Showing posts with label stock market. Show all posts
Showing posts with label stock market. Show all posts
Tuesday 20 February 2024
Thursday 31 August 2023
Modi-linked Adani family secretly invested in own shares, documents suggest
Hannah Ellis-Petersen in Delhi and Simon Goodley in London in The Guardian
A billionaire Indian family with close ties to the country’s prime minister, Narendra Modi, secretly invested hundreds of millions of dollars into the Indian stock market, buying its own shares, newly disclosed documents suggest.
According to offshore financial records seen by the Guardian, associates of the Adani family may have spent years discreetly acquiring stock in the Adani Group’s own companies during its meteoric rise to become one of India’s largest and most powerful businesses.
By 2022, its founder, Gautam Adani, had become India’s richest person and the world’s third richest person, worth more than $120bn (£94bn).
In January, a report published by the New York financial research firm Hindenburg accused the Adani Group of pulling off the “largest con in corporate history”.
It alleged there had been “brazen stock manipulation and accounting fraud”, and the use of opaque offshore companies to buy its own shares, contributing to the “sky high” market valuation of the conglomerate, which hit a peak of $288bn in 2022.
The Adani Group denied the Hindenburg claims, which initially wiped $100bn off the conglomerate’s market value and cost Gautam Adani his prime spot on the world rich list.
At the time, the group called the research a “calculated attack on India” and on “the independence, integrity and quality of Indian institutions”.
Yet new documents obtained by the Organised Crime and Corruption Reporting Project (OCCRP), and shared with the Guardian and the Financial Times, reveal for the first time the details of an undisclosed and complex offshore operation in Mauritius – seemingly controlled by Adani associates – that was allegedly used to support the share prices of its group of companies from 2013 to 2018.
Up until now, this offshore network had remained impenetrable.
The records also appear to provide compelling evidence of the influential role allegedly played by Adani’s older brother, Vinod, in the secretive offshore operations. The Adani Group says Vinod Adani has “no role in the day to day affairs” of the company.
In the documents, two of Vinod Adani’s close associates are named as sole beneficiaries of offshore companies through which the money appeared to flow. In addition, financial records and interviews suggest investments into Adani stock from two Mauritius-based funds were overseen by a Dubai-based company, run by a known employee of Vinod Adani.
The disclosure could have significant political implications for Modi, whose relationship with Gautam Adani goes back 20 years.
Since the Hindenburg report was published, Modi has faced difficult questions about the nature of his partnership with Gautam Adani and allegations of preferential treatment of the Adani Group by his government.
According to a letter uncovered by the OCCRP and seen by the Guardian, the Securities and Exchange Board of India (SEBI) had been handed evidence in early 2014 of alleged suspicious stock market activity by the Adani Group – but after Modi was elected months later, the government regulator’s interest seemed to lapse.
In response to fresh questions relating to the new documents, the Adani Group said: “Contrary to your claim of new evidence/proofs, these are nothing, but a rehash of unsubstantiated allegations levelled in the Hindenburg report. Our response to the Hindenburg report is available on our website. Suffice it to state that there is neither any truth to nor any basis for making any of the said allegations against the Adani Group and its promoters and we expressly reject all of them.”
The offshore money trail
The trove of documents lays out a complex web of companies that date back to 2010, when two Adani family associates, Chang Chung-Ling and Nasser Ali Shaban Ahli, began setting up offshore shell companies in Mauritius, the British Virgin Islands and the United Arab Emirates.
These financial records appear to show that four of the offshore companies established by Chang and Ahli – who have both been directors of Adani-linked companies – sent hundreds of millions of dollars into a large investment fund in Bermuda called Global Opportunities Fund (GOF), with those monies invested in the Indian stock market from 2013 onwards.
This investment was made by introducing yet another layer of opacity. Financial records paint a picture of money from the pair’s offshore companies flowing from GOF into two funds to which GOF subscribed: Emerging India Focus Funds (EIFF) and EM Resurgent Fund (EMRF).
These funds then appear to have spent years acquiring shares in four Adani-listed companies: Adani Enterprises, Adani Ports and Special Economic Zone, Adani Power and, later, Adani Transmission. The records shine a light on how money in opaque offshore structures can flow secretly into the shares of publicly listed companies in India.
The investment decisions of these two funds appeared to be made under the guidance of an investment advisory company controlled by a known employee and associate of Vinod Adani, based in Dubai.
In May 2014, EIFF appears to have held more than $190m of shares in three Adani entities, while EMRF looks to have invested around two-thirds of its portfolio in about $70m of Adani stock. Both funds appear to have used money that came solely from the companies controlled by Chang and Ahli.
In September 2014, a separate set of financial records set out how the four Chang and Ahli offshore companies had invested about $260m in Adani shares via this structure.
Documents show that this investment appeared to grow over the next three years: by March 2017, the Chang and Ahli offshore companies had invested $430m – 100% of their total portfolio – into Adani company stock.
When contacted by the Guardian by phone, Chang declined to discuss the documents setting out his company’s investments in Adani shares. Nor would he answer questions about his links to Vinod Adani, who along with Ahli did not respond to efforts to contact them.
Indian stock market rules
The alleged offshore enterprise of the Adani associates raises questions about the possible breaching of Indian market rules that prevent stock manipulation and regulate public shareholdings of companies.
The rules state that 25% of a company’s shares must be kept “free float” – meaning they are available for public trade on the stock exchange – while 75% can be held by promoters, who have declared their direct involvement or connection with the company. Vinod Adani has recently been acknowledged by the conglomerate as a promoter.
However, records show that at the peak of their investment, Ahli and Chang held between 8% and 13.5% of the free floating shares of four Adani companies through EIFF and EMRF. If their holdings were classified as being controlled by Vinod Adani proxies, the Adani Group’s promoter holdings would have seemingly breached the 75% limit.
Political ties
Gautam Adani has long been accused of benefiting from his powerful political connections. His relationship with Modi dates back to 2002, when he was a businessman in Gujarat and Modi was chief minister of the state, and their rise has appeared to happen in tandem since. After Modi won the general election in May 2014, he flew to Delhi on Gautam Adani’s plane, a scene captured in a now well-known photo of him in front of the Adani corporate logo.
