|Pakistan's Ex-Chief Justice Iftikhar Chaudhry|
If I were asked to moderate this panel, I would not treat it as an abstract discussion of how rule of law impacts investors and entrepreneurs anywhere in general. Instead, I would focus on how Justice Iftikhar Mohammad Chaudhry conducted himself and how his conduct affected the investment climate and the economy in Pakistan during his tenure as Chief Justice of Pakistan.
Foreign Direct Investment in Pakistan:
World Bank's data shows that foreign direct investment (FDI) in Pakistan reached a peak of over $5 billion (3.6% of GDP) in 2007 and then fell sharply in the wake of Justice Chaudhry's reversal of the privatization of Pakistan Steel Mills. FDI has essentially dried up and the Pakistan Steel Mills Corporation has accumulated losses over Rs. 100 billion in spite of multiple bailouts at taxpayers expense. It is currently operating at just 3% of capacity and its monthly payroll adds up to Rs. 500 million, according to Dawn.
|FDI as % of GDP in Pakistan Source: World Bank|
Canceled Privatization Deals:
Huge subsidies are being given at taxpayers' expense to Pakistan Steel Mills and several other state-owned enterprises which take resources away from more pressing needs for spending on education, health care and infrastructure. In fact, Pakistan Education Task Force Report 2011 reported that "under 1.5% of GDP [is] going to public schools that are on the front line of Pakistan's education emergency, or less than the subsidy for PIA, Pakistan Steel, and Pepco."
Speaking at a recent international judicial conference in Islamabad, Dr. Ishrat Hussain, current dean of the Institute of Business Administration and former governor of The State Bank of Pakistan, said there has not been a single privatization deal in Pakistan since the Supreme Court's 2006 decision voiding the steel mill transaction.
Dr Hussain said that despite fulfilling the legal requirements, the fear that the country’s courts may take suo motu notice of the transaction, and subsequently issue a stay order, deters businesses from investing in Pakistan, according to a report in The Express Tribune. “A large number of frivolous petitions are filed every year that have dire economic consequences. While the cost of such filings is insignificant the economy suffers enormously,” he added.
Crucial Projects Delayed:
Among other projects, Dr. Hussain particularly cited Reko Diq and LNG projects which could not proceed because of judicial activism of Pakistan Supreme Court judges.
The lack of progress on liquefied natural gas (LNG) deal has exacerbated Pakistan's energy crisis. It would have brought in 400 million cubic feet of gas per day to bridge the growing supply-demand gap now crippling Pakistan's economy.
The invalidation of Reko Diq license to Tethyan, joint venture of Canada's Barrick and Chile's Antofagasta, has turned away Pakistan's single largest foreign investment deal to date. The deposit in Balochistan was expected to produce about 200,000 tons of copper and 250,000 ounces of gold annually. Under the deal Baluchistan province would hold a 25 percent stake in the project, with Tethyan holding the remaining 75 percent.
In addition to activist judges intervention in economic matters, there have also been many instance in which known militants have been released by Pakistani courts. Those released have then committed acts of terror which have also scared away investors, both foreign and local.
Dr. Hussain closed his speech by pleading with Pakistan's judges "with all the humility and without sounding arrogant or offending anyone’s sensibilities, that economic decision are highly complex and its repercussions are interlinked both in time as well as space.”
I hope that this opportunity to question the former chief justice is not wasted by an adoring crowd asking him soft-ball questions at the OPEN conference on May 10, 2014. It's important that we, including the honorable judge, do an honest assessment of our past mistakes to learn from them.
Shaukat Aziz's Economic Legacy in Pakistan
Saving Pakistan's Education, Steel Mill, Railway and PIA
Politics of Patronage Trumps Public Policy
Iftikhar Chaudhry is no Angel
Musharraf Earned Legitimacy by Good Governance
Vindictive Judges Pursue Musharraf
Rare Earths at Reko Diq?