investors through the SECP, many of whom have had their fingers burnt in this whole sorry episode. The SECP wants compensation for the losses suffered by equity investors. Meanwhile the shareholders have been left in the lurch, their interests unprotected and unsafe guarded. Millions have been lost in the process. The whole merger scheme is smelling fishier than ever and the stink is growing with each passing day. The SECP says in its letter to the SBP that it was not taken into confidence by the latter regarding the moratorium or merger. The SECP reminds the SBP that it has a role to play regarding investors' interests. Ignoring equity traders' losses would engender negative comment, criticism and suspicion, all of which would inevitably combine to shake confidence in the banking sector and the economy as a whole. The SBP has placed the interests of the 150,000 depositors of KASB Bank worth Rs 57 billion as its top (if not only) priority and completely ignored and forgotten about the shareholders of KASB. If the SECP's argument regarding the interests of equity investors is valid, why can the same logic not be applied to the shareholders' interests? Consider also the sordid and unprecedented manipulation (arguably insider trading) of KASB's shares in the two days preceding the announcement of the merger. In just these two days, the normal trading volume of KASB shares went up 10 times and more and the price flipped up to twice or thrice its previous level. By no stretch of the imagination can this be considered ordinary. It is difficult to resist the conclusion that somebody made a killing based on privileged information. The cast of usual suspects is headed by the KASB sponsors/owners and the SBP since these were the only parties with knowledge at that point of the impending merger deal. If nothing else, this should be sufficient grounds for a thoroughgoing probe and investigation into the whole affair, taking into its purview the whole dubious manner of rejecting Chinese potential investors in favour of the inequitable and unjust takeover of KASB by BankIslami, the non-transparent and secretive manner (excluding totally the shareholders) of agreeing the merger, and the injustice to shareholders and equity investors. A class action suit by the robbed shareholders and hard done by equity investors could lie, while a suo motu notice by the superior courts may not be out of place in this instance.

Daily Times Editorial May 10, 2015

Bank robbery The case of the KASB Bank’s merger with BankIslami gets murkier and murkier. The saga began in November 2014 when the KASB Bank was put on a six month moratorium by the State Bank of Pakistan (SBP) on the grounds of the bank being unable to meet the SBP’s capital adequacy ratio. While various banks were invited by the SBP to carry out due diligence in order to make offers for capital injection/restructuring of the bank to put it back on its feet, a relatively late entrant to this list was the JS Bank in December 2014, whose owners/sponsors are also the major shareholders of BankIslami. In the meantime, Chinese investors who had shown an interest in acquiring the bank were shunted out without cogent reason, the SBP claiming they did not meet the SBP’s criteria of banking experience, although at least one potential Chinese investor, the Industrial and Commercial Bank of China, is one of the biggest Chinese banks. After the moratorium was imposed on KASB, it also emerged that the bank was holding Iranian deposits that could not be returned because of the risk of inviting international sanctions. A scheme of amalgamation of KASB with BankIslami was forwarded to the KASB Bank sponsors in April 2015. This was examined by the KASB sponsors but neither shared with its shareholders nor were they consulted. After reports of some initial hesitation, Finance Minister Ishaq Dar gave final approval to the merger and it has now become a fait accompli. On the first day after the moratorium was lifted, the merged bank shelled out millions of rupees to its depositors. But there is no word so far what will be the fate of the KASB Bank’s shareholders, who have been hung out to dry without any clue what will happen to their investment. The merged bank is paying depositors out of the holdings of KASB but the shareholders are still clueless how their stake will be dealt with or satisfied. For example, will they receive shares of equivalent value to their original holding in KASB in the new, merged bank? What will be the formula for determining this equivalence? In the absence of such clarifications, the shareholders of KASB naturally feel hard done by. It is not that the SBP does not have the statutory authority to do what it has done, i.e. impose a moratorium pending final decision on how to proceed with the bank or producing a scheme of restructuring/merger of the bank with some other banking entity. All this is within the purview of the SBP under the Banking Companies Ordinance 1962. However, the other law in the field, the Companies Ordinance 1984, arguably in so far as it relates to the rights of shareholders in any entity, may override the Banking Companies Ordinance 1962 to the extent of protecting the rights of shareholders. This and the aspect of non-transparency and lack of consultation with the co-owners (shareholders) of KASB regarding the merger scheme do provide grounds for a legal challenge to what appears to be an arbitrary disposal of KASB Bank for a laughable Rs 1,000 on the debatable claim that KASB’s net worth is negative, to a bank whose owners/sponsors do not enjoy an enviable reputation in banking circles or on the stock exchange. Manipulation of the price of KASB shares just two days before the merger scheme was announced, in which the normal trading volume of the shares of 0.3-0.4 million galloped to 50 million, in the process doubling if not tripling the price of the shares, smells fishy. Trading was suspended when the merger scheme was announced, raising even more questions and suspicions regarding who benefited from this extraordinary surge in trading and the price of KASB’s shares. While the KASB shareholders are perfectly within their rights to legally challenge the whole scheme on the grounds of lack of consultation and transparency and the suspicion of ‘insider’ manipulation, it also throws into relief the role of the SBP and its governor, apart from Finance Minister Ishaq Dar. It would have been in the fitness of things had the SBP ensured the whole deal was conducted transparently to avoid the fingers of accusation and suspicion now being pointed at it, damaging the credibility of the central bank and the country’s financial managers. Pakistan is no stranger to banking scandals, but this bit of legerdemain risks being described as the biggest daylight bank robbery in our history.