During Modi’s time as leader, the power and influence of the Adani Group has soared, with the conglomerate acquiring lucrative state contracts for ports, power plants, electricity, coalmines, highways, energy parks, slum redevelopment and airports. In some cases, laws were amended that allowed Adani Group companies to expand in sectors such as airports and coal. In turn, the stock value of the Adani Group rose from about $8bn in 2013 to $288bn by September 2022.
Adani has repeatedly denied that his longstanding connection with the prime minister has led to preferential treatment, as has the Indian government.
Yet a document unearthed by the OCCRP and seen by the Guardian suggests the SEBI, the government regulator now in charge of investigating the Adani Group, was made aware of stock market activity using Adani offshore funds as far back as early 2014.
In a letter dated January 2014, Najib Shah, the then head of the Directorate of Revenue Intelligence (DRI), India’s financial law enforcement agency, wrote to Upendra Kumar Sinha, the then head of the SEBI.
“There are indications that [Adani-linked] money may have found its way to stock markets in India as investment and disinvestment in the Adani Group,” Shah said in the letter.
He noted that he had sent this material to Sinha because the SEBI was “understood to be investigating into the dealings of the Adani Group of companies in the stock market”.
However, a few months later, after Modi was elected in May 2014, the SEBI’s apparent interest seemed to disappear, a source working for the regulator at the time said.
The SEBI has never publicly disclosed the warning given by the DRI, nor any investigation it might have conducted into the Adani Group in 2014. The letter appears to misalign with statements made by the SEBI in recent court filings in which it denied there were investigations into the Adani Group before 2020, as well as saying suggestions it had investigated the Adani Group dating back to 2016 were “factually baseless”.
The ability of the SEBI, a regulator under the purview of the Modi government, to independently investigate the Adani Group has recently been called into question by critics, lawyers and the political opposition.
According to a report given in May to the supreme court – which set up an expert committee to investigate the Adani Group after the publication of the Hindenburg report – the SEBI had been investigating 13 offshore investors in the conglomerate since 2020 but had “hit a wall” in trying to establish if they were linked to the Adani Group. Two of the entities under investigation are EIFF and EMRF.
The regulator has been accused of dragging its feet in their investigation into possible violations by the Adani Group, seeking several extensions. On Friday, the SEBI submitted a report to the supreme court stating that their investigations were in the final stages but did not reveal any findings.
The Adani Group said: “The provocative nature of the story and the proposed timing of its publication, when the allegations in it are entirely based on matters which are already under a formal investigation by SEBI and is at the verge of finalisation of the report and while the honourable supreme court hearing is also scheduled shortly; makes us believe that the proposed publication is being done wilfully to defame, disparage, erode value of and cause loss to the Adani Group and its stakeholders.
“Further, it is categorically stated that all the Adani Group’s publicly listed entities are in compliance with all applicable laws, including the regulation relating to public share holdings and PMLA [Prevention of Money Laundering Act].”
A spokesperson for the two funds that invested in Adani stocks – EIFF and EMRF – said the funds had not been “involved in any wrongdoing generally and particularly in connection with the Adani Group”.
It added: “Both the funds had multiple investments across asset classes like equities, mutual funds, alternate investment funds, bonds etc. Amongst these, EIFF and EMRF had investment in equities of the Adani Group, apart from other investments. EIFF and EMRF received subscriptions from Global Opportunities Fund Limited (GOF) which was a broad-based fund as per declarations received. GOF fully redeemed all its participation in EIFF in March 2019 and EMRF in March 2020.”
The SEBI did not respond to requests for comment.
Wednesday 17 March 2021
Sunday 5 August 2018
The empty rituals of daily lives
Tabish Khair in The Hindu
Just as religious rituals move the practitioner away from the immensity of faith, secular rituals move citizens’ attention away from real issues
Serious religious thinkers have tended to distinguish between ritual and religion. Some, of course, have distinguished between spirituality and religion too, mostly because they have associated religion with rituals.
Now, rituals have their uses, as long as we employ them in the full awareness that they are arbitrary and man-made. This applies to secular matters as well as religious ones: I like my ritual of a morning cup of coffee with a biscuit or two, but I do not assume that this is god-ordained or that my day will not commence unless I have my cup of coffee. So, I am not talking of rituals of this sort. I am talking of rituals that are made ‘essential’ to either religion or secular life.
The matter with religion is clear enough. The reason why religious but nonconforming thinkers, like Kabir, railed against rituals was that they perceived how rituals are used, in the name of religion, to control, influence and exploit people. They also felt that rituals are worldly matters and have nothing to do with the divine. The priestly classes insist on rituals, as if god would care about the colour of your dress, the posture of your prayer, the number of your beads, etc. Rituals proliferate in religions because they allow the priestly classes to control and exploit ordinary believers. Instead of being used as an option, the coffee cup ritual becomes a necessity imposed on the ordinary believer, often at great cost.
Rituals in secular life
This much is clear enough about religion, and explains why so many religious thinkers — apart from the accredited priestly classes, whether mullahs or pandits — tended to criticise rituals or blind observance of rituals. But how, you might be asking, do rituals work in the secular sphere? Because such rituals are not confined to religion. They also exist in secular life, and are used by various ‘priestly classes’ to mislead, control and exploit ordinary people. I suspect that basically religious people, conditioned to associate belief with rituals, are likely to be misled by rituals in secular life too.
A ritual in secular life is like a ritual in religion: it is demanding, obsessive, unavoidable, essential. It is the one thing that you ‘need’ to do in order to have a good life (in this world or the next, or both). Or so the priestly classes claim. Because when you really look at this ‘essential’ ritual, it falls apart. It is not necessary; you can do without it. You can understand the world in other ways, live your life differently. But no, the priestly classes claim, you have to practice this ritual — or you will suffer and probably be damned for all eternity!
Rituals of prosperity
Think of the rituals that we are surrounded by in ordinary secular life. Think, for instance, of all those economic figures trotted out by national economists in all countries to show that the nation is progressing. GNP. Average national income. The rising value of shares in the stock market. These are rituals of prosperity, because if you really look into them, they mean nothing. Or they mean nothing because they have been turned from actual, though limited, indicators into sweeping rituals: empty practices.
