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Asia Stream: Exclusive -- The Toughest Job in Asia

When Bilawal Bhutto-Zardari became Pakistan's youngest foreign minister six months ago, the nuclear-armed country stood on the brink. It still does.

NEW YORK -- Welcome to Nikkei Asia's podcast: Asia Stream.

Every episode, Asia Stream tracks and analyzes the Indo-Pacific with a mix of expert interviews and original reporting by our correspondents from across the globe.

Listen on: Apple Podcasts | Spotify | YouTube

This episode, we interview Pakistani Foreign Minister Bilawal Bhutto-Zardari about the challenges his country is facing, including terrorism, a heavy debt burden, the rivalry with India, and the worst environmental disaster Pakistan has ever experienced. We also compare the approaches that Asia's central banks are taking to deal with this difficult economic moment.

Waj Khan talks to Bhutto-Zardari, and then Alice French interviews reporter Mitsuru Obe about the central banks' tactics. Asia Stream is hosted by Wajahat S. Khan, our digital editor and executive producer, and produced by Monica Hunter-Hart, with a regular Tokyo Dispatch segment by Alice French.

Related to this episode:

Pakistan foreign minister: China debt is price of development, by Wajahat S. Khan

'The country is broken' - Pakistan's climate minister urges justice, by Wajahat S. Khan

The money blizzard: Asia's central banks reckon with the aftermath of COVID-19, by Mitsuru Obe, Kim Jaewon and Francesca Regalado


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WAJ KHAN, HOST: Hello and welcome to Asia Stream, where we track, report and analyze the issues and interests of the world's largest region.

I am Waj Khan, Nikkei Asia's digital editor, here in New York City.

Today's episode -- The Toughest Job in Asia.

When Bilawal Bhutto-Zardari, the scion of assassinated Prime Minister Benazir Bhutto and former President Asif Zardari, took over as Pakistan's youngest foreign minister in April, the nuclear-armed Islamic Republic, which is also the world's fifth-largest nation, stood on the brink -- of economic default, diplomatic isolation and political chaos.

The country of 220 million was overburdened by loans from its main ally, China, and faced hard negotiations in its bid for support from the International Monetary Fund.

It was being outperformed in most sectors by archrival India and was beset by terrorist threats emanating from Afghanistan.

Moreover, the U.S. -- its on-again, off-again partner -- had cut it off from most assistance, and on top of that, Washington was being blamed by ousted Prime Minister Imran Khan for orchestrating "regime change" -- a charge that had triggered an unprecedented wave of anti-Americanism and protests across the country.

Today, the picture remains bleak, especially after recent catastrophic flooding -- the worst environmental disaster in the country's history.

These are the challenges facing Foreign Minister Bilawal Bhutto-Zardari, who we've obtained for an exclusive interview in this episode. Bhutto-Zardari is the chairman of the left-leaning Pakistan People's Party, and you'll even hear him admit that he's signed up for a brutally difficult gig.

In the coalition government -- which wields little control over parliament and is stitched together by Pakistan's praetorian military-intelligence apparatus -- Bhutto-Zardari has been tasked with pivoting: back to America, back to solvency, and away from the activist Islamist populism that former Prime Minister Imran Khan had pursued.

This is no simple feat. As a bitter political feud between Khan and pretty much everyone else in the Pakistani political establishment has polarized the state, it's also paralyzed the economy: The rupee has tumbled to its lowest value, the stock market has nosedived, and the country remains on life support at the IMF, with its 23rd bailout underway.

Meanwhile, a third of Pakistan's landmass -- an area larger than the size of the entire United Kingdom -- is underwater, and 33 million people -- more than the population of Australia -- have been rendered homeless by the floods. This as Khan and his millions of followers are demanding snap elections.

Mr. Bhutto-Zardari may just have the toughest job in Asia: trying to repair ties with an America that feels betrayed after the loss of Afghanistan; trying to get relief from a China that isn't doing too well itself; trying to get the Taliban next door to control terrorists from not crossing over; trying to outmaneuver archrival India, which seems to be better at pretty much everything it does; and most importantly, trying to stay in power.

Bhutto-Zardari recently toured the U.S., spending a week in New York at the United Nations and another in Washington.

That's where Asia Stream caught up with the 34-year-old Oxford graduate.

And that's our show today.

You're listening to the sound of Asia, streaming in your ear.

