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Pakistan in hunt for offshore cash

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    Pakistan in hunt for offshore cash

    The following article by Farhan Bokhari appeared in the Financial Times of London:

    Pakistan's new military regime has approached European governments to seek assistance in pursuing the offshore wealth of its prominent citizens.

    The requests come on the eve of tomorrow's deadline for bank-loan defaulters to begin repaying their dues. Popular opinion across Pakistan appears to favour the threatened widespread arrests and harsh penalties.

    Pakistan's central bank officials say that the equivalent of at least $4bn is owed by domestic borrowers who have repaid neither principal nor interest. Some are thought to have already fled the country to evade prosecution.

    Many of the borrowers are believed to have put their money in offshore banks and foreign property. Though estimates vary, some government officials say the offshore assets of Pakistanis could be worth $5bn to $7bn - almost equivalent to the country's entire tax collections last year. Others say the amount could be much larger, and may include money earned through the drug trade that flows from the poppy crop grown in neighbouring Afghanistan.

    Abdus Sattar, foreign minister, told the Financial Times: "We have already taken up this matter with the Commonwealth, Britain on a bilateral basis, and the European Union envoy [who travelled to Pakistan after last month's military coup] for assistance in closing the loopholes."

    Mr Sattar said that banking secrecy laws were an obstacle to Islamabad's efforts to track down funds. The Channel Islands' tight banking laws helped depositors from countries such as Pakistan place wealth irrespective of how it was earned, he said, describing such havens as "tribal areas". He added: "There is also total chaos in the Caribbean."

    Past investigations ordered by Nawaz Sharif, the prime minister whose government was removed in last month's coup, against Benazir Bhutto, the sacked previous prime minister, led investigators to discover properties and accounts in Europe believed to be owned by Ms Bhutto and Asif Ali Zardari, her husband. Pakistani newspapers have also reported that Mr Sharif owns properties in the UK.

    Foreign bankers said it would be difficult for Pakistan to make progress in its search, given the experience with other countries involved in similar pursuits.

    "The case is genuine. The rich in this country have become very corrupt but the track record of searching for such offshore wealth doesn't give much encouragement," said one banker.

    Meanwhile, bankers said that they expected General Pervez Musharraf's government to announce soon a tightening of existing laws to pursue defaulters within Pakistan.

    Many suspected defaulters have taken advantage of the inefficient and in part corrupt legal system to evade arrest.

    More dedicated judges to hear cases of bank loan defaulters were expected to be appointed, and there could also be efforts to allow banks to confiscate properties quickly - in the past many cases have been deadlocked in the courts for years.

    [This message has been edited by ehsan (edited November 15, 1999).]