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EFSAS Commentary

The Pandora Papers reflect a deep-seated malaise in South Asia in general and Pakistan in particular


The International Consortium of Investigative Journalists (ICIJ), a global network of reporters and publication houses, this week released the Pandora Papers, a global investigation based on a leak of 11.9 million files from 14 companies that manage offshore transactions in tax havens ranging from the Cayman Islands to Switzerland. The Pandora Papers reveal how the rich and the famous from across the world set up complex multi-layered trust structures for estate planning in jurisdictions that are loosely regulated for tax purposes. Described as a “treasure trove”, the exposure by the paper of hundreds of wealthy and powerful South Asians, especially Pakistanis, in fleecing the resources of the State and hiding them in vague, distant entities raises several serious questions.

Over 700 Pakistanis, including serving Ministers in Prime Minister Imran Khan’s cabinet and members of the country’s powerful military establishment, have been implicated in the Pandora Papers. This is both remarkable and distressing – remarkable for the fact that neighbouring India, which has several times the population of Pakistan, has only half the number of people, mainly businessmen and sportspersons, named in the papers. It is distressing because Pakistan is one of the poorest countries in the world, the leadership of which has in recent years been criss-crossing the globe pleading for money to service the nation’s ever increasing debts, especially to China, and whose educated youth are reeling under the 24% unemployment level that the Pakistan Institute of Development Economics (PIDE) has recently reported.

Among the significant aspects that helped catapult Imran Khan into power in 2018 was the release of the Panama Papers in 2016, the other being the Pakistani military establishment’s backing of Khan against Nawaz Sharif because of the uncomfortable questions regarding the establishment’s involvement in cross-border terrorism directed against Afghanistan and India that Sharif had begun asking. Sharif’s involvement in the Panama Papers had provided Khan with the ammunition he needed to hasten the formers exit from power, and Khan’s strong anti-corruption campaign had struck a chord with the voters. Now, with the Pandora Papers finding that “key members of Khan’s inner circle, including cabinet ministers, their families and major financial backers” have stashed away millions of dollars in a maze of companies in offshore accounts, Khan's anti-corruption credentials have come under a dark cloud. That the Pandora list also includes Pakistani military leaders, who are widely believed within Pakistan to have propped up Khan and helped him remain in power, has made the beleaguered Prime Minister’s position even more awkward and untenable.

Pakistan’s Finance Minister Shaukat Tarin and Water Resources Minister Moonis Elahi have both been named in the Pandora probe, along with family members of other ministers and political leaders associated with the government. The News, ICIJ’s Pakistani partner, found that Shaukat Tarin and his family members own four offshore companies. The companies were set up as part of the Tarin family’s planned investment in a bank with a Saudi business, but the deal did not eventually go ahead.

As for Moonis Elahi, the ICIJ revealed that he had contacted a Singapore-based offshore services provider Asiaciti in 2016 about setting up a trust to invest the profits from a family land deal that had been financed by what the lender later claimed was an illegal loan. The bank told Pakistani authorities that the loan had been approved due to the influence of Elahi’s father, a former deputy Prime Minister. Asiaciti records showed that Elahi backed off from putting money into a trust in Singapore after the provider told him it would report the details to Pakistani tax authorities. The Singapore-based firm denoted Elahi as a “politically exposed person” (PEP), which meant that the management had to green light all business with him and also establish the source of his wealth. The ICIJ report added, “Asiaciti commissioned Thomson Reuters Risk Management Solutions, a unit of the financial information giant, to conduct an ‘enhanced due diligence’ check. Thomson Reuters produced a 19-page report detailing allegations of Elahi’s involvement in ‘several corrupt land development projects’, including that he set up a fake company, fraudulently obtained loans and sold land at inflated prices to government agencies”.  Despite the report, Asiaciti accepted Moonis Elahi as a client in February 2016. Elahi declined Asiaciti’s advice to tell Pakistani tax authorities about setting up a Singapore-based trust.

