Profit E -Magazine Issue 39 by Profit (by PT)

10 The Black Sheep of the White Hat community 16 What makes Syed Babar Ali tick

22 22 Has Yousuf Dewan hoodwinked everyone once again? 28 Who has the right to our data? Mohammad Farooq

32 How Akhuwat impacts lives through the miracle of interest-free microfinance 38 Why content is king for Propergaanda

Managing Editor: Babar Nizami l Joint Editor: Yousaf Nizami l Contributing Editor: Farooq Tirmizi l Business Editor: Agha Akbar Reporters: Farooq Baloch l Kazim Alam l Aisha Arshad l Arshad Hussain l Muhammad Faran l Syeda Masooma l Ghulam Abbass l Ahmad Ahmadani l Shehzad Paracha l Director Marketing: Zahid Ali l Regional Heads of Marketing: Muddasir Alam (Khi) l ZulďŹ qar Butt (Lhr) l Mudassir Iqbal (Isl) l Layout: Rizwan Ahmad l Illustrator: ZEB l Photographers: Zubair Mehfooz & Imran Gillani lPublishing Editor: Arif Nizami l Business, Economic & Financial news by 'Pakistan Today' Contact: proďŹ t@pakistantoday.com.pk

CONTENTS

welcome

IMMOVABLE, LIKE SET CEMENT Is Dewan Yousuf playing the banks? A cat might have nine lives but Dewan Group’s Yousuf Dewan seems to have thirteen. And counting. The banks, to whom he owes quite a packet, have been at it since long, asking him to sell of his prized Dewan Cement to pay them back. A total of thirteen local and international players have expressed interest in buying the company, with some even having gone on to the later stages of paperwork. But Dewan always slipped out. Not a good deal, he maintained every time. And got away with it as well. Still has his cement company despite the significant debt. Has his cake and eating it, too. Many doubts, here, about the validity of his objections to the acquisitions. Even the consultant firm that he himself tasked with evaluating offer number 13 (Mega Corporate Ltd) said that it was a really good deal. But, no. The fellow has been rather skittish in giving out the reasons for turning down the offers. At times, he even alleges that some of the banks themselves don’t want the sale to go through. A hard sell, this argument. By now the banks just want to take their money and run. At other times, he says that he is in this position in the first place because of the banks. They didn’t extend my credit lines when I needed them the most, is his line. Surely it can’t all be the banks’ fault. What if he just can’t run a tight ship? Amongst the biggest cement companies, his has the lowest profit margins. His cement factories are very well located, making it difficult for them not to be as profitable as the other firms. This has led to allegations of there being some hanky-panky at the

FROM THE MANAGING EDITOR

factories; that the margins were, in fact, high and that money was being siphoned off. Nonsense, says Dewan Cement. Our books are audited routinely; are you implying that the regulator is sleeping? That is an argument I have long had a problem with. Having audited books doesn’t mean quite what is commonly thought. Doesn’t preclude the possibility of there being a scam. Just think about it: all the mega scandals, like Enron’s, for instance, took place right under the nose of auditors as well as the regulators. Imagine how malicious corporates would be able to game the system here in Pakistan. Post-script: a word, here, about the banks. The hive-mind of the nation’s bankers is patently unimaginative. Dewan was once the darling of the banks and everyone was beating a path to his door. Why? Herd mentality, rather than a close look at business fundamentals, characterises the corporate lending decisions of our banking sector. They had it coming.

Babar Nizami

Readers Say If a bank has a negative net worth as per its own auditors, doesn't it make sense that it will sell for a token Rs1000 because the buyer is basically agreeing to recapitalize it with his own money? Deposits do not belong to bank owners, so are not used in pricing it. How much is known about those "Chinese investors" outside of what KASB people tell us? No regulator can place the depositors interests on the line based on a "supporting letter from the Chinese embassy". Fact is, it was a dodgy party agreeing to capitalize a bank without any due diligence. Round trip anyone? (Apropos: Apropos: A bank sold for just Rs1,000. Does it make any sense?) Khurram Hussain This was a straight case of favoritism and political decision making by SBP in awarding KASB bank to Bank Islami. The main issue is not that the bank had negative value. All over the world the new owner has to pay huge sum of money just to get the brand of an entity in huge losses and liabilities. It’s all about what is the worth of owning the bank for potential investors and owners. Through auction even if all investors across the country and abroad was asked to participate, I am pretty sure the final deal price would have been at least 10 billion i.e. around the paid up capital. Look at this from investor’s point of view. If they want to own a bank in Pakistan, they would need billions of rupees of investment to set up a large branch network and hire experienced human resource. It would be a long process involving years. (Apropos: A bank sold for just Rs1,000. Does it make sense?) Analyst

How to ContaCt

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Sorry to say that Pak Suzuki has unable to provide the quality cars in Pakistan. They are selling the same old 800cc Mehran for decades without any change. Can it be possible for Suzuki to launch the same Mehran 800cc in Japan?. However, their motorcycles Motorcycles are far better than Suzuki cars. (Apropos: Why should Suzuki improve models if people continue to patronise) Faisal A very good point that SBP never offered Rs 25 billion to all the banks which it offered

to BIPL. AFF role needs to be assessed. Why it was Rs 25 million, why it adopted this task when it was already auditor for SBP. What happened to conflict of interest. (Apropos: Editor’s Note: The state of the State Bank) Hussain Khoja I'm a big fan of Engro. Think they have their heart in the right place as much as that is possible in the commercial arena. But they are incredible at complex project execution. Are they as good at competing & selling? In a highly competitive market I honestly don't think so. They know it too. So this play probably has been done by their strategy analysts to death and it can only mean one thing. This is a greenfield play where launching fast and financing are conditions for victory. If this went public I'd buy shares and hold for 5 years not 10. (Apropos: Engro poised to set up first Pak merchant LNG terminal) Habibullah Khan Miss Aisha you have clearly mentioned the overpricing drive by the shopkeepers. U mentioned minimum calculation where Rs. 2300 are saved but why to ignore the commission companies give to shopkeepers. And both shopkeepers commented that electric bill labour wages and shop rent is to be paid so dear soft drinks are not the only items which are sold at your shop restaurant or store. Every items available for sale is having profit margin so each item will give you profit. If selling soft drink in actual price is not possible for you then talk to company for increasing your profit margin but on your own if you start charging more it can be justified at all. There is no maintenance cost of chiller or deep freezers they maintained by the provided companies. (Apropos: Shopkeepers’ scam adds fizz to profits) Abdul Wali Khan It is a superb adea which would save us from big expaniture on state run gas distribution organisation. Why not the system of distribution by pipelines stop and replaced by perfect gas cylinder system run in Saudi Arabia by gas vendors and very cheap. (Apropos: Engro poised to set up first Pak merchant LNG terminal) Saeed Ansar

COMMENTS

THE

BLACK SHEEP OF THE WHITE HAT COMMUNITY

During our investigation into the recent security breach at Careem, some industry sources highlighted a faction of the white hat community that exploits startups that are vulnerable to cyber attacks, prompting Profit to look into how ethical these ‘ethical hackers’ really are

By Farooq Baloch

n a working day in midsummer afternoon in 2017, a Pakistani fintech company received a rather unusual email: an independent information security researcher requesting to connect with the company’s development head so he could alert him about a ‘high priority’ security issue in their system. Within 20 minutes the company obliged, connecting their development head with the white hat or ethical hacker – tech synonyms for independent security researchers. With that commenced an hour-long correspondence between the two parties. The startup asked if the ethical hacker could shed some light on the security vulnerability he had identified but the latter responded by saying he has found “a serious vulnerability” in their system and if they didn’t fix it, “anyone could access the whole server by uploading a simple shell within a minute”. He didn’t go into the specifics of the bug, but asked the company if there was any ‘bounty’, a monetary reward, for his [disclosure]. In the subsequent correspondence, the company once again asked him if he could share some more details regarding that vulnerability. This time they even offered him to have a conference call to discuss the matter in detail, but the hacker insisted they let him know if there was any bounty, only then would he reveal the vulnerability otherwise the fintech had to find it on its own. “He was clearly soliciting money,” an official with direct knowledge of the development told Profit on the condition that we wouldn’t identify either party because they want good ties with the white hat community – the documentary evidence of the correspondence between the hacker and the

company is available with us. Despite a swift response from the fintech startup, the hacker went on to claim on his social media page that the company, which he identified by name, did not respond – rather ignored him. Questions about this bounty hunter abound: did he seek permission from the fintech before testing their system? Did he do responsible disclosure? Whether his intention was honest? And most importantly, is it ethical hacking at all?

A criminal offense

he legal experts and Pakistan’s top ‘ethical’ hackers (by their own admission), penetrating a private company’s data without prior consent is a criminal offense. “Testing [penetrating] an information system of a private business without their permission is illegal, there are no two opinions about it,” says Rafay Baloch, a renowned information security expert who commenced his career as an ethical hacker in Pakistan, later moving to the UAE to work as an independent consultant now. With many feathers in his cap,

‘A CYBER SECURITY ANALYST AND A LEADING BOUNTY HUNTER, AMIR HAS HELPED TECH GIANTS FACEBOOK, MICROSOFT, YAHOO AND TWITTER FIX VULNERABILITIES IN THEIR SYSTEMS. HE SAYS, ETHICAL HACKERS MUST SEEK PERMISSION FROM THE COMPANY THEY PLAN TO TEST BEFORE ACCESSING THEIR SERVERS’

including exposing bugs in PayPal, Android Open Source Program, and more recently in Google and Firefox web browsers, Baloch says white hats can only test those apps that run a bounty programme and make public announcements or authorize ethical hackers to test their systems for security vulnerabilities. Even in these cases, he adds, penetration testers are bound to make a responsible disclosure – communicating the ‘specific vulnerability’ to the company privately. What if some ethical hackers fail to follow these rules, we ask Baloch. “It is happening already and on a grand scale. Every community has black sheep, white hats are no exception.” The UAE-based information security expert tells us many bounty hunters are blackmailing startups, both local and international, only for money. “Even in the case of Careem, Pakistani hackers have been blackmailing the company for quite some time. Everyone knows it,” Baloch said, pointing to the close-knit community whose members are based mostly in Pakistan and the UAE. “These people were begging for money.” Multiple sources within the information technology industry maintained that many of these hackers pass on this information to their friends or colleagues who also demand bounty using the same information. The ethical hackers we spoke to for this story also endorse this view. Careem was questioned with regard to whether it experienced blackmail, especially by Pakistani hackers, but its response was still awaited till

CYBERSECURITY

this report was filed. Sources within Pakistan’s startup community confirmed that such malpractice was common, if not rampant. For example, both Zameen.com and Pakwheels.com, two of Pakistan’s most popular startups, were blackmailed by a group of bounty hunters who acted as ethical hackers. Later on, both the startups were hacked. In case of Zameen.com, a real estate portal, the hackers even released critical users data online – including names, passwords, email addresses and phone numbers, inviting action from the Federal Investigation Agency (FIA) cyber crime wing, National Response Center for Cyber Crime (NR3C), which arrested many members of this group in 2016.

