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Pakistan: Imran Khan tackles sugar barons in push to hold on to power

Sidelined by the military during the pandemic, the prime minister is targeting his former backers

When Imran Khan was elected Pakistan’s prime minister in July 2018, he tasked his top adviser Jahangir Tareen with recruiting independent members of parliament to support him after failing to win an outright majority.

The sugar baron criss-crossed Pakistan in his private jet scooping up politicians one by one, flashing a winning smile as he welcomed them to the party alongside Mr Khan. His nationwide headhunt was immortalised in satirical memes that showed him leaping out of his luxury SUV to capture candidates and successfully recruiting others from Mars.

Mr Tareen’s horse-trading gave Mr Khan’s Pakistan Tehreek-e-Insaf, or the Movement for Justice, a razor-thin majority by the time the former cricket superstar was sworn in three weeks later, with many of the new recruits coming from the leading political families of Punjab, the country’s most populous province and heartland of the powerful sugar industry.

The formation of PTI’s parliamentary majority perfectly captured the indispensable role of sugar barons in Pakistan’s government, who along with the military and Islamic groups dominate the country’s politics. In the absence of an organised public donation system for campaign funding, the barons bankroll every party in Pakistan, simultaneously serving as MPs and, in Nawaz Sharif’s case, as prime minister.

That cozy relationship was upended in April when Mr Khan released the initial results of a probe into a 20 per cent rise in the price of the commodity over the past year that has prompted heavy criticism of the sugar industry.

The calculation is straightforward. Mr Khan has been under intense pressure from the military, which has undermined his authority during the coronavirus crisis, and is encroaching on his civilian government. In a bid to re-establish his political standing with the people, he has decided to do battle with the sugar barons.

The probe alleged Mr Tareen and others close to the ruling party colluded to influence policy that allowed them to continue exporting sugar despite low stocks and benefit from an export subsidy worth Rs2.5bn ($15m). They then subsequently gained, the report said, from the steep rise in prices caused by the sugar shortages at home.

The final report — which could pave the way for criminal prosecutions — is to be released later in May.

Mr Khan removed Mr Tareen as the chair of the task force on agriculture and reshuffled his cabinet, declaring that “no powerful lobby will be able to profit at the expense of our public”.

By isolating Mr Tareen, Mr Khan hopes to quell turbulence in his heavily factionalised party and burnish his anti-corruption credentials in his quest to build a “New Pakistan” after being criticised for failing to act decisively to address a balance of payments crisis and mismanaging the response to the Covid-19 pandemic.

Yet if Mr Khan’s gambit backfires, he will have alienated a crucial benefactor who holds influence over the power centre of Punjab. Without that support, Mr Khan is vulnerable to opposition groups and the all-powerful military, which pushed him aside to take control of the country’s coronavirus outbreak.
“It’s good for his image but he can only go so far,” says Arif Rafiq, president of political risk company Vizier Consulting. “If push comes to shove he could face dissent in his party, lose the coalition majority and trigger the downfall of his government.”

If Mr Khan falls, the worst-case scenario would be nuclear-armed Pakistan returning to military rule in a big blow to the country’s fragile democracy. Experts warn that political instability and economic ruin in Pakistan, a country of 200m people that is a volatile mix of Islamic extremism and mass poverty, poses a great danger to western security interests in the region.

Mr Tareen is not going down without a fight. In the first 48 hours after the report was released, he denied any wrongdoing and threatened to spill election secrets on how he recruited the prized Punjab candidates.

The owner of JDW Group, whose carefully side-parted silver hair and simple eyeglasses suggest a clinician rather than a tycoon, appeared on TV networks to dispute the findings of the report. He brushed off allegations that he is part of a sugar cartel and used the airtime to warn the prime minister over his crucial role in forming the government.

“I brought most of them. We picked pearl after pearl that became the necklace worn by the prime minister,” he told Samaa TV. “This is how Imran Khan became the prime minister and Punjab was won by the PTI.”

