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Paper no. 1040
30. 06. 2004
SHAUKAT AZIZ: Reforms With an American Face
by B.Raman
When Shaukat Aziz, the Finance Minister in the outgoing Cabinet of Mir Zafarullah Khan Jamali, takes over as the Prime Minister of Pakistan before the year-end, both India and Pakistan will have technocrats well-versed in economic management as their Prime Ministers. However, whereas Dr. Manmohan Singh, the Indian Prime Minister, learnt his economic management skills mainly in India and has come to be known for his policy of economic reforms with a human face, Aziz is known in Pakistan for what his critics describe as economic reforms with an American face.
2. Even Aziz's worst critics appreciate his low profile and free-of-rhetoric approach to the economic and other problems facing Pakistan and admit that since taking over as the Finance Minister in November 1999, he has saved the Pakistani economy from the verge of collapse and brought it out of the intensive care unit to which it had remained confined under Mrs.Benazir Bhutto and Nawaz Sharif, both of whom made a mess of the economy. He firmly enforced a long-felt need for fiscal responsibility, reduced the fiscal deficit and brought down Pakistan's external debt liability from around 40 per cent plus of the GDP to around 36 per cent.
3. The remarkable turn-around in Pakistan's economy under his stewardship would be evident from the fact that whereas in the past, Pakistan faced difficulties even in meeting its interest payment obligations, since last year it has not only been able to pay the interests due, but has also started repaying its debts, thereby reducing its over-all debt burden. He has already declared that in future Pakistan would require only project assistance from international financial institutions and would no longer require any concessional facility in the form of budgetary support for keeping its economy floating.
4. However, he would not have been able to achieve these results but for the following factors:
* The total trust of Musharraf enjoyed by him. Musharraf, who understands little of economy, gave a free hand to Aziz and instructed Jamali that no recommendations of Aziz in economic matters could be overruled by him (Jamali) without consulting him (Musharraf) beforehand.* The excellent equation enjoyed by him with the ruling and other princely families of Saudi Arabia. When he took over as the Finance Minister, the Pakistani economy was tottering from the effects of the additional economic sanctions imposed by the US and other Western countries after the Chagai nuclear tests of May,1998. Pakistan might not have been able to meet the resulting crisis without generous assistance from Saudi Arabia in the form of concessional oil facilities and other means.
* The network of friendships built up by him in the World Bank and the International Monetary Fund (IMF) during his stay in the US, which made them more sympathetic to Pakistani requests and more attentive to Pakistani difficulties than they were under Benazir and Nawaz.
* 9/11 and Pakistan's emergence as the so-called frontline ally of the US in the war against terrorism. This led to a removal of all sanctions against Pakistan and there was a tremendous increase in aid flow from the US and other Western countries. This flow was supplemented by US payments for the use of Pakistani military facilities by the US armed forces for logistic and other purposes.
* The tremendous increase in legal remittances through normal banking channels by overseas Pakistanis following a close monitoring of suspect bank and hawala transactions by the USA's Federal Bureau of Investigation (FBI) and the intelligence agencies of other Western countries in pursuance of the call for action against terrorist funding issued by the UN Security Council under its Resolution No.1373.
* An improved market in textiles, which resulted in a 14.3 per cent increase in the export of textiles.
5. As positive results of his economic stewardship, one could mention the following:
* The increase in the total value of Pakistani exports from around US $ 8 billion per annum before 2000 to US $ 12 billion.6. On the negative side, one could mention the following:* The increase in the Pakistani foreign exchange reserves from around US $ 1.5 billion in 1999 to US$ 12.5 billion.
* The decrease in the budget deficit from five per cent plus of the GDP in the 1990s to 3.1 per cent.
* The decrease in external debts fron US $ 40 billion plus in 1999 to US $ 35.8 billion.
* A six per cent plus GDP growth rate as against around 3 per cent before 1999.
