KARACHI, Nov 26: Renowned economist Dr Shahid Hasan Siddiqui claimed that the “Stock Market Scandal” was the result of organised corruption with the covert and active support of government institutions and alleged that the menace had reached such an alarming level that the term ‘accountability’ had lost its meaning.

Speaking at a seminar held here at the Pakistan People’s Party (PPP) Central Secretariat, Dr Siddiqui said that the National Accountability Bureau (NAB) itself deserved to be subjected to accountability.

He claimed that things had been made much more difficult since the interior minister during the military rule had always been those politicians against whom cases in NAB were pending. The seminar was presided over by MNA Nawab Yousuf Talpur.

Dr Siddiqui said that within one week starting from March 16, 2005, medium and small investors in the stock exchange lost more than Rs750 billion. This was done in an organised manner after months of preparation and a systematic campaign of luring the masses into a trap of investing their savings, remittances received from abroad and the golden handshake payments received after retrenchments, their borrowings and whatever they had into stocks in the hope of making windfall profits, the economist added.

He said that the crash was followed by a large-scale cover-up as no investigation was undertaken and no responsibilities were fixed. After the large-scale public protests and the hue and cry raised by the media a task force was constituted, which submitted a report in June 2005, calling it a large conspiracy, he added saying that the report was kept under cover for 13 months and only in July 2006 an American company was hired at an exorbitant rate for further probe into the matter.

According to Dr Siddiqui, the foreign firm in order to save the culprits said that the evidence was incomplete and inconclusive and also raised doubts against the leading brokers for having manipulated the scam so as to save itself. Thus, the investigation conducted by this American firm proved to be a mere cover-up exercise, he added.

In its report the American firm cleverly declared that important record was not saved and the data presented was confusing, Dr Siddiqui added saying that the foreign concern very generously offered its services under a ‘fresh contract’ to examine any fresh data that might be made available to it.

His contention was that a basic flaw in appointing the company to probe was that the period under investigation started from the date of the stock market crash, although the conspiracy had started a year earlier in 2004 when the market was being made to go up by artificial means and non-stop propaganda of economic strength to lure the general public to part with their hard earned savings, he alleged.

He also expressed serious reservations about the gap of 13 months between the report of the task force and the appointment of the investigating company. Was the data being changed and being made ‘confusing’ during this period? He pointed out that skimming off the investments of small investors had become a regular feature and there had been at least four manipulated stock market crashes during the last five years. He feared that there would be many more such scams, if strong political pressures were not brought in by the forces of democracy to stop the loot.

Dr Siddiqi accused the Ministry of Finance, State Bank of Pakistan, brokers, big commercial banks, some investment banks, DFIs, some senior bank executives in their personal capacity, Privatisation Commission, some politicians, industrialists, feudals and ERRA chairman to have worked hand in glove in engineering the March 2005 crash.

He pointed out that the abnormal rise in the stock market without any economic logic or sound basis was indicating that things were being manipulated to bring about a crash

Giving the details of the organised conspiracy to lure the people in the trap, the economist pointed out that the economic survey of June 2004 called the rise in stock prices an indicator of the great economic progress that the country had made.

This opinion was given wide circulation in the press. In October of the same year full page advertisements were published by the KSE claiming that the stock market was showing a steady rise during the five years of the military era. This was a lie, since in the first two years the market indices had shown a drop of more than 20 per cent and only after 9/11, these started to rise, he said.

He added that the State Bank of Pakistan reduced the borrowing rates to 5 per cent which was 4 per cent lower than even the rate of inflation. Loans of Rs1,100 billion were given by banks, which instead of going to the trade and industry were diverted to the speculative and full of risks stock market. The Privatisation Commission embarked on a series of dirt cheap privatisation of national assets, whose shares started showing phenomenal gains.

Financial institutions and brokers started large scale buying and the market’s manipulated gains in two and half months preceding the crash jumped to Rs1. 091 billion, he added saying that at this stage the big players started selling and small investors were simply wiped out.

Dr Siddiqi said that the Ministry of Finance and the Government of Pakistan was helpless in front of the power of the stock brokers. The Ministry of Finance publicly says that it can not document the transactions since the stock brokers are resisting the move.

He emphasized that all transactions in the stock market should be documented with NTN numbers, banking control should be strengthened, loans should be strictly monitored so that they were channelled to industry and trade rather than finding their way in speculative transactions and culprits should be made accountable so as to ensure that the Stock Exchange played its due role in building the national economy. He lamented that instead the persons responsible for skimming of billions belonging to the masses were being given civil awards.