Ethical hackers strike it rich

tarting in 2009, the bounty hunting peaked after 2012 and a lot of ethical hackers jumped on the penetration testing bandwagon, turning it into a whole new industry. They made quick money and earned international fame as tech giants started rewarding them with cash and goodies, at times mentioning their names in their hall of fame, helping build the hackers profile. According to Baloch, there are 15 to 20 bugs per 1000 lines of coding and large companies like Google and Facebook have coding lines that run in millions and this is where penetration testers come in handy. These companies can’t fix every bug on their own because they don’t have enough manpower to do it – this also explains why all tech companies want to have good ties with the white hat community. With the rising demand, a lot of techies have entered this ‘industry’ and started indulging in malpractices like blackmailing companies and sometimes leaking or selling their data in frustration when denied a bounty or ignored. These are mostly teenagers,

‘THEY MADE QUICK MONEY AND EARNED INTERNATIONAL FAME AS TECH GIANTS STARTED REWARDING THEM WITH CASH AND GOODIES, AT TIMES MENTIONING THEIR NAMES IN THEIR HALL OF FAME, HELPING BUILD THE HACKERS PROFILE’ who want to test their newly acquired skills, professionals don’t do it, Baloch says, adding these amateur hackers have created a negative perception of Pakistani hackers, making their hiring difficult in the UAE. Even in Pakistan, the case is not much different as local startups we reached out to for this report tell us a similar story. “They try to blackmail all the time and want bounty or consultancy assignments even for the smallest of things,” a top executive of one of Pakistan’s leading startups told Profit requesting we don’t identify him. “You get thousands of emails so you have to filter what is a threat and what is not. These bounty hunters should give you enough information before you commit to pay them,” he said. In the case above, the hacker, who appear to be a lone wolf, didn’t seek prior consent from the company, making it a clear case of unauthorized access. On top of that, he used his corporate email from a startup, which operated from a reputable incubation center and focussed on providing education testing services, but acted as an independent bounty hunter. Even if one ignores all of this, was it ethical on his part to ask for bounty before sharing details of his findings? “As an ethical hacker, your goal is just to report the bug. It is the right of the company whether to give a bounty or not,” says Shahmeer Amir, Chief Executive Officer of Veiliux, a Cyber Security Startup based out of Lahore. Veiliux was the first company, at least by public record, to report a security vulnerability in Careem 18 months ago,

‘QUESTIONS ABOUT THIS BOUNTY HUNTER ABOUND: DID HE SEEK PERMISSION FROM THE FINTECH BEFORE TESTING THEIR SYSTEM? DID HE DO RESPONSIBLE DISCLOSURE? WHETHER HIS INTENTION WAS HONEST? AND MOST IMPORTANTLY, IS IT ETHICAL HACKING AT ALL?’ 12

but it didn’t receive any bounty for that. A cyber security analyst and a leading bounty hunter, Amir has helped tech giants Facebook, Microsoft, Yahoo and Twitter fix vulnerabilities in their systems. He says, ethical hackers must seek permission from the company they plan to test before accessing their servers. Giving his own example, Amir said, before penetrating Careem, he met both Junaid Iqbal, their country head, and Talal Burney, a senior manager at the company, and told them how he felt their app might not be safe and whether he could test it. “They gave me a verbal approval for that.” Amir was able penetrate Careem and access critical information including ride information, booking id, car type, and pickup and drop off locations, which he also shared on his blog after Careem made a public announcement about the Jan 14 security breach, in which private data of 14 million users was compromised. In a recent email to Amir, Careem told him they had fixed that vulnerability immediately after he informed them and that the recent hack was different from what he had reported to them. However, this entire episode points towards SOPs practiced by ethical hackers: Amir sought permission to test their app, then made responsible disclosure – evidence available with Profit – and made full disclosure, making the security flaw public only after it was patched by the company.

Responsible disclosure?

y contrast, the hacker who tested the fintech under discussion didn’t share specific details regarding the bug he claimed to have found in the app. Since the correspondence between the two parties hit a deadlock over disclosure of information, it merits a question: how much information should be disclosed as per responsible disclosure? “When they [hackers] show

screenshots of information or data they have accessed, we know they have penetrated our system and got something,” said the CEO of a renowned startup. Based on that information, the company’s own development team can assess the impact of that vulnerability and find out whether it is of critical importance, he said. “This is how you build trust and take these people on board for resolving the issue.” The two ethical hackers, namely Shahmeer Amir and Daniyal Nasir, who had identified security bugs in Careem’s system last year, shed more light on responsible disclosure. Both the researchers had shared screenshots of the vulnerability with the company privately. Nasir had managed access to critical information of Careem’s global user base, including live location of cars, vehicle registration numbers, ID card numbers, phone numbers, pictures and emails, but unlike that fintech case, he made responsible disclosure before expecting a bounty. “If somebody asks for money first, it is wrong and he is responsible for his own actions, but asking whether a company has a bounty programme has no harm,” Nasir told Profit. Asked if he sought Careem’s permission before testing their system, he answered in the negative. This unauthorized access – regardless of his ethical handling of the matter – can get him trouble then, right? Actually, no, or this is at least what we understand from Baloch’s interpretation of Pakistan’s cyber crime law. The cyber crime law has legalized unauthorized testing by adding the dishonesty clause, Baloch said in reference to Section 6 of The Prevention of Electronic Crimes Act (PECA) 2016, which states: “Whoever with dishonest intention gains unauthorized access to critical infrastructure information system or data shall be punished with imprisonment which may extend to three years or with fine which may extend to Rs1 million or with both.” “Who will prove if the researcher’s

‘MULTIPLE SOURCES WITHIN THE INFORMATION TECHNOLOGY INDUSTRY MAINTAINED THAT MANY OF THESE HACKERS PASS ON THIS INFORMATION TO THEIR FRIENDS OR COLLEAGUES WHO ALSO DEMAND BOUNTY USING THE SAME INFORMATION. THE ETHICAL HACKERS WE SPOKE TO FOR THIS STORY ALSO ENDORSE THIS VIEW’ intention was honest or not,” Baloch questioned. “If caught, I can say I did it in the larger public interest and go scot free.” However, Aun Abbas, former Deputy Director of NR3C and a key member of the team that wrote PECA 2016, seems to disagree with Baloch and insists the law deeply covers this subject. Using a layman’s explanation for the said clause, Abbas said, “If someone leaves the door of his house open, does it give you the right to enter their premises, No! And what if the doors are closed, even if not locked? You don’t have the right to enter, this is trespass.” The hacks at Zameen.com, Pakwheels.com and Daewoo Bus service were all acts of unauthorized access thus illegal, says the expert who was instrumental in busting PakBugs, a gang of hackers involved in online fraud and illegal access to many local and international websites. Then former NR3C officer helped FIA arrest five members of that gang in 2010 and later in 2016 played a key role in identifying attackers behind Zameen.com and Pakwheels.com security breaches.

Massive amount of critical data

ollowing the law is one thing, but wouldn’t it be a public service to test the cyber security soundness of companies that sit atop massive amount of critical data but lack resources to fix all the bugs internally and don’t even run any bounty programs? After all, Careem was informed

‘THESE COMPANIES CAN’T FIX EVERY BUG ON THEIR OWN BECAUSE THEY DON’T HAVE ENOUGH MANPOWER TO DO IT – THIS ALSO EXPLAINS WHY ALL TECH COMPANIES WANT TO HAVE GOOD TIES WITH THE WHITE HAT COMMUNITY’

about the vulnerabilities in its system by at least two Pakistani hackers a year in advance, which if not ignored, could have possibly saved it from the recent breach. In fact, Telenor Bank, where Abbas is chief information security officer, manages the country’s largest mobile payment service EasyPaisa, but has no third-party bounty programme on offer. This is despite the fact that it was hacked in the past. “If there is no bounty programme or authorization from the company being tested, then you can say you are giving a pro bono (for the public good) service,” Abbas says. But this brings us back to the article 6 of PECA 2016. So how do we find if the intention was honest. To this, Abbas says by seeing the trail of activity, one can find out whether the access was “intentional or unintentional, honest or dishonest, legal or illegal”. So is there a way to counter this menace? Abbas thinks part of the problem is lack of awareness regarding cyber crimes and critical data. The government should declare information of telcos, Nadra and banks as critical data to create deterrence, he suggests. Similarly, information security should be adopted by academia because presently on a handful of universities are teaching that subject. “We should make a national information security forum and register all the ethical hackers and cyber security companies with it. In fact, we should register specialists from all areas of information security on that forum,” Abbas said, implying only registered members should be allowed to test applications. Though he co-authored the country’s cyber crime law and defends it, Abbas suggests it will take a lot more to improve the country’s cyber security scene. “The current legislation addresses cyber crime, but there should be separate law for cyber security.” n

CYBERSECURITY

WHAT MAKES

SYED BABAR ALI TICK

The life story of a Man of Substance

By Agha Akbar

he second edition of Syed Babar Ali’s autobiography ‘Learning from Others’ is out. This scion of Lahore belonging to an exceptional family of outstanding businessmen has not just stood out in the mercantile context, but left an indelible imprint on industry and business at a national level, apart from facilitating specialized advanced education by founding an ever-expanding world class university in LUMS. Enormous in itself, his endeavours in the field of education, culture, and conservation and environment are by no means limited to it. As the title of the book suggests, concluding on Saadi’s verse (‘My companions’ virtues elevated me/ Otherwise I am the same humble creature that I was’), this man of old world charm and grace, portrays himself as a humble, self-effacing man. In the preface he recounts an incident, where he brusquely brushes

aside an interviewer for a documentary on LUMS on how he would want to be remembered: “I don’t want to be remembered”. Really? In the next breath, he asks a rhetorical question: “Why have I written this autobiography?... The whole purpose of this initiative is not for people to learn about me and what I did, but to see what lessons can be learnt from it. It would give me great satisfaction, if, in the future, somebody were to use it as a case study.” Much later in the book, discussing family, he mentions his grandson with pride and joy as doting grandfathers the world over do, and with unalloyed pleasure recounts his comment: “I want to be like my grandfather.” So take a pinch of salt with ‘not wanting to be remembered’!