* The policy of diversification of the economy initiated in 2000 to increase the contribution of information technology and non-traditional manufactured goods to the economy has failed to take off. 63 per cent of Pakistan's exports continue to come from cotton and textiles and another 17 per cent from leather articles, sports goods and rice.7. Pakistani Finance Ministers, whether under its political or military dispensations, have always faced accusations of fudging of statistics. Aziz is no exception. In preparing the annual reports on the state of the economy, his predecessors were using 1980-81 as the base year for comparison purposes. Aziz has changed it to 1999-2000. In the year 1980-81, the economy did quite well under Zia-ul-Haq, particularly after the large-scale flow of Western assistance in the wake of the Soviet invasion of Afghanistan. In 1999-2000, the Pakistani economy hit the rock bottom as a consequence of the imposition of some sanctions by the US in 1990 under the Pressler Amendment, more sanctions after the Chagai nuclear tests of 1998 and still more sanctions following the military take-over in October,1999. His critics allege that the figures of today look impressive as compared to those of 1999-2000, but they are not that impressive if compared with those of 1980-81.* Over-concentration on incentives to the business community and the manufacturing sector and neglect of the farmers. While the contribution of the industrial sector to the economy has increased from 22.6 per cent to 24.5 per cent of the GDP, that of agriculture has declined from 26.2 per cent to 23.3 per cent. While the industrial sector has grown by 13.1 per cent and the services sector by 5.2, the agricultural sector has grown by only 2.6 per cent.
* Continued poor flow of foreign direct investments (around US $ 760 million per annum) despite incentives offered due to the fears and nervousness caused by the Government's failure to control terrorism and sectarian violence.
* Continued neglect of the social sector (less than 20 per cent of the expenditure) and preference to the defence sector ( 21.5 per cent).
8.Amongst the controversies which have dogged Aziz since he took over as the Finance Minister in November,1999, are those relating the following:
* His nationality: His critics allege he is an American national of Pakistani origin. So was Moeen Quereshi, who became the caretaker Prime Minister after the dismissal of Nawaz Sharif in 1993. Quereshi made no secret of his American nationality. Aziz does not admit it.9. The following is the biodata of Aziz as given in the records of the Senate:* His religious background: His critics allege he comes from a family of Ahmediyas, but this is indignantly denied by those close to him.
* His proximity to Musharraf: His critics allege that he had helped Musharraf's brother, son and wife in acquiring property in the US and that is how he came to the favourable notice of the General. Neither Aziz nor Musharraf have commented on this.
* His proximity to the US: He is projected as the USA's cat's paw. His being used by Musharraf since last year for exercising ostensible civilian supervision over the Kahuta uranium enrichment plant has come in for considerable suspicion as to the real reasons for it. The question often posed is: Did Musharraf himself entrust this task to him or was this suggested by the US?
* His overseas assets: While filing his nomination for election to the Senate, the upper House of Parliament, in 2002, Aziz had declared his overseas assets as follows: A flat in the UK worth Pakistani Rs10.84 million, an apartment in New York worth Rs10.1 million, a bungalow in the Defense Society, of Karachi, worth Rs3.5 million, a plot in Karachi worth Rs500,000, a bank account in the UK with a balance of 310,000 pounds and another in the US Citibank with a balance of three million dollars. With the help of statements from real estate experts in New York, his critics have allged that his New York flat must be worth at least between five and 10 million US dollars as against the value of US $ 1,75,000 declared by him and demanded an enquiry by the National Accountability Bureau set up by Musharraf to investigate political wrong-doing. They point out that while Musharraf has been getting political leaders belonging to the parties of Benazir and Nawaz harassed by the Bureau on charges of false declaration of assets, he has ignored the charges against Aziz.
Shaukat Aziz
Position: Senator
Party Affiliation: PML(Q) (Pakistan Muslim League--Quaide Azam)
Home Phone: 9202212
Office Phone: 9213204, 9203687
Mobile Phone: 0300-8558804
Fax: 9213780, 9202098
Email: finance@isb.paknet.pk
Province: Punjab
Address: 27-Minister’s Enclave, Islamabad.Committee(s): Standing Committee on Cabinet, Establishment and Management Services
Standing Committee on Food, Agriculture and Livestock
Standing Committee on Health and Social Welfare and Special Education
Finanace CommitteeCareer: Born at Karachi, 6th March, 1949.Early Education at Saint Patrick’s School Karachi and Abbotabad Public School,Abbotabad.Graduated (B.Sc) in 1967 from Gordon College, Rawalpindi.