The Ministers were not the only ones directly linked to PM Imran Khan that figured in the Pandora probe. The son of Waqar Masood Khan, the PM’s former chief adviser for finance and revenue, found mention as the co-owner of an off-shore company based in the British Virgin Islands (BVI). Faisal Vawda, who resigned in March as Minister for Water Resources due to a controversy over his dual citizenship, had set up an offshore company in 2012 to invest in UK properties. The brother of Makhdum Khusro Bakthyar, Pakistan’s Minister of Industries, transferred a $1 million apartment in Chelsea in London to his mother through an offshore company in 2018. Further, in the ICIJ’s words, “The records also reveal the offshore dealings of a top PTI (Pakistan Tehreek-e-Insaf, the party Imran Khan leads) donor, Arif Naqvi, who is facing fraud charges in the United States”. It also noted that “former finance minister Ishaq Dar’s son, Ali Dar, Sindh’s former information minister Sharjeel Inam Memon and former chairman FBR and Secretary Finance Salman Siddiq’s son Yawar Salman owned companies in the tax havens”.

The naming of members of the Pakistani military establishment, Imran Khan’s benefactors who are long rumored within knowledgeable Pakistani elite circles to be given to excessive levels of embezzlement, will be making Khan uncomfortable. The financial wealth of Pakistani military officers has, at most times, been kept assiduously away from the prying eyes of the media. Exposés such as the Pandora Papers are seeking to change that situation and correct the narrative. Commenting on the offshore holdings of close relatives of several senior military figures, the ICIJ observed, “Taken together, the findings offer a portrait of an unaccountable military elite with extensive personal and family offshore holdings”.

The probe revealed cases such as that of Raja Nadir Pervez, a former army officer and government Minister, who had transferred his shares in a BVI-registered company to a trust that controls several offshore firms. The ICIJ pointed out that “One of the trust’s beneficiaries is a British arms dealer”. It also revealed that Major General Nusrat Naeem, a former director of counter-intelligence of Pakistan’s Inter-Services Intelligence (ISI), had registered a company, Afghan Oil and Gas Limited, in BVI. The ICIJ report added, “Islamabad police later charged Naeem with fraud related to the attempted purchase of a steel mill for $1.7 million. The case was dropped”. Pakistani daily Dawn reported that the Pandora investigation had revealed that “a luxury London apartment was transferred from the son of a famous Indian movie director to the wife of a three-star Pakistani general”. The officer concerned was Lieutenant General Shafaat Ullah Shah, a former aide to Pakistani dictator Pervez Musharraf.

These revelations have put Imran Khan in a fix. In his initial response Khan tweeted that he welcomed the “Pandora Papers exposing the ill-gotten wealth of elites, accumulated through tax evasion & corruption & laundered out to financial havens”, and added that his government would “investigate all our citizens mentioned in the Pandora Papers and if any wrongdoing is established we will take appropriate action”. As is his wont, however, Khan soon veered into a direction that hinted at obfuscation and lack of seriousness. Instead of focusing on what he ought to be doing to address the weighty and significant disclosures, Khan absurdly sought to shift the blame for the misdeeds of his associates and benefactors to the West, which he threatened with a huge wave of migration. He tweeted, “I call on the international community to treat this grave injustice as similar to the climate change crisis. If unchecked, inequalities between rich & poor states will increase as poverty rises in the latter. This in turn will lead to a flood of economic migration from the poor to the rich states, causing further economic & social instability across the globe”

As inexplicable as Khan’s efforts at beclouding the disclosures of the Pandora Papers are, they actually reveal his powerlessness as a proxy Prime Minister. Investigating the names of serving or retired military officers and their families is a bridge too far for Khan, and as Mehreen Zahra Malik, the Pakistan editor of the Saudi Arabia-based newspaper Arab News told DW, “There will be no investigation against the military officials. There might be an illusion of inquiry, an illusion of accountability, but nothing will happen”. Michael Kugelman, South Asia expert at the Washington-based Woodrow Wilson Center for Scholars, echoed Malik when he said, “Given the realities of Pakistani politics, one tends to expect that military officers are more likely than civilian leaders to receive the kid gloves treatment”

