Free Market and Good Government: Common Grounds
Policy Research Institute of Market Economy (PRIME) – an independent think tank organised a Business Recorder conference on Free Market and Good Government: Common Grounds at Government College University, Lahore. It was supported by Friedrich Naumann Foundation for Freedom. The conference discussed Pakistan’s economic credibility on the basis of institutional deficits underpinned by legal system and property rights. It was concluded that economic freedom which offers equal chances for all can be contrasted from crony capitalism on the basis of legal system and property rights. The conference featured three panel discussions on: ‘Private Property Rights’, ‘Dispute Resolution: Competition between State and Non State Actors’ and ‘Contract Enforcement’, chaired by: Dr. Ikram Ul Haq, Dr. Saeed Shafqat and Dr. Khalil Ahmad.
During the conference the speakers said that there is a broad level of consensus amongst the theorists and policy makers that market economy or free market as a system of allocation of scarce recourses has helped creation of wide spread prosperity. However, its attendant details of macro and micro economic policies greatly vary across nations.
They were of the view that despite this variation, literature on new institutional economics has given currency to another consensus: the success of market economy as a bed rock of widespread prosperity rests on the socio economic institutions in a society. These are situated in the legal system and property rights environment in a country.
First Session on Private Property Rights
Addressing the first session on Private Property Rights, Dr. Raza Ullah stated that his study aims to explore the role of property rights in women empowerment using Hernado De Soto’s International Property Rights Index gender component. Data was collected from a sample of 115 respondents in district Charsadda and Peshawar in Khyber Pakhtunkhwa. Dr. Raza suggested that property have stronger linkages with women real empowerment. However to ensure such rights this study has identified social activism, access to information, need for technological orientation, organisational re-engineering, and access to finance as pre-requisites.
Ali Salman, Executive Director of PRIME, in his presentation, highlighted key policy messages for Pakistan’s economy. According to the Economic Freedom of the World Report 2013, Pakistan stands at 103 out of 152 countries in economic freedom. One of the key findings of the report was that the status of legal system and property rights in Pakistan has shown deterioration over years which is correlated with Pakistan’s decline in economic freedom. This is associated with a declining expenditure of government where it matters the most: enforcement of the law. In fact, Pakistan’s lowest score in the index is on the Legal System and Property- a 4.22 out of 10 points. Pakistan’s fall in economic freedom is associated with a declining expenditure of government where it matters the most: enforcement of the law.
Second Session on Dispute Resolution
During the second session on ‘‘Dispute Resolution: Competition between State and Non State Actors”, Ali Malik stated that lack of strong corporate law and contract enforcement infrastructure allows non-state actors including mafia to emerge in an economy, and create a competition between state and non-state actors. In his presentation, Ali highlighted that how in their evolution, almost every major commercial hub in the world, while drawing lessons from Pakistan had to deal with mafia and how with the increased economic activity, state power and capacity to provide strong cooperate law and contract enforcement infrastructure and to root out mafias and non-state actors.
The second presenter, Syed Ali Raza Shah shared his views on Dispute resolution Challenges in Transitioning and Developing States. He said that there is a concept of efficacious remedy in law which has to be proportionate when there is a breach of contract. A state’s ability to enforce contract enforcement lies in how the power of the state has been structured and distributed in its legal system. Even if there is an underdeveloped economy and a struggling democracy, the ability of state to bounce back hinges upon one fundamental aspect -that is the devolution of state powers.
Third session on Considerations for investing in a country
The need for FDI in Pakistan is crucial. Ahmad Hassan, Advocate Supreme Court while explaining the economic costs of poor contract enforcement described how the court decisions have a direct impact on investor morale. Thus, the risk associated with breach of contracts with foreign investors can have significant impact on attracting investment in a country.
The last presenter of the session, Zia Banday compared Pakistan and China’s standing on Contract Enforcement. He said that china is the second largest outward investor after US. Despite a fair weather friend, China out of 408 USD Billions has invested 879.4 USD Millions in Pakistan in the last ten years. The total percentage which Pakistan has attracted in last ten years is 0.2 per cent. China has a lesser Economic freedom than Pakistan but its contract enforcement policies has made it the third largest every eye destination in the world.