Summary: Government of Pakistan (GOP) and the US government speak of weapons and Microsoft

The following Cablegate cable, dated 2008, has a special section about "MICROSOFT CORPORATION". It says that the "GOP currently uses 90 percent of pirated Microsoft Software for its operations worth USD 10 million. In an April meeting with now former Prime Minister Shaukat Aziz at the Economic Forum Summit in Boao, China, Microsoft's Bill Gates proposed that the GOP pay USD 10 million over a five year period for legal licenses for government desktops, and asked that the PM respond within 45 days. The deadline passed on June 5 without a response from the GOP.

"Bill Gates sent a letter to former Prime Minister in June 2007 to follow up on their agreement and Microsoft has yet to receive a response."

This was written around the same time Microsoft Gold Partners in Pakistan helped subvert an OOXML vote on the face of it. Here is the cable in full:

VZCZCXRO1809
PP RUEHBI RUEHLH RUEHPW
DE RUEHIL #0392/01 0260355
ZNY CCCCC ZZH
P 260355Z JAN 08
FM AMEMBASSY ISLAMABAD
TO RUEHC/SECSTATE WASHDC 4672
INFO RHMFISS/CDR USCENTCOM MACDILL AFB FL PRIORITY
RUEKJCS/SECDEF WASHINGTON DC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC
RUEHNE/AMEMBASSY NEW DELHI 2698
RUEHDO/AMEMBASSY DOHA 1482
RUEHKP/AMCONSUL KARACHI 8754
RUEHLH/AMCONSUL LAHORE 4669
RUEHPW/AMCONSUL PESHAWAR 3338
RUEHBI/AMCONSUL MUMBAI 3743





C O N F I D E N T I A L SECTION 01 OF 03 ISLAMABAD 000392 




SIPDIS 




SIPDIS 




E.O. 12958: DECL: 01/24/2018 
TAGS: ECON [Economic Conditions], 
PREL [External Political Relations], 
ETRD [Foreign Trade], EAID [Foreign Economic Assistance], 
EINV [Foreign Investments], EFIN [Financial and Monetary Affairs], 
PGOV [Internal Governmental Affairs], PK [Pakistan] 
SUBJECT: AMERICAN COMPANIES EXPERIENCE INCREASED DIFFICULTY DOING 
BUSINESS IN PAKISTAN 




REFS: (A) Islamabad 191, (B) Islamabad 228, (C) Islamabad 288 




Classified By: DCM Peter W. Bodde, Reasons 1.4 (b), (d) 




ۦ1. (C) SUMMARY: Embassy Islamabad has received an increased number of 
complaints from American companies over the last several months 
regarding unfair practices on the part of GOP, many stemming from 
action of the caretaker government.  General Electric, Oracle, Bell 
Helicopters and AES have experienced problems in GOP tenders. 
Chevron and AES have yet to be paid millions of dollars for energy 
products and services rendered.  Netsol and Microsoft have 
experienced non-compliance or interference in intellectual property 
rights (IPR) violations.  These problems, totaling an estimated USD 
1.82 billion, present challenges for American businesses to fairly 
compete and survive in Pakistan.  The GOP's cash crunch is the cause 
of the slow payments to the energy companies and the cancellation of 
the Augusta helicopter contract, and may further complicate bidding 
on GOP contracts.  END SUMMARY. 




--------------------------------------------- ------- 
PROBLEMATIC GOP CONTRACT BIDS WORTH USD 1.7 BILLION 
--------------------------------------------- ------- 




ۦ2. (C) GENERAL ELECTRIC (GE):  GE won a tender for a Railways 
Re-signaling Project with the Ministry of Railways worth USD 46 
million in Phase One to re-signal the existing railway lines in 
Pakistan.  Phase one and two are worth USD 150 million.  Pakistan 
Railways made technical changes in the contract so that the full 
contract can be awarded to another supplier using cheaper Chinese 
inputs. 




