Eye on Pakistan

MCB’s purchase of Royal Bank of Scotland’s Pakistani assets collapses

Posted in Political Economy by onpakistan on January 6, 2010

MCB’s ongoing disagreements with the State Bank of Pakistan, regarding the State Bank’s request for a deposit of MCB shares, has scuppered the agreed sale of RBS’s Pakistani branches to MCB. Other buyers are thin on the ground.  Foreign investors appeared to have learned their lessons following a string of disastrous acquisitions – not least ABN Amro’s 2007 acquisition of Prime Bank and RBS’s acquisition of ABN Amro’s Pakistani operations (also in 2007). Consequently RBS now has little choice but to remain in Pakistan (a market to which, following the recent banking crisis, it now has no commitment) for the foreseeable future. RBS is likely to keep its Pakistani subsidiary largely as it is for the time being, with an attempt at some light (and so relatively low risk) cost cutting. Deep cost cuts (such as merging the erstwhile ABN Amro and Prime Bank operations) are risky and may damage the future sale value of its Pakistani assets.

For more information see:

RBS’s stock exchange announcment.
The two most informative press articles are: an article in Pakistani Daily Times, and an article in London’s Financial Times.

I reproduce the Financial Times article below:

RBS fails to conclude sale of Pakistan arm
By Adam Jones in London and Farhan Bokhari in Islamabad
Published: January 4 2010 08:58 | Last updated: January 4 2010 16:44
Royal Bank of Scotland’s withdrawal from retail and commercial banking in Asia has suffered a setback after a plan to sell its Pakistani arm unravelled.
RBS announced in August that it was selling a 99.4 per cent stake in its RBS Pakistan subsidiary to MCB Bank, a Pakistani rival, for PKR7.2bn (£53m).
However, in a brief stock exchange statement on Monday it said that the deal had lapsed because it had not received the necessary regulatory approval by the end of 2009.
Pakistan’s central bank in Karachi said it had refused to clear the deal because of a dispute over MCB depositing its shares as security.
RBS indicated that a fresh buyer was now being sought for the unit, which has more than 300,000 customers.
An official said: “The Pakistan business remains part of the non-core businesses and the process of identifying a suitable buyer is under way.”
However, bankers in Karachi said RBS would face a difficult challenge in finding another buyer soon, in view of concerns over Pakistan’s internal security conditions and its moribund economy.
The president of a private Pakistani bank said “MCB is out of the race. But finding another buyer may not be that easy at a time when investors looking at Pakistan see the country surrounded by many issues, mainly security and the economy”.
A Pakistani central bank official who did not want to be named said RBS would have to consider continuing to function in Pakistan for the foreseeable future.
The official said: “Unless the RBS managers have something up their sleeves, I don’t see the likelihood of another deal coming together anytime soon. RBS will have to consider functioning as it is”.
RBS, which is majority-owned by the British government, said in February that it was withdrawing from retail and commercial banking in Asia, arguing that its presence in the region was too small and too thinly spread.
In August, RBS announced the sale of assets in Taiwan, Singapore, Indonesia, Hong Kong, the Philippines and Vietnam to ANZ, the Australian lender.
Shares in RBS closed 9.5 per cent higher at 31.98p after reports that Brazil’s largest bank, Itau Unibanco, was considering taking stakes in a number of UK banks.

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In America’s Sights: First Nigeria…Now Jordan

Posted in Foreign Affairs by onpakistan on January 5, 2010

The capture of a Nigerian would-be bomber by the Americans led to the inclusion of Nigerian travelers to the US into the recently instituted ‘extended security’ list. Well, in my previous blog entry, on this very issue, I mentioned as an aside that Jordan may well end up on this list too. Now that we have learnt that the recent bombing of a CIA base in Afghanistan was carried out by a Jordanian (the Jordanians and the CIA thought he was their double agent, it turned out he was a triple agent), I am sure that Jordan will be added to the list. Perhaps, like Microsoft, they’ll roll-out monthly security updates until all countries have been added…

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PIA the First to Submit to America

Posted in Domestic Affairs, Foreign Affairs, Political Economy by onpakistan on January 4, 2010

Foreign nationals (and American ethnic minorities, no doubt!) flying in from 14 “predominantly Muslim” countries are to undergo “enhanced screening” at American airports. (Official TSA announcement here).

According to press reports, and a statement from the airline itself, PIA was the first airline to submit to these procedures, and had done so from the 2nd of January: “Sultan Hasan said the passengers are subjected to special screening, including full body searches, in a designated area of the departure lounge. He said the airline had run advertisements in newspapers to warn prospective passengers of the increased safety measures.” How kind of PIA to offer itself as an advance guinea pig for the new procedures!

This is part of a wider trend towards increased American jurisdiction and control over Pakistani nationals. This is occurring through both legal treaty, and unofficially. The case of Aafia Siddiqui is already well known ( and quite rightly called the “tip of the iceberg”), but there are other recent insidious trends in the same direction. I have already blogged about how Pakistani government attempts to channel money flows in and out of Pakistan through the institutionalized and regulated banking sector will allow for greater U.S. control of Pakistani money transactions. Now this: the Pakistani government has conveniently discovered that it can actually legally deport Pakistanis to America: “We have an extradition treaty with the US,” Foreign Office spokesman Abdul Basit said at a recent media briefing. The basis is, rather flimsily, a US-UK accord dating back to 1932!! Zardari et al clearly want to protect themselves from torture and human rights-based litigation once they retire to their palatial mansions in the UK or Switzerland.

But why bother with formal extradition, when the Pakistani government has allowed American security forces and mercenaries to harass Pakistani citizens in their own homes…in Pakistan? (At least this ‘fortunate’ woman was not dragged off to Bagram, or reditioned to be tortured in Syria – like this unfortunate, and almost randomly chosen, Canadian citizen).

Talk of tortue, ofcourse, takes one back to the countries chosen for additional screening (strip searches anyone?) by the US authorities. They are:

Saudi Arabia

What an assorted bunch they are. They include strong allies of the US (Pakistan, Saudi Arabia), sworn enemies (Iran, Cuba, Syria), client-states (Yemen, Iraq, Afghanistan, Lebanon) and, interesting, governments which happily torture on behalf of the US: Saudi Arabia, Pakistan, Algeria, Afghanistan, Syria, Libya. I would not be surprised if Jordan is eventually added: it is both a client-state and lead-torturer.

A final note on PIA. It is in under imminent threat of bankruptcy. It cannot even now pay for the government’s five (yes, five!!) private VVIP jets.  Responsibility for their financial upkeep has now been transferred to the military. (see this report) This may be in preparation for an eventual privatization of PIA. Once the Arabs purchase PIA (and the Arabs are the only politically viable purchasors), the airline will no doubt further fall prey to American security demands. Whilst Bilawal and his buddies will continue to fly in VVIP comfort, Pakistan’s flying masses will have to get used to used to KESC-style service (KESC having been rather disastr0usly sold to Dubai-based Abraaj Capital a while back).

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US-Nato Forces Execute 10 Afghan Civilians, including 8 Children

Posted in Foreign Affairs by onpakistan on January 1, 2010

With news reports such as this, can anyone now doubt that the American-led occupation of Afghanistan will end soon? When they leave, Karzai’s government will fall faster than Najibullah’s following the Soviet withdrawal….

(Even the US-supporting London The Times concedes the execution of these children, see this).

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