Profile, Shaukat Tarin

By Amir Zia
Monday, July 25, 2011
Money Matters
The News

A Trendsetter

As a veteran banker, Tarin gets the credit of pioneering consumer banking in Pakistan.As a finance minister, he kept the IMF programme on track and managed to evolve a consensus on the NFC

There are only a handful of bankers in Pakistan who can be called trendsetters in the industry or boast a larger than life public image. Shaukat Tarin, undoubtedly, belongs to this elite group of professionals, who made their mark not just on the national banking scene, but internationally.
Tarin gets the credit of pioneering consumer banking in Pakistan, playing a key role as a member of the small team that pulled the loss-making nationalised banks out of the red and of introducing the culture of high-end services for customers in the local banks. In his 16-month stint at the Finance Ministry — first as an advisor and then a minister — Tarin managed to give the country a consensus National Finance Commission (NFC) Award and kept the International Monetary Fund (IMF)-backed reform process on track despite political pressures. Both in the banking industry and the finance ministry, he is known as a headstrong, candid and dynamic person, who can withstand pressure and go against the current.
“He is a tough and demanding boss,” said Muneer Kamal, one of his old associates of the Citi and Union Bank days. “As a senior, he teaches you a lot. But he is not a micro-manager. He gives space and autonomy to subordinates and allows them to grow, which is the hallmark of a great boss,” said Kamal, who is now the Chairman of the Karachi Stock Exchange and Vice Chairman of the KASB Group.
Sakib Sherani, a former principal advisor to the finance ministry, shares the same views. “He used to give full authority and backing to his team.”
“I found him an upright person,” Sherani said. “I never saw him work for his Silkbank when he was finance minister. Mindful of the clash of interest, he had built the Great Wall of China around him. He led by example, walking into the office before 9 am and was always the last one to leave. This reflects his dedication to his work.”
Born on October 1, 1953 in Multan to a military doctor, Tarin as a teenager dreamt of becoming an entrepreneur. “My father, Jamshaid Tarin, was a veteran of the Pakistan Movement and remained president of the Muslim Students Federation Punjab. He wanted me to join the civil service or become an aeronautical engineer.”
But destiny had other plans.
In 1971, Tarin’s father was transferred with his unit to the former East Pakistan where he became a prisoner of war. During his father’s more than two-year ordeal in Indian captivity, the young man got the freedom to exercise his will and he took admission in an MBA course. Although Tarin got selected for aeronautical engineering, he refused to join the Air Force. Instead, he joined Citibank with the aim of giving 10-15 years to this profession and then starting his own business. “I always thought that bankers knew which businesses would succeed. My plan was to spend a few years in banking and then go for my own business. But it took me more than two decades to do that.”
Tarin had an uninterrupted 22-year-long association with Citibank. He worked both in Pakistan and abroad, getting important postings, including Dubai and Bangkok. Tarin’s first big breakthrough came in Pakistan in 1990 when he was made Citibank’s head of consumer banking. This helped establish his reputation as a dynamic banker and won him the title of “father of consumer banking in Pakistan” from admirers. For the first time in Pakistan, he introduced large-scale consumer lending that included credit cards and auto and house financing, targeting the growing middle and upper middle classes. His next and even bigger assignment was in Thailand where he was posted as Citibank’s country manager.
In 1997, the then prime minister, Nawaz Sharif, asked Tarin to head the Pakistan International Airlines, but he refused, citing lack of expertise in the field. Sharif agreed and later offered him to head the Habib Bank Limited (HBL), which was then in the red because of overstaffing, bad loans and poor management.
Tarin did not personally know Sharif and was introduced to him through a common friend. Sharif assured Tarin of independence and non-interference in running the bank’s affairs. “I took the plunge and returned to Pakistan, leaving the Citibank job which paid close to a million dollars annually. At HBL, my take-home was 175,000 rupees along with the school fees of my children and a portion of my house rent. I had to eat into my savings to remain afloat.”