From Nikkei Asia, this is Asia Stream.

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KHAN: All right! It's so good to be back in our New York studio! Asia Stream was off last week because I was off, reporting in D.C., which I must confess was warmer than Gotham, but I have returned a victor, with what is an exclusive interview with Pakistan's foreign minister.

He's an interesting character, Bilawal Bhutto-Zardari: he is the second foreign minister in his family. His grandfather Zulfiqar Ali Bhutto served in the same role before he became Pakistan's prime minister and was then executed. His mom, Benazir Bhutto, was also PM -- by the way, I've never put this on the record before -- she had an interview scheduled with me back in 2007 but was assassinated just a couple of days before we could meet. His dad, former President Asif Ali Zardari, is one of the wiliest political operators you will ever meet. I've also interviewed him.

But none of those past interactions were for Asia Stream, and we're excited to share this recording with you. Be sure to stick around afterwards for our regular Tokyo Dispatch at the tail of the show. This one's about Asia's central banks and how they're all struggling, much like the rest of us.

But without further ado, here's my conversation with Bilawal Bhutto-Zardari.


KHAN: All right, Mr. Foreign Minister, thank you for doing this. You're the youngest foreign minister in the country's 75-year history. And yet you are beset by a set of problems, which are unparalleled. You have a breakdown of what was once an alliance, which you're trying to repair here in the United States. You are caught between a rock and a hard place with Beijing. And you are next to what you call a Hindu-supremacist neighbor in India. You also now have the largest natural catastrophe in the country's history on your hands. The only person who gets close to this sort of portfolio of problems was your late grandfather, which around 1971 had similar issues, if not the same, he was dealing with. How does it feel to fill those shoes?

BILAWAL BHUTTO-ZARDARI, FOREIGN MINISTER: I don't know about filling those shoes. And I don't know if anyone can fill those shoes. But obviously, when we took over it's, it's been an incredibly challenging time. I think being foreign minister of Pakistan is probably anyway one of the most challenging foreign ministries to guide in the world. Not because -- I mean, our team is fantastic. We probably have the best diplomats of anywhere. But the challenges are as such. What we've done sort of from day one has been emphasizing, on engagement, positive engagement. And luckily, those that our consistent engagement has been beginning to bear fruit with here in the context of our relations, ever-expanding relations with the United States, but elsewhere as well.

KHAN: Besides climate, which you say is the only problem on your agenda these days, when you wake up on regular mornings, let's say before the floods, and you were beset by the U.S. versus China versus India, what was your, if I may ask, your Twitter-sized solution set to the three? Which is the bigger problem?

BHUTTO-ZARDARI: I don't know if there's a Twitter-sized solution, but thank you for reminding me. OK, so obviously, engagement is key. But with the floods and the devastation that they have caused, we've amped up our conversations with our partners, with international institutions. Because of the desperation of the situation back home, the scale of the tragedy has made our job all the more important. Before climate, as you know, the biggest challenge that Pakistan was facing was the economic difficulties. And we were all playing our role to ensure that we could help address that within our contracts at the foreign office, we're working to enhance trade relations with all countries. Also the United States. And actually, the initial purpose of all our engagements, and this was supposed to be the conclusion of that, was the fact that we are now having conversations of expanding trade relations between Pakistan and the United States -- Pakistan and other countries, but since we're here, I'm talking about the United States -- in areas such as tech, energy, agriculture, health and a whole host of fields. We've been working on GSP+ [tariff-slashing arrangement for sustainable development and good governance]. We're working on getting us off FATF [the Financial Action Task Force's list of countries that scarcely combat money laundering and terrorism financing]. Do whatever we can really to improve the economic environment. And obviously, the finance team is working incredibly hard with dealing with the IMF itself.

KHAN: But, Foreign Minister, normal foreign ministers from normal countries don't have such a checklist. So to really filter it down, to distill it, right for our audiences: What's the top three things on your, on your agenda on a given day?

BHUTTO-ZARDARI: I think, I think that all foreign ministers ultimately have this checklist now. Everybody's facing economic difficulties, everybody prioritizes economic engagement as part of their for -- as foreign relations, particularly post-COVID, where everybody took an economic hit, and the consequences of the Ukraine war and the sanctions over there, resulting in economic complications for everyone across the world. So it's become front and center of, of everyone's foreign policy. Otherwise, literally, it's been four months. In those four months, I'm sure if you go back to six months [to the Khan administration], our relations were strained in many places. So it's taken not only, sort of, phone calls, visits and engagements and delivering on the ground, to allow sort of a confidence to build between many of our bilateral relations.