The sugar barons

Jahangir Tareen Born in 1953, Mr Tareen graduated with a masters degree in business administration from the University of North Carolina. He built experience at his family farm in Lodhran in the province of Punjab before launching JDW Sugar Mills In 1992. A decade later he entered politics, when he was elected to the lower house of parliament as part of a military-backed political party during the rule of General Pervez Musharraf. He joined Mr Khan’s PTI in 2011. Today Mr Tareen’s factories produce about 20 per cent of Pakistan’s sugar output, making him the largest industry player.
Sweetening politics

Sugar is the lifeblood of Pakistani politics. Of the more than 80 sugar mills in Pakistan, many have links to political families that hold huge sway over the rural voters who are key to winning elections.

The phenomenon dates back to General Muhammad Zia-ul-Haq in the 1980s, who established pro-sugar policies with the aim of cultivating sympathetic politicians by offering subsidies, rebates and duty drawbacks that persist to this day.

Today the barons run for office outright or fund political campaigns in return for concessions including a freight subsidy on the export of sugar — a system that is at the heart of the corruption report and which has been criticised for benefiting the country’s richest families.

The industry is synonymous with crony capitalism. In 2017 Mr Tareen, then a member of the National Assembly, was disqualified from holding office by the Supreme Court for not being honest over the disclosure of his assets and offshore companies.

The sugar barons

Shamim Khan Heads the Al-Moiz group, which owns five sugar mills. But Mr Khan has only shot to prominence with the government’s investigation into the sugar industry, which reported that Al-Moiz exported more than 29 per cent of its total production last year. Al-Moiz has diversified into other areas such as processed food and steel manufacturing, reflecting its sizeable returns from its sugar businesses. Unlike Mr Tareen, Mr Khan does not have a visible political role.

“Imran Khan is a product of the political marriage between the military and the sugar barons,” says Husain Haqqani, a former Pakistan ambassador to the US and now a senior fellow at the Hudson Institute, a Washington-based think-tank. “The sugar barons are an integral part of Pakistan’s deep-rooted corruption, along with the military.”

As public outrage mounted over sky-high sugar prices, analysts say Mr Khan had to act. For a politician who cultivated his image as an outsider promising to clean up Pakistan’s endemic graft and end the reign of corrupt elites, his relationship with Mr Tareen had become a liability.

“He understands that he has made so many compromises that if he does not go back to his roots he will gradually lose his power base, the urban middle class,” says Mian Abrar, a political commentator in Islamabad.

While the final report into the sugar scandal could issue demands for reform of the sector, others are sceptical that there is a genuine will for change. They suggest that the investigation has as much to do with internal PTI politics as the price of sugar.

The sugar barons

Makhdum Omar Shehryar

A member of a politically influential farming family in central Pakistan, Mr Shehryar began his career in banking, working with Citigroup and United Bank, but then moved to head the family-owned RYK Group focused on sugar production. His two brothers, Khusro Bakhtiar and Hashim Jawan Bakht, are both politicians in Imran Khan’s PTI party, serving as ministers in the central government and the provincial government of the populous Punjab province.

Some in the party say friction had been growing between Mr Tareen and planning minister Asad Umar and foreign affairs minister Mahmood Qureshi. Another theory suggests that Mr Tareen fell foul of Mr Khan’s influential third wife, the faith-healer Bushra Bibi, who guided Mr Khan to victory after exchanging vows months before the 2018 vote.

“Imran Khan may tame the sugar lobby for the time being with his recent action, but not permanently,” says Mahmud Durrani, a retired major general and former national security adviser. “They must be accountable for their actions.”

So far Mr Khan has not removed any members of his government linked to beneficiaries of the sugar price rises, highlighting the limits to his war on corruption.

Buying some ‘breathing space’

Like other parts of the world, Pakistan is tentatively emerging from its coronavirus lockdown, with parliament and sections of the economy reopening last week. The virus has infected over 42,000 people and killed more than 900 in the country, according to Johns Hopkins University, though experts warn that low testing may be concealing the true scale of the crisis.

