Political freedom and a competent judiciary, like natural
resources, energy resources, and technical resources, play a significant and
critical part in the economic development. The issue therefore becomes, how can
the judiciary play a vital role in economic development? The answer is to ensure
the security of property rights and their application, as well as to resolve
business disputes quickly.Laws even best practice substantive laws cannot bring
Rule of Law in country unless there is no effective enforcement. Administration
can enforce some technical laws but rule of law in economic terms means
guaranteeing property rights security, enforcing the contracts etc. can only be
established when there is efficient justice system. Efficient justice system
requires judiciary to resolve conflicts against private parties and also with
state, results, stimulating investment both foreign investment and local,
bringing positive innovations, competition and developing financial markets.
Both economic and legal scholars agree on the fact that judiciary plays vital
role in rule of law.
A well-functioning legal system is necessary for both society and corporate
activity. The length of a trial is important since it determines judicial
efficiency. When rulings are made in a fair amount of time, the judicial system
is efficient. The Pakistani judiciary is confronted with tremendous challenges,
with pending cases being the most prominent. Report issued by Judicial
Commission of Pakistan on 31st August 2021 states around 2.2 million cases are
pending in country’s courts.While there is a massive backlog with the judiciary,
the current Chief Justice of Pakistan, MianSaqibNisar, urged the high courts to
determine a matter within three months while presiding over a recent meeting of
the National Judicial Policy Making Committee (NJPMC).
He said that, because to a lack of adequate legislation, subordinate courts are
issuing judgments based according to their own discretion rather than following
the law and instructions established by the SC. He claimed that parliament
needed to alter centuries-old colonial legislation. Ineffective judicial
systems, he claims, are a threat to the state and society. Which mean that is if
treatment is available for patient but not delivered it on time, its totally
useless.
Maria Dakolias noted in a speech on November 14, 2003 that socioeconomic
progress in the twenty-first century is not merely about the balance of
payments, building infrastructure, or boosting tax collection. It's becoming
more about the rule of law. According to World Bank report, “firms in Brazil,
Peru, and the Philippines report that they would be willing to increase
investment if they had more confidence in their nation’s courts The World Bank
and numerous other donor institutions have financed judicial reform programs in
more than two dozen developing nations and transition economies in recent years,
recognizing the relevance of solid judicial systems to effective governance and
economic success. Improved laws can make only little difference where legal
institutions are ineffective.
Foreign Direct Investment is imperative for economic development as it is
regarded as a key source of foreign exchange, assisting in the alleviation of
the balance of payment restriction on economic growth. Furthermore, it adds to
the domestic investment resources, brings new technology and creates employment
opportunities. Inflows of foreign direct investment (FDI) into Pakistan averaged
over $2.3 billion during the past four years, but fell below $1.8 billion in the
first eleven months of the current fiscal year. Our yearly FDI intake, even at
$2.3 billion, is less than half of our monthly merchandise import cost. To
assist alleviate the balance of payments concerns, considerably larger FDI
inflows are clearly necessary. Why foreign investor is reluctant to invest
capital in Pakistan? It might be due to inefficient judicial system.
Smooth environment is prerequisite for foreign investment. A state should
provide business environment to attract foreign investors. Business conflicts
are an inevitable part of business, and every owner will ultimately face
conflict regarding their operations. Business operates through contracts and the
legislation that governs them. Contracts have far-reaching legal implications
that might jeopardize company's future. Written contracts that are properly
formed defend business’s interests and reinforce all of the parties' rights in
any particular transaction. Commercial conflicts can be resolved in court, and
it is critical that they be resolved swiftly. According to World Bank Doing
Business report (2019) it takes 1,072 days on average to resolve commercial
conflict in Pakistan. Investor will avoid investing in the country where it
takes years to resolve business conflicts. As time is money, no investor will
tie down his money in long period due to commercial disputes. There is concept
of time value of money in business which states that amount of money worth more
today than in future date. Efficient judiciary can built smooth business
environment and foster innovation and can attract foreign investment.