KHAN: Right. Speaking of dependencies and bilateralism. There is, you asked this, but I'm going to ask in a different way. 30% of Pakistan's external debt is owed to China. Now your party has led the way for, for decades now in promoting -- those places -- the idea is, the idea is that, what is your China debt restructuring plan? Because you need one, sir. Now the Chinese don't do debt restructuring. They don't do debt relief. But yet in this case, it's required. And your party is specially placed because of its history with the, with the Communist Party of China, which goes all the way back to the '60s and beyond, in fact. Do you have a China plan for debt restructuring?

BHUTTO-ZARDARI: As far as Pakistan and China's relations are concerned, they're called "all-weather friends" for a reason. Because they've been all-weather friends throughout our history. Our party's contribution is absolutely there. As far as de -- debt restructuring is concerned, I'm not talking about this restructuring with anyone at the moment. I --

KHAN: Don't you think you need to?

BHUTTO-ZARDARI: We've talked about -- maybe we've talked about debt, what do you call it, deferments. We haven't, I haven't asked the U.S. or I haven't asked anybody about restructuring. We're still waiting on our damage needs assessment to be fully done before we have a complicated plan. But that will be an if, right? And before I get that if, I'm not going to comment on debt restructuring. But as far as Pakistan-China relations are concerned, particularly here in the United States, I hear this 30% thrown out a lot. Well, how much investment is done in Pakistan? How much has China invested in Pakistan? How much has China and Pakistan built together? Whether it's our communication network, whether it's the advances in our energy, infrastructure, whether it's in it, sort of in our ports. Obviously, when you do development to that scale, there is debt, and I'd really like to ask countries like the United States, how much of their debt is due to China? Right? This is the way of the world. If I, if I go back to 2010/2011 floods, I -- to restructure, rehabilitate, rebuild from there, we took debt from the World Bank, from the Asian Development Bank. Now, I can't just go to people that X, Y and Z approve of to get my debt. I am secure and comfortable and confident in the Pakistani-China relationship. I do not need anyone to, to, to become a third party to that. We'll have our own conversations. And every time, Pakistan and China, whenever we face difficulties, we've been there for each other. And I'm sure that will happen again. But I will be asking or talking to China myself as a foreign minister of Pakistan on behalf of my country. And in the context of our conversation, whatever comes out, I'll surely let you know. But I think this preemptive concern that we see at some of the think tanks is a bit unnecessary.

KHAN: Do -- your reset, or your attempted reset, while you're here to repair drives in Washington -- do you think Beijing is watching it warily? Does Beijing have reason to worry about Bilawal Bhutto-Zardari here in Washington?

BHUTTO-ZARDARI: I think that we are confident, as I just said we're confident in our relationship with China, and China's confidence in me. And I honestly believe it doesn't serve our purposes, it doesn't serve America's purpose, it doesn't serve China's purpose, if Pakistan were to play a role of a divider or divisive force. We have in the past been a bridge: at the time that diplomatic relations were being established between Pakistan and China, the People's Party, the Foreign Ministry, and Pakistan played an incredible role. And even today, if I see ourselves or Pakistan or myself playing any role between the two great powers, I would hope it would be that of a bridge.

KHAN: All right. Last couple of questions. You've been doing some maneuvering as far as India is concerned, you started playing the Ukraine card. You've said it a couple of times on this trip, one has noticed it, that every time you mention India's unilateral annexations, measures and maneuvers since August 2019 in occupied Jammu and Kashmir, you started pairing that quite in a wily manner with what's happening in Ukraine. Do you have an India plan here beyond asking them to step back, as you just did? Beyond asking India to step back and roll back its annexation and laws in Kashmir? Do you have a larger plan beyond this?