But the economic impact has been grave. Pakistan’s central bank expects gross domestic product to contract by 1.5 per cent in 2020, after growing 3.3 per cent last year.

The government’s Small and Medium Enterprises Development Authority revealed in April that 89 per cent of businesses it surveyed were in financial trouble, with nearly half laying off employees. Authorities now insist that the worst is over. If Islamabad can keep its death rate down, experts say Mr Khan could emerge stronger from the pandemic — even though he bungled the government’s initial response and was forced to cede control of the crisis to the military after resisting a harsh lockdown that was subsequently imposed.

Before the pandemic, Islamabad was struggling to implement a $6bn IMF programme, its 13th since the late 1980s. The government was refusing to impose additional taxes and electricity tariffs on people already struggling with soaring consumer price inflation that hit 14 per cent in January.

The pandemic has completely changed that scenario. The programme is on hold and the IMF separately approved a $1.4bn zero-interest loan to help Pakistan address the economic impact. Islamabad is also applying for a $1.8bn debt repayment referral under a G20 initiative. Meanwhile, the State Bank of Pakistan has lowered the interest rate from 13.25 per cent to 8 per cent in four successive cuts.

“Paradoxically, coronavirus coming into the country has given Pakistan some breathing space,” says Waleed Saigol, chief executive of investment company Maple Leaf Capital. “Businesses were suffering because of the high-interest rates; there was a stranglehold on the economy because of the IMF programme. That’s all been loosened.”

‘A creeping coup’

That gives Mr Khan time to refocus on the coronavirus crisis and rehabilitate his fraying relationship with the establishment, the code name in Pakistan for the military, which backed his bid for office after it clashed with the Sharif government.

For decades Mr Khan had campaigned on a promise to end the reign of political dynasties and four-star generals. Using the intoxicating rhetoric of populist leaders, he railed against a system that had failed ordinary Pakistanis and seen the country slip ever further behind its arch-rival India as the economy sputtered and radical Islamists launched bloody attacks.

“They just don’t have the vision to run a country, they are not equipped to deal with normal human beings,” said Mr Khan about the military generals over a decade ago. “When you tell them to run the country, it doesn’t work.”

Under Mr Khan not only has the status quo been preserved but analysts say the military is now more involved in politics than at any time since the end of President Pervez Musharraf’s dictatorship in 2008.

In the past two years, there has been a concentration of power in the hands of unelected officials. In December, a retired general was appointed chairman of a new authority overseeing the China-Pakistan Economic Corridor, a key part of Beijing’s Belt and Road Initiative. The military sidelined Mr Khan to control the coronavirus response through a new body, the National Core Committee.

“Call it a creeping coup. Wherever it matters, the military is exercising great power and authority,” says Hassan Javid, an assistant professor of political science at the University of Lahore. “If you’re interested in the entrenchment of democracy in Pakistan, you should be worried that recent interventions have set that process back.”

As long as Mr Khan’s government and the military are in lockstep, there is unlikely to be regime change — always a possibility in Pakistan, where no civilian prime minister has ever served a full five-year term.

At the moment, there is no strong alternative to the PTI. The opposition is fragmented, with both Sharif — who was jailed in 2018 on corruption charges — and his daughter Maryam facing money laundering allegations over suspicious transactions. They deny any wrongdoing.

“I don’t think there is a serious move anytime soon to remove Khan’s government,” says one senior opposition leader. “I doubt if there is any mainstream politician in today’s Pakistan who would like to become the prime minister. It’s an unusually tough time.”

But should the pressure on the government start rising again, analysts warn Mr Khan’s rift with Mr Tareen could weaken his position if he needs to marshal support against his political rivals and the military.

“Khan has damaged that relationship and he doesn’t have a replacement for Tareen,” says Asfandyar Mir, a south Asia analyst at Stanford University. “He’s going to feel the heat as and when the military decides to pull the plug on him.”

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