Daily Times Editorial May 9, 2015

FO’s warning In his ‘opening innings’ as Foreign Office (FO) spokesman, Khalilullah Qazi told a weekly press briefing that Pakistan had warned India to refrain from interfering in its internal affairs. He went on to state that Pakistan has provided proof in this regard to India on many occasions, including the secretary-level talks in March this year. Whether this statement was prompted by the rare public criticism by the army on Tuesday that accused India’s RAW intelligence agency of whipping up terrorism in Pakistan is not known. But the fact that the army’s criticism carried the imprimatur of the Corps Commanders’ conference raises the question whether the FO is following the military’s lead in this regard. Qazi did admit, however, that he was not aware of any fresh proofs against RAW. Nor did he comment on a question whether the matter was being raised with New Delhi again. The FO spokesman dilated on the Dawood Ibrahim issue by referring to the admission by India’s Minister of State for Home Affairs Haribhai Chaudhary that India was not aware of his whereabouts as a vindication of Pakistan’s oft stated position in response to accusations from time to time by New Delhi that he had taken refuge in Pakistan. Further, that reservations expressed by the UN regarding the release of Zakiur Rehman Lakhvi, the main accused in the 2008 Mumbai attacks case, had been addressed, given that Pakistan had implemented the UN resolutions by banning his group, the Lashkar-e-Taiba. Regarding the reconciliation process in Afghanistan playing out in Doha, the spokesman reiterated Pakistan’s formula of supporting an Afghan-led and -owned dialogue process for peace and stability in that country. He welcomed the recent PPP delegation’s visit to Kabul, arguing that such political contacts would be helpful in promoting bilateral ties. Pakistan has fraught or difficult relations with all its neighbours with the notable exception of China. With India, both countries seem perennially bogged down in a mistrustful, suspicious engagement with each other, often being reduced to a tit-for-tat game rather than serious diplomacy. The FO spokesman’s remarks cannot be viewed as anything but a continuation of this long standing practice. There is no gainsaying the possibility that in response New Delhi’s South Block will once again castigate Islamabad over infiltration by militants into Indian Held Kashmir or rake up the Mumbai attacks case all over again. And so this tired and predictable script rumbles on, seemingly without end or hope of some positive developments. Both countries are guilty of disproving the old adage that in politics, there are neither permanent friends nor enemies. In the Pakistan-India case, it seems permanent enemies is what they have decided on or been pushed into by a combination of history and inimical lobbies on each side. Of course the real sufferers in this danse macabre are the people of Pakistan and India, whose ruling elites are wedded to the continuation of tension and conflict for one reason or another, and if none from the past suffice, the innovative minds in both countries’ establishments have proved more than equal to the task of inventing new reasons. This perpetual stand-off reduces the economic and fiscal space for both countries to tackle the poverty and deprivation of their peoples, traps them in an unending arms race (including the deadly nuclear one) and foregoes the obvious advantages of peace and normalisation between the two neighbours while being open to continuing dialogue on the vexed issues that divide them. In other words, a normal diplomatic engagement geared towards finding solutions to problems rather than one based on permanent enmity. Things are not much rosier to the west with Afghanistan, despite the sweet sounding phrases about supporting peace and stability in that country. So long as the Afghan Taliban continue to enjoy our ‘hospitality’, it is to be expected that Kabul will harbour resentment and suspicions about us, given the history of our interventions in that unfortunate country. With Iran, our relationship is precarious to say the least. Cross-border issues, hamstrung cooperation because of the lingering threat of international sanctions and the sectarian play in the Muslim world and our region have all combined to render relations with Tehran shadowed by deep and dark clouds. It is in the interests of any state to be at peace with its neighbours, particularly Pakistan, located as it is in an unstable region. Can the FO grope its way towards some such policy paradigm?