BHUTTO-ZARDARI: So I think that you can have a rational conversation with rational players. It's very difficult to have a rational conversation with irrational players. And people who are -- let me repeat the thought. The impression that we've all developed, or at least we've developed in that context, is that Modi's India doesn't like the Muslims of their own country. They don't treat them particularly well. They're not treating the Muslims of Kashmir particularly well. And that leaves us in a particularly difficult position because you're dealing with someone who, the impression we get on the basis of our faith, has a certain approach to that. We have always, in the past, took the political risk with the confidence or the hope that that political risk would be reciprocated by our neighbors. I hope to be proved wrong. And I hope that there's a different reality in India, they are more interested in engagement, in living in peace with their neighbors than we, than the perception that we have. But their actions and conduct between, in Jammu and Kashmir has made, sort of, has made people like us who did hope for peaceful relations with our neighbors, to lose that hope a little bit.

KHAN: But, Foreign Minister, this is now the world's fifth-largest economy. They're a $3.3 trillion empire now. Fine, they're Hindu supremacists, but you're gonna deal with them, right?

BHUTTO-ZARDARI: You can be rich and evil at the same time. That doesn't change the realities.

KHAN: That's gonna be my headline.

BHUTTO-ZARDARI: Oh dear. I don't -- I think "evil" isn't a word that you shouldn't, you should throw about, fair enough. But the actions that have taken, been taken over there are obviously something that is objectionable from a human rights angle, and I hope that we get to the point where we can address the concerns of Kashmir. Because the engagement between our two countries -- imagine the unlocked economic potential. Not only for Pakistan, but for India. As much as they're the fifth-richest country, they'd like to be the fourth-richest country, right And the economic potential that will get unlocked one day, if not under this Hindu-supremacist regime, but under some other formulation, and where Pakistan is not only trading with India, but through a peaceful, stable, prosperous Afghanistan with Central Asia, a secure, a sort of settled Iran on that side, and access to the warm waters, I think that we're positioned not only to have exponential economic benefits for our people, but for all our neighbors.

KHAN: Last question. The TTP. I know you've been quite -- you yourself have said you're a hawk as far as the Tehrik-i-Taliban Pakistan, the Pakistani Taliban, even the Afghan Taliban are concerned. You've admitted it. You seem to be a skeptic standing out on the sidelines as the rest of your administration is involved deeply in talks with the TTP. There is now a mechanism in place, there's a piece at play now. But my question really, sir, is that the TTP, from what we understand of it, killed your mother. How does it make you feel that your government is at terms with these people at this time?

BHUTTO-ZARDARI: So as far as that that Tehrik-i-Taliban Pakistan are concerned, obviously we have strong views about the Tehrik-i-Taliban Pakistan. Baitullah Mehsud was killed in a drone attack. Then we had our own South Waziristan operation when we were in power, North Waziristan operation when Mian Sahib was in power. We broke the backs of this organization. They could not conduct terrorist activities within Pakistan at the same scale, at the same pace, in the same way that they had before. Before our administration came in, there was a peace attempt, or a dialogue attempt, that took place, that we maintain took place behind the backs of parliament, and without parliament being taken on board. No such dialogue could have legit -- legitimacy or the staying power necessary for one that could actually truly achieve peace. As a result of these concerns, for the first time, the negotiations with the TTP were brought before parliament. In addition to that, our demand was that a parliamentary committee oversee such talks. I'm not sure the status of talks as we speak right now, because I believe quite a few changes have happened. I hope that our suspicions as far as sort of our past experience with dialogue not working out, I hope that sort of improves from there, and we reach an agreement or an understanding where we live in peace, where people come back and accept Pakistan's constitution, our way of life and live peacefully within Pakistan. I'm not optimistic that that necessarily will be the outcome. But, you know, the process is there and I can hope.

Your government conducted -- not your government, but the military conducted airstrikes earlier this summer inside of Afghan territory to push the TTP and other assets back. Would you, do you condone that?

BHUTTO-ZARDARI: I think that --

KHAN: Would you do it again?

BHUTTO-ZARDARI: Look, terrorism has to be a red line. People who conduct violence within Pakistan, violence against Pakistani citizens and violence against Pakistani armed forces, will have to answer for it. We prefer that the TTA take action against terrorist groups on their own, in their own soil. I, as you said, there was a strike that took place. And I'm looking at my ambassador, because I'm not exactly sure what the official policy on the issue is. But I would say that we should first encourage that the interim government within Afghanistan take action themselves. If they do not do that, and there are groups there that we know that continue to conduct attacks on Pakistani armed forces or Pakistani civilians, then obviously, ultimately, a red line is crossed so many times that it forces a reaction, which you saw in the form of those strikes. Now that they're giving engagement a shot, let's see how it works out. If we managed to reach a peaceful settlement, all well and good. But Pakistan's experience has shown that when we have drawn a red line, established the reach of this state, unlike in other areas, we've succeeded. And that may be the path going forward.


