Family business in Pakistan The ghost of Mahbub-ul-Haq
A Pakistani economist, international development theorist and politician, Dr Mahbub-ul-Haq (February 1934–16 July 1998) served as the Federal Minister of Finance of Pakistan from 10 April 1985 to 28 January 1986, and again from June to December 1988 in the Caretaker Cabinet.
To quote the New York Times, “An early proponent of economic liberalization who, in later years, argued that poor countries failed to prosper because they neglected the basic development of their people”, unquote.
Dr Haq realized as early as the 1960s that the economic liberalization policy promoted by his western teachers was not working well in Pakistan.
As Chief Economist, Planning Commission in April 1968 Dr Mahbub-ul-Haq made the famous speech in Karachi that the economy of Pakistan was dominated by 22 families owning 66% of the country’s total industrial assets, 70% of insurance and 80% of its banking.
His list included the Dawood family Group, Saigols, Adamjees, Colony, Fancys, Valika, Jalils, Bawanys, Crescent Group, Wazir Ali Group, Gandhara Group, Ispahanis, House of Habibs, Khyber Group, Nishat Group, Beco Group, Gul Ahmed Group, Arag Group, Hafiz Group, Karim Group, Milwalas and Dadas.
He hinted in his speech that the number of 22 stood rather symbolically for a process of concentration of wealth in the hands of a few.
Majority of these families of the 1960s in Pakistan started as traders and exporters, only 17 of the 100 people at the top in industry were reported to have experience in industry prior to 1947.
First and Second Five Years Plans also noted that they were people in the trading who had surplus capital and, therefore, they should diversify in manufacturing and industry.
The Korean boom of the early 1950s because of the Korean War helped these traders to reap fortunes and enter manufacturing.
Today most of the original 22 families are either out of business or play a much-reduced role in current economic affairs of Pakistan.
An article “Who owns Pakistan” in Profit Magazine https://profit.pakistantoday.com.pk/2021/05/09/who-owns-pakistan/ established “that the wealthiest families and entities in Pakistan today are all owners of legacy businesses, and that the future of wealth creation will come from industries entirely different from the ones that account for the great Pakistani fortunes of today.
Those among the current crop of wealthy families, who see this and decide to make the pivot, will continue to be on this list 20 years from now.
Those who do not will vanish like the more than two-thirds of Ayub-era 22 families”, unquote.
Almost all the big business groups of the 1960s had started in 1947 as family joint ventures and those that survived the separation of East Pakistan and nationalization under Bhutto stand divided today, with the exception of Crescent group of Industries.
It is interesting to make a short study of these 22 families. The Dawood Group: A Memon businessman from Kathiawar, Ahmed Dawood (1905-2002), emerged as the uncrowned king of Pakistani businessmen under President Ayub Khan.
He had moved to Bombay and started his own business at the age of 15 at his father’s death.
Setting up 26 offices and shops in various cities all over India, he was on the verge of setting up a viscose plant as a joint venture with leading Hindu industrialist Nagin Das Phool Chand.
He decided to migrate to Pakistan along “with his Chevy car”, in 1947 and with his three brothers — Suleman, Siddiq and Ali Mohammed — he started business activities as Dawood Corporation Ltd., with an office in Karachi’s old business area New Chali. They then opened a shop on Saleh Muhammad Street (adjacent to Bandar Road) for trading textile and yarn.
Dawood founded several businesses and chaired companies in the cotton, textiles, paper, consumer goods, oil, logistics, insurance, jute, chemicals, motorbikes, home appliances, electronics and fertilisers industries in East and West Pakistan.
Rising to prominence at the national level he became a major figure in the industrialisation of Karachi.
Founding Dawood Foundation (TDF) in 1960, he established the Dawood College of Engineering and Technology (re-named Dawood University of Engineering & Technology after being granted the status of a university in 2013)
With the independence of Bangladesh in 1971, assets and properties in East Pakistan of residents of West Pakistan were confiscated and nationalised.
Dawood and his family lost factories in Dhaka and Chittagong — including Karnaphuli Paper Mills Limited, Karnaphuli Rayon and Chemical Limited, Dawood Jute Mills Limited and Dawood Shipping Company Limited — accounting for 60% of their industrial undertakings
In January 1972 he and other industrialists were put under house arrest by Bhutto for no conceivable reason but except jealousy and spite, this penchant for repression has not charged over the years.
Success is a disqualifier; successful people are to be targeted. The Government initiated nationalisation of local private companies across the country, the nationalisation process affected many industries including those of Dawood and his family.
Ahmed Dawood lost two billion rupees and profitable industrial projects, namely Dawood Petroleum Limited and Central Life Insurance Company Limited
Disappointed with the nationalisation policy of the government, Dawood and his wife left Pakistan In 1975 for the US.
But he did not like it abroad and came back in 1977. By the late 1970s and early 80s, although the Corporation was doing well financially, Dawood’s siblings parted ways with him, the Group being split with his brothers Suleman Dawood and Sidiq Dawood operating as Descon and BRR group respectively.
Both the groups have done well, Descon Group especially so under Razzaq Dawood. A relatively unknown Ghani group comprising the in-laws of Ahmad Dawood was also carved out of the main groups.
After Ahmed Dawood expired in 2002 in Karachi, the Dawood Hercules (DH) Group has been led by his son Hussain Dawood, who has done a magnificent job building positively on an entrepreneurial history spanning over a century.
One of most respected members of the World Economic Forum (WEF), he is held in great esteem both in Pakistan and abroad for not only his tremendous business acumen but a calm and gentlemanly demeanour.
Apart from the capital deployed in many subsidiaries, he has actively invested in local public equities and money markets.
The flagship company Dawood Hercules Corporation Limited (DH Corp), is a publicly listed company which is the investment holding platform for the Group.
DH Group is one of the family businesses in Pakistan which has succeeded mainly because of his knowledge, skill and expertise.
Hussain Dawood is also the major shareholder in Engro Corporation Limited, one of the largest industrial conglomerates in Pakistan, leveraging joint ventures to scale up businesses and enhance capabilities for handling complex green-field projects.
He is an example of how a family business cannot only succeed but thrive because of extraordinary leadership, not only in Pakistan and Asia but in the world. The First article is the first on the major family business in Pakistan.
—The writer is a defence analyst and security expert, based in Karachi.
