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Cover Story

1999 — an eventful year

Dec 27, 1999 - Jan 02, 2000

From beginning to end, the year 1999 proved to be full of events, some of them giving a new direction to the socio-economic and political life in Pakistan.

The diplomatic journey of Indian Prime Minister Attal Behari Vajpayee from Wahga to Lahore on a newly introduced bus service. Aversion of a possible nuclear war between India and Pakistan as a result of occupation of Kargil heights by Mujahideen which led to a serious border conflict between India and Pakistan. Shooting down of two Indian planes in which one of the Indian pilot was captured alive by Mujahideen and downing of a Pakistani surveillance aircraft by Indian forces in which several lives were perished. The exciting beginning and end of the prize schemes launched by the banks which overwhelmingly took over the entire financial sector by sucking a huge amount of Rs64 billion out of the market. The historic recovery of stuck up bank loans of over Rs12 billion. The most heinous crime in the history of Pakistan in which over 100 children killed by a group of criminals in Lahore etc. all were important events having their widespread socio-economic fall outs in the country.

However, on top of the list was the change of government on October 12, 1999, the most outstanding feature of the year which changed the entire complexion of socio-economic and political activities in Pakistan.

The dramatic change was a stunning shock for those so-called politicians engaged in looting, plundering and ruining the country without any fear of law and accountability.

It all started when the deposed Prime Minister Nawaz Sharif, who was running the country on his whims decided to replace General Pervez Musharraf as the Chief of the Army Staff with Lt. Gen. Agha Ziauddin to the position. The orders for removal of the Gen. Musharraf were also flashed on TV while Chief of the Army Staff Gen. Pervez Musharraf was on his way from Sri Lanka to Pakistan on a PIA regular flight. The aircraft with Gen Musharraf along with 200 passengers on board was not allowed to land at Karachi airport and the pilot was asked to land anywhere other than Karachi. The aircraft running short of the fuel while hovering over Karachi was finally given a green signal to land by army officers who in the meantime had taken over the charge of the air strip.

The news about removal of Chief of the Army Staff spread like a jungle fire and was the talk of the town till 6-7 pm. The situation however reversed later in the evening. The television and radio ceased to operate for quite sometime as the screen and speakers of TV and radio respectively went blank. The drop scene of the thriller came when it was announced that Gen. Pervez Musharraf has taken over the control as the Chief Executive of the country.

Nawaz Sharif's scheme to install a man of his own choice as chief of the army staff was however proved to be a futile exercise at the end of the day. In fact it was a rare day in the history of Pakistan. In an instant reaction army took over the charge of the country.

Now the deposed Prime Minister Nawaz Sharif and his accomplices are facing a trial in the Supreme Court of Pakistan.


On assuming the charge as the Chief Executive of Pakistan, the Chief Executive General Pervez Musharraf, in his first address to the nation gave a policy guideline based on following points to rescue the nation out of economic crisis.

The new leadership resolved to rebuild investors' confidence through stability and consistency in economic policies and economic security, to increase domestic savings, to carry out pragmatic tax reforms, to turn around the state enterprises towards profitability, boost agriculture sector and revive industries through strict austerity measures in the financial sector.

The Chief Executive also vowed to strengthen the federation of Pakistan by taking steps to remove inter-provincial disharmony which was rapidly eroding the very fibre of national cohesion.

Although the new government declared an state of emergency in the country, yet the bank accounts were not disturbed. Since the banks were operating as usual, there was no sign of panic for withdrawals. A small amount worth $15 million was withdrawn from the banks during first two to three days after the change in the government.

Recovery of bank loans

The Chief Executive, Gen. Pervez Musharraf assumed the charge of the country at a stage when Pakistan's economy was literally on the verge of collapse and needed immediate remedial steps. In order to restore financial discipline, he declared strict measures to be taken against loan defaulters and gave them a deadline of November 16, 1999 to settle down their bank defaults amounting to over Rs211 billion. The tax evaders and all others including corrupt officials responsible for the present economic crisis were given a clear signal to prepare for an across the board accountability. A deadline of Nov.16, 1999 was given to the defaulters for settling down their defaulted loans.