A life lived so well

nd there is nothing remotely wrong in the desire to be remembered, to survive mortality by living in memory, for

‘POST HIS GRADUATION FROM THE MICHIGAN UNIVERSITY, HE HAD SEVERAL STINTS AT HARVARD – FROM WHERE HE BROUGHT THE GERMS OF AN IDEA FOR LUMS’ without that innate pride and purpose which provides the spur, there would not be any high-achievers. Actually, for a life lived so well, with accomplishment levels as high as Syed Babar Ali’s, and for 90-plus years no less (To borrow from Hafeez Jullundri’s yeh nisf sadi ka qissa hai do char baras ki baat nahin [This tale spans half a century, not a mere two years or four], the perspective and canvas of the author is spread around a century, give or take a few years),

there is every reason to be remembered. Even if the vast business empire that he built under the banner of Packages for some reason doesn’t, LUMS shall ensure that. Split in neat compartments – spread over 12 chapters, under Parents and Siblings, Education, The Family Business, Packages Limited, Other ventures in industry, Business Learnings, Promotion of Education, WWF Pakistan and WWF International, Marriage and Children and Interaction with Some Politicians – the autobiography narrates the family business from pioneer days, from nearly 70 years before he was born in 1926, his great grandfather’s initiation into business in the walled city of Lahore, his father’s cantonment shops, and army contracts from the late 1850s onwards. Syed Babar Ali’s father was married into the Faqir family, Faqir Syed Iftikharuddin being his maternal grandfather. With three brothers in Ranjit Singh’s court, with two considered intimate confidants of the Maharaja, the Faqirs were what counted as front rank amongst ‘the Chiefs gentry’ of Lahore. Babar Ali was educated at the exclusive Aitchison College (then really very select, to the extent that when he was done with school and went over to Government College, there were just 120 students), many among the students belonging to the ruling families of the many states dotting then undivided India, sons of Maharaja of Patiala and Nawab of Bahawalpur, among them. At Aitchison, Harcharan Singh Brar, later the chief minister of the Indian Punjab, was Babar’s best friend, a lifelong friendship that endured till the former’s passing away. Brar was a political animal, a Mahatma Gandhi supporter and an Indian nationalist from his school days, while Babar Ali and his family rooted for Jinnah and were enthusiastic about Pakistan. Despite their poles-apart political leanings, their bond was not affected by either this contradiction or Brar’s being a Sikh.

2000: Three successive presidents of WWF International HRH The Duke of Edinburgb (1981:1996); Syed Babar Ali (197-1999) and Ruud Lubbers (2000) at St James’s Palace, London

Outshining the princes

eing the son of ‘a boxwallah’ (in contemptuous colonial parlance, ‘a businessman’, not considered a ‘pucca sahib’) to win recognition from the elite, he had to outperform them as an all-round student, excelling at studies as well as on the sporting field. Babar Ali did both, with the same single-minded zeal that was so apparent in his later years in business. The sporting ‘holy grail’, the ‘full blazer’ a ‘most coveted achievement’ – only awarded to a ‘colour holder’ in at least three disciplines, including cricket, swimming and athletics, with riding thrown in for good measure too, he bagged with distinction. Of his three elder brothers, Syed Babar Ali adored and idolized Syed Amjad Ali and Syed Wajid Ali. While the former found his calling in public service to the newly independent state, the second was busy in business elsewhere in India before the Partition and in Karachi after that. Being their understudy in business was reinforced by his inquisitive mind to observe and

‘BEING THEIR UNDERSTUDY IN BUSINESS WAS REINFORCED BY HIS INQUISITIVE MIND TO SEE AND STUDY THE OPERATIONS OF VARIOUS INDUSTRIES IN THE UNITED STATES, NOT TO MENTION A SPELL OF WORKING IN PAKISTAN’S UN DELEGATION UNDER SIR ZAFARULLA’

‘EVEN IF THE VAST BUSINESS EMPIRE THAT HE BUILT UNDER THE BANNER OF PACKAGES FOR SOME REASON DOESN’T, LUMS SHALL ENSURE THAT’ study the operations of various industries in the United States, not to mention a spell of working in Pakistan’s UN delegation under Sir Zafarulla Khan. Post his graduation from the Michigan University, he had several stints at Harvard – from where he brought the germs of an idea for LUMS. The book has great anecdotal value for general readers, because of its vast time perspective, detailing events and people from a day and age long bygone and up to the recent times, and also the myriad characters, especially some of the politicians that he had occasion to brush shoulders with. The most interesting of these are his description of Sir Zafarulla, Zulfikar Ali Bhutto and Gen. Pervez Musharraf. In the preface of the book, Babar Ali wonders at whether it would spawn a case study. Whether it does or doesn’t is a moot point, but the content is valuable enough, in terms of communicating his own experiences on how to make the most of business opportu-

BOOK REVIEW

nities – as the one presented to him to set up Packages by a Swedish postWar stalwart of packaging industry Ruben Rausing, an innovator who was not just a friend but a mentor as well. A fascinating blend of sub-con-

tinental social, political and economic history, with illuminating first-hand glimpses of prominent personalities, and of course a wise and shrewd discourse on setting up and successfully running a business, the author must be

appreciated for his painstaking efforts at an advanced age to pass on his hard-gained expertise and experiences to posterity. Unfortunately, in our environment, most ‘role model’ kind of people rarely take such time and trouble.

BOOK EXCERPTS The Growth of the Business

‘W

hen my maternal grandfather accompanied the Amir of Afghanistan in India, his son-in-law, my father, got the opportunity to look after the King’s entourage and travelled throughout India with them. This was the big break for my uncle and father, to be recognised by the government in Delhi, and it brought their firm more business with the British Army. Because of their hard work and quality of their

service, they soon became the largest contractors to the British Army in India, spread all over the country.’

Father’s Business and Personal Ethics

y father received much respect in the business and political communities of the country… However, despite his standing in the country he still suffered slights from the British: he had a memory of riding in Murree and meeting an Englishman on foot, who stopped him

Faqir Iftikharuddin

and told him that he had to get down from the horse. He could not tolerate an Indian riding a horse past an Englishman walking on foot! My father carried that scar…

Ruben Rausing’s Personal Relationship with me

rom 1955 to 1983, until his death, I visited him in Europe at least once a year and spent half a day with him when there were just the two of us. I benefited from his advice, guidance, and experience.

Syed Maratib Ali

Ruben Rausing had a profound impact on me. He took me under his wings and encouraged me to go into the milk industry, providing all his contacts to me… He was happy to see Packages making progress. I think what broke his reserve with me was my openness, truthfulness and my anxiety and eagerness to learn. I kept on asking him questions. This is what he himself did: he always asked people questions. He not only became my friend but also my mentor. He was always sending me ideas in his letters. I remember in one of his letter he wrote, ‘I have seen the statistics; Pakistan has a large number of cattle, most of which are scrap. The world is short of meat. There is gold lying on the ground of Pakistan. Why don’t you pick it up?’

LUMS School of Science and Engineering

n 2005, we felt that with management you can only improve the country in a limited way. However, if you want to make a quantum leap, you have to add value to what the country produces, and that would be through science and engineering… [In the US] Atiq Raza [one of the most successful Pakistanis] said, ‘You should aim high… try and produce people whom Microsoft and GE would want to hire, not the cement and sugar industry in Pakistan whose needs will automatically be met.’... At MIT I met a number of professors including Professor Bob Jaffe, senior professor of Physics. Jaffe had verified my credentials from his friend,

US First Lady Hillary Clinton at LUMS on March 27, 1995 Professor Hoodbhoy, in Islamabad. He [Jaffe] said, ‘Why don’t you organise a retreat for two days where we can focus on his idea?’... The advice we received was: 1. We should start from where Harvard and MIT want to be tomorrow, not today. 2. We should have a School of Science and Engineering with science and engineering without boundaries, so that the chemist and the biologist and the mathematician are forced to talk and work together. 3. We should have a very strong undergraduate programme bringing

Receipt of donation from Syed Maratib Ali to All-India Muslim League Fund acknowledged by the Quaid

in students who are strong in basic sciences… Science changes very slowly while technology changes all the time… 4. ...Follow the American system, not the European… There were hardly any Nobel Prize winners coming out of Europe. The US, they said, is where new knowledge is being created.

INTERACTION WITH SOME POLITICIANS The Quaid-e-Azam

f there was any legal issue with our contracts, my father would, in important cases, seek Mr Jinnah’s advice as a lawyer… During my holidays, I used to go to Bombay, where I was very well looked after by Bhai Wajid. He offered to introduce me to Mr Jinnah and asked his PA if he could bring me over. The next day, Mr and Miss Jinnah invited us for lunch and I remember a very embarrassing incident. We were served grapefruit, fish, and roast chicken with the skin on. When I tried to carve the chicken, a piece fell on to my lap! I picked it up with my hand and put it on the plate. I looked at Mr Jinnah who pretended that he had not noticed. I can never forget that. He was a generous host.

BOOK REVIEW

Malik Ghulam Mohammad

hile serving as Pakistan’s first finance minister Malik Ghulam Mohammad was a regular visitor to our house in Karachi. He once came over to my brothers in an agitated state, saying, ‘If this country is to be saved, do some lobbying and make sure that the Objectives Resolution is not passed.’ This was the resolution that named Pakistan as the Islamic Republic and added all the Islamic clauses – it was passed in 1951. The then Prime Minister, Nawazada Liaquat Ali, had been advised that this Resolution would make him popular! He was from Karnal in UP and was elected from East Pakistan to the National Assembly, so he had no real political base in West Pakistan.

Chaudhry Muhammad Zafarulla Khan

e gave away all his wealth to his community three times in his lifetime – and each time started from zero again… When Chaudhry Sahib was a member of the cabinet, he was very concerned about the future politics of Pakistan and impressed on my brother, Wajid Ali, the need to use his influence with the Quaid, to ensure that the constitution was framed during the Quaid’s lifetime.

Zulfikar Ali Bhutto

e was a person of many sides. Among his positives, he was very efficient. Any file that went up to him came back within twenty-four hours. He was very hardworking. When he was travelling, he had almost Genghis Khan like arrow riders who would get him the files whether he was in Quetta or wherever; he left nothing pending. He had a very quick disposal system.

On setting up National Fertilizer Corporation under the ZAB dispensation

started my work as chairman of the National Fertilizer Corporation on February 1, 1974, and spent three and a half years in the post. The government was very supportive of what I did... There was never any interference. ...Zulfikar Ali Bhutto treated me well… I never had a telephone call from him recommending anyone to be given a job or to ask me to purchase materials from a particular source. This is despite the fact that I spent US$500 million of government money on new plants during the nearly four years that I was at NFC and these were big contracts.

