Investor is the first bird to fly away when there is a remote possibility of

instability and fear of disregards for international contracts. Populist rhetoric of

half-learned scholars and opportunists politicians that corruption and lack of
accountability are responsible for discouraging investment does not makes any
sense. Although these two factors impact the investment decisions, the studies
suggest that authoritarian regimes with massive corruption and lack of
accountability has attracted equal investments as did the transparent
and democratic governments. In reality, the authoritarian regimes are favourite
of international investors while corruption, kickbacks and commissions are
established practice of doing business in corporate MNE’s. From arms deals to
explorations licences and from Foreign Direct Investment to award of
development projects,;corrupt practices, political influences
and reactivity commissions do exist at varying levels. The biggest fear of any
investor lies in uncertainty and discontinuation of policies of host state where
institutions become dysfunctional because of internal conflicts.

In case of Pakistan, much glorified case of preventing privatisation of Pakistan

Steel Mills by Supreme Court of Pakistan, played a key role in
breeding uncertainty. As the judgement is a public document, it is open for
criticism, but very little has been said and written on it’s impact and
constitutionality apart from securing political mileage against an unpopular
dictator. In terms of investor confidence, the judgement proved to be an
absolute disaster for privatisation and Foreign Direct Investment (FDI). The most
vocal economists in country who are aware of its disastrous consequences on
economy remain silent because of fear of backlash from supporters of popular
Chief Justice.

Superior courts play a supervisory role and their prime function is to resolve the
matters where rules, regulations and constitutional provisions are violated by by
executive authorities. When a public functionary or institution violates these
regulations, courts have powers to direct them to follow the same, but court has
no capability to acquire the functions of that institution. When it does so, not
only said institution would becomes dysfunctional and people loose faith on it but
also a court would not be able to understand the complex deals which only
professionals are capable to handle. This basic principal of dispensation of justice
was ignored by Supreme Court while deciding the case of Pakistan Steel Mills in
2007. Despite pointing out the irregularities and directing Privatisation
Commission to ensure the public interest is safe guarded under certain
conditions, the Supreme Court exceeded its constitutional and supervisory limits
by indulging in to investigation process before finally scrapping the deal.
Certainly, none of the Honourable judges in bench has expertise to understand
and structure the complex fiscal arrangements, which only corporate
professionals can perform.i
Had court confined it to pointing out irregularities and directing the institutions
concerned to fix these issues, it would have been strengthen the
Privatisation Commission and added in to investors confidence. The
unprecedented decision of altogether scrapping the entire deal without
understanding its fiscal aspects proved to be first ‘stay-away signal’ for investors.
The situation got worst during two years long popular ‘restoration of judiciary’
movement which at the same time brought both Pervez Musharaf and Pakistan’s
economy to its knees. With installation of democratic government in Islamabad
there was a brief period of partial restoration of investor confidence and
international investment houses started expressing interest in Pakistan’s
power, agriculturalist and infrastructure sectors. The same was wiped away when
a showdown in Punjab based Mian Nawaz Sharif and Pakistan People’s Party
government lead to restoration of deposed judges.

The hostile judiciary has taken Zardari regime to task while interfering in every
executive matter beyond its constitutional authority . Be it fixing Sugar and
Electricity prices, tax on imported fuel or contracts for rental power projects, the
judiciary is continuously taking over the functions of specialised institutions. If
this interference remains to the constitutional supervisory limits and pointing out
irregularities, it can strengthen the institutions to function within the regulatory
frame work. However, institutions loose credibility and
become dysfunctional when judiciary assumes their role. Each judicial
interference is followed by a parallel media trial. Political rivals and self
styled analysts in media with little or no understanding of issues which need
specialised professionals, run their regular campaigns to settle scores with
government and parties involved while courts stay silent spectator.

Although profits are prime target for any corporate, the corporate leaders have
to do business worldwide and are very much conscious about repute of their
organisations. An investment destination is never a choice which turns them in to
clowns, corrupt and dishonest thugs without any valid proof. Depute corrupt
practices which are undeniable part of any investment regime, these corporate
are always careful in following the rules and regulations, under the table deals
always remain untraceable. Even in developed countries judiciary and regulatory
institutions keep themselves limited to their supervisory role to ensure that rules
and regulations are being followed. No court in world, would interfere in issue on
mere assumption of corruption and would takeover the role of regulatory bodies
which require specialised skills and understanding of fiscal matters of state.
When this happens, existence or otherwise of corporate regulators becomes
relevant, both for courts and investors.

Pakistan offers some of the most attractive investment opportunities to

international investors. The growing middle class and educated workforce with a
decent infrastructure can make the country an ideal place for investors. While
discussing about Pakistan as their potential investment destination, every
investment house raises two questions. First being the political stability
and continuation of state policies and second and biggest concern being
the guarantee that courts would not turn their legitimate contract in to a devils
act on perceived corruption charges. In developing countries like Pakistan, here
can hardly a way forward without attracting the foreign investment. The dream
would not materialise unless all institutions of state respect the mandate of
others. Judicial activism is welcome step and should be focused on ensuring
that constitution, laws, rules and regulations are followed by other institutions.
Certainly, Supreme Court does not posses the capability, understanding
and expertise to acquire the role of every other institution.

Corruption is a reality in all developing countries and even in developed world. In

order to eradicate corrupt practices, the institutions needs to be enlightened.
This can not happen when one institution of states takes over powers of others
and starts making decisions for which it does not posses expertise. The present
state of affairs which took birth from ‘Judicial Activism’ in terms of political
instability and investors confidence are biggest deterrents for economic
development. On its own resources even with completely eradicating corruption
and ensuring transparency, which itself is not possible, the country could not
create three million jobs annually for its youth beside
developing infrastructure for hundred and seventy million population. As long as
institution does not stop interference in to others mandate, the investors
confidence would not be restored. No investor is going to trust the Privatisation
Commission or Pakistan’s Board of Investment without an assurance that after
following rules and regulations, their contracts would not be terminated by courts
on charges of perceived corruption followed by a massive media trial.

The judicial activism should instead be directed towards internal transparency, as

judiciary even after being restored, itself stands as second most corrupt
institution of country. In present economic conditions and limited options, media
activism waged by self-styled analysts, judicial activism in wake of
‘righteousness’ and political opportunism for sake of grabbing power on cost of
economy might lead the state to a complete collapse. The first and most
important step in restoring investors confidence can only be achieved if judiciary
limits itself as a guardian of law and constitution and not a parallel policy making
or a regulatory body.