Tuesday, April 16, 2013

The State of Property Rights Protection in Pakistan

Ultimately property rights and personal rights are the same thing. 
(Calvin Coolidge, 1872-1933)

It was in January 2007 that a letter appeared in some newspapers. Its writer was a former cricketer. He was part of the national cricket team which toured India in 1952-1953. He also received an award from the president for his services to the game of cricket. He had a heart-rending story to relate: An engineer by profession, he spent a good part of his life in Middle East. On coming back to Pakistan, besides his family dwelling, he built a house in DHA, Lahore, with an intention to give it on rent to meet their daily living expenses out of the rental income.

But as it happens, the tenant did not pay the rent for many years and he had to knock at the doors of the courts to seek justice. After five years’ tiring litigation, the court gave a verdict in his favor and appointed a bailiff to get the house vacated with the support of the local police. When they reached the house, the tenant’s brother used abusive language and threatened to shoot them. The police party mysteriously escaped from the scene. The bailiff was also forced to run away by the tenant’s armed companions. Later it came out that one call from a senior police officer who happened to be the relative of the tenant to the concerned SHO was the actual cause of the police’s whisking away.

After detailing his ordeal, the former cricketer wrote thus: ‘The bailiff has already given the factual report of the above happening. Will the court take strong action to get their orders implemented? And will some senior police officer take time to find out why their department failed to get the law implemented. If not, then where should we go to plead our case? Can someone guide us how we should get the justice?’

We do not know whether this particular case came to a conclusion or not. But we do know that such stories are not uncommon in Pakistan. We quoted this case because what distinguishes it from other so many cases is this person of a status and probable connections, and if he is unable to win police on his side to implement the court orders, imagine the plight of millions of ordinary sufferers.

Every neighborhood in Pakistan is familiar with such illegal possessions and the injustice meted out to the legal owners of land plots, houses, shops and buildings, and the hanky-panky going on in the offices that deal with legal titling. And we do know how legal owners and renters of various properties waste their time and money in the corridors of courts to seek justice. And if they are fortunate enough to have the court orders in their favor, they find themselves thrown out of the frying pan into the fire. Now they are at the mercy of police the brutal force that is notorious to usurp their right to dignity, and thus how one could expect of it to implement the court’s orders.

Also, we do know how a good many number of people who go abroad leave their properties un-rented because they fear dispossession by the prospective tenants, and thus save themselves from the courts and police ordeal. They are well aware that they incur multiple losses such as depreciation their property undergo, rent money they could earn, property tax and utility bills they have to pay in any case, maintenance and guarding expenses their property need; but they lose all this only to one gain: that their property remains in their legal as well as physical possession.  

Intellectual property rights are another case in point. The same situation prevails here. Generally speaking, we are quite oblivious of intellectual property rights’ existence and justification which is another evidence of our intellectual backwardness: no intellectual property, no intellectual property rights. Under such circumstances, talking of such rights seems ridiculously irrelevant. Leave the individual cases aside, what about big private and public organizations and big businesses which are using pirated software.                
No doubt, we have abundant anecdotal evidence how property rights whether intellectual or physical are disregarded and flouted in Pakistan. But this evidence needs to be substantiated by some scientific evidence.

Luckily now we have such an index which by using ‘an innovative gauge . . . ranks countries according to their strengths and efforts to protect both physical and intellectual property.’ Though, there are many indices and reports such as Index of Economic Freedom, Economic Freedom of the World Annual Report, which use property rights as an indicator, but this International Property Rights Index (IPRI) focuses solely on property rights. In fact, it is ‘the only available annual international index dedicated exclusively to property right issues – and the only to integrate both the intellectual and physical aspects of property.’ Thus it is more reliable than others.

Under Hernando de Soto Fellowship, the IPRI was started in 2007 as a Project of the Property Rights Alliance, and its first report was issued in the same year. In 2007, 38 and in 2008, 40 civil society organizations from six continents partnered to release the Index and highlight the state of property rights protection in their respective countries. In Pakistan, the IPRI report is released by Alternate Solutions Institute, a think tank based in Lahore.

The IPRI argues that without secure property rights, no country can achieve economic development. “Clearly delineated property rights help lead to an efficient ordering of economic activity through several channels: creating security beyond the short-term which incentivizes investment over long-term horizons (dynamic efficiency); as a coordination device; creating an element of clarity in ownership which facilitates trade; as a first condition to an efficient allocation of resources; as a precondition for first-stage investment by outsiders.” It is the same argument Hernando de Soto put forward in his seminal book, The Mystery of Capital. He raised the question: Why capitalism triumphs in the West and fails everywhere else? De Soto’s answer reveals that it is secure property rights that enable poor people to transform their assets into capital an inevitable tool of economic development. He says: ‘This year’s (2008) IPRI provides further proof of the relationship between the robustness of a country’s property rights system and its economic development, revealing that much still needs to be done to extend property rights to more people, especially the poor.’       

The IPRI is comprised of three core categories which are ‘essential to the strength and protection of a country’s private property system.’ The grading scale ranges from 0 to 10, with 10 representing the strongest level of property rights protection and 0 the non-existence of secure property rights in a country. Here is the structure of the IPRI:

1) Legal and Political Environment (LP)

• Judicial Independence
• Confidence in Courts
• Political Stability
            • Control of Corruption

2) Physical Property Rights (PPR)

• Protection of Physical Property Rights
• Registering Property
• Access to Loans

3) Intellectual Property Rights (IPR)

• Protection of Intellectual Property Rights
• Patent Protection
• Copyright Piracy
• Trademark Protection   

Now the overall score and ranking of Pakistan in 2007 and 2008 reports is detailed below:

Score/Rank 2007
(Out of 70 countries)
Score/Rank 2008
(Out of 115 countries)
Legal and Political Environment (LP)
Physical Property Rights (PPR)
Intellectual Property Rights (IPR)
In LP though our score improved from 1.9 (2007) to 3.0 (2008), but on the whole it is quite hopeless. As the Legal and Political Environment is formed by four variables, Judicial Independence, Confidence in Courts, Political Stability and Control of Corruption; we know how low is the quality of this Environment.

In PPR, our score was better (5.1) in 2007, and it further rose to 5.8 in 2008 report. But the reason for this much better score in this category is obvious enough: the two variables, Registering Property and Access to Loans neutralize the much negative impact of Protection of Physical Property Rights variable. We discussed above the never-ending property rights litigation and the role of those agencies which are entrusted with the implementation of court orders.  

In the last category, IPR, we taste bad. It seems all the government efforts including the setting-up of Intellectual Property Rights Organization (IPRO) bear no fruit; the low score (2.8) in this category remains static. Here we are a worse performer than our erstwhile part, Bangladesh.

Likewise, if we analyze our performance in comparative terms, the already deplorable state of property rights protection in our country looks precarious. We are ranked with Nepal and Ecuador which is surprising given the fact these are far backward countries. In comparison with our neighboring country and our age-fellow, India, which is ranked at 36, we stand nowhere. More than that, we fall in the bottom quintile that includes countries like Bangladesh and Ethiopia.

This brings us down to our ground realities. In the early years of General Musharraf, it was reported in the press that on his invitation, Hernando de Soto visited Pakistan and met him. We can safely assume that de Soto’s advice to the General would not have been different from the argument that is now being made in IPRI reports. As the General’s dictatorial rule evaporates, it is high time for the new civil-political government to pay heed to the IPRI advice: poor need property laws and property protection to create wealth!

[This article was completed on March 23, 2008.]

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