The World Justice Project (WJP) released the 2024 Rule of Law Index for 142 countries. In this edition, Pakistan is ranked 129th out of 142 nations overall, 5th among 6 South Asian nations, and 30th out of 38 lower-middle-income countries in terms of the Rule of Law. The Rule of Law Index operates on a scale from 0 to 1, where 1 represents optimal compliance with the rule of law and 0 indicates minimal adherence. From 2014 to 2024, the overall score for the Rule of Law Index has stagnated at 0.39, which falls short of satisfactory. In 2014, a World Justice Project report ranked Pakistan 96th out of 99 countries for adherence to the rule of law. By 2024, Pakistan had fallen to 129th place among 142 nations. Throughout this period, Pakistan consistently underperformed across all sub-indices related to the rule of law. The country’s performance dropped by at least 30 positions in several sub-indices, except in the open government index where the decline was less marked, moving from 95th to 106th. The most dramatic decline occurred in public order and personal security, where Pakistan dropped from 99th to an alarming 140th position. Only Mali and Nigeria ranked lower in terms of law and order and security. Even Afghanistan, with its turbulent history of conflict and recent emergence from the influence of US and allied forces, surpasses Pakistan in public order and personal security. The economic fallout from a weakening rule of law is starkly evident when examining foreign direct investment (FDI) flows. Over the span from 2014 to 2023, Pakistan’s FDI tally stood at a mere $20.087 billion – a sum that starkly contrasts with its South Asian neighbours. India, for instance, attracted a colossal $442.84 billion, while Bangladesh slightly edged out Pakistan with $20.11 billion. This disparity underscores a fundamental investment principle: capital gravitates towards stability. The erosion of the rule of law is not merely a legal or political issue; it is a formidable barrier to FDI. To grasp how capital is drawn to stability, let’s consider Singapore’s example. Renowned for its rigorous adherence to legal norms, Singapore ranked 10th among 99 countries in the rule of law index in 2014 and held strong at 16th out of 142 by 2024. This unwavering commitment to law and order has placed Singapore in the esteemed 90th percentile for more than a decade. The impact on its economic landscape is profound; over the past decade, Singapore has attracted a staggering $1,036 billion in FDI, an amount 52 times greater than Pakistan’s FDI. This stark contrast underscores how robust legal frameworks fuel investor confidence and economic prosperity, offering a sharp juxtaposition to nations where diminishing rule of law repels potential investment. Over the past decade, Singapore has witnessed a formidable economic ascent, fueled by a robust legal framework and a surge in FDI. For instance, Singapore’s real GDP per capita rocketed from $57,564 in 2014 to an impressive $84,734 by 2023. Meanwhile, Pakistan’s economic story presents a stark contrast; its real GDP per capita nudged only marginally from $1,303.2 in 2014 to $1,407 in the same period. The critical role of FDI in economic narratives is irrefutable. It serves as a crucial artery in the body of economic growth, pulsating capital, technology, and expertise into host countries. It stimulates job creation and boosts economic diversification which shapes a nation’s economic destiny. The erosion of the rule of law is not merely a legal or political issue; it is a formidable barrier to FDI. Investors are drawn to environments characterized by stability, clarity in legal frameworks, and consistent enforcement of laws. When the predictability of legal norms erodes, it injects a significant level of uncertainty into the business landscape, intensifying the risks tied to corporate ventures. A compromised legal system tends to escalate instances of corruption and arbitrary decision-making, which can lead to extortion, biased treatment, and an uptick in operational costs for businesses. Additionally, inadequate protection of property rights and inefficient judicial processes in the host country deter investors who fear that they may not be able to safeguard their investments or effectively resolve disputes. Such concerns about the impartiality, efficiency, or fairness of a host country’s judicial system often compel foreign companies to consider resolving legal disputes in courts outside of the country where they are investing. This inclination to seek justice abroad is usually associated with the higher costs of incorporating international arbitration clauses into contracts. Ultimately, this practice discourages FDI by leading investors to fear potential complications and financial losses, undermining confidence in the local legal environment. To address Pakistan’s declining rule of law and attract more FDI, the government should prioritize comprehensive legal reforms aimed at enhancing judicial efficiency and transparency. Strengthening government accountability and enforcing anti-corruption measures will be critical to restoring investor confidence. Investing in the judicial system to expedite processes and improve the enforcement of existing laws can further reassure investors. Additionally, promoting open government initiatives will enhance transparency and help rebuild Pakistan’s international image. Enhancing political stability is also essential, as it underpins all other reforms by providing a predictable environment that is critical for investment decisions. Finally, by improving public safety and security measures, Pakistan can create a more stable environment conducive to investment, thereby increasing economic opportunities. The writer is a Lahore-based economist working at the Centre of Economic Planning and Development (CEPD), Minhaj University.