The recovery drive of Rs211 billion defaulted loans produced tangible results for the first time with the recovery of Rs.12.30 billion. Out of the total recovery, Rs9.8 billion loan were recovered from defaulters while another Rs14 billion loans were rescheduled. Another Rs2.5 billion revenue was realized from tax defaulters and the process for arrears recovery is still going on.

The recovery was a great success not in terms of money but a first time crackdown on the culture of loans defaults in Pakistan. Consequently, 21 big loan defaulters and corrupt persons were rounded up by the law enforcement agencies. Most of the arrested persons were politicians and businessmen who failed to settle their loans with the banks within the stipulated time i.e. November 16.

Some of the heavy weight defaulters taken into custody were identified including the deposed prime minister Nawaz Sharif, deposed chief minister of Punjab Shahbaz Sharif, former chairman of Ehtessab Bureau Saif ur Rehman Khan, former chairman of ad hoc cricket committee Mujeeburehman Khan and former Director General Intelligence Bureau Brig Imtiaz. Asif Ali Zardari, Usman Faruqui and Ramesh Udeshi were already in jail and facing trial in Ehtessab cases. A former naval chief Admiral Mansoorul Haq , Dr Farooq Sattar, former federal secretary commerce Salman Faruqui, former Sindh chief minister Abdullah Shah, Mian Aftab Ahmad and Riaz Laljee are also fugitives of law and out of the country.

All these efforts have put a dent in a culture which was never challenged by any government in Pakistan and the corrupt had taken the national resources for a ride. In order to make the recovery drive effective, an Ordinance to provide for the setting up of a National Accountability Bureau to eradicate corruption and hold accountable all the accused involved in malpractices were promulated by the President of Pakistan Rafiq Tarar on November 16.

The governments in the past criminally ignored the defaulters on political considerations. The weak governments were never in a position to give a dent into the vicious circle of influential feudals, corrupt bureaucrats and dishonest politicians.

The Central Board of Revenue(CBR) was asked to undertake fresh tax assessment of the big evaders, particularly belonging to textiles, sugar and cement industries to re-examine cases of large tax evasions.

The economic agenda, announced by Gen. Pervez Musharraf, emphasises upon revival of the national economy.

Among the revolutionary steps declared include ruthless accountability, allowing no room for bank defaulters and tax evaders. The programme include to restore confidence of investors at home and abroad, increase domestic savings, boost agriculture, turn state enterprises profit making and adopt strict austerity measures.

The aims and objects before the new government are to rebuilt national confidence, stem disharmony, restore law and order, devolving of powers and carrying out of swift accountability. He added that good government was a pre-requisite for all these objectives.

Gen. Musharraf feels that the country stood at the cross-roads of destiny which we can make or break. In the darkening environment, there was no beacon of hope as the economy was crumbling fast, credibility was lost, state institutions were demolished and provincial disharmony was rife endeavouring the federation.

The country was not poor but endowed with great richness in the form of fertilize lands, water resources and untapped minerals and a dynamic and industrious people.


Taking advantage of the recovery drive launched by the government, Karachi Electric Supply Corporation and WAPDA both accelerated pace of their long standing dues both against private and public sector consumers.

As a result of WAPDA campaign against power theft and recovery of dues one of the federal minister Syeda Abeda Hussain had to lose her job who was according to report was found guilty of power theft.

WAPDA also released a list of its top private sector defaulters owing Rs507.595 million on October 31,1999.

Apart from big defaulters of electricity consumers, names of some heavy weight politicians, parliamentarians and bureaucrats were also disclosed by Gohar Ayub Khan, the then minister for power while speaking at the Senate. The minister of water and power held these stalwarts for power theft which indicates the extent of decline of moral values in our society.

