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International relations

APEC to add 'debt trap' concerns to investment guidebook

Proposed revision to require fiscal sustainability in face of Chinese investment

China-backed infrastructure projects have left some Asian countries with more debt than they can handle.   © Reuters

SINGAPORE -- Japan is leading an effort within the Asia-Pacific Economic Cooperation forum to set new rules on infrastructure development in the region that take into consideration financial sustainability and transparency to prevent borrower countries from falling into a debt trap.

Japan and several other members will propose updating the "APEC Guidebook on Quality of Infrastructure Development and Investment," which the 21 Pacific Rim nation-body issued four years ago.

APEC ministers will affirm the revision at their Thursday meeting in Papua New Guinea. The bloc's leaders are expected to endorse the idea of promoting high-quality infrastructure development at a summit on Sunday.

The current guidebook focuses on the life cycle cost of an infrastructure project, including performance and durability, as well as the impact on the environment, and elements such as safety and maintainability.

The new version is expected to also touch on the importance of ensuring projects make financial sense.

The update comes in light of China's aggressive investment under its Belt and Road infrastructure initiative, which has not always taken into account the host country's ability to afford the projects. In 2017, Sri Lanka ended up handing over its strategic Hambantota Port to a Chinese state-run company on a 99-year lease to help pay its debt to Beijing.

The Group of Seven previously issued a set of principles for infrastructure investment at their 2017 summit, but no similar document exists that involves China and major Southeast Asian countries. APEC members hope that shared expectations will help minimize any investment-related problems within the bloc.

Developing Asia will need to invest $26 trillion in infrastructure between 2016 and 2030 in order to maintain its growth momentum, according to the Asian Development Bank.

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