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Property Rights:Reforms and Challenges in Pakistan Ali Salman
Economic Freedom Network AsiaManila September 2008
Property Rights: Reforms and Challenges in Pakistan
2
Motivation
To understand history of reforms and current challenges in private property rights in Pakistan
To explain existing situation in the light of De Soto’s framework
To identify a road map of investigative research
Property Rights: Reforms and Challenges in Pakistan
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Main Results
Pakistan has remained a heavily under-capitalized country due to Information Failure Legal Failure Political Failure Limited access to capital
PROPERTY RIGHTS
Property Rights: Reforms and Challenges in Pakistan
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Methodology
Based primarily on secondary sources Review of past reports and articles Some Interviews
Property Rights: Reforms and Challenges in Pakistan
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THEORETICAL FRAMEWORK[DE SOTO] PROPERTY RIGHTS
Ownership of Legal Title of an Asset Process to convert Asset into capital
MYSTERIES Information Capital U.S. History Political Failure Legal Failure
Property Rights: Reforms and Challenges in Pakistan
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MYSTERIES EXPLORED
INFORMATION: the case of 9.3 trillion dollars …
CAPITAL: ownership is the iceberg… POLITICAL AWARENESS: taking
stakeholders on board… U.S. HISTORY: long struggle involving
judiciary and politicians… LEGAL FAILURE: merging ‘social contract’
into law…
Property Rights: Reforms and Challenges in Pakistan
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Property Rights in Pakistan
Reforms and
Challenges
Property Rights: Reforms and Challenges in Pakistan
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Mystery of Information
World Bank Project worth USD 45 million to improve: Land records service delivery Tenure security Operations of land market
Computerization without structural reforms does not alter the relationship
Facts finding about millions of small and informal enterprises remains a very big challenge
Property Rights: Reforms and Challenges in Pakistan
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Mystery of Capital
The only instrument used by the government to expand formal sector is by some tax breaks and tax incentives. Pay 2% and white your assets!
Size of ‘extra-legal’ economy could at least be 50% and it grows 3% faster than official economy!
Challenge is to win the trust of small enterprises for access to finance…
Property Rights: Reforms and Challenges in Pakistan
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Mystery of Political Awareness Transfer of assets to the poor without any
political strategy is counter productive Transfer to landless farmers (haris)
A violent struggle over land tenure and tenancy issues between Military and farmers
Property Rights: Reforms and Challenges in Pakistan
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Mystery of Legal Failure
Western Union money transfer is an example of a ‘social contract’ building upon efficiency of hawala system and transparency of banking system.
USD 5 billion annual flow through informal channels, i.e. 130% of official flow.
Challenge is to identify an efficient and cost effective method for transfer of money
Property Rights: Reforms and Challenges in Pakistan
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Recommendations: Fact Finding Impact of land transfer to landless farmers Potential wealth of small and informal
enterprises Study of an ‘illegitimate’ law and projected
effect of reforms Evaluation of Land Record Information
Systems Comparison of money transfer through legal
and illegal means