They were identified as Ch. Shujaat, the then minister for interior, Deputy Speaker of National Assembly Jaffar Iqbal, Aftab Sherpao, Begum Wali Khan, Jam Mohammed Yousaf, Azam Khan Hoti, Pir Mazhar ul Haq , Birjis Jabbar and others.


The economic package announced by the Chief Executive on December 15, 1999 was an effort to improve things within the given resources. When 96 per cent of the GDP goes into debt servicing what is left for an economic specialist of any standard to operate within such a tight space.

The tax reforms, ownership rights to farmers on government lands, deregulation of petroleum business, new corporation for revival of sick units, Rs15-20 billion fund for welfare programmes, amnesty for tax evaders and levy of GST across the board and above all the decision to bring agriculture sector into tax net were some prominent features of the economic package.

The package said that no black money whitener scheme will be allowed in future. However immunities, exemptions on existing investments, deposits, bonds and foreign currency accounts would be honoured by the government. This is an effort to ensure that consistency in government policy would be the hallmark of the new government.

Gen. Pervez Musharraf, while recalling freezing of foreign currency accounts on May 28,1998 said it was a mistake that should not have been committed.

In fact it was a blunder which not only shattered the confidence of the investors both foreign and the local but it greatly destabilised the credibility of banking system in Pakistan.

While apologising the foreign currency account holders affected in 1998 due to freezing orders by Nawaz Sharif government, the Chief Executive said that the action had damaged the nation's financial credibility. The apology on the part of the head of the state has signalled that recurrence of such mistakes will not be allowed again in Pakistan.

POL prices

The POL prices were increased by the government for the second time during the year 1999.

The POL prices were raised on two accounts first the drastic surge in the prices of petroleum in the international market which are estimated to cause an extra burden of around $650 million on the import bill during current year and of course pressures from IMF to increase the POL prices.

The first increase was of 10.58 per cent were announced in the month of May. Another increase of 10 per cent in POL prices and 20 per cent furnace oil was imposed in the last month of the year that December 11, 1999. The new government while announcing the most unpopular decision, however promised that the prices have been linked with the rise and fall of the international prices which will be reviewed on quarterly basis. Although oil prices touched down to the lowest at $8 per barrel during Nawaz Sharif regime but the benefit was not passed on to the consumers. Let us see whether the present government honours its promise of lowering the prices if the international market goes down.

Since the common man is already under heavy pressure of the price inflation, the increase in prices will add to the miseries of the poor due to multiplier effects on over all prices in the country.

Deregulation of petroleum sector

In order to accelerate pace of investment in the petroleum sector the government on December 9 decided to completely deregulate petroleum which is among other measures include abolishing of freight pool system in the country.

It may be recalled that the caretaker government of Moin Qureshi in which Jawed Jabbar, now the advisor to the Chief Executive Gen. Pervez Mushrraf had given a petroleum policy aimed to scrapping of the freight pool system in which billions of rupees are being embezzled in the country. In the existing system the freight charges are equally share by different parts of the country and price is maintained at the port city of Karachi and the remotest part of northern areas of the country. It is alleged that hundreds of oil tankers filled at Karachi supposedly for remotest parts of Balochistan charges millions of rupees for transportation but never deliver the goods and off-load them within Karachi but the transportation charges are regularly paid to these fake freighters. The doing away with the freight pool system is expected to save at least Rs4 billion a year, it is said.


Cotton which is the mainstay of the national economy was again in crisis despite having a bumper crop during the year. It is estimated that the size of the crop this year is around 11 million bales yet prevailing glut in the international market has severally affected this cash crop. At one time the cotton prices dipped down almost half as compared to last year's prices in the market. In order to ensure sustainable growth in cotton sector the government has come out with a support price by allocating over Rs10 billion to Trading Corporation of Pakistan to lift cotton from ginning factories.

IPPs and HUBCO issue

In order to resolve controversy of power purchase agreement with the private power producers (IPPs), the Chief Executive Gen. Pervez Musharraf has taken a serious note of the adverse effects of the problem especially on investment climate in the country. He has given 30 days for settling the issue.