Ruben Rausing and his sons, Dr Gad and Hans Rausing looking at the first Tetra Pak prototype machine

Gen Zia-ul-Haq

he last function that I attended at the President’s House was just before he died. At that time, he had announced elections to democratise Pakistan. Wasim Sajjad was his chairman of the Senate and when I met him, I said, ‘Congratulations, things are opening up.’ He said, ‘I don’t know whether he will hold the elections or not!’ This was one of his closest colleagues!... Gen Zia was also very anti-shia. During my Shoora days, on the 10th of Moharrum, Ashura Day, I got a call from Bhatti Gate that as soon as the Majlis was over, I should leave for home. The next day, I found out that there had been a mob attack on our Imam Bargah and they had tried to burn it. Our neighbours, who were not shias, came and fought to protect it. A few weeks later one of the senior bureaucrats of Lahore, who was not a shia, called to say that the next morning he had received a call from Gen Zia-ul-Haq to ask what had happened in Lahore. He had told Gen Zia that nine people had died in the unfortunate incidents. Gen Zia said, ‘Only nine!’ In those days Gen Zia had put together a force employed by the government to drag people to the mosques.

Gen. Pervez Musharraf

1955: Washington, D. C. Mr. & Mrs. Richard Nixon attending Perwin and Syed Babar Ali’s wedding

[

Oct 29 1999] I told him that I could not come in... I suggested reforms of the police and judiciary, the need to strengthen the civil service and I stressed the necessity of preparation for clean elections. n

BOOK REVIEW

...OR WILL HE HOODWINK EVERYONE YET AGAIN? The Group faces serious credibility crisis as it turns down offers for its cement plants for the umpteenth time – even the lucrative Mega offer – raising doubts about its intent to sell and settle the default

‘HE USES THE NEW-INVESTOR CARD TO DODGE BANKERS AND THE COURTS. HE’S BEEN DRAGGING HIS FEET ON THE ISSUE OF DEBT SETTLEMENT FOR 10 YEARS NOW’

By Kazim Alam

n Feb 25 night, fancy vehicles in large numbers were chock-a-block in whatever parking space was available along the side streets of the magnificent Mohatta Palace Museum in Clifton. From federal ministers to foreign diplomats, dignitaries arrived in droves at the ceremony to mark the ‘comeback’ of the Yousuf Dewan (YD) Group of Companies in the auto sector, Minister for Interior, Planning, Development and Reforms, Ahsan Iqbal and Chairman Kolao Group Oh Sei Young among them. The highlight of the ceremony was the unveiling of Daehan Shehzore, the successor to Shehzore pickup that Dewan Farooque Motors Ltd – the auto wing of the debt-ridden conglomerate – assembled in its 20,000-unit plant in Sujawal district until 2010. This time around though, the light commercial vehicle is being relaunched as Daehan Shehzore following a joint venture (JV) agreement between the YD Group and the Kolao of South Korea in April 2016. Apparently, the YD Group owes its reentry into the auto industry to the incentives it would get under the brownfield status that its auto assembly plant received through the Automotive Development Policy 2016-21. But the real reason for the planned revival of its auto assembly plant is the expected cash inflow from the sale of Dewan Cement Limited (DCL) to Mega Conglomerate, a relatively new player in the country’s cement industry. In other words, the billion-dollar behemoth of the pre-2008 era is now betting the ranch on selling one of its companies to pay for the revival of another. If successful, the move can lift the whole conglomerate out of the default that, analysts say, is the biggest in Pakistan Inc’s 70 years of existence. To have an idea of dwindling fortunes of the YD Group, consider this: Only two of the nine listed YD Group companies were trading at more than Rs10 a share on May 11. One of them was DCL, the company that the group is selling to revive Dewan Farooque Motors Ltd, the only other subsidiary trading above its par value.

Biggest default

ccording to one seasoned banker, who played a central role in helping the YD Group avoid total collapse or liquidation after 2008, the default amounted to Rs 55 billion. The group, which originated in 1912 as a small company dealing in used garments, grew with few major setbacks until Dewan Muhammad

COVER STORY

Yousuf Farooqui started playing a more active role in business in the late 1990s. “Yousuf got close to Musharraf. He started expanding like nobody’s business. He went into too many businesses and got overstretched,” the banker said, requesting anonymity. With the arrival of the Pakistan Peoples Party at the centre in 2008, the fortune stopped smiling on the YD Group. The new political dispensation tightened the noose around the neck of its chairman and cut him to size, he said. At the same time, the global financial meltdown hit the cash flows of the conglomerate badly. Most of its businesses depended heavily on imported raw materials, like auto kits, coal and polyester. Banks revoked credit lines, and the group’s companies were left without working capital to run even everyday operations. Farooqui had been on a shopping spree for far too long, accumulating leveraged assets and buying companies left, right and centre. With balance sheets bloated with debt that he couldn’t afford, this left him with little liquidity to operate. The Dewan empire crumbled like a house of cards within two years. From posting a net profit of $5.8 million in 2005-06, the group went on to register the country’s largest-ever default in 2007-08. The number of employees decreased from 14,000 to 6,000.

The largest-ever default

he group went into negotiations with the banks. The State Bank of Pakistan (SBP), the banking sector regulator with a mandate to ensure stability in the financial market, forced banks to set up the steering committee to help minimise the loss arising out of the country’s largest default. It decided that all the banks that had lent money to the YD Group would go pari-passu: an arrangement under which all creditors are regarded equally

‘BANKERS HAD A PROBLEM WITH MY LIFESTYLE. THEY WANTED TO SEE ME IN SLIPPERS. WHY SHOULD IT BOTHER THEM IF I OWNED PROPERTIES?’ Dewan Muhammad Yousuf Farooqui, Chairman, Yousuf Dewan Group of Companies and repaid at the same time and at the same fractional amount as all other creditors. In case a company that has used an asset as collateral for more than one loan goes bankrupt, its creditors usually get their money back based on their seniority. Those that lent it first take priority over others. “But the steering committee made a big concession in this case. Those banks that extended loans first made a sacrifice. That was a big event. It enabled the YD Group to survive by ensuring that banks stuck together,” the banker said. Had the pari-passu arrangement not been worked out, banks with superior charges would have taken their money and vanished. The rest of the lenders with inferior charges would have been left high and dry, forcing them to go to court against the YD Group. “That would’ve upset the entire apple cart,” he said, adding that it was not a wilful default by the YD Group. Rather, Farooqui ended up defaulting for his own doings. “He became aggressive and expanded heavily. He was like a bull in a china shop, picking up everything, opening all sorts of businesses without realising that he would need liquidity to run them,” he said. The steering committee came up with a debt restructuring plan in August 2015 to the satisfaction of both

‘FAROOQUI HAD BEEN ON A SHOPPING SPREE FOR FAR TOO LONG, ACCUMULATING LEVERAGED ASSETS AND BUYING COMPANIES LEFT, RIGHT AND CENTRE. WITH BALANCE SHEETS BLOATED WITH DEBT THAT HE COULDN’T AFFORD, THIS LEFT HIM WITH LITTLE LIQUIDITY TO OPERATE’ 24

the borrower and the lenders, according to a spokesperson for the YD Group. Both parties agreed that YD Group companies would get financing to stand on their own feet while the past loans would be restructured to allow the struggling conglomerate some breathing space. But the plan was suddenly shelved by banks for unknown reasons, the spokesperson said. He refused to comment on the possible reason for the banks’ unilateral decision against loan restructuring. Analysts sympathising with Farooqui attribute the sudden collapse of the restructuring plan to the vested interests of lenders. Sponsors of the two of the four banks on the steering committee also own cement plants. “They want the YD Group to either sell the cement business altogether or survive barely in the marketplace,” said one analyst. While the south plant of DCL enjoys proximity to the port, the north plant is the closest one to the under-construction Diamer-Bhasha Dam, which ensures steady sales for the next many years.

Cash cows

f all his businesses, Farooqui seems to consider Dewan Farooque Motors Ltd to be one company that can potentially lift the pall of gloom that his empire has been enveloped in for the last decade. He’s apparently willing to exit the cement industry, which has grown phenomenally since 2013, to focus on the auto sector.

But his auto company has a major debt on its balance sheet. Its current liabilities exceed its current assets by Rs4.3 billion, which indicates the company is unable to meet obligations in the immediate term. In addition, the company hasn’t provided markup on its borrowings from banks amounting to Rs4.8 billion. Litigation for the repayment of loans amounts to Rs6.8 billion through attachment and sale of the company’s mortgaged properties. So the only apparent way for the YD Group to revive the auto company is to sell another asset and use that liquidity to restructure its outstanding loans. Farooqui has long maintained that he intends to pay off his debt. That’s why he sold his 51 per cent stake in Bawany Sugar Mills in 2010. He reportedly paid Rs5 billion out of the sale proceeds of the sugar mills to settle some of the outstanding debt. As for the debt of Rs15 billion on the books of Dewan Salman Fibre Ltd, bankers are of the view that the company is a dead duck. It’s been out of operation since 2008 due to working capital constraints. There is no chance the company will escape liquidation. Farooqui showed willingness to sell his cement plant around 2012, but found the price to be too low. The going rate for his cement plant was Rs7 billion at the time. “So he kept delaying the sale until cement became a big industry... a cash cow. Now that he’s selling DCL, he’s expecting to fetch Rs20 billion,” said the banker. Background interviews with three people with direct knowledge about the workings of the YD Group suggest that it is expecting a price tag of around Rs28 billion for the cement company’s two plants. The share of the YD Group in the sale proceeds will be approximately Rs20 billion given its shareholding is limited to 75 percent in DCL. Retail and institutional investors hold the rest of shareholding. After accounting for the bad debt on the balance sheet of Dewan Salman Fibre Ltd and the money paid back using the sale proceeds of Bawany Sugar Mills, the outstanding loans of the YD Group amount to roughly Rs35 billion. In order for banks to restructure the remaining debt, YD Group must cough up around one-third of that amount, as per the State Bank’s prudential regulations. “So he’s going to give banks Rs11 billion while keeping Rs9 billion for reinvestment in his

auto company and textile mills. He will become solvent once this deal concludes. His relationship with banks will be restored,” he said.