A rise in GNP, the average national income, or the share market can indicate some types of prosperity, but these are not enough — and they are misleading when trotted out in ritualistic fashion by politicians. In each case, there is a good chance that some people might be gaining and many more losing. Take the situation of Amazon: the company is thriving, but, at least in the U.S., it is reputed to offer its workers a very meagre wage package and unsatisfactory working conditions. To think that the profits being made by Amazon is percolating down to its workers is to make a mistake. But that is the mistake we make when we simply note the net value of Amazon or the rise in its shares. Such figures play the role of empty rituals.
With countries, the matter is even more complex, as the prosperity of a country depends on factors other than financial ones. Hence, politicians who give us general figures and averages, whether correct or not, are indulging in empty rituals.
Of course, figures are not the only rituals practiced by politicians in power, the apex of the secular priestly classes. For instance, it is a ritual to construct a highway without making a sustained effort to improve the existing highways, to create a super-city without a sustained effort to improve the urban infrastructure in existing cities, to raise the statue of a great leader and ignore the best aspects of his example.
These acts and decisions are rituals because they are empty and misleading. Just as a ritual in religion moves the practitioner away from the endless immensity of faith to a delusive shortcut, a ritual in secular life moves citizens’ attention away from all the real issues and offers a soupçon of misleading satisfaction. I fear that we Indians might or might not be a spiritual people, but we do have a certain tendency to indulge — and let others indulge — in empty rituals in religious as well as secular life.
Serious religious thinkers have tended to distinguish between ritual and religion. Some, of course, have distinguished between spirituality and religion too, mostly because they have associated religion with rituals.
Now, rituals have their uses, as long as we employ them in the full awareness that they are arbitrary and man-made. This applies to secular matters as well as religious ones: I like my ritual of a morning cup of coffee with a biscuit or two, but I do not assume that this is god-ordained or that my day will not commence unless I have my cup of coffee. So, I am not talking of rituals of this sort. I am talking of rituals that are made ‘essential’ to either religion or secular life.
The matter with religion is clear enough. The reason why religious but nonconforming thinkers, like Kabir, railed against rituals was that they perceived how rituals are used, in the name of religion, to control, influence and exploit people. They also felt that rituals are worldly matters and have nothing to do with the divine. The priestly classes insist on rituals, as if god would care about the colour of your dress, the posture of your prayer, the number of your beads, etc. Rituals proliferate in religions because they allow the priestly classes to control and exploit ordinary believers. Instead of being used as an option, the coffee cup ritual becomes a necessity imposed on the ordinary believer, often at great cost.
Rituals in secular life
This much is clear enough about religion, and explains why so many religious thinkers — apart from the accredited priestly classes, whether mullahs or pandits — tended to criticise rituals or blind observance of rituals. But how, you might be asking, do rituals work in the secular sphere? Because such rituals are not confined to religion. They also exist in secular life, and are used by various ‘priestly classes’ to mislead, control and exploit ordinary people. I suspect that basically religious people, conditioned to associate belief with rituals, are likely to be misled by rituals in secular life too.
A ritual in secular life is like a ritual in religion: it is demanding, obsessive, unavoidable, essential. It is the one thing that you ‘need’ to do in order to have a good life (in this world or the next, or both). Or so the priestly classes claim. Because when you really look at this ‘essential’ ritual, it falls apart. It is not necessary; you can do without it. You can understand the world in other ways, live your life differently. But no, the priestly classes claim, you have to practice this ritual — or you will suffer and probably be damned for all eternity!
Rituals of prosperity
Think of the rituals that we are surrounded by in ordinary secular life. Think, for instance, of all those economic figures trotted out by national economists in all countries to show that the nation is progressing. GNP. Average national income. The rising value of shares in the stock market. These are rituals of prosperity, because if you really look into them, they mean nothing. Or they mean nothing because they have been turned from actual, though limited, indicators into sweeping rituals: empty practices.
A rise in GNP, the average national income, or the share market can indicate some types of prosperity, but these are not enough — and they are misleading when trotted out in ritualistic fashion by politicians. In each case, there is a good chance that some people might be gaining and many more losing. Take the situation of Amazon: the company is thriving, but, at least in the U.S., it is reputed to offer its workers a very meagre wage package and unsatisfactory working conditions. To think that the profits being made by Amazon is percolating down to its workers is to make a mistake. But that is the mistake we make when we simply note the net value of Amazon or the rise in its shares. Such figures play the role of empty rituals.
With countries, the matter is even more complex, as the prosperity of a country depends on factors other than financial ones. Hence, politicians who give us general figures and averages, whether correct or not, are indulging in empty rituals.
Of course, figures are not the only rituals practiced by politicians in power, the apex of the secular priestly classes. For instance, it is a ritual to construct a highway without making a sustained effort to improve the existing highways, to create a super-city without a sustained effort to improve the urban infrastructure in existing cities, to raise the statue of a great leader and ignore the best aspects of his example.
These acts and decisions are rituals because they are empty and misleading. Just as a ritual in religion moves the practitioner away from the endless immensity of faith to a delusive shortcut, a ritual in secular life moves citizens’ attention away from all the real issues and offers a soupçon of misleading satisfaction. I fear that we Indians might or might not be a spiritual people, but we do have a certain tendency to indulge — and let others indulge — in empty rituals in religious as well as secular life.
Saturday 22 April 2017
Pakistan's Panamagate - I told you so!
Irfan Husain in The Dawn
IN a nation of some 200 million, I doubt if a handful could pinpoint Panama’s location. And yet, this tiny Central American state has dominated Pakistan’s political discourse for the last year to the point of tedium.
Finally, after nearly two months of hearings before a Supreme Court bench, the verdict is here. And, as I had predicted to friends a few weeks ago, it is a cop-out that has both sides declaring victory.
For me, the abiding image is of the Sharif brothers, Nawaz and Shahbaz, embracing and beaming at each other. In the PTI camp, we watched Imran Khan and senior party members pass sweetmeats around.