It may be mentioned that the Hub Power Co has also pressed hard the government to drop corruption charges against it and honour the power purchase agreements so that IPPs could fulfil liabilities to their lenders and shareholders.


The occupation of the strategic Kargil heights by Mujahideen early this year was one of the most significant event in the military history of the sub-continent.

The intensity of the border conflict is reflected in the two fatal incidents in which Mujahideen shot down two Indian gunships and Indian military forced shot down a Pakistan Navy aircraft in Pakistan territories resulting in martyrdom of five Navy officers and 11 other navy personnel on Aug 10.

It is said that withdrawal of Mujahideen from the Kargil Peaks in the second week of July was one of the reasons which led to strained relations between the deposed prime minister Nawaz Sharif and Chief of the Army Staff Gen. Pervez Musharraf. It is however said that Kargil issue had tensed the border conflict between India and Pakistan to such an extent that it may sparked off a nuclear war between the two countries.

Stock exchange

The stock market conditions were steeply declined mainly due to international sanctions against Pakistan after nuclear blasts on May 28, 1998, eruption of IPPs and Hubco controversy with the government and later the border conflict with India on Kargil issue. As a result of that the KSE Index dropped from 1200-1300 points to even less than 800.

In order to improve the conditions at stock markets, the government allowed companies willing to buy back their shares from shareholders to maintain debt to equity ratio at 40:60 and current ratio at 1:1 level during July this year.

The Companies buy back of shares Rules 1999 was made under section 95-A of the Ordinance Promulgated on July 31, 1999.

It is expected that the conditions at the stock business likely to attain a real height as soon as the controversy between Hub Power Co. is resolved for which a deadline has already been given by the new government.

Prize schemes

The prize schemes such as "Crore Pati" of Habib Bank, "Zaraamad" and Maala Mal of MCB took the financial sector overwhelmingly and within a short period of 4 months sucked over Rs64 billion from the market. The schemes launched by the banks sometimes in May were so attractive that economic activities in other sectors of the country came almost to a stand still. This forced the State Bank of Pakistan to ask the banks to wind up their lottery schemes for raising deposits and all future banking products must spell out the year annual percentage return on them in July this year.

The commercial banks, it is said, were forced to launch these schemes in view of much attractive rate of return allowed to the National Saving Certificates which had rendered the bank's products unattractive for the investors. A complete ban of these prize scheme was however imposed and a deadline of 31st December 1999 was given to do away with these schemes.

Trade policy

Earlier the Nawaz Sharif Government announced a Trade Policy for 1999-2000 in which various concessions and tax incentives and relief to expand and diversify country's export base was announced.

The Trade Policy had fixed exports targets at $ 9 billion while imports target of $9.8 billion for the current fiscal. The salient features of that policy were extension in export refinance facility for below 30 counts cotton yarn up to June 30, 1999. Import of polyester staple fibre was allowed under no-duty no-drawback and manufacturing bonded scheme.

Income tax on the export of rice was reduced from one per cent to 0.5 per cent with the aim to encourage rice export up to 5 kg consumer packs bearing brand name of exporting companies.

Income tax on the exportable packed food items including fish was also curtailed from one per cent to 0.5 per cent. Income tax rate on the untrimmbed precious and semi precious stones was slashed from 1 per cent 0.5 per cent.

Import of machinery, spare parts up to $7000 was allowed to industrial units, registered as importers through foreign currency demand draft without opening letter of credit provided these items are imported by air or through courier.

Regulatory duty on the export of steamed and crushed bones was also reduced from 20, 15 per cent to 10 and 5 per cent respectively. Duty free purchase of raw materials was also allowed to industrialists turned exporters from the public bonded warehouses.

Inhuman crime against 100 children

The brutal killings of over 100 children allegedly by Jawed Iqbal of Lahore and some of his accomplices was the most heinous crime of the year.