ۦ3. (C) GE CURRENT STATUS:  On Dec 19, a letter was sent to the 
Chairman of the Pakistan Railways by the Ambassador requesting that 
the transparency of the tender process be respected and that GE's 
contract award for Phase One of the project be upheld. Neither GE nor 
the Embassy has received any reply to date.  Railway infrastructure 
was targeted and damaged in the post Bhutto assassination violence 
and the GOP is currently assessing the extent of the damage and how 
this will impact planned railway projects. 




ۦ4. (C) ORACLE:  Oracle is interested in projects with Pakistan 
International Airways (PIA) worth USD 23.5 million. PIA plans to 
implement ERP (Enterprise Resource Planning) and MRO (Maintenance 
Repair and Overhaul) solutions using prepackaged applications 
software in order to automate its key business functions such as 
revenue accounting, inventory, aircraft maintenance, repair and 
overhaul.  The two other competitors are representing German software 
package SAP. 




ۦ5. (C) ORACLE CURRENT STATUS:  Samina Rizwan, Regional Director, 
reported on December 19 that Oracle was structured out of the ERP 
project and could not fairly compete for the MRO project because the 
only competitor booked all costs under the ERP project to "give away 
the ERP project for free."  Oracle does not plan to submit a tender 
due to their perceived unfairness in the procurement process. 




ۦ6. (C) BELL HELICOPTERS:  Bell Helicopter bid on a tender with the 
Pakistan Military worth USD 35 million. The Cabinet Division plans to 
procure new twin engine and single engine helicopters totaling USD 35 
million for which the local distributor for Bell Helicopters has 
expressed keen interest.  Bell Helicopters have served the Cabinet 
Division and other GOP agencies for the past 15 years. 




ۦ7. (C) BELL CURRENT STATUS:  The GOP tender was structured for the 
specifications of Agusta helicopters.  All competitors were 
structured out of the bid because of the technical specifics related 
to Augusta's products.  Advocacy letters from the American Embassy 
and Canadian High Commission were unsuccessful in convincing the GOP 
to open its tender to competition.  January 25 press reports indicate 
that the GOP is cancelling the Augusta helicopter contract.  Comment: 
 The USG has given the GOP two VIP helicopters for the President's 
use.  End comment. 




ۦ8. (C) AES:  AES has the opportunity to build a 1000-1200 MW Coal 
Fired imported Power Plant near Karachi worth USD 1.6 billion.  The 
Private Power and Infrastructure Board of Pakistan has issued AES 
Pakistan a Letter of Interest to carry out a feasibility study by 
March 15. 




ۦ9. (C) CURRENT STATUS:  AES reported to ECON that they are getting 
signals from the GOP that the tender process for the power plant may 
not involve a level playing field.  AES is awaiting the installation 




ISLAMABAD 00000392  002 OF 003 




of a new government before moving forward with further expansion 
plans. 




--------------------------------------------- ------ 
NON-PAYMENT ISSUES WITH GOP WORTH USD 85.2 MILLION 
--------------------------------------------- ------ 




ۦ10. (C) CHEVRON: The GOP owes Chevron nearly USD 3 billion rupees 
(USD 50.2 million) in back payments on differential price claims from 
August 2007- January 2008. The GOP heavily subsidizes consumer gas 
prices and has not increased local prices since gas was approximately 
USD 55 per barrel. 




ۦ11. (C) CHEVRON CURRENT STATUS:  The Ministry of Petroleum and 
Natural Resources is willing to pay, but they and Chevron report that 
the Ministry of Finance is the hold up.  Chevron's headquarters would 
like to see a reimbursement of at least USD 27.5 million made prior 
to January 31, 2008 or the company plans to reduce distribution to 
Pakistan from 40,000 metric tons to 20,000 metric tons. Chevron 
currently supplies approximately 25 percent of Pakistan's gas and 
diesel. 