Resentment among creditors

ot all creditors are happy about the potential revival of the YD Group if the cement deal goes through. One institutional investor that put in roughly Rs200 million in bonds (term finance certificates) issued by one of the YD Group companies told Profit the leniency shown by the central bank in this case reeks of favouritism. “Why didn’t the regulator go by the book in this case? The default happened 10 years ago, but very little recovery has been made so far. What’s so special about the YD Group?” said the company CEO requesting not to be named. A capital market professional who witnessed Farooqui’s earlier failed attempt to sell one of his two cement plants to an existing industry player said the banks had deliberately thrown a spanner in the works. “They collectively decided against providing the potential buyer with liquidity for the transaction,” he said, adding that the unavailability of credit stopped the potential acquirer from striking the deal. “Who will dish out billions of rupees out

of their own pocket to acquire an already debt-ridden company?” he said. The latest bid to acquire DCL by Mega Conglomerate is partly financed by banks though. “Farooqui is a shrewd businessman. He’s been dodging 20 banks for 10 years. You think anyone else could’ve done that? He’ll survive,” he said.

The Mega offer

he share price of DCL started surging as soon as the word spread about a new investor showing interest in acquiring

DCL.

The share price had increased almost 54 percent to Rs27.69 on February 1 when Mega Conglomerate, a group of companies operating in cement, logistics and real estate amongst other sectors, expressed its intention to acquire a substantial shareholding in DCL. DCL informed the stock exchange that Mega Conglomerate would soon start due diligence, a comprehensive appraisal of a business by a potential buyer. In a letter on April 21, Mega Conglomerate Executive Director Aly Khan told Farooqui that the due diligence exercise established an ‘enterprise value’ of Rs27 billion. Khan acknowledged in the letter, seen by Profit, that the enterprise value is below the initial offer that the potential acquirer had made.

COVER STORY

“This is due to the fact that historically DCL plants have produced much less than their rated capacities... As such, heavy investments are required to rehabilitate both of the company’s plants,” it said, noting that even the Rs27 billion enterprise value was “well above” the actual estimate furnished by the due diligence team to reach a workable solution for both the buyer and the seller. On the face of it, the final enterprise value of DCL was not significantly lower than the price tag of Rs28 billion that Farooqui expected. But after making ‘adjustments’ and accounting for long-term liabilities and contingencies, the net asset value came to Rs15.26 billion. This means the 75 percent stake owned by the YD Group in DCL would amount to Rs11.45 billion. Farooqui turned down the offer. In his response to Khan on April 30, also seen by Profit, DCL Director Haroon Iqbal wrote that Mega Conglomerate had indicated that the enterprise value would be around Rs24 billion, with a possible revision of Rs1 billion either upwards or downwards as a result of the due diligence exercise. But the post-due diligence offer by Mega Conglomerate was not acceptable to DCL for being too low – the sponsor of DCL apparently was not getting the kind of money it expected despite a higher enterprise value. The share price of DCL was Rs22.75 on April 30, the day the company turned down the offer. There has been no formal announcement on the stock exchange by DCL about the status of the deal. The DCL share price touched Rs19.67 on May 11, down 13.5 percent from April 30.

Against professional advice

he decision by Farooqui to walk away from the deal was against the advice of Next Capital CEO Najam Ali, the sell-side adviser

Dewan Yousuf Farooqui photographed with then Prime Minister of Pakistan Mian Mohammad Nawaz Sharif in June 2016 appointed by the YD Group itself. It should be noted that the appointment of Ali as adviser by the cement maker needed formal approval of his mandate by banks who expected to recover Rs6.1 billion from the Mega offer. Next Capital reviewed the Mega deal along with all other offers that DCL received in the past. It concluded that the Mega offer was better than all the past ones. Next Capital highlighted a number of reasons in its report, viewed by Profit, for the YD Group to go ahead with the offer. For example, it said the offer was tax efficient. The sponsor and other shareholders would get funds on a tax-free basis as opposed to the past offer by Bestway Cement, which involved a heavy tax on capital gains. It also highlighted that the settle-

‘THE YD GROUP PLANS TO SEEK A CREDIT LINE OF RS5 BILLION FOR ITS AUTO COMPANY IMMEDIATELY AFTER THE RESTRUCTURING OF THE OLD DEBT. BANKS ARE OBVIOUSLY RELUCTANT TO TRUST THE GROUP AS IT SLOWLY COMES OUT OF A DECADE-LONG DEFAULT’

ment of bank liabilities would be swift under the Mega deal because its structure required fewer legal procedures. As for the bid by Bestway Cement received in February 2017 and withdrawn subsequently, it sought to acquire only one asset of DCL – its north plant for Rs11.8 billion. It would have involved a capital gains tax of Rs3.16 billion given that the company was selling an asset with a written down value of only Rs0.63 billion. The proposed deal also had other complexities, such as the requirement that DCL should settle the debt of Dewan Textile Mills and Dewan Khalid Textile Mills from the sale proceeds. Anhui Conch Cement, a Chinese cement manufacturer, had also shown interest in December 2016 to buy a 51 percent stake in DCL. It proposed an enterprise value of Rs25 billion. After making various deductions, the final equity value came to be Rs13.58 billion. Next Capital used multiple methodologies to assess different offers that DCL received in the recent past. For example, its working under the replacement cost method – a valuation technique that looks at the amount that an entity would have to pay today to replace an existing asset – showed

Mega Conglomerate was offering Rs9,317 per ton as opposed to Rs10,352 per ton cost of new plant expansion. According to Next Capital, even that methodology showed the Mega offer in a favourable light considering that the north plant is about 14 years old while the south plant is “quite inefficient”. Other valuation methodologies like enterprise value per ton, equity value, enterprise value as a multiple of EBITDA (earnings before interest, taxes, depreciation and amortisation) also showed the Mega offer was better than the rest. Going by the then share price in the stock market, the total value of DCL was around Rs11.3 billion, substantially lower than the offer of Rs15.26 billion extended by Mega Conglomerate. In addition to Mega Conglomerate, Bestway and Anhui Conch, Lucky Cement had also expressed interest in buying the north plant of DCL. It quoted an enterprises value of Rs10 billion. Bids quoted by Fecto Cement, Cherat Cement and the Popular Group of Companies for the same plant were Rs12 billion, Rs11 billion and Rs12.5 billion, respectively. Power Cement and EQ Partners, a South Korean private equity firm, also conducted due diligence, but didn’t make an offer. Attock Cement, Engro Corporation, Master Group and Sapphire Group also forwarded their expressions of interest, but didn’t conduct due diligence. All in all, 13 companies expressed interest, in varying degrees, in buying a stake (or asset) in DCL. Farooqui turned away each one of them.

Is he even serious?

“H

e uses the new-investor card to dodge bankers and the courts. He’s been dragging his feet on the issue of debt settlement for 10 years now,” said one analyst. He also accused the YD Group sponsor of siphoning off money from different businesses through cash sales. At least two more senior bankers accused Farooqui of the same. “He will never sell DCL as long as he can continue to siphon off billions every year from it. Why else would DCL’s profit margins be much lower than other players in the industry?” said one suggesting that DCL is either understating

‘ FAROOQUI SHOULD BORROW – IF HE MUST – FROM THE BANKS AGAINST PERSONAL ASSETS. FOR EXAMPLE, HE SHOULD BE ABLE TO GET FINANCING OF UP TO RS500 MILLION AGAINST HIS HOUSE ALONE’ its sales or overstating its expenses for the purpose. “He even manages to put pressure from different quarters to buy more time for himself,” said the other. The spokesperson for the YD Group termed the accusations baseless, saying that the banks themselves bring potential investors to the conglomerate. “How can we fool the court or the regulator? Don’t our opponents engage expensive lawyers? Wouldn’t the regulator catch us if we indulged in corrupt practices?” he asked, rhetorically. He insisted that the negotiations with Mega Conglomerate were still on. “We’re still in talks. The deal hasn’t fallen through,” he said.

Old habits die hard

prominent businessman who has worked with Farooqui as a partner doesn’t think highly of him. “He doesn’t know how his businesses are run because his managers are running the businesses,” he said, requesting that his identity shouldn’t be disclosed. As a case in point in support of his argument, he said that after paying one-third of the outstanding loan, Farooqui plans to go back to the banks to borrow almost the same amount once again for his auto and sugar businesses. “Bankers are wondering if he’s mad. I mean what would the banks get out of this then? They have already lost billions because of him” he said, adding, he had urged Farooqui to first invest part of the sale proceeds of DCL into his businesses, earn some profit and then show it to the banks to seek further financing. According to him, the YD Group plans to seek a credit line of Rs5 billion for its auto company immediately after the restructuring of the old debt. The objective is to use that liquidity to import kits and assemble Daehan Shehzore pickups. Banks are obviously reluctant to trust the group as it slowly comes out of a decade-long default. But he says the whole idea of seeking a credit line for assembling

vehicles is senseless. “You already have a fully functional auto plant. Open a letter of credit for 90 days to import 600 kits from South Korea at the rate of $12,000. Use your dealers’ network of Shehzore, which already exists across the country, to get money in advance from customers. Rotate that money and assemble the vehicle in 45 days. Why do you need banks’ Rs5 billion for?”, said he. Similarly, he said the YD Group is looking for another credit line of Rs3 billion for its sugar mills. “Instead, he can easily get a broker who’d give him liquidity to produce 5,000 tons of sugar and buy it at Rs45 a kilogram. He can then produce another 5,000 tons and repeat the cycle. But what can I say, if he wants to hoard now and sell during the Ramazan peak,” he said. He recommended that Farooqui should borrow – if he must – from the banks against personal assets. For example, he should be able to get financing of up to Rs500 million against his house alone. The YD Group spokesperson agreed that it was looking for working capital for its sugar and auto businesses. “Mobilising funds through auto dealers and sugar brokers is easier said than done. Some of our auto dealers recovered their 2008 funds in 2014,” he said. Despite going through rough times, Farooqui has been living life king size unapologetically, much to the chagrin of bankers – a fact he acknowledged in a 2014 interview with The Express Tribune. “Bankers had a problem with my lifestyle. They wanted to see me in slippers. Why should it bother them if I owned properties?”, he was quoted as saying. With the potential sale of DCL and a Korean JV partner on its side, the worst days of the YD Group may possibly be behind it. But how soon it succeeds in borrowing its way out of the country’s largest corporate default is yet to be seen. n

COVER STORY

OPINION

Mohammad Farooq

WHO HAS THE RIGHT TO OUR DATA? How a lack of data protection legislation in Pakistan is hurting users and gives them no recourse to legal action in event of a data breach like the one that happened at Careem ur electronic lives have over the years become a veritable treasure trove of digital information. An increase in smartphone usage has led to a growing addiction to apps, in particular, social media apps, that have made us visible to the naked eye online, whether we chose to do so or not.