While the military will certainly get away scot free, it is equally unlikely that Khan will do much against his political associates and advisers. Shazia Marri, a lawmaker from the opposition Pakistan People’s Party (PPP), aptly observed that “We are not seeing the same kind of reaction from Imran Khan as when he was part of the opposition and the Panama Papers came out. There was no excitement this time around because some of the names are associated with Khan's Cabinet. Those involved should step down. Announcing an investigation on Twitter and forming a commission under the government seems only to be a formality. He is not known for living up to his previous promises, and his ministers are doing political bashing on Twitter, against other names appearing in the leaks. They are not taking it seriously enough”. Malik also believes that Khan’s government will not take an investigation seriously. She asserted, “In Pakistan we know that the best way to postpone action or defer an issue is to create the illusion of accountability by announcing a high-level commission. And this isn’t the first commission announced by this government.”

Imran Khan’s government, unfortunately, is not the only one in South Asia that is having to deal with the fallout of the Pandora Papers. The political opposition in Sri Lanka raised the issue in the country’s parliament following President Gotabaya Rajapaksa’s niece Nirupama Rajapaksa and her husband Thirukumar Nadesan finding prominent mention in the Pandora Papers. The couple set up anonymous offshore trusts and shell companies to acquire artwork and luxury apartments and to store cash, securities and other assets in secret. A former Minister, Nirupama has often been in the news for the wrong reasons. Rajapaksa’s government, after the Pandora disclosures, disowned the couple and claimed that they had no political links with the current government. President Rajapaksa on 6 October gave a one-month deadline to the country’s anti-graft commission to investigate the people accused of maintaining offshore accounts.

The serious implications of the Pandora revelations are highlighted by the fact that several politically connected businessmen from Nepal, a country that figures among the least developed countries of the world, also figure in the disclosures. Some of the country’s wealthiest businessmen, including Binod Chaudhary of the Chaudhary Group, Diwakar Golchha of the Golchha Organisation and Ajeya Sumargi Parajuli, to name a just a few, found mention. Binod Chaudhary and Diwakar Golchha had been nominated to the Nepali Parliament in 2008. Parajuli, who is known to have close links with the leadership of the Maoist Centre party, had also been accused of transferring ill-gotten wealth of politicians to tax havens abroad.

Among the over 300 Indian names on the Pandora list are cricketing icon Sachin Tendulkar, businessman Anil Ambani, fugitive diamantaire Nirav Modi’s sister and Biocon promoter Kiran Mazumdar-Shaw’s husband. Perhaps as a consequence of the firm policy of zero tolerance to corruption adopted by the government of PM Narendra Modi, the financial scandals that had plagued the early years of the last decade now appear to be a thing of the past. There have been no reported cases of any major political leader being involved in large-scale corruption in the past several years, and this finds reflection in the Pandora Papers. That being said, the menace of corruption at the lower levels of the bureaucracy continues to pose a challenge and demands the serious attention of the government.

The massive amounts of money generated illegally through corruption and tax evasion that is stashed away in secretive trusts in shady locations belongs in all cases to people who are already extremely wealthy. As governments, especially those in poorer nations, struggle with scarce resources, the draining away of national wealth by the rich elite through illegal and semi-legal means only detracts from the government’s ability to invest in schools, health care and other social programs that are so necessary for the most vulnerable sections of society. As the Indian unit of Oxfam International, a British consortium of charities, described it, “Tax havens cost governments around the world USD 427 billion each year. Developing countries are being hardest hit, proportionately. Corporations and the wealthiest individuals that use tax havens are outcompeting those who don’t. Tax havens also help crime and corruption to flourish… Abolishing tax havens can go a long way towards ensuring that government actually have the access to tax revenue they need to fund quality public expenditure”. Oxfam International eloquently added in a statement, “This is where our missing hospitals are. This is where the pay-packets sit of all the extra teachers and firefighters and public servants we need. Whenever a politician or business leader claims there is ‘no money’ to pay for climate damage and innovation, for more and better jobs, for a fair post-COVID recovery, for more overseas aid, they know where to look”.

Imran Khan was not wrong when he berated “the ill-gotten wealth of elites, accumulated through tax evasion & corruption & laundered out to financial havens”, but it is only through decisive action against corrupt Pakistani elites, his associates and benefactors, that Khan can prove the sincerity of his protestations and the authenticity of his anti-corruption credentials.