ۦ12. (C) AES:  AES reports that the Pakistan Water and Power 
Development Authority (WAPDA) consistently does not pay the company 
in a timely manner for electricity.  The Country Manager said that 
his subsidiary routinely stops plant operations from time to time due 
to lack of funds available to purchase power plant fuel. 




ۦ13. (C) AES CURRENT STATUS:  AES has received some payment for 
electricity production and is currently operational but the company 
is still owed approximately USD 30 million for its operations and 
services rendered. 




------------------------------------------- 
THE GOP CASH CRUNCH AND GOVERNMENT SPENDING 
------------------------------------------- 




ۦ14.  (C)  The GOP's cash crunch is due to increased fuel and food 
subsidy bills, lack of political will to pass through increased 
international fuel and food prices to consumers already faced by high 
essential good inflation in an election year, and increased 
government spending on infrastructure projects prior to elections. 
This increased spending means that there is less money available to 
pay outstanding bills or contemplate new projects (ref C), 
particularly since GOP revenues are not able to keep pace with the 
increased expenditures.  The GOP has deferred any decision to pass 
along increased commodity prices until after the February 18 
elections, which will cause further increases in the fiscal and 
current account deficits.  The GOP has also resorted to increased 
borrowing from the State Bank of Pakistan.  We believe the GOP cash 
crunch is behind the Augusta contract cancellation.  Finance Minister 
Shah (ref A) acknowledged that the GOP's fiscal difficulties (ref A) 
were holding up payments to the energy companies in a January 4 
meeting with the Ambassador. 




--------------------------------------------- 
REPORTED IPR VIOLATIONS WORTH USD 30 MILLION 
--------------------------------------------- 




ۦ15. (C) NETSOL TECHNOLOGIES:  NetSol has a pending IPR investigation 
worth USD 20 million.  The company reported Dec 20 that two former 
employees stole secret information from the company and launched 
their own public company in Pakistan to sell the exact same products. 
 The company filed a complaint with the Federal Investigative Agency 
(FIA) Nov 22 and investigators then arrested one of the partners and 
scanned his laptop which contained over 100 secret corporate 
documents.  On December 18, 2007 FIA contacted NetSol to say the 
Supreme Court Justice Nawaz Abbasi, a family friend of one of the 
accused, called their investigators in for a meeting and asked them 
to drop the case, return the laptop, and dismiss evidence. 




ۦ16. (C) NETSOL CURRENT STATUS:  Embassy drafted letters requesting 
information from the FIA on the status of this on-going 
investigation.  Embassy pressure was successful.  FIA retained the 
laptop, the company dissolved, a non-disclosure agreement was signed, 
and the Supreme Court justice moved his pressure down to a civil 
suit. 




ۦ17. (C) MICROSOFT CORPORATION:  GOP currently uses 90 percent of 
pirated Microsoft Software for its operations worth USD 10 million. 
In an April meeting with now former Prime Minister Shaukat Aziz at 
the Economic Forum Summit in Boao, China, Microsoft's Bill Gates 




ISLAMABAD 00000392  003 OF 003 




proposed that the GOP pay USD 10 million over a five year period for 
legal licenses for government desktops, and asked that the PM respond 
within 45 days.  The deadline passed on June 5 without a response 
from the GOP. 




ۦ18. (C) MICROSOFT CURRENT STATUS:  Bill Gates sent a letter to former 
Prime Minister in June 2007 to follow up on their agreement and 
Microsoft has yet to receive a response. 




ۦ19. (C) COMMENT: With an estimated total of approximately USD 1.82 
billion at stake, Embassy Islamabad considers the increased activity 
a troubling trend. Increased economic and financial problems continue 
to compound the GOP's political difficulties. The newly elected 
government, regardless of party, will have to face mounting economic 
challenges.  Embassy will continue to closely monitor each situation 
involving these and other American companies and raise each issue 
with the appropriate GOP officials on a regular basis.  END COMMENT. 




PATTERSON 
- 1 -

Much of the above is too political for us to delve into. ⬆