Although Tarin describes his 18 months at HBL as “torturous,” he managed to revive the country’s ailing banking sector along with his peers in the other state-run banks. But Tarin got on the wrong side of Sharif on the yellow cab and housing schemes, which he refused to back because he feared poor loan recovery. Differences with Sharif forced Tarin to seek other options. While serving at HBL, he along with his partners acquired the struggling Union Bank. The deal was closed in August 1999. Tarin operated from behind the scenes during the deal and formally joined Union Bank in May 2000.
The Union Bank proved another feather in Tarin’s cap as within six years, it was ranked among the top 10 Pakistani banks with an asset size of 1,122 billion rupees compared with 14 billion rupees when it changed hands. Tarin bought the operations of several other banks, including Bank of America and American Express cards, and replicated the model of consumer lending at a larger scale.
“As a local bank, our motto was to provide first-class customer service, which was the domain of foreign banks.”
Pakistan’s relatively stable political conditions, low interest rates and a booming economy under Musharraf provided a perfect environment for Union Bank.
“In Union Bank, we managed to galvanise different working cultures,” Tarin said. “Unless the team is motivated and everyone pulls together in one direction, one cannot deliver.”
Then what made Tarin sell Union Bank?
Tarin says differences with partners.
“I like to do things professionally and don’t like interference.”
In 2006, Tarin managed to strike a dream deal worth $487 million with the Standard Chartered Bank (SCB) for the sale of Union Bank. “The deal gave 18 times the return on assets,” Tarin said.
Tarin explained that SCB struck the deal after 10 weeks of due diligence, in which 80 people were involved.
“SCB’s problem was that of integration with the new acquisition,” he said brushing aside the question that Union Bank was sold for much more than its worth.
In March 2008, Tarin and his partners bought the Saudi-Pak Commercial Bank. Tarin was working as its president when he was assigned the task to lead the finance ministry as an advisor. But the deal with Saudi-Pak — renamed Silkbank in 2009 — proved challenging as the country’s economy got caught in the low-growth and high-inflation cycle amidst political instability and the rising wave of terrorism. The fact that Tarin pulled himself out of the bank’s operations also impacted its performance.
At the Finance Ministry, Tarin faced bigger challenges. “I took charge of the ministry in October 2008 when the country faced the risk of default,” Tarin said. “At that time, we were not in a position to go beyond December.”
Friends of Pakistan promised help but they needed a referee, he said. “Only China gave $500 million without any conditions.”
The Pakistan economy had been shaken by external and internal shocks. Inflation had peaked to 25 percent and external imbalances expanded due to rising international food and fuel prices as well as terrorism.
“We had no alternate but to go to the IMF,” he said.
Tarin had to perform a high wire act to keep the IMF programme going. The Fund praised his performance as he kept the key economic targets, including the budget deficit, in check.
“Most politicians do not understand what we say,” he said adding that President Asif Ali Zardari and Prime Minister Yousuf Raza Gilani gave him a free hand. Yet, the going was tough with issues like rental power being pushed by vested interests despite their “destructive” economic cost.
In retrospect, Tarin sees the agreement for the distribution of resources between provinces and the federal government under the NFC as a major achievement. But he resigned within months on Feb. 23, 2010 apparently to raise equity for his troubled Silkbank. However, sources close to him say that his sudden departure also stemmed from the fact that he was unable to push unpopular reforms through the cabinet. Tarin says that he remains a satisfied man as his decision to rejoin the banking world helped him pull Silkbank out of trouble. But perhaps the bigger source of solace remains that despite being part of a government swamped by scandals and controversies, Tarin managed to walk out untarnished.