The collation, bulk collection of the metadata that is gathered whenever we go online, is analogous to a violation of our right to privacy, as defined and endorsed by leading human rights organisations, including the UN Special Rapporteur on freedom of expression, the UN Special Rapporteur on counter-terrorism and the High Commissioner for human rights. The information being collected by telecom companies, for example, includes our personal details having our address, telephone numbers and our NIC, biometric identification at their disposal.

Mohammad Farooq is a Senior Sub-Editor at Profit by Pakistan Today

Due to the lack of a Data Protection Act, we can neither sue the companies for any breach of data that occurs and how can they be held liable? Which then leads to the question how these companies are protecting our data, because confidential information is at risk of being leaked out. Is the data being stored on their servers, encrypted in any given way? Without prior user consent, data should not be shared with third parties. The aim of a Data Protection Act is to create a balance between the rights of individuals and competing interests of those with legitimate reasons for using personal information. The fast pace at which technology is innovating, advancing and accelerating, the data protection policies and guidelines are failing to keep up to date. As Pakistan makes the foray into the digital age, with a growing percentage of work being done online, from banking, marketing, and management to technology outsourcing; we have no law to address data protection and privacy. The issue being faced worldwide with data protection & privacy laws are their in-adeptness to protect individuals from the privacy implications that upcoming technologies present. In the absence of any official data protection act in Pakistan, ISPs and any companies that house our personal data on their servers and systems are bound to cave into the measures proposed by the cybercrime bill, due to the legal ramifications. With a lack of access to protection measures by individuals, and a lack of judicial oversight, what are the options left that can be exercised by organisations

and individuals? Data retention by ISPs can be utilized by regulatory authorities to keep track of political dissidents and critics of the government, allowing them to be under threat from proverbial assaults, including blackmail. It also raises the possibility of breaches of confidentiality between journalists and their sources â&#x20AC;&#x201C; a concern that becomes a central matter of discussion abroad, in the wake of the whistle-blowing activities of Edward Snowden. To continue to legally operate, ISPs in Pakistan must comply with these data retention measures as laid out by the cyber-crime bill, for their own survival. In doing so, furthermore, a dangerous precedent is set, wherein ISPs have no choice but to monitor and store the digital movements of their customers and users. Factoring the massive data leak reported by Careem in which data of over 14

million users was compromised, begs the question as to why a data protection act hasn’t been promulgated. The absence of a data protection act leaves users with no leverage over the legal options they could exercise, as they are left at the mercy of companies and unable to know the extent of the breach for e.g. in case of Careem. The disclosure of the hacking was made public three months after its discovery and can be termed as appalling. However, Careem is lucky it can’t be reined in by the absence of any appropriate law and stands vindicated in its stance that it reported about the breach and issued an apology with instructions on how to change passwords. And the data which was leaked begs the question, were the user details encrypted by the company? What measures did Careem take to protect their user database? Digital Rights Foundation in a published statement regarding the Careem hack and disclosure said “This particular breach of Careem’s security protocols raises a lot of queries and concerns that their statement failed to answer. First and foremost, why did it take four months to report the incident to the public? Although the blog states that they took their time to investigate into the details of the breach due to the complex nature of the incident, but the fact remains – millions of Careem’s customers and drivers

were using their compromised accounts while their data was compromised. Customers were kept in the dark and had no mechanism of holding the company accountable. Secondly, the statement fails to mention the number of customers that were affected by this breach. Careem is used by over 14 million users around the world, and the silence of this important aspect could signify that all of the users were influenced.”

How Twi‫מּ‬er responded to a glitch in their system ast week, Twitter in a blog post and series of tweets disclosed that a glitch in their systems resulted in passwords being stored in readable form on its internal computer system instead of being masked by a technique known as hashing. It immediately asked all its 330 million users to reset their passwords, although an internal investigation conducted by the company revealed no passwords were stolen or misused. As per media reports, Twitter acted swiftly after discovering the bug three weeks ago and is said to have reported it to regulators. Although, both cases draw interesting parallels. Careem’s disclosure came three

months after its discovery compared to Twitter, where it took less than three weeks to come out publicly with it. Also, Twitter served a full-screen alert to users upon login, told them as to what happened and offered instructions on how to change their passwords and strongly recommended to do it. The transparency on part of Twitter and the timely disclosure is commendable when compared to Careem where it didn’t bother to apprise customers within its app that a hack had taken place and recommend them to immediately change their passwords. The sophistication of hackings and online data leakages is never-ending, but Careem’s veiled secrecy over this massive leak of user data and lack of user awareness raises chilling questions about the primacy that we attach to data protection and privacy. Companies will keep on evading their responsibilities in absence of laws pertaining to data protection, as they won’t be taken to task for such leaks and mere disclosures would absolve them of all their responsibilities. The relevant authorities need to set their priorities right and ensure that a data protection legislation is enacted to provide consumers with appropriate protection and options available to seek legal recourse in case of serious data breaches.

CYBERSECURITY

HOW AKHUWAT IMPACTS LIVES

THROUGH THE MIRACLE OF INTEREST-FREE MICROFINANCE $500 million worth of loans disbursed to 2.2 million families over a period of 16 years

By Bilal Hussain

r Amjad Saqib, founder and chairman Akhuwat, an interest-free microfinance entity, said that increasing GDP was nothing but a mirage if it was not equitably distributed. Other than having more than 700 branches in 350 cities of the country to conduct its operations of distributing Karz-e-Hasna – interest-free loans – Akhuwat also uses places of worships, like mosques and churches to disburse credit. Dr Amjad Saqib, who has a celebrity status in the economic circles of Pakistan, said that Akhuwat has extended interest-free loans amounting to ‘$500 million to 2.2 million families’ over a period of 16 years. “If multiply the number to the average size of a family of seven then, 15 million people have been positively impacted by Akhuwat’s interest-free loans,” said Dr Amjad Saqib during a conference in Karachi. He said, the loans were not asked for if the borrowers default. “The loans have been equitably distributed. These are not going into few hands,” said he.

He further said, there were around haves and havenots were about equal in Pakistan. So, if the haves share with the other 50% have-nots then everyone in this country would be living respectably. According to Pakistan’s first-ever official report on multidimensional poverty published in 2016, four out of 10 Pakistanis live in multidimensional poverty while the highest rates of poverty were found in the FATA and Balochistan. Pakistan’s Multidimensional Poverty Index (MPI) showed a strong decline, with national poverty rates falling from 55% to 39% from 2004 to 2015. However progress across different regions of Pakistan is uneven. Poverty in urban areas is 9.3 percent as compared to 54.6 percent in rural areas. Disparities also existed across provinces, according to an article published in pk.undp.org. Profit had the opportunity to interview Dr Amjad Saqib through email to learn and disseminate on how Akhuwat operated, what its inspirations were, and also what its future plans included. Profit: How did you come up with the idea of Akhuwat? Dr Amjad Saqib: Akhuwat was conceived over the years,

poverty-free society based on the principle of compassion and equity. By using interest-free microfinance as a tool, we are creating a bond of solidarity between the haves and the have-nots, assuring the poor that they aren’t alone in this. Profit: Please briefly tell us how Akhuwat works? AS: I’m humbled to share that Akhuwat is the world’s largest interest-free microfinance institute, Alhamdulillah. The primary tool being used is micro-credit in a shariah-compliant manner, that is we give interest-free small loans to the unbanked, underprivileged families. Since 2001, we have disbursed Rs56 billion among 2.5 million families through our network of 770+ branches all across Pakistan. It is important to mention that the recovery rate is an astounding 99.93%, something unheard of in conventional banking. Profit: Is Akhuwat a welfare organization or a social enterprise? AS: Akhuwat is a non-profit institute so you may call it a welfare organisation. However, since we are managing a ‘revolving fund’ and have an extremely high recovery rate, it leans towards social entrepreneurship too.

Dr Amjad Saqib, Founder/Chairman, Akhuwat shaped by my experiences as a civil servant. Belonging to the District Management Group (DMG) gave me the opportunity to work with different segments of the society very closely and observe the problems faced [by them], especially by the poor. It was during my tenure as the general manager of the Punjab Rural Support Program (1998-2003) that can be said to be the final phase of shaping Akhu-

wat as an idea. As we worked on community development and supporting the marginalised, I found the charging of exorbitant interest rates a direct contradiction of the mission of poverty alleviation. I often asked myself, how can poverty be truly alleviated till our financial system is unjust? That is how the idea of Akhuwat developed – we set out to create a

‘SINCE 2001, WE HAVE DISBURSED RS56 BILLION AMONG 2.5 MILLION FAMILIES THROUGH OUR NETWORK OF 770+ BRANCHES ALL ACROSS PAKISTAN. IT IS IMPORTANT TO MENTION THAT THE RECOVERY RATE IS AN ASTOUNDING 99.93%, SOMETHING UNHEARD OF IN CONVENTIONAL BANKING’

Profit: Some people criticize welfare trusts like Seylani, which mainly provide food to poor people. They are of the view that such organisations make poor people inefficient by making them idle, since they can get food without making any effort. How do you see this? AS: Poverty has different levels of measure. In Pakistan, the Benazir Income Support Program (BISP) has developed a Poverty Scorecard Index that is essentially a scale of 1 to 100, categorizing families according to their financial status. People who fall on the scale as ‘extremely poor’ or even ‘chronically poor’ are those worst-affected by poverty – without financial resources, a skill-set or a safety-net. Therefore, this segment qualifies for a socio-economic safety-net, even if it is in the form of access to a food bank. Profit: Akhuwat is widely praised for its innovative ways. What, if anything, has it done differently?

