Lahore

Due to inefficient contract enforcement, which is essential to economic development and sustained growth, Pakistan’s ranking has declined further to 138th out of 189 economies in Doing Business 2016 rankings by the World Bank Group (WBG).

The countries which are developed or developing and attract major portion of foreign investment normally ranked around 50th position in “contract enforcement” factor whereas Pakistan is ranked 151st on this indicator. This indicator measures the time and cost for resolving a commercial dispute through a local first-instance court.

‘The government itself has become leader in creating hindrance for contract enforcement factor, so how it can attract foreign direct investment in Pakistan, especially in power sector and privatisation,’ said Syed Intazar Mahdi, Secretary of The Law Society - an NGO working for rule of law in Pakistan.

He pointed out that Nawaz Sharif has on his credit some of the most successful privatizations executed in Pakistan during 1991-93, the transparency of which is vouched by the fact the none of regimes found fault in this process in 25 years. Now NAB and other federal agencies are investigating the privatization deals made during that era, even though the privatization act clearly states that no privatization can be investigated and challenged after one year of deal finalization.

However, these entities are now being victimized in in the era of Nawaz Sharif again and by not defending its successful and transparent deals which generated billions of rupees for the country so far, the government is inflicting a huge setback on privatization process.

‘Opening any ‘past and closed transaction’ is illegal ab-initio and would not serve any good to Pakistan, rather it will tarnish the national image among local and foreign investors,’ he added.

The entities privatized during that period are among the star corporate performers of Pakistan and most are included in the KSE-100 companies.

‘Pakistan’s ranking was 61st in 2006. Now see where we stand today, and how our governments played their role to get this ranking further down instead of making it better. This is really alarming,’ he added.

‘Pakistan is struggling even under China Pakistan Economic Corridor (CPEC) arrangements because the cornerstone of security documents for such projects is the government of Pakistan’s sovereign guarantee,’ he added.

‘How will Chinese firms trust the government of Pakistan when it is creating hindrance in contract enforcement when comes the guarantee issue or dispute resolution issue?’ he said, adding that one case in this regard would show the non-seriousness of the government. 

He added that in 2013 the Independent Power Producers (IPPs) invoked the ‘sovereign guarantee’ against the government for defaulting on payments to IPPs as the Power Purchaser.

He said Pakistan will not attract good size of foreign investment until and unless it improves on contract enforcement factor through proper legislation and enforcement institutions. However, he said that it is unfortunate that even with such institutions and proper legislations, businesses are still a target of political victimization.

‘It’s high time the government should stop dishonoring the contracts and agreements it has entered with local and foreign investors, otherwise the global rankings of the country on “ease of doing business index” would suffer further which would make the country very unattractive for foreign investments,’ concluded Intezar.