Daily Times Editorial May 4, 2015

KASB scandal Pakistan is no stranger to banking scandals. One only has to recall names such as BCCI, Mehran Bank, the cooperatives banks, et al to be reminded that something is rotten in the state of Denmark. Recently, another scandal is brewing that promises to shake the banking sector and its regulatory institution, the State Bank of Pakistan (SBP) to its very roots. Theoretically, the SBP is supposed to be independent, especially where the formulation of monetary policy is concerned. Surprise, surprise therefore when the January 2015 announcement of the base interest rate emanated not from the SBP in Karachi, whose purview it is, but from Minister of Finance Ishaq Dar sitting in Islamabad. The minister thereby unprecedentedly pre-empted the SBP, raising in the process many eyebrows. This incident and the perception that the affairs of the SBP were being run virtually by the minister earned SBP Governor Ashraf Mehmood Wathra the epithet of a ‘yes man’. No prizes for guessing whose ‘yes man’. It therefore came as a surprise to knowledgeable observers when Governor Wathra appeared to stick his neck out a mile by announcing that troubled bank KASB was being ‘merged’ with BankalIslami for the princely sum of Rs 1,000! It may be recalled that KASB had been in trouble for some time, ostensibly because it had a large depositor base (150,000 depositors, Rs 57 billion) but a largely non-performing loan portfolio. The bank had been incurring losses for many years, and this haemorrhage finally landed it in a crisis when the SBP pressed it to inject enough capital to bring its affairs in conformity with the SBP’s rules regarding banks’ capital base. However, all the efforts of the SBP in this regard failed to cut much ice with the KASB’s owners, led by KASB group of companies’ chairman Nasir Ali Shah Bokhari. In the meantime, Wathra reportedly rejected two bids by Chinese investors to take over the bank, ostensibly because the terms they offered did not meet the bank’s requirements or fulfil the criteria for banking companies of the SBP. This reportedly annoyed Ishaq Dar, given the close economic ties Pakistan is currently forging with China in the context of the China-Pakistan Economic Corridor that promises to bring in $ 46 billion of Chinese investment. Reports say the SBP may have hurried into the KASB-BankalIslami deal because the deadline of the six-month moratorium on KASB (which froze the affairs of the bank) was about to expire. However, the ‘best possible deal under the circumstances’ touted by SBP Governor Wathra has raised more than just eyebrows. Fingers of suspicion are being pointed at the owners/sponsors of BankalIslami for being behind the push to ‘acquire’ KASB. It may not be out of place to mention that the major shareholders of BankalIslami are a well known but controversial stock market mogul Jehangir Siddiqui and a major media mogul. Between them and another ‘beneficiary’ shareholder, they are said to control about 57 percent of BankalIslami’s shares. Like in any whodunit, therefore, the trail of suspicion leads inexorably to who stands to benefit from this non-transparent, highly dubious ‘merger’. The amazing part of all this manoeuvring is the transfer of KASB to BankalIslami for a mere Rs 1,000. Admittedly, KASB has huge liabilities, but no one can deny that it also has considerable assets. Is the net worth of the bank then so negligible as to attract this laughable takeover sum? The whole deal smells fishy. The government does not need another scandal/problem on its already overladen plate. Since the SBP Governor, having made his case strongly for the merger through the media has seen it fit (or wiser) to shift responsibility onto the Ministry of Finance to give final approval for the deal, Mr Dar and his government may be better served by rejecting this merger that threatens to return the depositors’ money over time after ‘restructuring’ but at the cost of the shareholders of KASB, who will be left whistling in the wind. Following the striking down of this highly dubious deal, the Ministry of Finance should order an investigation into how this whole shindig was thought up, by whom, in whose interest. And following that, perhaps the ministry should punish anyone, including the SBP Governor, found responsible for what looks increasingly like skullduggery of a level that dwarfs past banking scandals and leaves the integrity of the SBP and the banking sector in tatters. The restructuring of KASB must be conducted professionally, transparently, and while taking into account the interests of both depositors and shareholders of the bank. Let this also serve as an object lesson in how not to allow fly-by-night operators to acquire deposit-taking permission to fleece depositors and shareholders alike.

