People marching for which justice?
By: Tarique Khan Javed
President, Overseas Pakistani Investors Forum.
                           Dated 23 Feb 2009

One major contributor of poverty:
While Lawyers are marching for full independence of judiciary, people of Swat are dancing at the end of jurisdiction of the judiciary in their State. It is feared that soon the rest of Pakistan will demand the dismantling of the British style Courts. The British style courts have miserable failed to function and deliver. They are costly and dead slow. Simple cases of land or property ownership, divorce, eviction of tenant takes years when it should not take more than one or two weeks. Complicated commercial and criminal cases go on for 20-30 years making the whole point of lodging the case meaningless. This delay in justice equals to denial of justice. Besides inequality in distribution of land, inflation, indirect taxes the expensive and dead slow justice systems is an additional source of poverty in Pakistan. People accept all kind of excesses but dare not go to the Court for justice for fear of unlimited expenses and uncertainty of duration of the case. In the process they loose their property, honour and even life when confronted with a rich and powerful person. Thus rich keep getting rich and poor more poor.

The list of negative impact of not having a working legal system is endless. However as an Economist and ex Banker I will concentrate on economic and banking issues. To prove my point lets take the example of very miserable living condition of city slum dwellers in Pakistan and its preventable causes.

Misery in cities party due to weak justice system:
In my opinion it is the duty of the Government to provide a 80 yards plot to each city worker’s family; who has no other flat or land. As this is not done people tend to build temporary houses in any open space they can field. These unregulated properties are demolished from time to time wiping out capital invested and adding to the poverty in the cities and its implication like violence.  First the Government should regularize the Kachi Abadies so that the fear and uncertainty is gone and people can mortgage their property to raise funds for additional construction. Second Government should embark on a major construction drive to provide cheap and affordable houses to the masses. Thirdly it should remove all obstrucals to construction of houses.

Private parties could have supplied enough housing units to meet the demand provided proper protection of property right was available. If title deed can be considered as a solid security Banks are glad to finance any property built on them. However except Defence properties all other title deeds are looked at suspension by Banks and thus they can not be mortgaged for raising funds for construction.  

This inefficiency of land management and justice system is a great obstructer to capital formation. People in Pakistan are afraid of making more property other than own house for living, because once a property is rented it is very difficult to get vacated, if the tenant choices to go to the Court. This is one factor why there is so much shortage of houses in the cities. In the absence of rentable houses in regularised residential areas, people are forced to build makeshift shelters in shanty towns and Kachi Abadies. The miserable living condition of 80% or 13.6 million people of Karachi, who are forced to live in such conditions, for instance is a major cause of violence in the city. This huge number occupies only 10% of cities space while the remaining 3.4 million enjoy the remaining 90%.

If good property laws were present much more rentable houses could have been built in cities thus reducing the misery of city dwellers a great deal. With strong collateral Banks would have landed much more to the people directly thus reducing the need of rented property, as in the west. People instead of paying Rs 2 to 5,000 per month rent, for very bad quality houses in Kachi Abadies, could become owners of property in Regularized areas paying the same amount, as mortgage payment and gradually come out of poverty trap.

The demand for houses has been much greater than supply over last 60 years thus it implies that with strong property rights, a massive construction boom will ensue which will absorb a great number of unemployed over next decade. 

The plight of only lender for poor- HBFC
House Building Finance Corporation’s Rs 12 billion loans out of total 20 billion by 2007, became non performing and bad as people refused to pay their instalments keeping in mind the inefficient legal system will not allow foreclosures. When Bank tried to sell some of the mortgaged property under the 2002 Act Finance Act for Recovery of Advances through Banking Courts they were stopped by other courts. There were instances were the auction allowed by one Banking Court was objected by another Banking Court. Now the only source of cheap housing loan is likely to be closed and no one else will dare to lend for this purpose in future. This will ensure that people will continue to live in miserable condition and take revenge when ever they can like 27th Dec 2007 excuse of Benezir’s death.