For the SC, the verdict gave the impression of balance and fairness, with something for both sides to cheer about. Imran Khan had a lot of praise for the two dissenting judges who declared the prime minister ineligible to rule because he didn’t meet the criteria of honesty and integrity laid down in the Constitution.
The ruling PML-N is gloating over a verdict that, for the time being, has let their leader off the hook. As far as the party is concerned, it has every chance of hanging on to power until the 2018 election. Here, according to opinion polls, it is most likely to win a majority. So who’s the real winner in the verdict?
When the Panama brouhaha began a year ago, I had suggested that the Sharif brothers were masters of kicking the can down the road, and would drag matters out indefinitely. Now, with a joint investigative team (JIT) being set up, expect more of the same.
Even though the SC has required the JIT to submit fortnightly progress reports, the fact remains that members of this committee will all be serving members of the civil and military bureaucracy. To expect them all to perform their tasks independently is a rather big ask.
Then there is the problem of the team having to obtain and verify information in different jurisdictions. Will they be able to force banks and government departments in Dubai and Qatar to hand over documents? And all this in two months? Forgive my scepticism, but having first-hand knowledge of the pace at which our bureaucracy works, I have some doubts.
No wonder that Imran Khan is demanding the PM’s resignation. He knows how difficult it will be to get a group of civil servants to report against a sitting PM. But he’s right in underlining Nawaz Sharif’s loss of moral authority to rule.
Irrespective of the legal rights and wrongs of the case, it is clear that the daily drip-drip-drip of corrosive evidence against Sharif and his family has done much to strip away the aura of decency he had tried to project. And his disqualification by the two dissenting judges on the bench has reinforced the impression of corrupt practices at the heart of the Sharif empire.
With supreme irony, Asif Zardari has also demanded Nawaz Sharif’s resignation, and asked if he would be taken to the local police station for questioning, or would the JIT go the PM House? The reference here was to his own vicious treatment over a decade of incarceration.
Indeed, the PPP has good reason to be aggrieved at what has often appeared to be its targeting by the judiciary, starting with Zulfikar Ali Bhutto’s judicial murder to the sacking of another elected PM, Yousuf Raza Gilani. In many other cases, the judiciary has displayed an apparent animus against the PPP.
And yet, despite demands for his resignation from the opposition, Nawaz Sharif isn’t going anywhere. He didn’t get to where he is by being sensitive to corruption charges. Throughout his political career, he has shown himself to be tough and opportunistic.
Imran Khan has given examples from other countries where leaders tainted by the Panama Papers have either provided full disclosure (David Cameron), or resigned (Iceland’s Sigmundur Gunnlaugsson). However, members of Putin’s and Bashar al-Assad’s inner circle have not even bothered denying the allegations against them contained in the leaks.
As we know, there is no tradition of resignations in Pakistan. Even in Israel, Bibi Netanyahu is mired in corruption charges, but is refusing to step down. But in Israel, the police are far more independent than they are in Pakistan, and have investigated similar charges against presidents and prime ministers before.
Whatever happens next, Panama is a name that will continue to resound on our TV chat shows for some time to come. But will the verdict reduce corruption? I doubt it. But it will force crooked politicians to be more careful about their bookkeeping.
A final factoid: the verdict triggered our stock exchange’s biggest bull run, with the index shooting up by 1,800 points in a single session. Do investors know something we don’t?
----The background of the case to those who don't know by Husain Haqqani
Pakistan’s Supreme Court is an arena for politics, not an avenue for resolution of legal disputes. Unlike other countries where the apex court serves as the court of last appeal, Pakistan’s Supreme Court often entertains direct applications from political actors and generates high-profile media noise. In that tradition its judgment in the so-called Panama Papers case is a classic political balancing act. It raises questions about Prime Minister Nawaz Sharif’s property in London, but does not remove him from office.
Opposition politician Imran Khan, currently a favourite of Pakistan’s establishment, initiated the case after Mr. Sharif’s name appeared in leaked documents about owners of offshore companies worldwide. The documents indicated that the Sharif family had borrowed money against four flats they own in London’s posh Mayfair district.
Show them the money
Having an offshore account is not in itself a violation of Pakistani law, but transferring money from Pakistan illegally is. Hence the case decided on Thursday revolved around the provenance of the money with which the Sharifs became owners of the property in London. In hearings that began in January, the petitioners insisted that the Sharif family’s ownership of this particular property could not have been possible without their possession of undeclared wealth or illegal transfers of money from Pakistan.
Instead of insisting on the time-honoured principle that accusers must prove their allegation beyond a shadow of a doubt and that investigations must precede judicial hearings, the Supreme Court acted politically. It asked the Sharifs to explain the source of money used to buy property abroad, forcing the Sharif family’s lawyers to offer various (sometimes contradictory) explanations at sensational hearings.
One of these explanations comprised a letter from a member of the Qatari royal family who said that he had transferred $8 million to the Sharif family as return on investments made in cash by the Prime Minister’s deceased father, Mian Muhammad Sharif, in the Qatari family’s real estate business in 1980.
The Qatar letter did not settle the matter because the Sharif family members had, at different times, given different explanations for the source of their funds. Moreover, the timelines of the acquisition of the London properties, the formation of the offshore company that was used to buy them and the apparent cash dealings in Qatar did not always align. In any case, a Qatari royal might be willing to send a letter for his friends, the Sharifs, but could not be expected to testify in person in Pakistan and submit himself to cross-examination, something that would be needed if the case ever went to proper trial.
The Supreme Court’s final verdict was split 3-2 among the five-judge bench, with two ruling that Prime Minister Sharif should be disqualified from holding office for failing to explain the source of money for his property. The majority said there was insufficient evidence for such a drastic step and instead announced the formation of a Joint Investigation Team (JIT) comprising five members.
These would include appointees from the Federal Investigation Agency, the National Accountability Bureau, the State Bank of Pakistan, the Securities & Exchange Commission of Pakistan and one representative each from the Inter-Services Intelligence (ISI) and Military Intelligence (MI).