Obtained MBA Degree in 1969 from Institute of Business Administration, University of Karachi.
Started his career in 1969 when he joined Citibank, Karachi. Moved overseas in 1975 and has since served in several countries including the Philppines, Jorden, Greece, USA, UK, Malaysia, Singapore and Saudi Arabia. His assignments included Head of Corporate and Investment Banking for the Asia Pacific Region; Head of Corporate and Investment Banking for Central & Eastern Europe, Middle East and Africa; Corporate Planning Officer, Citicorp; Managing Director, Saudi American Bank; and Global Head, Private Banking, for Citibank in 1992 and has had 30 years of experience in global finance and international banking.Mr. Aziz is a frequent speaker on international finance and has attended numerous forums, seminars and conferences on international finance as well as attended management courses at several universities. He has been a member of the Board of several Citibank owned entities including Saudi American Bank, Citi Islamic Bank as well as several non-profit organisations.
In November, 1999 Mr. Aziz was appointed as Pakistan’s Minister of Finance with responsibility for Finance, Economic Affairs, Statistics, Planning and Development and Revenue Divisions. As Minister of Finance, Mr. Aziz is also Chairman of Economic Coordination Committee of the Cabinet, Chairman, Executive Committee of National Economic Council and Chairman Cabinet Committee on Privatisation. ‘Euromoney’ and ‘Bankers Magazine’ have declared him as the Finance Minister of the year 2001. The democratically elected Government of Prime Minister Jamali has also retained him as Finance Minister which indicates continuation of Financial and Economic Reforms Agenda. Mr. Aziz was elected Senator in 2002.
Mr. Aziz enjoys golf, music, and art. He is married with three children.10. The following is his biodata as disseminated by an overseas Pakistani association of the US in 1999 when he joined Musharraf's Cabinet:
Shaukat Aziz
Banker, USA
Born in Karachi, Pakistan on 6 March 1949. Married to Rukhsana in 1972. Has 3 children: Lubna, Abid and Maha.
Educated at University of Punjab, Pakistan (B.Sc. 1967); University of Karachi, Pakistan (MBA, 1969).
Executive Vice President, Incharge of Corporate Planning at Citibank reporting directly to the Chairman CEO, New York, USA, March 1996 - present; Executive Vice President, Global Finance Asia, Citibank, Singapore, 1993-96; Executive Vice President, Central and Eastern Europe, Middle East and Africa, Citibank, London, 1992-93. Some of Mr. Aziz's International assignments include: Managing Director of Saudi-American Bank, Riyadh; Chief Executive of Citibank, Malaysia; Assistant Regional Treasurer for Middle East, Athens; Director of Middle East and Africa Training Center, Athens; Chief Executive for Citibank, Jordan; Divisional Operations Head for Middle East, Athens; and Chief of Staff for Asia Pacific Group, New York.
Directorship, Saudi American Bank, Riyadh, 1985 - present; Directorship, Citicorp Investment Bank Limited, Pakistan, 1990 - present; Directorship, Citicorp Islamic Bank limited, Bahrain, 1996 - present.
Professional of the Year, Asian American Heritage Council, New Jersy, USA, 1996; Honour for Achievement in Global Banking, New York, USA, 1996.
Senior International Banker with global experience and one of the senior most among Bankers of Pakistani Origin.
Avocations include Music and Golf.
(The writer is Additional Secretary (retd), Cabinet Secretariat, Govt. of India, and, presently, Director, Institute For Topical Studies, Chennai, and Distinguished Fellow and Convenor, Observer Research Foundation (ORF), Chennai Chapter. E-mail: corde@vsnl.com )
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