Armed, dangerous and building their own empires

Both India and Pakistan's military operate like private corporations. Photo / AP

Military forces across South Asia are flexing their commercial muscles to create ventures that rival private firms and threaten to militarise civil society.

In Pakistan, Bangladesh, Indian and Sri Lanka defence chiefs have interests in everything from airlines to sugar factories, banks to bakeries, from power plants to ports. Investments worth billions of dollars are controlled by a military elite that is eclipsing civilian bureaucracies and, in some cases, corrupting the services.

Pakistan
In Pakistan the military controls state-owned armament factories and runs trusts which work like private corporations. Its interests are worth US$20 billion ($24 billion).

Serving officers head up highway construction projects and manage trucking operations. Aided by the Army Engineering Corps, the military's road building conglomerate completed the precipitous Karakoram Highway in the 1980s, connecting Pakistan to military and nuclear ally China.

A communications group working with the Signals Corps wires up the country.

Possibly the most profitable operation is the Army's Logistics Cell, set up by Pakistan's former dictator General Mohammad Zia-ul-Haq in the late 1970s. The cell used trailer trucks to collect weapons such as assault rifles and Stinger missiles from the southern port city of Karachi from ships chartered by America's Central Intelligence Agency to arm the Mujahideen fighting the Soviet occupation of Afghanistan.

Later these trucks and their plucky Pashtun drivers from Pakistan's restive North West Frontier region played a role in establishing the Taleban's control over Afghanistan in the mid-1990s. The large fleet of trucks continued to supply the Taleban regime with weapons, fuel and food until it was toppled by the US in 2001.

The Fauji or Soldier Foundation, the country's largest industrial conglomerate, is the jewel in the army's crown.

Headed by a three-star officer, it provides "womb to tomb" facilities for nearly nine million retired servicemen. The foundation offers resettlement and re-employment schemes, a private airline, educational institutions, power plants, steel and cement factories and even consumer goods, producing electronic items, sugar and breakfast cereals.

"A large part of the military's internal economy remains invisible," writes defence analyst Ayesha Siddiqa in Military Inc: Inside Pakistan's Military Economy.

In her analysis she details hundreds of serving and retired Pakistani military personnel, mainly from the army, who operate the complex web of lucrative financial institutions, infrastructure, transport, telecommunication and construction businesses.

It is often jocularly said that all countries have a military but Pakistan's military has a country, which it runs at tremendous profit.

Satish Kumar, who edits India's National Security Annual Review, said the Pakistan Army was a ruling oligarchy with substantial economic interests to safeguard. And it was highly unlikely that it would ever relinquish this role in the foreseeable future as it has too much money to lose, he added.

Sri Lanka
Sri Lanka is South Asia's most militarised country with 8000 defence personnel for every one million citizens. After defeating the Tamil Tiger guerrillas in May 2009, the country opted to involve its bloated military in a range of commercial activities.

Instead of downsizing its 300,000 strong defence forces after the bitter civil war ended, President Mahinda Rajapaksa's administration has encouraged their involvement in selling vegetables, running travel agencies, hotels and highway restaurants and collecting garbage in the capital, Colombo.

The army builds houses and, for last year's Cricket World Cup, erected one stadium and renovated another.

On the northern Jaffna peninsula the army has converted a mess into a 22-room luxury resort. The Sri Lankan Navy runs ferry services and tours for whale-watchers.

Disturbingly, the island's Education Ministry plans on sending fresh graduates to military camps for three-week leadership courses where they will be given instruction in English, leadership skills and social etiquette.

The authorities justify this by claiming that army camps are the only places where a large body of students can be accommodated but analysts warn that it is a move fraught with "militarising the seat of Sri Lanka's higher education".

Analysts and NGOs question defence involvement in commercial ventures claiming it could lead to Rajapaksa's administration using the military to perpetuate its rule as in time it would be too hard to separate from national economic activity.

Bangladesh
In Bangladesh the military's business empire is worth around US$500 million ($600 million). Assets include hotels, at least two five-star properties in Dhaka and another being built in Chittagong.

The Dhaka Radisson hotel offers guests use of the nearby deluxe army golf course which is owned by Bangladesh's Army Welfare Trust (AWT). It was built on dedicated military land giving it a commercial advantage in Dhaka's sky-rocketing real estate market.

The army owns the Trust Bank with around 40 branches nationwide. In 2007 the military-backed caretaker government granted it exclusive rights to receive fees for passports.

The army's welfare trust has a group which cares for veterans and family members of servicemen. Over the years this group has expanded its industrial and financial operations to include interests in the food industry such as icecream manufacturing-textiles, jute, garments, electronics, real estate and travel.

Analysts in Dhaka maintain many defence-owned businesses were "virtually indistinguishable" from other commercial enterprises in the way they operated but in recent years this aspect had impacted adversely on the Bangaldeshi military.

The inquiry into the country's worst mutiny, by the paramilitary Bangladesh Rifles (BDR) border guards in 2009, in which some 68 senior military officials were shot dead, revealed the insurrection was partially fuelled by resentment over the corruption of army officers engaged in commercial activities.

India
The Indian military is the largest in South Asia. Since independence in 1947 successive civilian governments fearful of Pakistani-style coups have assiduously and determinedly denied defence chiefs commercial and business opportunities.

But the Indian Army still manages to run around 100 golf courses and clubs which recently were the focus of a corruption probe by the country's auditor. The Comptroller and Auditor General (CAG) declared the army's 97 golf courses were "unauthorised" and were being "exploited" to earn revenue.

In its report on the management of defence estates, the CAG declared the golf courses spread across 3200ha were not authorised and the army was doing wrong in using government land to generate profits.

Large revenues were being earned without paying any rent for use of government assets. The revenue these courses generated was not credited to the government account but presumably to regimental funds, the CAG declared.

While this can be dismissed as relatively tame compared to the business interests of neighbouring defence interests, there is an alarming rise in the number of Indian military officers charged with corruption, many court-martialled for selling subsidised defence rations and liquor on the open market at great profit.

"Standards and values have changed for the worse and the army is not impervious to the overall environment" retired Lieutenant General V.K. Kapoor admitted.