The fallout
The Prime Minister’s side breathed a sigh of relief that the court did not disqualify him from holding office, a decision it has given in the past for the removal of elected civilian Prime Ministers. Imran Khan, who wanted disqualification, declared victory even with the JIT’s creation. He and other opponents of the government are hoping that Nawaz Sharif will now bleed politically from the thousand cuts that are likely to be inflicted on him through reports emanating from the JIT.
Mr. Sharif has won elections before notwithstanding allegations of personal financial wrongdoing, but a new wave of charges could make things difficult for him in Punjab’s urban centres when Pakistan goes to the polls in 2018.
Ironically, the Supreme Court’s nearly 549-page judgment begins not by invoking some eminent jurist, but with a reference to Mario Puzo’s novel The Godfather, citing Balzac’s well-known words, “Behind every great fortune there is a crime.” But then most Pakistanis, including judges and military officers, have known for years that the fortunes of Pakistan’s uber-wealthy families come from bending or breaking laws or using political connections for private advantage. Why go looking into the origins of wealth now?
The creation of the JIT, and including two military intelligence service members who are not trained in matters relating to business and finance, says more about Pakistan’s judicial and political system than it says about the merits of this particular case. The issue in Pakistan is never corruption or failing to explain the source of funds for property. It is where someone fits into the permanent state’s scheme of things.
Nawaz Sharif was fine when he was picked up by General Zia-ul-Haq as leader of a military-backed Punjabi political elite after the coup of 1977. Courts and investigators seldom found anything wrong with the phenomenal expansion of his family’s wealth until he decided to start questioning Pakistan’s military establishment and, in recent years, even assert himself in core policy areas. Politicians can make money as long as they do not seek a role in policymaking. When Benazir Bhutto stood for a different paradigm for Pakistan, she and her husband were subjected to long-drawn legal proceedings over corruption. Asif Ali Zardari might have fewer problems on that score now after he is content to parrot the establishment’s views on national security and foreign policy. Nawaz Sharif is being put through the wringer to become more like Mr. Zardari and less like Bhutto.
As for the Pakistani Supreme Court, it intervenes to swing politics one way or another by favouring the country’s establishment against politicians or vice versa, to justify patently unconstitutional military takeovers and occasionally to embarrass one party against another. Unlike elsewhere in the world, its function is not just to determine the constitutionality and legality of judgments already given by lower courts.
As a victim of one such Commission (ironically, created on Mr. Sharif’s petition) in the so-called Memogate Case, I know that the principal damage inflicted by its proceedings is to public image. The Memogate Commission’s findings never led to criminal charges, not even an FIR, against me for any crime as none was actually committed. But its proceedings and comments created sufficient political noise for some Pakistanis to still think I am a fugitive from Pakistani law.
Signal from the deep state?
Generating smoke without fire against persons deemed difficult or uncontrollable by Pakistan’s permanent state establishment, the deep state, is often the greatest accomplishment of inquiries created by the Supreme Court on direct petitions like the one over the Panama Papers.
The JIT might still find nothing definitive for prosecution but Mr. Sharif is on notice. And that is how Pakistan’s system is designed to work.
IN a nation of some 200 million, I doubt if a handful could pinpoint Panama’s location. And yet, this tiny Central American state has dominated Pakistan’s political discourse for the last year to the point of tedium.
Finally, after nearly two months of hearings before a Supreme Court bench, the verdict is here. And, as I had predicted to friends a few weeks ago, it is a cop-out that has both sides declaring victory.
For me, the abiding image is of the Sharif brothers, Nawaz and Shahbaz, embracing and beaming at each other. In the PTI camp, we watched Imran Khan and senior party members pass sweetmeats around.
For the SC, the verdict gave the impression of balance and fairness, with something for both sides to cheer about. Imran Khan had a lot of praise for the two dissenting judges who declared the prime minister ineligible to rule because he didn’t meet the criteria of honesty and integrity laid down in the Constitution.
The ruling PML-N is gloating over a verdict that, for the time being, has let their leader off the hook. As far as the party is concerned, it has every chance of hanging on to power until the 2018 election. Here, according to opinion polls, it is most likely to win a majority. So who’s the real winner in the verdict?
When the Panama brouhaha began a year ago, I had suggested that the Sharif brothers were masters of kicking the can down the road, and would drag matters out indefinitely. Now, with a joint investigative team (JIT) being set up, expect more of the same.
Even though the SC has required the JIT to submit fortnightly progress reports, the fact remains that members of this committee will all be serving members of the civil and military bureaucracy. To expect them all to perform their tasks independently is a rather big ask.
Then there is the problem of the team having to obtain and verify information in different jurisdictions. Will they be able to force banks and government departments in Dubai and Qatar to hand over documents? And all this in two months? Forgive my scepticism, but having first-hand knowledge of the pace at which our bureaucracy works, I have some doubts.
No wonder that Imran Khan is demanding the PM’s resignation. He knows how difficult it will be to get a group of civil servants to report against a sitting PM. But he’s right in underlining Nawaz Sharif’s loss of moral authority to rule.
Irrespective of the legal rights and wrongs of the case, it is clear that the daily drip-drip-drip of corrosive evidence against Sharif and his family has done much to strip away the aura of decency he had tried to project. And his disqualification by the two dissenting judges on the bench has reinforced the impression of corrupt practices at the heart of the Sharif empire.
With supreme irony, Asif Zardari has also demanded Nawaz Sharif’s resignation, and asked if he would be taken to the local police station for questioning, or would the JIT go the PM House? The reference here was to his own vicious treatment over a decade of incarceration.
Indeed, the PPP has good reason to be aggrieved at what has often appeared to be its targeting by the judiciary, starting with Zulfikar Ali Bhutto’s judicial murder to the sacking of another elected PM, Yousuf Raza Gilani. In many other cases, the judiciary has displayed an apparent animus against the PPP.
And yet, despite demands for his resignation from the opposition, Nawaz Sharif isn’t going anywhere. He didn’t get to where he is by being sensitive to corruption charges. Throughout his political career, he has shown himself to be tough and opportunistic.
Imran Khan has given examples from other countries where leaders tainted by the Panama Papers have either provided full disclosure (David Cameron), or resigned (Iceland’s Sigmundur Gunnlaugsson). However, members of Putin’s and Bashar al-Assad’s inner circle have not even bothered denying the allegations against them contained in the leaks.
