Pahalgam & Pak army’s business interests

WHAT is common between the terrorist attack in Pahalgam and Fauji Fresh n Freeze potato wedges? They both have to do with the Pakistani army’s commercial interests. Fauji Fresh n Freeze is one of the thousands of companies that the Pakistani military establishment owns. It gives the army an overwhelming control over the Pakistani economy, and acts as a key lever to stay in power.

The other important lever is whipping up jingoist frenzy against India. That’s where Pahalgam comes into the picture. The Pakistan army, once seen as the most stable institution in a nation disgusted with a succession of corrupt politicians, has been losing power for the past several years.

A terror attack in the Valley, orchestrated from across the border, is meant to help revive the army’s power and prestige.

The Pakistani army is essentially a commercial enterprise. It owns a big chunk of industry, land, and other assets in the country. A famous Pakistani scholar has termed this process ‘Milibus’, short for military business. When the scholar published her pioneering study, ‘Military Inc.’, in 2008, she estimated that the Pakistani armed forces owned assets worth $20 billion. At that time, Pakistan’s GDP was about $200 billion. Of course, wealth and GDP are not directly comparable, but it gives you a sense of how rich the army was.

Pakistan’s military has commercial interests in real estate, financial services, insurance, agriculture, fertilisers, food, IT, cement, mines, water resources, power plants, oil and gas, aviation, media and advertising – in short in every single sector of Pakistan’s economy. And they are used for private gains of the military elite and their hangers-on.

The Pakistan army has the Cold War to thank for this. Back then, the US was worried about India’s ties with the USSR and wanted Pakistan as an ally in the subcontinent. The US was suspicious about civilian political governments in Pakistan and preferred to back the army. The first of the military rulers, Ayub Khan, established the foundations of ‘Milibus’ in the 1960s. But the real expansion took place under General Zia ul-Haq, Pakistan’s most powerful military dictator. Zia came to power just before the Soviet Red Army invaded Afghanistan, to fight Mujahideen insurgency. The US could not enter the Afghan war directly, so it chose to go through Pakistan.

Throughout the 1980s, American money and arms, meant for the Afghan insurgents, flooded into Pakistan. Only a part of it went to the Mujahideen fighters. The rest was diverted into the private vaults of Zia’s aides, and to expand ‘Milibus’. This is when the army took over most of Pakistan’s economy.

After a decade of lull in Pak-US relations, in the 1990s, the US again needed Pakistan after 9/11. Even though Washington was now deeply suspicious of Islamabad’s connections with Al Qaida and other global Islamic terrorist networks, it had no option but to depend on the Pakistani army for operations in the frontier provinces bordering Afghanistan. This was another chance for the army to enrich itself and build military capital for the future.

Things would change from 2011, as the then US President, Barrack Obama, began a phased withdrawal of troops from Afghanistan. By the end of 2016, only 8,400 American soldiers were left behind, that too, in order to train and assist the Afghan army. Pakistan was being forgotten once again.

When Donald Trump took charge in 2016, he promptly cut $1.2 billion in security aid to Pakistan, and called it a ‘terrorist haven.’ A couple of years later, Pakistan was put on the ‘grey list’ of the global terror-finance watchdog, the Financial Action Task Force (FATF). That meant greater monitoring of financial transactions in Pakistan. This was a big blow to the Pakistani armed forces, since its commercial operations have always been notoriously opaque.

If Trump was hostile to Pakistan, his successor, Joe Biden, simply ignored it for the first two years in office. Washington lost all interest in Islamabad after the complete troop withdrawal from Afghanistan in August 2021, a few months after Biden’s inauguration. When Biden finally did speak about Pakistan, during the congressional campaign of 2022, he had only uncharitable things to say, calling it “one of the most dangerous nations in the world." Biden summed up the Pakistani establishment with this pithy phrase – “Nuclear weapons without any cohesion."

Indeed, the relations were so bad that Imran Khan blamed the no-confidence motion against him, that threw him out of power, on Washington. The Pakistani army stood in the background. Stung by the FATF grey list, and the cold shoulder treatment from the US, Qamar Javed Bajwa, Pakistan’s then army chief, decided to push for peace, even with India.

The army was rewarded with FATF removing Pakistan from the grey list in 2022. It coincided with Bajwa’s retirement, and his replacement by the nation’s first truly Islamist army chief, Asim Munir. Munir’s attempt to strengthen Milibus was evident when he helped set up the Special Investment Facilitation Council (SIFC) to bring in FDI into Pakistan. All the top posts in the SIFC have been given to Munir’s men in the army. Munir, reportedly, directly negotiated deals with the Gulf Cooperation Council (GCC) countries for the SIFC.

Yet, Pakistan’s economic woes have made the army extremely unpopular. Social media is full of posts critical of the army and the government. The army under Munir is especially disliked in Punjab, where it is blamed for illegally ousting Imran Khan. Munir’s latest plan to build six canals across Pakistan, to move waters into Punjab was aimed to gain public support there, but it caused collateral damage in Sindh. Protests have erupted across the southern province, where people believe the canals will cause water shortages.

Munir has been trying to divert the popular anger in Pakistan towards India. He made his intentions clear with anti-India speeches in the past few weeks. The terrorist attack in Pahalgam follows directly from that strategy — to tide over the popular opposition to the army’s plan to expand ‘Milibus.’

Aunindyo Chakravarty is a senior economic analyst.

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