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Interview

Pakistan president sees Belt and Road as path to poverty relief

Alvi says economy is on mend as money laundering and corruption subside

Pakistani President Arif-ur-Rehman Alvi speaks to the Nikkei Asian Review in Tokyo. (Photo by Shihoko Nakaoka)

TOKYO -- Pakistan's president believes efforts to root out corruption have set the stage for an economic revival in his country, and he is optimistic that both China and Donald Trump's U.S. will play important roles in that brighter future.

President Arif-ur-Rehman Alvi, who spoke to the Nikkei Asian Review while visiting Tokyo for Emperor Naruhito's enthronement ceremony, also expressed hope that Beijing's Belt and Road Initiative will not only bring infrastructure but also help address social issues like poverty.

Pakistan has received considerable aid from countries such as Saudi Arabia, the United Arab Emirates and China, along with a $6 billion bailout package from the International Monetary Fund. Alvi insisted better days lie ahead.

"Four things are very important," he said. "First, money laundering is going out of Pakistan. The second thing is that Pakistan has started fighting against corruption, which discourages foreign investors."

The third key point, he continued, "is the documentation of the economy. Because all the corruption and money laundering were happening, when the government was very poor, this government has insisted on documentation of the economy and bringing more people into the taxpaying net."

"The fourth thing is that we have slashed the major trade deficit."

Pakistan's economy has indeed been showing some bright spots. The trade deficit for the July-September quarter of 2019 shrank by 34.8% on the year. Tax collection for the same period was 13.5% higher.

"Our exports have been increasing slightly but imports, especially luxury goods, have declined. So the trade gap has been reduced," the president said.

Overall, Pakistan remains in a difficult economic situation. Gross domestic product growth for fiscal 2018-2019 came to 3.3%, the lowest in eight years.

But Alvi was adamant that things are looking up. "I think [the entire] situation was improved, having the package from the IMF, and opening doors to cooperation with the Asian Development Bank, World Bank and other funds of Asia." On Monday, the IMF and World Bank provided assurances of continued support in meetings with Pakistani officials.

"Today, capital is available at a very low interest rate in the world, around 1% or so," the president said. "It is very comfortable to repay those loans for developing infrastructure."

To this point, the focus of the infrastructure drive has been the China Pakistan Economic Corridor, or CPEC -- a $50 billion endeavor at the heart of the Belt and Road. This was hailed as a game changer for Pakistan but has also been criticized as an example of "debt-trap diplomacy" by Beijing -- a strategy critics say forces countries that rely on Chinese money to give up other concessions in return.

Alvi, though, is hopeful that the Belt and Road can be about more than just physical infrastructure. "In the first phase, we were looking at energy. Today we have gone to more social-related issues -- poverty alleviation, improvement in education and health care."

He also stressed that warming relations with the U.S. should give Pakistan's economy another boost.

"There is better understanding in Mr. Trump's mind of what is happening in the geopolitical region, and what is a solution in Afghanistan," he said of the American president, arguing that this will lead to more U.S.-Pakistan trade.

"Trump said that we intend to increase bilateral trade to 20 times. That is a very important statement coming from the U.S. president."

On the diplomatic front, too, Alvi sees Islamabad gaining a higher profile. "Recently, Mr. Trump mentioned, Saudi Arabia and Tehran show some inclination for Pakistan to play a role of improving contact and mediation. So Pakistan has become a very big player."

This would build on Pakistan's involvement with the Afghanistan peace process. "Pakistan is already playing a role, encouraging negotiation between the Taliban and the government," Alvi said. "Pakistan has no interest but peace. Pakistan has a role in suggesting mediation to bring them to the table, has a role in future reconstruction."

Even so, Pakistan has struggled to make much diplomatic headway on a high-priority issue of its own: India's decision in August to revoke Article 370 of its constitution, which guaranteed special status to predominantly Muslim Jammu and Kashmir. Despite loud appeals from Pakistan, only a few countries voiced concerns.

"Besides ethics, moral and legal issues, countries look at market," Alvi said. "India is a big market, so these arguments took a back seat."

He continued: "I think what Pakistan needs to do is to let the world understand that promises, the United Nations Security Council resolutions [which underline the Kashmir people's right to self-determination], were made by anybody else but the Indian government itself."

Meanwhile, Pakistan aims to keep building up its economy with the help of international partners. Japan is also keen to assist Pakistan with developing infrastructure and human resources while enhancing security.

The president hopes to expand trade with Japan, ultimately through a free trade agreement but even before a deal is sealed. He pointed to the way Bangladesh benefits from special preferential tariff treatment by Japan and said he would talk with Prime Minister Shinzo Abe about a similar arrangement.

"We should be able to import Japanese machinery with no duty, before the FTA happens," he said.

As for examples of Japanese infrastructure investment, he pointed to the revival of the Karachi circular railway project.

"The security situation made the movement of Japanese investors to Pakistan difficult," Alvi said. "But now the security has much improved."

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