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The Unbroken Line of Law [2005] ADBLPRes 16 (1 May 2005)

The Unbroken Line of Law

ADB Review [ May 2005 ]

Creating the conditions for economic growth and poverty reduction necessitates legal reforms that take into account all aspects of the rule of law

By Hamid Sharif, (hsharif@adb.org)
Assistant General Counsel

The Asian Development Bank (ADB)’s focus on law and policy reform raises some interesting questions. Why, as an international finance institution, charged by its Charter to be singularly devoted to economic development, do we at ADB care about justice? What price does injustice inflict on the body of an economy, even if we were blinded to the costs inflicted on its soul? How does poverty reduction, the overarching goal of our institution, fare in the face of shifting levels of injustice? Where, when, and how does the seemingly intangible notion of justice become a tangible and an empowering force in the fight against poverty?

The nexus between law and economic progress is best established in the literature of new institutional economics. It empirically demonstrates that the predictability of outcomes and the efficiency in the administration of justice have a veritable impact in attracting investment and fueling economic growth as well as in improving the general management of an economy.

In other words, establishment of the rule of law, at least for resolving disputes relating to contractual or property rights, helps foster growth.

Even the indefatigable dean of free enterprise, the Nobel laureate Milton Friedman, has given precedence to law over free enterprise. In his preface to the Economic Freedom of the World: 2002 Annual Report, authored by James Gwartney and Robert Lawson, Friedman remarked in the context of transition countries that he was actually wrong in insisting on the mantra “privatize, privatize, privatize,” when, in fact, “… the rule of law (was) probably more basic than privatization.”

Much of the recent work on legal and judicial reform has been driven by the desire to create an enabling legal environment for market economies. It is, therefore, not surprising that many of these projects focus on the reform of commercial and business laws, or systems of dispute resolution.

Paradoxically, what seems to have been less appreciated—or at least less formally acknowledged—is the link between the criminal justice system and economic development.

If you accept that human lives are both the end and the means of economic development, securing citizens and their assets in their daily environment would seem critical for any measure of economic development.

Today, ADB is one of the few international finance institutions directly involved in supporting reforms in the criminal justice system and law enforcement organizations. Our experience so far emphatically reinforces the proposition that reform of the criminal justice system is fundamental to economic development.

Consider this fact: the police forces of many of ADB’s developing member countries (DMCs) have inherited a system of financing from the colonial era where minimal budgets were allocated for operating police stations. For an average police station in many settings, the annual allocation for nonsalary expenditures would not be much more than the equivalent of $100, while a single investigation of a major case could easily cost many times the annual budget allocation for a whole police station. In such a context, how do investigations get financed? What are the odds here for poor people to protect their entitlements and interests?

It is now widely acknowledged that unfettered discretion in the hands of public officials fosters corrupt practices. Yet, how do you limit the scope of discretion? In Bangladesh as in Pakistan, and in many other DMCs, the only forensic capacity an average police station will have is limited to the ability to distinguish between human and animal blood—the rest belongs to the domain of judgment, or what we might call discretion.

The phenomenal rise in private security forces across our region, guarding the lives and assets claimed by those who employ them, may boost the gross national product (GNP) figures but it also hints at a disturbing trend toward the conversion of public safety—an essential public good— into a private commodity.

The economic costs are most severe in such circumstances among small traders who peddle their goods on sidewalks and shops, the truck operator who must ride through the night to make his delivery, and others like them, for they meet their private toll collectors along the way and the tolls must be paid. And the cost is passed on to citizens.

Tackling the Whole System

We in the development community often talk about entry points and emphasize the importance of the right entry point to make a difference. The choice of the entry point may vary from one context to another. But our experience so far in pursuit of judicial and legal reforms makes one thing very clear: irrespective of the particular entry point, one must tackle the whole system.

You can begin your work with the police, or the prosecution, or the judiciary but, ultimately, each element of the system must mesh together to make it all work. There has to be a consistency in approach, purpose, and means across the system. The judiciary cannot function effectively if the state structure does not grant its independence.

But the independence of the judiciary without commensurate accountability runs the risk of being irresponsible and creating its own tyranny. Similarly, a vigorous public prosecution is less meaningful if the criminal investigation process is tainted.

ADB’s flagship program in judicial reform is its continuing support to the Government of Pakistan under the Access to Justice Program (AJP). More than $350 million has been committed for a program that in the initial phase addresses the needs of the whole system.

It is perhaps too early to draw final conclusions, but there are already some remarkable results and lessons learned (see Justice for All).

Under the AJP, considerable progress has been made in improving the enabling environment for justice.

The Government of Pakistan has also taken the bold step of dedicating $25 million for an access to justice development fund that is finally getting off the ground. The annual income of this fund will be available to subordinate courts for improving service delivery to citizens, and it will also be used to support subfunds for legal empowerment and improving legal education.

Such success rarely comes easily and without considerable cost. The temptation often is to find options that are inexpensive and affect large numbers of people—the oral rehydration therapy equivalent, if you will, of justice.

The growing affection and even romanticism among many quarters in the informal (extra) systems, such as alternative dispute resolution, spring from such a perception of it. Yet, mounting evidence suggests that it can be a dangerous remedy to a difficult problem.

Informal dispute resolution mechanisms, which are seldom subject to judicial review by the formal system, can no doubt provide speedy resolution of a dispute and at an impressively low cost. Yet the alternative dispute resolution often fails in delivering the fundamental objective of justice.

To the extent the informal dispute resolution systems are captured by local elites, they are often inherently gender- and classbiased, and sanctions they impose may not withstand the minimum expectations of human decency. Informal dispute resolution works best under the shadow of a robust formal system. Therefore, in our quest for justice, it is important that we stay focused on the ultimate objective of justice and make serious investments in strengthening a formal system rather than be blindsided by the mirage of rapid solutions at low cost