The crime unfolded by Jawed Iqbal himself and it was not due to efforts by the agencies responsible for maintaining law and order in the country. The alleged killer who maintained a diary of his crimes sent the hair raising details of inhuman crimes to some newspapers and high officials during the month of November 1999.

The killer use to liquidate bodies of the children in drums filled with deadly acid chemicals in his house. It is surprising that how the culprit use to manage acid chemicals without justification of running any industry. Who use to supply that chemical to the criminal. How the man behind the crime was affording to buy such expensive chemicals to dissolve the children's bodies. There are strong doubts in the minds of the people only sex cannot be the only motive for killing over 100 children. There must be something more than it meets the eye. The possibility of selling of human parts like kidney, eyes or hearts etc. should also be kept in mind while investigating the case.

The Chief Executive General Pervez Musharraf, although condoled with the grieved families of one hundred minors who were killed by a serial killer in Lahore.

Visibly moved by the horrible crime, the Chief Executive directed the authorities to expedite investigations into the gory crime and leave no stone unturned to bring the culprit to book. It is good that the head of the government has taken notice of the situation, but situation demands to be handled on top priority.

This horrible crime indicates about deterioration of human, social, and religious values in our society. Generally speaking, people do not go to the police to lodge reports over 95 per cent crimes. Because they do not have any faith in the police system. It is generally known that instead of solving the problem of the aggrieved, the police add to the problems if anybody dare to ask any sort of help from the police. It is better to bear the loss, tolerate excesses of the people, not to resist the dacoits or robbers or not to lodge any report about the missing child.

The sight of the police mobile sends a wave of fear among the innocent citizens instead of giving a sense of security. How citizens would like to come in to contact with our law enforcement agencies and to go to report crimes. Wearing of the police uniform means that the man in the uniform whatever his credentials may be, gets the license to treat the citizens at his will. All of a sudden he becomes a stiffed neck ruler who is not answerable to anyone, whatever he says is the law. Only fundamental and radical steps can weed out the ills and evils from our police system.

It may be recalled that an industrialist had offered keys of his industry to General Ziaul Haq when he had visited the Karachi Chamber of Commerce and had said he would be more prosperous in the police or customs department instead of being an industrialist. The reforms in our system of course is a hard nut to break but we have to break that barrier if we really desire to survive as a civilized nation.

Increase in prices

This is the third increase in the petroleum prices since May 1998. Immediately after detonating the nuclear devices, the government had announced 25 per cent increase in the prices except for diesel. Another 10.5 per cent increase was announced just before the budget for 1999-2000 and now the recent increase is the third one within a period of 18 months.

According to an estimate, the ten per cent increase in prices may yield over Rs40 billion to the government revenue during the current financial year.

The increase in oil prices was expected much earlier in view of increase in international prices coupled with IMF's conditions for releasing the installment of $280 million which is the part of the total tranche of $1.56 billion IMF credit line approved earlier this year.

For the past many years fuel surcharge has become one of the major revenue sources of the government. In the last financial year Rs74 billion were collected in the form of petroleum surcharges.

The last revision was made in May 1999, the international petroleum prices had gone up by over 50 per cent.

The government has made special consideration in reviewing the prices of diesel as it was used in agriculture and public transport.

The domestic petroleum prices were linked to the then border prices of 24 dollars a barrel, no decrease was ever made in these prices through at one point in 1997 the world oil prices tumbled to as low as 8 dollar a barrel. Let us hope that the present government fulfils the promise of fixing the oil prices in accordance with the rise and fall in the international prices.

Islamic financial system

The Shariah Bench of the Supreme Court of Pakistan declared all laws which deal with the payment of interest as repugnant to the injunctions of Islam on Dec 23,1999.

The court also gave the ruling that all such laws shall ceases to have effect from June 30, 2001. The Supreme Court observed that a variety of Islamic modes of financing had been developed by Islamic Scholars, economists and bankers which may serve as a better alternative to interest. Hence the transactions of interest cannot be allowed to continue forever on the basis of necessity.