Governance: Back to British Raj

By Amir Zia
The News On Sunday
July 24, 2011

The elected local governments flourished mainly under the military rule, while the democratic governments maintain a record of stifling them. The affection of military rulers toward the local governments stems from the fact that they wanted to alienate the mainstream political parties. The democratic governments abhor the local governments and in most cases chose to run them through hand-picked lackeys as they could never truly digest the concepts of sharing and devolution of powers.


On July 13, the Sindh Assembly restored the time-tested legacy of British Raj, known in our part of the world as the “commissionerate system.” In what may appear as a befitting tribute democracy La Pakistani-style, the Sindh Assembly lawmakers belonging to the ruling Pakistan People’s Party (PPP) and its allies passed three controversial ordinances by a simple majority in barely 15 minutes, which repealed the former military ruler Pervez Musharraf’s Local Government Order of 2001 and amended the Sindh Land Revenue Act of 1967. One of the bills revived the British-era Police Act of 1861 by scarping the Police Order 2002.

The move is being described by the government loyalists as a victory for the democratic forces, though it is all set to increase polarisation and division in the ethnically diverse and volatile province of Sindh, which drifts from one crisis to another.

The PPP Sindh leaders claim that the Musharraf-era system remained alien to both masses and the administration and they wanted the old system back. Their rivals say that it gave powers to the grassroots level.

The government’s move first came in the form of Ordinances soon after its one-time ally, the Muttahida Qaumi Movement (MQM), which supports the Musharraf-era concept of local governments, quit the treasury benches and its Sindh Governor tendered his resignation. Within four days of the passing of the controversial ordinances, which restored the commissionerate system, the government got them passed in the assembly despite the bitter opposition of the MQM.

Although Sindh Governor Dr Ishrat-ul Ibad resumed his responsibilities on July 18, indicating a thaw in the relations of these two parties, the brewing crisis over the commissionerate system appears far from over.

As the MQM continues to sit on the opposition benches despite having its man as Sindh Governor, one of its leaders, Wasay Jalil, says that his party will continue its campaign for the restoration of Musharraf-era local government system. “We say that if there were flaws in the 2001 Local Government Order, they should be removed,” he says. “We are demanding this not just for Karachi, or Sindh, but for the entire country. Instead of living in the 21st century, the vested interests want to drag us back to the 19th century. We only harm ourselves by repeating the past experiments.”

Sindh remains the only province where the Musharraf-era system has been scrapped altogether by the elected representatives. In Punjab and Khyber-Pakhtunkhwa, nominal changes have been brought in this system through executive ordinances.

Fahim Zaman Khan, a former PPP-nominated mayor of Karachi, who now leads a civil rights group, says that Sindh has reverted back to the 1979 Local Government Ordinance, while other provinces have made only symbolic changes, including restoring the old administrative titles. “Under the constitution, the local government is a provincial subject. The Musharraf government took the political, administrative and financial powers away from provinces and gave them to districts in the name of devolution and decentralisation. However, the military government made no attempt to transfer powers from the centre to the provinces. The step was taken with bad intentions from the day one,” Khan said.

“It was akin to Ayub Khan’s Basic Democracy, which was aimed at weakening political parties and dividing the people on the basis of ethnicity, clans, tribes and regions. Musharraf followed the footsteps of Ayub in his bid to eliminate the provincial authority.”

The traditional political forces viewed the 2001 local government system as full of anomalies and contradictions compared with the Municipal Act of 1848, enforced by the British East India Company.

Under the Musharraf’s planned system, police had to report to the elected nazim, but this part of the reform was never implemented, which, for many of its critics, led to the police becoming a “monster”.

Under the British Raj, they say, responsibilities and duties of police remained clear. For instance, police were not allowed to open fire without orders from the magistrate, but Musharraf gave this power to the police force itself.

Taj Haider, a senior PPP leader, says that Musharraf’s ordinance also remained in conflict with the constitution. “The system was full of loopholes… indirectly elected people were given vast financial powers.”

He says the PPP reverted back to the Ziaul Haq-introduced 1979 ordinance because it was closer to the spirit of constitution compared with the one introduced by Musharraf, which could not be reformed.

However, in line with its policy, the government ensured the separation of administrative and judicial powers, he says, adding that the recently resorted system will be improved further. “The government has setup a task force to decide whether commissioners, deputy commissioners and other officials report to chief secretary or the elected representative.”

Analysts say that the traditional political forces, especially belonging to the rural areas, felt that the powers of ministers were slashed under the Musharraf’s local body system. That was the reason many influential feudal lords chose to get themselves or their relatives elected as nazims rather than going for the provincial or national assemblies.

