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Pakistani Prime Minister Shahid Khaqan Abbasi speaks to the Nikkei Asian Review.
Interview

Pakistan PM brushes off worries about Chinese 'debt trap'

Abbasi stresses broad economic benefits of joint infrastructure projects

TETSUYA JITSU, Nikkei senior staff writer | China

DAVOS, Switzerland -- Pakistan sees little reason to fear debts arising from its massive infrastructure projects with China, the South Asian country's leader said in an interview on the sidelines of the annual meeting of the World Economic Forum.

Prime Minister Shahid Khaqan Abbasi noted that when it comes to the ambitious China-Pakistan Economic Corridor project, an independent body will shoulder the loans in most cases, meaning the national debt would not necessarily increase.

"I don't think it is a correct perception," Abbasi said of the debt concern, speaking with the Nikkei Asian Review in Davos, Switzerland. He stressed that the corridor project has two core concepts -- financial sustainability and environmental conservation. "All projects are basically done on these two principles," he said.

Infrastructure development in the corridor coupled with enhanced public security would help raise international trust in Pakistan, giving foreign companies -- not just Chinese ones -- the confidence to invest, the prime minister said.

Abbasi also said he expects economic benefits from more efficient power generation and lower-cost transportation, thanks to road improvements. The development of Gwadar Port in Pakistan will also extend benefits to neighboring countries in Central Asia, he said.

China has positioned the corridor as a flagship project of its Belt and Road Initiative. The plan is to build roads, railways and energy infrastructure across Pakistan, linking Kashgar in China's western Xinjiang region with the Arabian Sea port of Gwadar.

The Chinese side is covering most of the estimated $62 billion cost. Beijing could conceivably use this to pressure Pakistan, especially if the country struggles to repay its debts.

We are partners in the war against terror

Pakistani Prime Minister Shahid Khaqan Abbasi

Sri Lanka, which saw its own debts to China swell, in December granted Chinese companies a 99-year lease on the port of Hambantota by converting debt to equity. Some worry Pakistan will fall into a similar "debt trap."

The administration of U.S. President Donald Trump has decided to halt military assistance to Pakistan, accusing the government of being uncooperative in rooting out terrorists. Abbasi sees things differently.

"Our position is clear," he said. "We are partners in the war against terror. The result of the war against terror is evident. There are no safe havens for terrorists anymore."

On Pakistan's real economic growth for fiscal 2017, which runs through June, Abbasi predicted the rate will be higher than in fiscal 2016, when the economy expanded by 5.3% -- the quickest pace in 10 years.

"Exports have increased significantly for the last six months," Abbasi said. "Despite devaluation and an increase in oil prices, inflation remains controllable. We should be able to get close to 6%."

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