SOCIAL ENTREPRENEUR

AS: Akhuwat is a philosophy, a mission. Our belief in this forms the basis of our core pillars. As Michael Harper says, we are essentially breaking the rules of microfinance with these. First, all our operations are interest-free. We charge neither any interest on the micro-loans we disburse nor any service charges from the borrowers. Secondly, local places of worship, mosques and churches, are being utilised by Akhuwat for disbursement of loans. On the one hand, where it minimizes our operational costs, the sanctity of the place also adds more value to the commitment of timely repayment of the loan. Third, to make our mission more inclusive and attainable, we promote the spirit of volunteerism. As our employees feel a stake, they work with utmost commitment. In addition, our network of global volunteers helps us in multiple ways including fundraising. Fourth, our belief in making our borrowers self-sustainable led to the development of our Member Donor Programme (MDP), which transforms our borrowers into donors. It gives me satisfaction to share that in the last financial year, the MDP contributed $2.3 million to Akhuwat. Profit: What are the demographics of donors of Akhuwat? And what is your relationship with the Punjab government? AS: Our donor-base is very wide and encompasses people from various backgrounds. It definitely transcends geographic boundaries as we are supported by individuals from all across Pakistan and the world over, including Canada, the US, Europe, the UK, the Nordic Region, and the Middle-East. As I’ve mentioned MDP earlier, it shows that people from even the most marginalized financial segment are supporting us. On the other end of the spectrum, some of the leading members of the business sector have been ardent supporters from initial days. The Punjab government launched its Chief-Minister’s Self-Employment

‘BY USING INTEREST-FREE MICROFINANCE AS A TOOL, WE ARE CREATING A BOND OF SOLIDARITY BETWEEN THE HAVES AND THE HAVE-NOTS, ASSURING THE POOR THAT THEY AREN’T ALONE IN THIS’ Dr Amjad Saqib, Chairman/Executive Director, Akhuwat

Scheme (CMSES) in November 2011. The Punjab Small Industries Corporation (PSIC) is the administrative body of the scheme and Akhuwat is its implementing partner. Profit: Do your borrowers use the loans to invest in business or to fund their consumption needs? AS: Our borrowers can be categorized on a scale of 16-40 on BISP’s Poverty Scorecard and belong to around 350 different cities from all provinces of Pakistan, including Gilgit Baltistan. It’s of interest to note that 47 percent of our total borrowers are women. Profit: Why financial inclusion of underprivileged people is important? AS: Unless the underprivileged are financially included, they are being deprived of sustained access to basic needs. They don’t have access to services such as formal loans, savings plan or even insurance. So in a nutshell, financial inclusion is important for that social segment to plan for the future and have a better standard of living. Profit: How many people are employed by Akuwat?

‘OUR BELIEF IN MAKING OUR BORROWERS SELF-SUSTAINABLE LED TO THE DEVELOPMENT OF OUR MEMBER DONOR PROGRAMME (MDP), WHICH TRANSFORMS OUR BORROWERS INTO DONORS... IN THE LAST FINANCIAL YEAR, THE MDP CONTRIBUTED $2.3 MILLION TO AKHUWAT’ 34

AS: Alhamdulillah, Akhuwat has 6,300 full-time employees Profit: What else needs to be done to achieve or reach what Akhuwat has set as its vision? AS: Akhuwat’s vision is to create a poverty-free society, a society that is embedded in a strong bond of solidarity between the affluent and the marginalized. A society where all have an equal socio-economic opportunity to sustain and grow. To achieve that, much more has to be done. Irreversible policy measures have to be taken – and education is that long-term policy tool that will confine poverty to the museums. That’s exactly why Akhuwat has ventured into education services as well. We’ve adopted 298 schools of the Punjab government that are providing free education to above 40,000 students. Akhuwat has established a free residential college for boys in Lahore and a bio-tech research facility in Faisalabad. But the goal is much larger – Akhuwat University, the first-free university, is under construction and is planned to be inaugurated in August this year. Akhuwat is taking steps towards fulfilment of its vision. However, as long as there is one poor person or an uneducated child in Pakistan, we are all poor. Profit: Does Akhuwat have some religious inclination or is it only using religious terminology to have its ends meet as a marketing technique, as

many banks nowadays do? AS: The philosophy of Akhuwat, originating from Muakhat or brotherhood, is embedded in Islamic history – it relates to migration of Muslims from Mecca to Madina where Prophet Muhammad (PBUH) established a bond of solidarity between the locals and the immigrants. In a similar manner, Akhuwat works to create a bond between the haves and the have-nots, with the privileged class assuming ‘responsibility’ for the well-being of the underprivileged. Our core tool is shariah-compliant microcredit – if a loan worth Rs100 is taken, that’s all you repay. There are no hidden costs or service charges in any form. Akhuwat only charges Rs200 as the application fee. In addition, insurance (takaful) equaling one percent of the loan amount is voluntary. It is important to mention here that though Akhuwat practices Islamic microfinance and ensures shariah-compliance, our work is for humanity, and not exclusively for the Muslims. Profit: There are reports that Akhuwat receives ‘preferential treatment’ from Punjab Government when it disburses loans under CM’s Self Employment Scheme-Punjab because Akhuwat’s key official is CM Shahbaz Sharif’s close associate. Is this true? AS: I’m a former civil servant and was last positioned as the GM of Punjab Rural Support Program in 1998. But that doesn’t have any link to the CMSES. It is true that CM Shehbaz Sharif observed the Akhuwat model of microfinance and that is what led him to development of a self-employment scheme. However, Punjab Small Industries Corporation (PSIC) was given the role of the administrative body of the scheme. It is the PSIC that selected Akhuwat as the implementing partner after a rigorous process and filing an application against a public advertisement and meeting all TORs (Terms of Reference). To ensure transparency in the process and the scheme at large, the Government of Punjab has appoint-

‘OTHER THAN HAVING MORE THAN 700 BRANCHES IN 350 CITIES OF THE COUNTRY TO CONDUCT ITS OPERATIONS OF DISTRIBUTING KARZ-E-HASNA – INTEREST-FREE LOANS – AKHUWAT ALSO USES PLACES OF WORSHIPS, LIKE MOSQUES AND CHURCHES TO DISBURSE CREDIT’ ed third party evaluators and internal auditors as well that are responsible to oversee the scheme. Profit: If it’s true, then can this be defended considering that this attitude from government may kill fair competition, which is considered good for a given industry and subsequently for economy and society? AS: The success of the CMSES reflects an opportunity for the microfinance sector. If practitioners work together and develop innovative microfinance products that cater to local needs, we can collectively persuade the government to join as a stakeholder to promote the cause. Profit: Other entities may also be interested in disbursing government loans against a premium, less than that of Akhuwat, which it charges from the government as its administrative expense? AS: It would be excellent and it implies that the administrative cost of revolving funds, other than the government-backed, has been lowered, therefore, providing the end borrower access to microcredit at a lower rate. Profit: It has been learnt from credible source that Akhuwat charges 7% of the total loans it receives from government to extend to borrowers. Is this per cent justified? AS: A global average of costs incurred by a microfinance institute is anywhere between 15 to 20 percent.Akhuwat has been successful in reducing it costs substantially to 7-10 percent as it does not have to bear an interest on its funding sources (conventional institutes raise funds for on-lending from commercial financial entities). Secondly, Akhuwat minimizes

‘I FOUND THE CHARGING OF EXORBITANT INTEREST RATES A DIRECT CONTRADICTION OF THE MISSION OF POVERTY ALLEVIATION’

its operational costs by cutting down on office expenditure and transaction costs. Our branches have a ‘farshi’ setup, eliminating the need for furniture expenses and other costs. We are a non-profit organization, not charging any additional cost from the borrowers. So this 7% under the head of service charge is justified. Profit: Also what will happen if there is a change in government and the new people want to work with someone else? Is there a contingency plan in place for Akhuwat having expanded its operations multifold based on the money it receives from this one large entity? AS: Akhuwat is a philosophy, it is now a mission of millions who support Akhuwat. And till a poverty-free society has been created, we won’t let go. As long as there is an element of ‘good’ and ‘empathy’ in the society, Akhuwat will continue. You may want to see it like this – Akhuwat would not have been an ardent believer in collaboration and cooperation, speeding up the process of outreach by encouraging model replication, had we ideally not been working towards a poverty-free society where Akhuwat does not need to exist. Coming to the CMSES and Akhuwat’s role as the IP, it would certainly be great news and would be considered Akhuwat’s success, if another institute grows to an operational capacity to take over the project’s implementation. Yes, we do have a plan to self-sustain Akhuwat for a given time period. Profit: As per our sources, NAB has also been reviewing your contract with the Punjab govt. Have they contacted you in this regard? AS: No, the NAB has not contacted Akhuwat directly. Relevant government departments have requested for required documentation in the past though. n

SOCIAL ENTREPRENEUR

WHY

CONTENT

IS KING FOR

PROPERGAANDA Propergaanda is out to create a global presence through quality digital content on indigenous social issues and politics

By Eleazar Bhatti

hen one thinks about hard hitting topics such as social issues and politics, one does not imagine a huge Gaanda aka a hippopotamus wearing a white shalwar kameez and a black waistcoat smoking a pipe like a Pukka British accent gentleman. However, that is exactly what you find when you visit ProperGaanda’s website or their social handles. An up and coming digital media content platform that aims to amplify a progressive voice from Pakistanis around the globe, Propergaanda, PG for short, is based on having constructive and important discussions from an objective viewpoint, effectively bridging the gap between conservatives and liberals in our neck of the woods. On top of it, it aspires to empower the Pakistani youth by providing them with a safe space where they can explore and hone their talents. Propergaanda co-founder Hamza Ghaznavi shared with Profit his raison d’etre: “Unlike everyone else – with same run of the mill content on all social media feeds – we wanted to produce quality and authentic content that resonates with people’s lives, ideally leading to social change.” Back in the early 2000s, the internet as we know became much more personal and accessible as social networks were introduced and embraced by the masses, and that soon led to the digital revolution. It gave a voice to those who did not have one. And connected many more who would have otherwise lived in complete isolation. However, it also brought about an unprecedented change in the dynamics of content on a host of topics – entertainment and social justice included. A Canadian resident who worked two jobs in addition to studying for his master’s degree, Hamza Ghaznavi also happens to be one of the founding members of Man-

gobaaz, an information and entertainment portal. Soon enough he realised he wanted to achieve more through content. He did not like being defined by the four corners of the screen and hated working as somewhat of a digital advertising agency spitting out sponsored content. Out of this quest, Propergaanda was launched in August of 2017.

The birth of an idea

“I

nitially we wanted Mangobaaz to touch hard-hitting topics but with every brand it’s different. At Mangobaaz we had a clash, a difference of vision, and in January of 2017 we parted ways officially. And due to that since we were also planning to start something, with Mangobaaz going in a separate direction, I was not very comfortable,” recalls Ghaznavi. Ghaznavi told Profit: “Day after day of reading and watching the same mundane content on all social media feeds made me see the obvious – need for quality content and its lack thereof. So, I rang up a couple of friends and colleagues who were as enthusiastic as I was about venturing into the expansive and ever-evolving world of digital media. “While our company is a digital media house, we do not intend to be limited by the four edges of a screen. On the contrary, PG is always willing to go to the root of an issue and start a conversation.” “You know it is fair, I respect Mangobaaz’s revenue model, which is working for them, helping them bring food to the table and I am in no position to judge them. I had a clash of vision but that is my opinion. Somewhere along the lines, clients influence prevailed, then they started focusing on clickbait, and at a point that became a problem,” he added. Dilating upon his role models, Ghaznavi said, “Our inspirations were Vice and Huffington Post to begin with.