USA’s 1954 Law on eviction and its result:
In the USA passing in 1954 of law giving special eviction power without interference for any one to the Financing Companies gave a major boost to housing financing industry. This led to construction of huge number of houses and made it possible for manual workers, drivers, and plumbers to own decent housing. With down payment of just 10 to 20% they could move in their dream houses and pay the remaining in next 20 to 40 years.  This simple formula explains the very high standard of living of USA. If you a see a  movie shot before 1954 you can see how miserable living conditions were before enactment and enforcement of this law.

Case of Gulf Countries and Nigeria:
In Saudi Arabia and other Gulf countries were Islamic laws are applicable land lords rent out property without any fear at all. Non payment of rent leads to quick eviction. No wonder people build a large number of houses for renting purpose and plan their retirement on such income.

Nigeria is an ex British colony and faced similar problem as we are doing. They introduced parallel Islamic Courts and allowed the British courts also to function. Soon bulk of the people including the non Muslims started to go to Islamic Courts and the huge pileup of cases in British Courts were gone as people withdrew their cases. Islamic Courts in Nigeria arrive at a decision within two three hearing and the case is resolved within months instead of years in British Courts. BBC was all praise for Islamic Courts in their recent documentary.

Swat  may provide the answer:
Under their Vali of Swat Islamic justice system was prevailing and people were happy and contended. After the forceful incorporation in Pakistan the complicated British justice system was introduced in 1968. The poor residents could not under stand the complicated law and could not afford the expenses of hiring Lawyers a necessity under British law even for the simplest of cases. By 1992 people were up in arms against the new system and demanded restoration of simple and efficient Islamic system. Vested interest including Lawyer, Land Lords, Khans and Maliks who benefited from the complex system and become rich resisted the restoration. Sufi Mohammed who championed the idea become a national hero. When he was imprisoned people made his son in law Fazalul Allah their leader and the movement turned violent when Taliban came to the help of  people of Swat. One and half year of full fledged military operation could not subdue the movement and finally government surrendered and accepted the demand for Islamic Justice system.  

Fears of FATA and PATA people:
In FATA and PATA Islamic justice system in the form of Jirga is operating. The system seems to provide quick resolution of disputes and one reason for the resistance against Pakistani Army, is the fear of the people that like Swat Pakistan will impose British style justice system. People of these area need to assured that we will attempt to do so.

It is reported that theft and other crimes in FATA and PATA area is seldom. No one even thinks of occupying other’s property, given on rent. People fear that once British style system is applied lawlessness will increase as will the cases of violation of property rights. The current level playing field will shift in favour of rich and powerful as in rest of Pakistan. 

Conclusion and recommendation:
While all support must be given to Lawyers movement to make judiciary third pillar of state able to keep in check the Executive, urgent measures must be taken to provide speedy justice to people. If not they will demand scarping of the entire British justice systems as something alien and unsuitable for the country. Before we arrive at that revolutionary stage, I recommend the following:

1. The compromise is to keep the British system for complex cases while Islamic Courts may be allowed to take care of simple commercial and family cases. This will reduce the burden on British Courts and help clear backlog. As a special measures Court premises should be used round the clock in three shifts, just like factories with too much work. Indeed the Courts have too many cases that can not be taken care by the current one shift system. The same Courts could be used by Islamic and British Courts. Appointment of Islamic judges would be required (they will cost lot less)   while traditional judges would be sufficient for the much reduced number of cases coming to them.

2. To help improve house building for rental purpose a special law on US pattern should be enacted which will allow swift foreclosure and eviction of non payers of rent or mortgage payment, without interference from any organ of the state or political party. Such a law will give a big boost to construction as investors and Bankers will pour in money without any fear and soon the huge backlog of housing needs will be cleared. The rate of interest on such financing will become most competitive as in USA. With decent affordable accommodation available, on easy instalments of upto 20 years, in regularised areas people will leave slums and Kachi Abadies. With that the anger of people will ease and violence in the cities will vanish.

3. A combination of Commercial laws of Hong Kong, Singapore, Dubai may be adopted in consultation with businessmen, so that we may have a simplified legal frame which every one can understand without the need for Lawyers. Complex British Laws should be scraped. This will help commerce, trade and encourage foreign investment.

4. At least Rs 20 billion for Legal Aid of common man should be set aside in every budget of the Central and Provincial Governments for the next few years. So that cost of removing the current backlog may be paid on behalf of poor. This allocation may be reduced as the backlog clears.