Daily Times Editorial May 3, 2015

PEMRA stirs A swirling controversy has broken out about MQM leader Altaf Hussain’s unwise choice of words about the army and its leadership in a rejoinder to Malir SSP Rao Anwar’s inappropriate press conference accusing the MQM of having links with Indian intelligence agency RAW. Altaf Hussain’s diatribe was met by strong words from ISPR and condemnations continue to flow thick and fast from political parties, some of whom have or are preparing to move condemnatory resolutions in the provincial Assemblies. Amidst all this clamour are the (usual) calls for banning the party and worse. So far, the only sensible stance has come from Prime Minister Nawaz Sharif after Altaf Hussain apologised unconditionally. The prime minister while appreciating Altaf Hussain's belated dawning of wisdom cautioned everyone, including Altaf Hussain, to think before they speak, especially where sensitive issues or state institutions like the armed forces are concerned. This latest outbreak of MQM-military tension has raised fears of conflict and violence in MQM’s stronghold of Karachi, which these days is undergoing an operation by the Rangers and other law enforcing agencies to cleanse the metropolis of terrorists, criminal mafias and the armed wings of the political parties. The federal information ministry, in a reversal of its circumlocutory attitude in the past of hiding behind the plea that the Pakistan Electronic Media Regulatory Authority (PEMRA) is an autonomous body and it does not want to interfere with its working, wrote a letter with unusual alacrity to PEMRA urging the regulator to take action against the television channels that had broadcast Altaf Hussain’s offending remarks. PEMRA has issued show-cause notices to 14 TV channels to explain why they broadcast Altaf Hussain's message that has been described as ‘hate speech’. PEMRA has also directed all TV channels to install at the earliest a mechanism for delayed broadcast of live programmes to allow censoring any offending material. The prompt response of the government (through the information ministry) in awakening the otherwise asleep PEMRA is to be welcomed. The media, and particularly the electronic media, has since it gained ‘freedom’, spiralled into a free-for-all of irresponsible journalism that makes sensible people cringe. For example, in recent days, a campaign of calumny, slander, defamation and libel has been mounted by at least three TV channels (including ironically the state owned channel) against individuals who dare to question the state of human rights in Balochistan. The issue raised its ugly head when a discussion on this topic in LUMS Lahore was forcibly cancelled by the powers-that-be. Subsequently, Sabeen Mehmud of T2F in Karachi was assassinated as she left the venue of a similar discussion on the same subject. Some of those who ‘dared’ to condemn Sabeen’s murder and support the right of academia and the people at large to discuss freely troubling questions such as the human rights conundrum in Balochistan were subjected to a hate campaign on the three TV channels, labelling them foreign agents and traitors by distorting the truth, facts and throwing to the winds all objectivity and media responsibility. First and foremost, this speaks volumes for the professional competence and integrity of the three channels’ management and their editorial policies. Second, it raises the question where the ‘autonomous’ PEMRA was through all of this. If it escaped its attention, that only reinforces the suspicion that PEMRA and its officials live in Lotus land. The issue has also emerged with a bang on the internet and social media. If PEMRA is unaware of these developments, what does it say about its so-called ‘regulatory’ role? This hate-filled campaign has put the lives of the targeted individuals at risk and raised serious questions about the dysfunctionality of PEMRA. A regulator that is incapable of regulating without being pushed by the government of the day is surely a waste of time and resources. Better to use such scarce resources on better things than a sleepwalking institution. As for the ‘free’ media, it is a sad comment to make that such hate-filled, dangerous, inciteful and irresponsible programming is allowed to pass in the name of some spurious idea of patriotism that insists on dubbing all dissenting elements ‘traitors’. When will the media, and we as a society, grow up?