Rule of Law and Economic Development

Rule of law and Economic Development

Rule of Law and Economic Development 

In the Declaration of the High-level Meeting on the Rule of Law, Member States noted that “the rule of law and development are strongly interrelated and mutually reinforcing, that the advancement of the rule of law at the national and international levels is essential for sustained and inclusive economic growth, sustainable development, the eradication of poverty and hunger and the full realization of all human rights and fundamental freedoms, including the right to development, all of which, in turn, reinforce the rule of law.”

In today’s era of globalization, capital will go where it is going to be safe as well as productive, i.e. attracting more capital in the form of profits. It would flee from societies or countries where corruption, bad policies and bad governance are rife, and rule of law is absent. Rule of law is the most important factor in determining the strength of an economy. This is why all successful economies concentrate on the rule of law; on the elimination of corruption; on human rights; and on democratic systems and processes which allow governments to reflect the will of their people.z

In the current scenario, Pakistan is among those countries that repel capital instead of attracting it. It is worth noting that our laws may be more open and vibrant when compared to other countries in the region, but the ‘rule of law’ is based on actual enforcement of law. Stagnation in Pakistan’s economy is due to our failure to establish the rule of law. This failure is evident from Pakistan’s poor performance and low rankings on Rule of Law Index 2019 released by the World Justice Project (WJP)—Pakistan is ranked 117 out of 126 economies surveyed.

Moreover, Pakistan has been ranked 32nd among 43 countries in the Asia-Pacific region on the basis of economic freedom. The increase by 0.6 points on the Index of Economic Freedom, an annual ranking created in 1995 by The Heritage Foundation and The Wall Street Journal, is due, essentially, to better scores for judicial effectiveness and property rights. These factors have surpassed the decline in monetary freedom and fiscal health.e

According to this rating, Pakistan’s economic freedom score is 55.0 on a scale of 0 to 100, making its economy the 131st freest in the 2019 index. The index evaluates rule of law, size of government, regulatory efficiency and the openness of markets to determine the points awarded to a nation. It notes that internal political disputes and low levels of foreign investment are the main factors holding back economic freedom and contributing to underdevelopment. It also pinpoints excessive state involvement in the economy and inefficient regulatory authorities as a hurdle in the way of economic growth and economic freedom. The large informal sector, especially in the textiles and apparel section of the economy, also holds back earnings from exports. Crucially, the index points out that poor protection of rule of law, the vulnerability of the judiciary to influence and the complex tax system hold back economic performance. Rising public debt and only a modest improvement in regulatory efficiency are also identified as factors which impinge on economic welfare.

It is important to note here that economy stagnates or even regresses in a country where governance is constrained, corruption is rampant, fundamental rights are denied, regulatory writ runs thin, and people do not trust state’s law, justice and security departments. Economy progresses when the judicial system is fair and quick in providing justice in both civil and criminal cases and when all the above issues are nonexistent.

Pakistan with a weak economy and poor rule of law is fast moving to qualify as a banana republic—a politically unstable country with an economy dependent upon the exportation of a limited-resource product.

We are dependent on textile exports that have a share of only 6 percent in the global trade. Improving the parameters that ensure sustained growth does not need foreign aid or foreign assistance.q

The planners do not have to reinvent the wheel. All they have to do is ensure rule of law. The government would have to exert its writ and should not kneel down to threats of strikes or political fallout. The corrupt elements would have to be brought to the book. The government should carry out a fair accountability. All laws that deny citizen the fundamental rights should be repealed particularly the National Accountability Bureau (NAB) law that allows the authority to keep an accused in custody for 90 days and before that period expires, books him in another case to ensure another 90-day custody.

Economy will not improve if all the businesses including shops, offices and factories have to arrange their own security. The state would have to give this confidence to its citizen that they would be safe under the government security. In fact, private securities are a threat to peace and order.

Private security-men openly bully common citizens—something that even real law-enforcers are not legally allowed to. Their actions are no different than rough-cut gangsters.

Last but not least, the poor regulatory institutions are playing havoc with the economy. Poor regulation has placed Pakistan among countries with money laundering and even terror financing risks. The unabated violation of environmental laws that results in reckless polluting of air and fresh/marine water is because of sloppy regulatory regime.

The anti-competition attitude is also because of toothless competition commission. Frail regulatory institutions are weakening the economy and fanning anarchy in the society.

The flaws in the criminal and civil justice have been pointed by none other than the Chief justice of Pakistan himself.

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