As we know, there is no tradition of resignations in Pakistan. Even in Israel, Bibi Netanyahu is mired in corruption charges, but is refusing to step down. But in Israel, the police are far more independent than they are in Pakistan, and have investigated similar charges against presidents and prime ministers before.
Whatever happens next, Panama is a name that will continue to resound on our TV chat shows for some time to come. But will the verdict reduce corruption? I doubt it. But it will force crooked politicians to be more careful about their bookkeeping.
A final factoid: the verdict triggered our stock exchange’s biggest bull run, with the index shooting up by 1,800 points in a single session. Do investors know something we don’t?
----The background of the case to those who don't know by Husain Haqqani
Pakistan’s Supreme Court is an arena for politics, not an avenue for resolution of legal disputes. Unlike other countries where the apex court serves as the court of last appeal, Pakistan’s Supreme Court often entertains direct applications from political actors and generates high-profile media noise. In that tradition its judgment in the so-called Panama Papers case is a classic political balancing act. It raises questions about Prime Minister Nawaz Sharif’s property in London, but does not remove him from office.
Opposition politician Imran Khan, currently a favourite of Pakistan’s establishment, initiated the case after Mr. Sharif’s name appeared in leaked documents about owners of offshore companies worldwide. The documents indicated that the Sharif family had borrowed money against four flats they own in London’s posh Mayfair district.
Show them the money
Having an offshore account is not in itself a violation of Pakistani law, but transferring money from Pakistan illegally is. Hence the case decided on Thursday revolved around the provenance of the money with which the Sharifs became owners of the property in London. In hearings that began in January, the petitioners insisted that the Sharif family’s ownership of this particular property could not have been possible without their possession of undeclared wealth or illegal transfers of money from Pakistan.
Instead of insisting on the time-honoured principle that accusers must prove their allegation beyond a shadow of a doubt and that investigations must precede judicial hearings, the Supreme Court acted politically. It asked the Sharifs to explain the source of money used to buy property abroad, forcing the Sharif family’s lawyers to offer various (sometimes contradictory) explanations at sensational hearings.
One of these explanations comprised a letter from a member of the Qatari royal family who said that he had transferred $8 million to the Sharif family as return on investments made in cash by the Prime Minister’s deceased father, Mian Muhammad Sharif, in the Qatari family’s real estate business in 1980.
The Qatar letter did not settle the matter because the Sharif family members had, at different times, given different explanations for the source of their funds. Moreover, the timelines of the acquisition of the London properties, the formation of the offshore company that was used to buy them and the apparent cash dealings in Qatar did not always align. In any case, a Qatari royal might be willing to send a letter for his friends, the Sharifs, but could not be expected to testify in person in Pakistan and submit himself to cross-examination, something that would be needed if the case ever went to proper trial.
The Supreme Court’s final verdict was split 3-2 among the five-judge bench, with two ruling that Prime Minister Sharif should be disqualified from holding office for failing to explain the source of money for his property. The majority said there was insufficient evidence for such a drastic step and instead announced the formation of a Joint Investigation Team (JIT) comprising five members.
These would include appointees from the Federal Investigation Agency, the National Accountability Bureau, the State Bank of Pakistan, the Securities & Exchange Commission of Pakistan and one representative each from the Inter-Services Intelligence (ISI) and Military Intelligence (MI).
The fallout
The Prime Minister’s side breathed a sigh of relief that the court did not disqualify him from holding office, a decision it has given in the past for the removal of elected civilian Prime Ministers. Imran Khan, who wanted disqualification, declared victory even with the JIT’s creation. He and other opponents of the government are hoping that Nawaz Sharif will now bleed politically from the thousand cuts that are likely to be inflicted on him through reports emanating from the JIT.
Mr. Sharif has won elections before notwithstanding allegations of personal financial wrongdoing, but a new wave of charges could make things difficult for him in Punjab’s urban centres when Pakistan goes to the polls in 2018.
Ironically, the Supreme Court’s nearly 549-page judgment begins not by invoking some eminent jurist, but with a reference to Mario Puzo’s novel The Godfather, citing Balzac’s well-known words, “Behind every great fortune there is a crime.” But then most Pakistanis, including judges and military officers, have known for years that the fortunes of Pakistan’s uber-wealthy families come from bending or breaking laws or using political connections for private advantage. Why go looking into the origins of wealth now?
The creation of the JIT, and including two military intelligence service members who are not trained in matters relating to business and finance, says more about Pakistan’s judicial and political system than it says about the merits of this particular case. The issue in Pakistan is never corruption or failing to explain the source of funds for property. It is where someone fits into the permanent state’s scheme of things.
Nawaz Sharif was fine when he was picked up by General Zia-ul-Haq as leader of a military-backed Punjabi political elite after the coup of 1977. Courts and investigators seldom found anything wrong with the phenomenal expansion of his family’s wealth until he decided to start questioning Pakistan’s military establishment and, in recent years, even assert himself in core policy areas. Politicians can make money as long as they do not seek a role in policymaking. When Benazir Bhutto stood for a different paradigm for Pakistan, she and her husband were subjected to long-drawn legal proceedings over corruption. Asif Ali Zardari might have fewer problems on that score now after he is content to parrot the establishment’s views on national security and foreign policy. Nawaz Sharif is being put through the wringer to become more like Mr. Zardari and less like Bhutto.
As for the Pakistani Supreme Court, it intervenes to swing politics one way or another by favouring the country’s establishment against politicians or vice versa, to justify patently unconstitutional military takeovers and occasionally to embarrass one party against another. Unlike elsewhere in the world, its function is not just to determine the constitutionality and legality of judgments already given by lower courts.
As a victim of one such Commission (ironically, created on Mr. Sharif’s petition) in the so-called Memogate Case, I know that the principal damage inflicted by its proceedings is to public image. The Memogate Commission’s findings never led to criminal charges, not even an FIR, against me for any crime as none was actually committed. But its proceedings and comments created sufficient political noise for some Pakistanis to still think I am a fugitive from Pakistani law.
Signal from the deep state?
