Military Inc.

1. Milbus: A Hidden Engine of Military Power

Milbus refers to military capital that is used for the personal benefit of the military fraternity, especially the officer cadre, but is neither recorded nor part of the defence budget.

Defining Milbus. Milbus, distinct from the official defense budget, encompasses economic activities controlled by the military for the benefit of its personnel, particularly officers. This hidden economy operates outside normal accountability procedures, making it a unique form of capital. It includes entrepreneurial ventures, land acquisition, and resource monopolization, often justified as welfare for military personnel.

Mechanisms of Milbus. The transfer of resources can take many forms, including state land allocation, perks for retired officers, and business opportunities diverted to military organizations. This capital is concealed, not recorded as part of the defense budget, and entails unexplained and questionable transfer of resources from the public to the private sector. The value of such capital drawn by the military depends on the extent of its penetration into the economy and its influence over the state and society.

Consequences of Milbus. Milbus perpetuates a predatory style, concealed from public scrutiny, and involves questionable resource transfers. It intensifies the military's interest in political control, hindering democracy and the rule of law. The fundamental research question that I believe deserves analysis is whether, when the military echelons indulge in profit making and use the armed forces as a tool for institutional and personal economic influence, they have an interest in withdrawing to the barracks and allowing democratic institutions to flourish.

2. Civil-Military Relations Dictate Milbus Scope

The size of the ‘tribute’ and the consequent level of the military fraternity’s penetration into the economy are directly proportional to the military’s control of politics and governance, and the nature of civil–military relations in a particular country.

Typology of Relations. The book identifies six types of civil-military relations, ranging from civil-military partnership to warlord domination. These types are distinguished by the political and economic system, nature of the civil society, and the level of military’s penetration into the polity, society and economy. The strength of the state, defined by its capacity to allow multiple players to negotiate their interests, determines the military's ability to exploit national resources.

Strong vs. Weak States. In strong states, the military is subservient to civilian authorities due to robust civil institutions and a vibrant civil society. In weak states, the military dominates politics and governance, often driven by a perceived need to ensure stability and security. The military’s economic predatoriness increases in totalitarian systems.

Milbus and State Capacity. The military’s ability to penetrate the state and society is determined by the strength of the political system. A weak polity leads to greater intrusion of the armed forces at all levels. The nature of civil–military relations shapes the military's economic exploitation, with exploitation increasing according to the extent of its political influence.

3. Pakistan's Praetorianism Fueled Milbus Growth

Pakistan’s political future has been the subject of enormous concern and scholarly debate since the events of 11 September 2000.

Military's Political Stakes. Pakistan's political fragility cannot be understood without probing into the military's political stakes. The fundamental question here is whether the Army will ever withdraw from power. The country is representative of states where politically powerful militaries exercise control of the state and society through establishing their hegemony.

Historical Context. The beginning of Milbus in Pakistan coincided with the military moving into the political front. Although some of the activities, such as granting land to individual officers and soldiers, were inherited from the pre-independence colonial army, the post-1954 growth of the military’s internal economy was unprecedented. The indigenous breed of military officers that took over the higher command of the three services of the armed forces around 1951 aimed at consolidating political power through increasing their influence in decision making and establishing the organization’s financial autonomy.

Cyclical Trend. Pakistan's political history exhibits a cyclic trend of seven to ten years of civilian rule interrupted by almost a decade of military rule. As a result, the political and civil society institutions remain weak. This powerful position also allowed the military to harvest an advantageous position in politics. The organization morphed into a dominant ‘class’ exerting considerable influence on society, politics and the economy.

4. Milbus Structure: From Institution to Individual

The military’s economic empire operates at three distinct levels: through the direct involvement of the organization, economic exploitation through its subsidiary companies, and by granting advantages to individual members of the military fraternity.

Three Levels of Operation. Pakistan's Milbus operates at three distinct levels: direct organizational involvement, economic exploitation through subsidiary companies, and advantages granted to individual members of the military fraternity. This pattern is similar to Indonesia’s, where the top political leadership preys on the economy along with the military institution.

Organizational Involvement. The military is directly involved through small and medium-sized enterprises, such as toll collecting on highways, gas stations, and shopping malls. These operations are the least transparent, making it difficult to calculate the net worth of the military’s internal economy.

Subsidiary Companies. The Fauji Foundation (FF), Army Welfare Trust (AWT), Shaheen Foundation (SF), and Bahria Foundation (BF) are subsidiaries of the defense establishment, employing both military and civilian personnel. These foundations run diverse businesses, ranging from bakeries and farms to commercial banks, fertilizer plants, and real estate agencies.

5. Early Milbus: Seeds of an Economic Empire

The beginning of Milbus in Pakistan coincided with the military moving into the political front.

Formative Years. From the mid-1950s, the armed forces expanded their stakes in all three segments of the economy: agriculture, manufacturing and service industry. These 23 years have been divided into two phases: 1954–69 and 1969–77. The first 16 years were the formative years during which the armed forces gradually established their foothold in politics and the economy.