Danial Aziz, a former federal minister, who is leading a campaign for the devolution of powers and restoration of the 2001 local body system, says that vested interests are opposed to it because Musharraf’s system loosened their grip on the power structure. “These so-called democratic politicians, who run parties as their fiefdoms and nominate their heirs, saw a dark future because power was being transferred to the grassroots level.”

“They use deputy commissioners and other bureaucrats as their political agents. Obviously, they won’t like institution-building and decentralisation of power where people take ownership and hold elected representatives accountable,” Aziz says.

Sardar Ahmed, a senior MQM leader and a former bureaucrat, says the commissionerate system fitted the needs of colonial times and undemocratic rule, but enforcing the 19th century system in this day and age remains a cruel joke. “Only local representatives remain in a position to address problems of their people. It is not the job of members of the national or provincial assemblies or ministers to do this. The PPP never reconciled with the concept of transferring powers at grassroots.”

Differences over the local body system remained the main bone of contention between the PPP and the MQM even when they were allies. But PPP officials say that they can work together even with difference of opinion on this vital issue.

The elected local governments flourished mainly under the military rule in Pakistan, while the democratic governments maintain a record of stifling them. The affection of military rulers toward the local governments stems from the fact they wanted to alienate the mainstream political parties and create an alternate. The democratic governments abhor the local governments and in most cases chose to run them through hand-picked lackeys as they could never truly digest the concepts of sharing and devolution of powers.

One can call it the absurdity of Pakistani politics that our ruling elite keeps reopening and revisiting issues, which should have been decided long ago. The PPP government’s attempt to address the problems of 21st century Pakistan with the 19th century system remains ironic in itself, underlining the intellectual bankruptcy of our times in which past not just continues to hound us but seen as a panacea of all our ills. Pakistan, indeed, is set for more testing times.

Karachi turmoil: the economic cost

By Amir Zia
Business Weekly: Money Matters
The News
Monday, July 18, 2011

The deep-rooted problem of politicisation of crime and criminalisation of politics has transformed Karachi into one of the world’s most dangerous mega-cities and resulted in the flight of capital