Generating smoke without fire against persons deemed difficult or uncontrollable by Pakistan’s permanent state establishment, the deep state, is often the greatest accomplishment of inquiries created by the Supreme Court on direct petitions like the one over the Panama Papers.
The JIT might still find nothing definitive for prosecution but Mr. Sharif is on notice. And that is how Pakistan’s system is designed to work.
Tuesday 25 August 2015
Why is China's stock market falling and how might it affect the global economy?
Katie Allen in The Guardian
What has happened in China?
China’s stock market has fallen sharply over recent weeks despite measures by officials in Beijing aimed at calming investors’ jitters and shoring up global confidence in the country’s slowing economy.
Shares in China had soared 150% in the 12 months to mid-June as individual investors piled into the rising market, often borrowing heavily to do so. But chiming with warnings that shares were overvalued and the signs of an economic slowdown, the momentum came to a shuddering halt when shares hit a seven-year peak.
Following another plunge on what was dubbed “Black Monday”, China’s stock markets have now given up all their gains for the year.
China’s shock move to devalue its currency, the yuan, this month only served to intensify worries about the world’s second-largest economy.
Shares around the world followed China’s stock markets lower. About £74bn was wiped off the value of the FTSE 100 and on Wall Street, the Dow Jones Industrial Average slumped by a record of more than 1,000 points at one stage.
Commodities such as crude oil and copper have also tumbled to multi-year lows as investors take fright over signs of waning demand in the world’s leading consumer of raw materials.
The currencies of emerging Asian economies have weakened as investors drop those assets seen as riskier to hold. But investments perceived as safe havens in times of trouble, such as gold and some government bonds, are in demand.
Is this a repeat of the 2008 global financial crisis?
Some of the falls on stock markets are certainly reminiscent of the swings seen around the time of the collapse of the US bank Lehman Brothers. The FTSEurofirst 300, a pan-European share index, suffered its biggest one-day drop since late 2008, losing 5.4%. For Shanghai’s composite index, Monday’s 8.5% slump was the biggest since February 2007.
But some economists say the parallels stop there. They see limited risk to China’s real economy from the stock market turmoil and little to be worried about beyond China.
Julian Jessop, the chief global economist at the consultancy Capital Economics, said: “The current panic is essentially ‘made in China’. The recent data from other major economies, including the US, eurozone and Japan, has generally been good ... Aside from the bad news from China, there is very little to support fears of a major global downturn.”
But others are less sanguine. They point out that China’s slowdown is just one of many factors worrying investors alongside lingering political problems in the eurozone, signs of weaker global growth and vast sums flowing out of fragile emerging markets such as Brazil. Furthermore, policymakers apparently have few tools left to help.
Should I be worried?
George Osborne, the UK chancellor, suggests not and believes China’s stock market woes will not have much impact on European economies.
But there are plenty of other voices saying this could get a lot worse.
What if I have money tied up in stocks?
Individuals with money invested in shares should not worry too much for now, financial market experts have said.
Nick Dixon, an investment director at the asset management company Aegon UK, said: “If pension savers don’t need to access their fund for many years, they needn’t be alarmed by short term volatility.
“Stock markets are in for a bumpy ride over the coming weeks, but if savers can stomach the ups and downs, equities are likely to provide superior returns over the medium and long term.”
What does it mean for interest rates?
There had been widespread expectation that the US Federal Reserve would start the gradual process of hiking interest rates as soon as next month. Signs of a potential hard landing for China could well stay the central bank’s hand.
The same goes for the UK, where the Bank of England governor, Mark Carney, recently hinted that a rate hike could happen around the turn of the year.
In China, meanwhile, the country’s central bank is widely expected to ease monetary policy further to shore up growth and confidence.
What will this mean for inflation?
A silver lining economists highlight for those countries that rely on imports of oil and other commodities is that this global sell-off will keep prices low. Oil has more than halved from a peak of $115 per barrel last summer to a Brent crude price of less than $44 per barrel now. At least some of that will be passed on to drivers in lower fuel prices.
Philippe Waechter, the global chief economist at Natixis Asset Management, said: “On the upside, the fall in the oil price will be positive news for European economies as consumer purchasing power will be increased.”
What happens next?
Officials in Beijing are under pressure to step in with more measures to restore stability to China’s stock markets. The trouble they face is that every action is also perceived as a further sign of quite how worried they are about the slide in shares and the wider economy.
Bill O’Neill, the head of the UK investment office at UBS Wealth Management, said: “There will be some form of additional stimulus over the next few days and weeks.
“That is likely to be combined with supportive words from developed economy central bankers aimed at offering reassurance that accommodative policies will remain in place regardless of when interest rates start to rise.”
From Thursday, investors will be looking to the US and a symposium of central bankers in Jackson Hole, Wyoming, for signs of how this new bout of market volatility may influence their interest rate decisions.
What has happened in China?
China’s stock market has fallen sharply over recent weeks despite measures by officials in Beijing aimed at calming investors’ jitters and shoring up global confidence in the country’s slowing economy.
Shares in China had soared 150% in the 12 months to mid-June as individual investors piled into the rising market, often borrowing heavily to do so. But chiming with warnings that shares were overvalued and the signs of an economic slowdown, the momentum came to a shuddering halt when shares hit a seven-year peak.
Following another plunge on what was dubbed “Black Monday”, China’s stock markets have now given up all their gains for the year.
China’s shock move to devalue its currency, the yuan, this month only served to intensify worries about the world’s second-largest economy.
Shares around the world followed China’s stock markets lower. About £74bn was wiped off the value of the FTSE 100 and on Wall Street, the Dow Jones Industrial Average slumped by a record of more than 1,000 points at one stage.
Commodities such as crude oil and copper have also tumbled to multi-year lows as investors take fright over signs of waning demand in the world’s leading consumer of raw materials.
The currencies of emerging Asian economies have weakened as investors drop those assets seen as riskier to hold. But investments perceived as safe havens in times of trouble, such as gold and some government bonds, are in demand.
Is this a repeat of the 2008 global financial crisis?