Financial Autonomy. The indigenous breed of military officers that took over the higher command of the three services of the armed forces around 1951 aimed at consolidating political power through increasing their influence in decision making and establishing the organization’s financial autonomy. The need to bring affluence to individual personnel was done through Milbus, which became a process of granting perks and privileges.

Civilian Interlude. The second set of six years reflects the civilian interlude in the form of democratic rule of Zulfiqar Ali Bhutto. This is the only time when Milbus did not grow rapidly, because of the political leader’s plans to check the autonomy of the armed forces. However, Bhutto failed in curbing the military’s political or financial autonomy because of his dependence on military force to attain personal political objectives.

6. Expansion of Milbus: Autonomy and Influence

After the imposition of the third period of martial law in 1977, the military undertook various projects to support its economic interests, including setting up new institutions such as the SF and BF to further institutionalize its economic exploitation.

Growth After 1977. After the imposition of the third period of martial law in 1977, the military undertook various projects to support its economic interests, including setting up new institutions such as the SF and BF to further institutionalize its economic exploitation. The military’s economic role got a further boost during the ten years of unstable democracy.

Civilian-Military Integration. From 1988–99, the political governments gave added economic advantages to the armed forces in return for their support. During this period, the military entered uncharted territories such as the finance and banking sector.

Consolidation of Power. The last period saw the expansion and consolidation of the military’s economic interests. Coinciding with the fourth military takeover in 1999, these years witnessed much greater penetration of the defence establishment into society.

7. Land as a Prize: The New Land Barons

The British tradition of granting land to the military for certain purposes has been exploited for the benefit of the senior echelons of the officer cadre.

Land Acquisition. Pakistan suffers from the problem of inequitable distribution of resources, especially land. There are a few people with large land holdings, while the 30 million landless peasants struggle for survival and remain in search of land. However the dominant classes, including the military, have not looked to equalize the situation, but have focused on satisfying their own appetites for land.

Feudal Attitude. The British tradition of granting land to the military for certain purposes has been exploited for the benefit of the senior echelons of the officer cadre. The feudal attitude of the state and its military is demonstrated by the pattern of land distribution and monopolization of vital resources such as water.

Urban Land. The distribution of urban land also reveals the power of the ruling elite. Instead of solving the problem of the lack of housing, successive governments have opted to award prime urban land to the officer cadre of the armed forces and other elite groups.

8. Military Welfare: A Justification for Predation?

The various perks and privileges are justified as welfare activities.

Welfare Programs. The military often justifies its intrusion in the economy as part of the overall cost of national security, in which light it is classed as a public good. The cost of Milbus remains excessive in comparison with the services rendered by the armed forces to protect the state and society against external and internal threats.

Supply-Driven Welfare. The welfare programmes for serving and retired personnel are carried out mainly to make military service attractive for able-bodied citizens. This welfare is driven by its own politics and dimensions. At one level, distribution of welfare funds is driven by the relative influence of the potential beneficiaries.

Inequitable Distribution. At another level, there is inequitable distribution of resources because of the skewed recruitment policy, which shows a bias against smaller provinces and certain ethnic minorities. This imbalance contributes to the existing ethnic tensions in the country.

9. The Cost of Milbus: Inefficiency and Distortion

The data presented in this chapter question the military’s assertions about the financial efficiency of its commercial ventures.

Financial Costs. Illegal military capital has a far-reaching impact on the economy, society, politics and military professionalism. To begin with, there are obvious financial costs such as creation of monopolies that cause market distortions. The military fraternity and its civilian clients have an unfair advantage in winning contracts.

Burden on Public Sector. Milbus often places a burden on the public sector because of the hidden flow of funds from the public to the private sector. Since the military claims that Milbus activities are legitimate private-sector ventures, funds are often diverted from the public to this particular private sector.

Compromised Professionalism. From the professional standpoint, the armed forces’ exposure to money-making takes its toll on professionalism. The example of China is a case in point. The protection given to businesses in the form of immunity from civilian monitoring and prosecution resulted in corruption.

10. Milbus and Pakistan's Future: A Vicious Cycle

The conclusion, based on the evidence in the earlier chapters, is that Milbus is both politically and socially expensive.

Political Costs. Milbus nurtures the military’s power ambitions. A military with such deep-rooted vested interests cannot be removed from a dominating position until there are significant changes in the country or in the international geopolitical environment which force the armed forces to secede political control.

Social Costs. Socially, it reduces the society’s acceptability of the military as an arbitrator and increases the alienation of the underprivileged, the dispossessed and the have-nots. Milbus represents the institutionalization of economic exploitation, and this has an impact on the military’s character.

Predatory Institution. This kind of economy transforms the military into a predatory institution which uses power for the economic advantages of the armed forces, especially the military elite. Already depressed by the greed of other dominant classes, common people even lose hope in the military’s ability to deliver justice as an arbitrator.

Last updated: March 1, 2025