A number of key wholesale and retail markets in the commercial hub of Karachi remained shuttered for at least six days in the first two weeks of July as former political allies turned their guns on one another, fighting pitched battles and resorting to targeted killings in various neighbourhoods. Many big, medium and small industries -- already shaken by a crippling energy crisis and protracted law and order problem – witnessed a further decline in production during the period as labourers stayed away from work and the supply chain got disrupted.
Yes, doing businesses and operating industries is increasingly becoming riskier in this volatile port city, where militants belonging to political and religious parties frequently fight bloody turf wars and run crime mafias to mint money through extortion, kidnappings for ransom, robberies and vehicle snatching.
“The continued state of lawlessness in Karachi is wrecking businesses and industries,” said Muhammad Saeed Shafiq, President of the Karachi Chamber of Commerce and Industry (KCCI). “This is hurting the Pakistan economy and tarnishing our image. We are cutting our own feet with an axe.”
The pain and anguish of business leaders appear understandable as they count the economic cost of turmoil in the city where more than 125 people lost their lives in the latest spate of violence in the first 15 days of July.
The rivalry and tussle for supremacy among the armed supporters of the Muttahida Qaumi Movement (MQM), the Pakistan Peoples’ Party (PPP) and the Awami National Party (ANP) is seen responsible for most of the bloodletting in the city, which has a long history of ethnic, religious and political violence.
The Human Rights Commission of Pakistan says that 490 people have been killed in the first six months of 2011 in political, religious and ethnic violence in Karachi. Dozens of others were killed in robberies, kidnappings, gang wars and bomb explosions.
The rampant lawlessness and crime emerged as the biggest challenge for Karachi’s business and industrial communities, which blame leading political parties for the crisis.
In April, traders and shopkeepers staged an unprecedented strike against politically-connected extortionists and criminals, specially operating in the city’s old parts, where major wholesale and retail markets are located. The strike resulted in the disbanding of the controversial Peoples’ Amn Committee of Lyari, which pledged allegiance to the PPP. However, the extortion racket continues to flourish as shopkeepers, small and big businesses and industrialists remain easy targets of criminals operating under the garb of this or that political party.
The deep-rooted problem of politicisation of crime and criminalisation of politics has transformed Karachi into one of the world’s most dangerous mega-cities and resulted in the flight of capital.
A report prepared by KCCI’s research cell says that billions of rupees worth of investment has been shifted to Bangladesh, Egypt and Malaysia in the last couple of years due to the poor law and order situation. Investors prefer peaceful countries for investment, the report said.
Background interviews with business leaders' show that jittery local investors have been scaling down their investments. The negative sentiment and spectre of uncertainty hurt most major businesses and industries and the KCCI report claims that 15,000 industrial units have been performing below their capacity.
Shafiq said that not just major political parties, but even those which cannot win a single seat in elections, posses the muscle power to partially affect business life in Karachi.
Whenever a member of any political or religious group gets killed, armed bands of youngsters fan out in different localities, forcing shops and businesses to close. Such partial and area-specific shutter downs have become a norm in the city. In most cases, police and paramilitary rangers never interfere and allow political activists-cum-criminals to have their way.
Zubair Motiwala, an advisor to Sindh Chief Minister and a leading businessman, said that Karachi’s violence directly impacts the country’s economy. "Karachi contributes almost 68 percent to the federal revenues," he said. “Our calculations say that the government loses on an average 3.3 billion rupees a day in revenues if the city is shuttered due to a strike, protest or violence.”
But the drop in revenues is not the only tangible loss to the national exchequer.
Business leaders estimate that the economy takes a hit of an additional seven to eight billion rupees a day in lost production, wasted work hours and drop in sales. The purchasing power of working class and low income groups erodes further as daily wage earners and people engaged in small enterprises remain unable to earn when the wheel of business and industry halts.
This is a bad tiding for the Pakistan economy, which has been caught in the vortex of low growth and high inflation for the last three years against the backdrop of the war against terrorism and rising global food and oil prices. The frequent bouts of violence in Karachi have indeed become another dampening factor for the business and investment environment.
Motiwala said that the long-term impact of violence and terrorism on the economy remains incalculable. “It erodes Pakistan’s image. International buyers are reluctant to deal with Pakistani exporters as they remain unsure whether we will meet commitments. They prefer buying the same product, at higher rates, from countries where there is security and stability,” he said. “Violence often disrupts cargo supplies. If a shipping date is missed, you have to send goods by air which is 10 times costlier.”
Shafiq of the KCCI echoed the sentiment.
“We have to give extra concessions to foreign buyers, who for the last few years have stopped visiting Pakistan because of terrorism and violence. They doubt our ability to meet their orders.”
Khalid Tawab, Vice President of the Federation of Pakistan Chambers of Commerce and Industry, said Pakistan’s credibility and image remains the foremost casualties. “It is ironic that a senior minister of the ruling party is responsible for the latest bout of violence. The economy is already in doldrums. Politicians have to think twice before they speak.”
Senior PPP leader Zulfikar Mirza heaped scorn on the MQM, its leader Altaf Hussain as well as the Urdu-speaking people who migrated from India during Partition in 1947. The statement led to the killing of at least 15 people and paralysed normal life in Karachi on July 14.
However, violence can be ignited in Karachi under any pretext -- from raising party flags to the collection of hides of sacrificial animals to collecting extortion money. The ethnic, political and religious fault lines, the presence of heavily armed crime mafias and political parties in the city coupled with weak and corrupt state institutions provide a setting for a perfect storm.
Major political parties, including the ones in Sindh’s ruling coalition instead of working for the rule of law and peace, themselves have become part of the problem due to their illegal financial stakes in the city. No wonder, the city drifts from one bloody cycle of violence to another, weakening and haemorrhaging the country’s economic jugular vein as the government looks the other way.