Some of the falls on stock markets are certainly reminiscent of the swings seen around the time of the collapse of the US bank Lehman Brothers. The FTSEurofirst 300, a pan-European share index, suffered its biggest one-day drop since late 2008, losing 5.4%. For Shanghai’s composite index, Monday’s 8.5% slump was the biggest since February 2007.
But some economists say the parallels stop there. They see limited risk to China’s real economy from the stock market turmoil and little to be worried about beyond China.
Julian Jessop, the chief global economist at the consultancy Capital Economics, said: “The current panic is essentially ‘made in China’. The recent data from other major economies, including the US, eurozone and Japan, has generally been good ... Aside from the bad news from China, there is very little to support fears of a major global downturn.”
But others are less sanguine. They point out that China’s slowdown is just one of many factors worrying investors alongside lingering political problems in the eurozone, signs of weaker global growth and vast sums flowing out of fragile emerging markets such as Brazil. Furthermore, policymakers apparently have few tools left to help.
Should I be worried?
George Osborne, the UK chancellor, suggests not and believes China’s stock market woes will not have much impact on European economies.
But there are plenty of other voices saying this could get a lot worse.
Larry Summers, the former US Treasury secretary, has suggested that the US Federal Reserve may be forced to ease monetary policy, rather than hiking interest rates in the next few months as had been expected.
— Lawrence H. Summers (@LHSummers)August 24, 2015
As in August 1997, 1998, 2007 and 2008 we could be in the early stage of a very serious situation.
— Lawrence H. Summers (@LHSummers)August 24, 2015
It is far from clear that the next Fed move will be a tightening.
Furthermore, experts say policymakers do not have many tools available to shore up the global economy this time around.
Interest rates are already at record lows and central banks have spent years printing electronic cash in quantitative easing (QE) programmes, cheap money that many blame for the latest market troubles.
Stephen King, the HSBC economist, warned back in May: “The world economy is sailing across the ocean without any lifeboats to use in case of emergency.”
Damian McBride, Gordon Brown’s former spin doctor, spelled out his advice for an impending crash on Twitter.
— Damian McBride (@DPMcBride)August 24, 2015
Advice on the looming crash, No.1: get hard cash in a safe place now; don't assume banks & cashpoints will be open, or bank cards will work.
— Damian McBride (@DPMcBride)August 24, 2015
Crash advice No.2: do you have enough bottled water, tinned goods & other essentials at home to live a month indoors? If not, get shopping.
— Damian McBride (@DPMcBride)August 24, 2015
Crash advice No.3: agree a rally point with your loved ones in case transport and communication gets cut off; somewhere you can all head to.
Another tweet posted later on Monday:
— Damian McBride (@DPMcBride)August 24, 2015
Today is just the stock market catching up with the terror over defaults that's been gripping the bond market for months.
— Lawrence H. Summers (@LHSummers)August 24, 2015
As in August 1997, 1998, 2007 and 2008 we could be in the early stage of a very serious situation.
— Lawrence H. Summers (@LHSummers)August 24, 2015
It is far from clear that the next Fed move will be a tightening.
Furthermore, experts say policymakers do not have many tools available to shore up the global economy this time around.
Interest rates are already at record lows and central banks have spent years printing electronic cash in quantitative easing (QE) programmes, cheap money that many blame for the latest market troubles.
Stephen King, the HSBC economist, warned back in May: “The world economy is sailing across the ocean without any lifeboats to use in case of emergency.”
Damian McBride, Gordon Brown’s former spin doctor, spelled out his advice for an impending crash on Twitter.
— Damian McBride (@DPMcBride)August 24, 2015
Advice on the looming crash, No.1: get hard cash in a safe place now; don't assume banks & cashpoints will be open, or bank cards will work.
— Damian McBride (@DPMcBride)August 24, 2015
Crash advice No.2: do you have enough bottled water, tinned goods & other essentials at home to live a month indoors? If not, get shopping.
— Damian McBride (@DPMcBride)August 24, 2015
Crash advice No.3: agree a rally point with your loved ones in case transport and communication gets cut off; somewhere you can all head to.
Another tweet posted later on Monday:
— Damian McBride (@DPMcBride)August 24, 2015
Today is just the stock market catching up with the terror over defaults that's been gripping the bond market for months.
What if I have money tied up in stocks?
Individuals with money invested in shares should not worry too much for now, financial market experts have said.
Nick Dixon, an investment director at the asset management company Aegon UK, said: “If pension savers don’t need to access their fund for many years, they needn’t be alarmed by short term volatility.
“Stock markets are in for a bumpy ride over the coming weeks, but if savers can stomach the ups and downs, equities are likely to provide superior returns over the medium and long term.”
What does it mean for interest rates?
There had been widespread expectation that the US Federal Reserve would start the gradual process of hiking interest rates as soon as next month. Signs of a potential hard landing for China could well stay the central bank’s hand.
The same goes for the UK, where the Bank of England governor, Mark Carney, recently hinted that a rate hike could happen around the turn of the year.
In China, meanwhile, the country’s central bank is widely expected to ease monetary policy further to shore up growth and confidence.
What will this mean for inflation?
A silver lining economists highlight for those countries that rely on imports of oil and other commodities is that this global sell-off will keep prices low. Oil has more than halved from a peak of $115 per barrel last summer to a Brent crude price of less than $44 per barrel now. At least some of that will be passed on to drivers in lower fuel prices.
Philippe Waechter, the global chief economist at Natixis Asset Management, said: “On the upside, the fall in the oil price will be positive news for European economies as consumer purchasing power will be increased.”
What happens next?
Officials in Beijing are under pressure to step in with more measures to restore stability to China’s stock markets. The trouble they face is that every action is also perceived as a further sign of quite how worried they are about the slide in shares and the wider economy.
Bill O’Neill, the head of the UK investment office at UBS Wealth Management, said: “There will be some form of additional stimulus over the next few days and weeks.
“That is likely to be combined with supportive words from developed economy central bankers aimed at offering reassurance that accommodative policies will remain in place regardless of when interest rates start to rise.”
From Thursday, investors will be looking to the US and a symposium of central bankers in Jackson Hole, Wyoming, for signs of how this new bout of market volatility may influence their interest rate decisions.
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