‘I ENVISION PG AS A FUTURE GLOBAL PLATFORM, A GLOBAL MEDIA ENTERPRISE... I KNOW IT WILL NOT HAPPEN OVERNIGHT, SO WE HAVE OUTLINED GOALS THAT WILL TAKE US THERE. WE SINCERELY BELIEVE THAT IF YOU ARE IN DIGITAL MEDIA OR EVEN IN MAINSTREAM MEDIA, WITH GOOD CONTENT YOU CAN MAKE A DIFFERENCE. I FIRMLY BELIEVE THAT FORTUNE FAVOURS THE BRAVE.’ Hamza Ghaznavi, Propergaanda co-founder I came to Pakistan 2-3 times just to study the market and meet different journalists in Pakistan. I met with Cyril Almeida and Mehreen Zara Malik – also a journalist for the New York Times, she has mentored us from time to time and we saw potential in it.”

The Uprising

s the name suggests, ‘Propergaanda’ is not your average Facebook page or a hip culture website or even a digital marketing company. It is indeed a propaganda against the current state of content. You see, when people realised the endless opportunities that the ever so glorious internet and digital media

‘THE PAKISTANI VERSIONS DO ADDRESS ISSUES OF THE PUBLIC IN WHAT WE TERM AS A MORE ‘ENGAGING’ AND ‘INTERESTING’ MANNER, AND YET THEY ALSO INTRIGUE THE INTELLECTUAL WITHIN EACH ONE OF US TO OFFER SOLUTIONS WHILE GIVING A VOICE TO THE COMMON MAN’

had on offer, marketers were swift to jump on to the bandwagon and influence digital content and creators alike. Unlike your traditional advert, clever sponsorships soon became a norm within the digital space influencing what content we engage with, how often we engage and essentially why we engage with the content in the first place. Although, in Pakistan, it sparked the birth of mammoth content creators such as Mangobaaz, Parhlo and many more, but it also changed the idea of free speech. Meanwhile, a similar trend is being followed internationally with the likes of Buzzfeed, Vice and Vox, disrupting the digital space. The Pakistani versions do address issues of the public in what we term as a more ‘engaging’ and ‘interesting’ manner, and yet they also intrigue the intellectual within each one of us to offer solutions while giving a voice to the common man. Yet, at times in the grand scheme of things, it seems to be orchestrated in a manner that would have a lasting influence on our cognitive decision making through sponsored content. During the last decade the society as a whole has changed due to the influx of social media and easy access to technology – high speed internet and affordable mobile phones. The recent revelations regarding the Facebook breach and how it influenced the US elections just goes to show how engraved digital media is in our daily lives. However, while it holds the power to influence our cognitive decision making, digital media and the likes of PG have inspired Pakistan as a nation to deliver change through a collective

START-UP

voice. Zainab, an eight-year-old, was raped and murdered in Kasur, Pakistan, in the name of child pornography. While as sad as it is, with all other players in motion, digital media platforms shook the nation and brought about justice. To counter such instances, after what had happened with Zainab, PG has partnered with the University of Toronto and University College London (UCL) to hold talks about sexual harassment,. Ghaznavi told Profit, we constantly get partners on board to address social issues but we have to be careful as well because we do not want to be completely sold like others in the market.Ghaznavi, while explaining how PG is different from others in the market and how easily PG could be derailed from its original vision, said, “We have had a lot of interest from people who wanted us to create content for them. While they do provide us with content, that is when we have to talk to them and tell them that we do not work like this.” He added that people in Pakistan are still getting used to this idea, they still confuse PG with digital media agencies and think that PG will essentially create ads. Those decisions are always tough but to draw a line for ourselves we have to make tough decisions – our ethics over revenue. It is the similar to a journalist, calling the shots when breaking a news – funnelling through the content. So, to address the issue PG offers branded content such as articles and video, which is separate from the mainstream content. PG takes pride in investing in social causes and politics. The idea is not to create clickbait content to bag clients, which Ghaznavi says he respects as it seems to be working for others in the market, but the idea is to start a conversation on topics that are consid-

Team Propergaanda at work ered taboo and decrease the stigma associated with them. For example, Ghaznavi said, “We at PG feel very strongly about transgender rights and raising awareness regarding sexual harassment; to that end we have worked closely with the Khawaja Sira Society and produced videos about the sheer prevalence of harassment of both the sexes within Pakistan.” Adding with a proud smile on his face “Our video was even featured in an article in The New York Times.” Consumerism and marketing go hand in hand, and we live in a age of consumerism. Ghaznavi believes it is PG’s job to create content that is not only beneficial to the client, but beneficial to the society as well.

‘PG TAKES PRIDE IN INVESTING IN SOCIAL CAUSES AND POLITICS. THE IDEA IS NOT TO CREATE CLICKBAIT CONTENT TO BAG CLIENTS, WHICH GHAZNAVI SAYS HE RESPECTS AS IT SEEMS TO BE WORKING FOR OTHERS IN THE MARKET, BUT THE IDEA IS TO START A CONVERSATION ON TOPICS THAT ARE CONSIDERED TABOO AND DECREASE THE STIGMA ASSOCIATED WITH THEM’ 40

Nurturing the Gaanda – the business model

ue to the rapid and ever-increasing use of smartphones and technology, digital media companies have no shortage of ways to generate revenue. In layman’s terms, the business model is based on 4 to 5 different things; branded videos and articles, google ads, partnerships and events, and merchandise. “Our own model is based on native advertisements, google ads, live events and branded content videos. We have even started producing our own PG merchandise and what is great is that the designs are all original and relevant to the society we live in,” Ghaznavi told Profit. “Obviously there are branded videos and articles, and we are currently working with Careem and Memo by M along those lines. We are also working with Mocha Cafe where we hold our live events. We just did failure nights, which by the way was a momentous success, in which anyone who has had an incredibly worthless idea went on and talked about their idea, so we made a whole night out of it. We feel this is awesome.”

When asked about how much PG goes about conducting its business and how much it charges for branded content, Ghaznavi answered, “PG does sponsored content for clients, but before we bring a client on board we let them know what PG is all about and thankfully all our clients have been onboard with our ideology thus far. In fact, we are not a huge fan of the term ‘client’. Our clients are our partners and as with any relationship our partnerships are based on mutual respect and understanding. He went on to say, “The sky’s the limit, my friend. We are always willing to compromise on cost if we believe in the message. There are a lot of videos we have produced without any charges because we believed in the cause behind it. An example being the video we did with Aurelie Salvaire in which we broached the topics of patriarchy and toxic masculinity and counteracting those vices with kindness and empathy.” However, a business is a business and at the end of the day it has to put food on the table. “We start at $300 to $2000 and go from there depending on each client’s needs.” Secondly. there are Google ads. “Right now we have not implemented Google ads as we believe they really disturb the website but then without google ads we cannot generate revenue as well. But we think we are lucky because we do not have to use google ads too much right now, we have not really put them all over, but we are going to give it a try. We have been talking to the developers to try Google ads by putting maybe one banner on the website. We are going to test it out because quality is important for us and we want our users to know that we are all about meaningful content.” PG also raises revenue through partnerships and events. PG actively seeks for individuals and businesses to collaborate with them to organise events such as stand up comedy, failure nights and poetry slams. By such partnerships the company hopes to create a safe space for people to share their ideas and discuss topics close to their hearts without having the fear of pissing the wrong kind of people. “We want to create a safe space as well, there is a huge issue with safe spaces in Pakistan, people are often afraid what they can say and what they cannot. So, in Lahore we have recently done an event with Olo Polo (Olo

‘CONSUMERISM AND MARKETING GO HAND IN HAND, AND WE LIVE IN A AGE OF CONSUMERISM. GHAZNAVI BELIEVES IT IS PG’S JOB TO CREATE CONTENT THAT IS NOT ONLY BENEFICIAL TO THE CLIENT, BUT BENEFICIAL TO THE SOCIETY AS WELL’ Junction), it was a ticketed event and we had around 600 people. People had a really good time and we made a good profit out of it as well,” said Ghaznavi. Sharing his frustrations over Food Fests, he said, “It was houseful because people in Pakistan are starved for good comedy and good entertainment. The market is flooded with food fests and events are something that not a lot of people are doing, which we want to do.” As the man himself put it – merchandise works! PG sells its own merchandise at the events they organise. Ghaznavi says he was inspired by Onion, a satire-based newsletter which started as a parody of the Washington Post and the New York Times. Interestingly enough Onion has recently been valued at over $260 million, leaving the Washington Post behind, which was bought by business magnate and Amazon Founder Jeff Bezos for $250 million back in 2013. According to some market analyst The Washington Post, the newspaper, was worth approximately $0 to its parent company. So, Onion used to sell their merchandise as well and still does, which PG hopes to adapt, and thinks is a great idea, simply because merchandise works.

Challenges, Achievements and the Future

ike every startup PG had a few, maybe a lot, bumps along the way. Ghaznavi recalls “Well, for starters our team was scattered all over the globe so we had to rely on the internet to connect, which I don’t even want to get started on – the connections could not have been worse. For a while we even thought we were cursed: one of our team member’s laptop completely shut down the day we had to release a video, one member lost their phone and another member’s car caught fire.” Another problem that became evident for PG, Ghaznavi highlighted, was that people are not ready for very crit-

ical pieces; everybody has such strong political and religious associations that every conversation has to be broached with caution. “At first it seemed difficult to penetrate a market that seems saturated but when you are in it you realise that is not the case at all. Our current concern is the lack of a proper working space, but hopefully we will have that sorted out soon!” Ghaznavi added. As with most barriers we face in life, the problem lies within and not outside, Ghaznavi answered to a question about barriers he had to face when starting PG. “Before you go into this industry, you must know what your niche is because there are a plethora of digital media companies doing the same thing. It is important to have a unique voice, otherwise you run the risk of being drowned out by the noise.” When asked about PG’s achievements, he humbly responded, “Since we are very involved in the curation process of content, it is important to know what an outsider thinks. To that end, the public’s perception of PG is important to me. I also place value on the reach of our articles because that directly indicates whether what we are producing is relevant, critical and good quality. But more so than measuring success, right now it is about the journey. And that in itself has been very fulfilling till now.” As Eleanor Roosevelt put it, the future belongs to those who believe in the beauty of their dreams. PG for its part believes, the sky is literally the limit. “I envision PG as a future global platform, a global media enterprise. And I am glad to have a team that not only shares but actively fights to achieve that vision daily. However, I know it will not happen overnight, so we have outlined goals that will take us there. We sincerely believe that if you are in digital media or even in mainstream media, with good content you can make a difference. I firmly believe that fortune favours the brave,” concluded Ghaznavi.

START-UP