Chapter 6: Political Ties and Business Growth
By the early 2000s, Dewan Group had positioned itself as a dominant force in Pakistan's business landscape. With interests in cement, automobiles, textiles, real estate, banking, and sugar, it was impossible to ignore the group's influence. However, in Pakistan's volatile economic environment, business success often depended on more than just sound strategy and innovation. It required political connections, government incentives, and navigating the delicate balance between power and profitability.
Dewan Muhammad Yousuf Farooqui understood this well. To keep his empire thriving, he had to maintain relationships with key political figures—whether they were in power or in opposition.
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The Political Connections Begin
In 2001, the Musharraf government was implementing aggressive economic reforms. The administration encouraged industrial expansion and foreign investments, creating opportunities for conglomerates like Dewan Group. But competition was fierce, and securing government support was essential.
One evening at the Islamabad Serena Hotel, Yousuf sat with Shaukat Aziz, Pakistan's Finance Minister, discussing the country's industrial potential.
Shaukat Aziz (sipping tea):
"Dewan Sahab, Pakistan's economy is on the rise. We want businessmen like you to lead the way in industrial development."
Yousuf (leaning forward):
"Minister Sahib, we are ready to invest further, but we need clear policies. Industrialists can't operate in uncertainty."
Shaukat Aziz (smiling):
"That's why we're offering incentives—tax breaks, import duty relaxations, and financial assistance for large-scale projects. The auto sector, in particular, has massive potential."
This conversation set the stage for Dewan Group's aggressive expansion in the automobile industry.
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The Hyundai-Kia Partnership and Government Backing
With political backing, Dewan Motors secured lucrative deals with Hyundai and Kia, two of the world's leading automobile manufacturers. The government, keen on promoting local vehicle assembly, supported Dewan Motors through duty exemptions and favorable import policies.
At a high-level meeting in Karachi's Governor House, Yousuf met with Dr. Abdul Hafeez Shaikh, the Economic Affairs Minister, to finalize government support for Dewan Motors.
Dr. Hafeez Shaikh:
"Dewan Sahab, the government wants to reduce reliance on imported vehicles. If your plants can produce quality cars locally, we'll ensure favorable policies."
Yousuf:
"Our goal is to make Pakistan self-sufficient in the auto sector. But we need long-term policy commitments. Changing regulations hurt industrialists."
Dr. Hafeez Shaikh:
"You have my word. Hyundai and Kia are strong brands. The government will facilitate your growth."
With these assurances, Dewan Motors expanded its assembly plant in Sujawal, Sindh, producing Hyundai Santro and Kia Spectra for the local market. By 2004, Dewan Motors had become one of Pakistan's largest automobile assemblers.
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The Cement Industry and Government Contracts
While automobiles were a growing sector, cement remained Dewan Group's backbone. The government's infrastructure projects—including motorways, dams, and housing schemes—created enormous demand. Dewan Cement, competing with giants like Lucky Cement and DG Khan Cement, aimed to secure government contracts for major construction projects.
One afternoon, in the corridors of the Ministry of Industries in Islamabad, Yousuf met with Jehangir Khan Tareen, a rising political figure and industrialist.
Jehangir Tareen:
"Dewan Sahab, the government is launching new road networks and housing schemes. Cement demand will skyrocket. Are you prepared?"
Yousuf (nodding):
"Dewan Cement is ready. We've expanded production capacity. But we need guarantees on bulk supply contracts."
Jehangir Tareen:
"The contracts will be open for bidding. But those with efficient supply chains and strong industry reputation will have an edge."
Understanding the importance of political networking, Yousuf strengthened Dewan Group's ties with influential policymakers. Within months, Dewan Cement secured major government contracts for highway construction and housing projects, further solidifying its position in the industry.
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The Sugar Industry and Political Manipulation
The sugar industry in Pakistan had long been deeply political. Controlled by powerful families, including the Sharifs, Tareens, and Habibs, it was a sector fraught with government interventions, price controls, and cartel activities.
Dewan Sugar Mills entered this competitive landscape in the early 2000s. But securing profitability in sugar required political alignment.
In a private meeting at Lahore's GOR-1 government residence, Yousuf met with Chaudhry Pervaiz Elahi, Punjab's Chief Minister.
Pervaiz Elahi:
"Dewan Sahab, sugar mills are facing pressure. The government is setting price controls, and farmers demand higher rates for sugarcane. What's your take?"
Yousuf:
"Chief Minister Sahib, price controls hurt industrialists. The market should determine sugar prices, not the government."
Pervaiz Elahi (nodding):
"I understand. We're trying to balance both sides. Some relief might be possible, but you'll need to work with industry leaders."
Dewan Sugar Mills joined the lobbying efforts of Pakistan's sugar barons, pushing for favorable policies on sugarcane procurement prices and securing export incentives. These efforts ensured that Dewan Sugar Mills remained profitable despite government price controls.
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The Downside of Political Ties
While political connections helped Dewan Group expand, they also created dependency on government stability. Pakistan's volatile political landscape meant that shifting alliances could impact business fortunes overnight.
By 2007, the Musharraf regime was weakening, and new political dynamics were emerging. Yousuf sensed the changing tide and attempted to strengthen relations with the incoming Pakistan People's Party (PPP) government. However, unlike previous administrations, the new government prioritized state-owned enterprises and foreign investors, leaving local industrialists vulnerable.
In 2008, as political uncertainty grew, Dewan Group faced delays in government payments for cement projects, and policy shifts in the auto sector hurt Dewan Motors' profitability.
During a tense meeting in the Dewan House boardroom in Karachi, top executives discussed the looming crisis.
CFO:
"Sir, our cash flow is tightening. The government hasn't cleared payments for our cement contracts, and the auto sector is struggling."
COO:
"The political landscape is changing. Our government allies are no longer in power. We might lose some of our preferential contracts."
Yousuf (exhaling deeply):
"We've relied on political stability for too long. We need to restructure and find private sector opportunities."
But the damage had already been done. Dewan Group's excessive reliance on government projects and incentives made it vulnerable when political winds shifted.
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Lessons from the Past
Dewan Group was not the first business empire to be impacted by Pakistan's fragile political climate.
Ittefaq Group (owned by the Sharif family) had been nationalized in the 1970s under Bhutto's government, later rising again in the 1990s when Nawaz Sharif returned to power.
Bahria Town and Malik Riaz had grown through government-backed real estate projects but faced legal and political challenges when governments changed.
Nishat Group (Mian Mansha's empire) had survived political transitions by minimizing reliance on government contracts and focusing on export-driven businesses.
Yousuf now faced a harsh reality: Dewan Group's expansion was built on political favors, and those favors were disappearing.
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Conclusion
Political ties had helped Dewan Group become an industrial powerhouse. From government-backed auto deals to cement contracts and sugar industry incentives, the group's fortunes were closely linked to political stability. But Pakistan's unpredictable governance made this a double-edged sword.
By 2008, as the country's leadership changed, Dewan Group found itself losing the political backing it once enjoyed. Without strong private-sector foundations, the conglomerate's financial health began to decline.
As Yousuf sat in his office late one night, looking over financial reports, he knew a storm was coming. The challenge now was not expansion—but survival.