KHAN: We go now to Alice French, our deputy Big Story editor, for this week's Tokyo Dispatch on how Asia's central banks are dealing with economic crisis.

ALICE FRENCH, CORRESPONDENT: Konnichiwa! And welcome to the Tokyo Dispatch, where I send regular updates from the narrow streets and neon lights of Tokyo, home to Nikkei HQ and hub for our East Asia coverage.

This week's Big Story looks at the diverging policies of Asia's central banks, in response to the worldwide post-COVID economic downturn. The money that many countries borrowed to weather the pandemic is now coming back to haunt governments across the region -- with economic crises unfolding in Sri Lanka, Laos, Pakistan and elsewhere.

Higher-income countries are struggling, too, like Japan, where the yen fell to a 24-year low of 145 to the dollar at the end of September. Consumers are feeling the pinch, with prices of everyday items such as fuel, utilities and even ramen noticeably increasing and wages not keeping up.

But despite the common crisis facing countries across Asia -- from China to Thailand -- governments have shown vastly differing approaches to dealing with post-pandemic economic challenges. Mitsuru Obe, one of our Tokyo correspondents, compares and contrasts the approaches of a range of Asian central banks in this week's story, with some help from our South Korean correspondent Kim Jaewon and our Bangkok reporter Francesca Regalado.

I caught up with Mitsuru for a sneak peak at what the story has in store.

So, let's talk first about the Bank of Japan, which has received a lot of attention in recent months for its rather unconventional approach to inflation. How has Japan been dealing with the economic downturn, and what do you think are the main reasons behind its tactics?

MITSURU OBE, REPORTER: It's not just Japan. Countries across Asia are experiencing inflation, and Japan is not an exception. But a business hub being as aggressive in raising prices as in the United States is, so people don't necessarily feel it as much as in another country or in Europe or in the United States. So BOJ has used that as an excuse for keeping rates at zero, or keeping its policy stimulative at a time when the global economy is slowing sharply. So that makes sense from the Japanese point of view. But the weak-yen policy has repercussions for other economies, especially Asia. So you could raise a question about why Japan doesn't think a bit more about other countries, you know, the impact of your policy on other countries. But Japan's really insisting on its monetary policy sovereignty. So their argument is that they are not emerging economies, or they don't have to follow every step taken by the Fed American central bank. It wants to decide its policy independently. So they decide to keep the rates low, even though the yen has weakened 20% so far. And you wonder whether that really was a sacrifice, you know, the pol -- monetary policy independence, whether it's really worth the sacrifice, considering the sharp yen depreciation. apparently, Japan believe so. Also, having already publicly committed to this loose monetary policy, the Bank of Japan find it difficult to change right now.

FRENCH: Your story also goes into the situation in China, where the central bank continues to ease its monetary policy despite tightening by most banks across the rest of the region. How has this affected the financial status of ordinary people in China? And in particular, what has been the effect on the property market?

OBE: China has been easing its monetary policy, but it has been very gradual. It hasn't relied on the monetary policy for stimulating the economy as much as the United States have, or the Japan has. You know, the, its main policy rate has been reduced only slightly, but they are changes support economy, the country is still feeling the effects of the massive stimulus they implemented after the Lehman crisis, which is a decade, you know, it's more than a decade ago. 2009. But at the time, and much of that spending, stimulus spending was done by, not by the central government, actually, by local governments and the corporate sector. And it left a huge amount of debt. And the country, now they're trying to work out that legacy of the huge debt. So the country cannot really afford to tighten monetary policy just because the U.S. is raising rates or other countries are raising rates or the yuan is falling. So in that sense, the Chinese people are benefiting from this stimulative monetary policy implemented by the People's Bank of China. But one concern is a capital outflow. In 2015 to 2016, there was a big, a capital outflow from China after a small ye -- yuan devaluation. China doesn't want to see that again. So it keeps its policy accommodated to the extent that it won't spark capital flight.

FRENCH: Right. And it's not just Japan and China. Your story goes into the monetary policies of several other major economies in Asia. And for me, the most interesting point of next week's story is just how different central banks' approaches are in the current post-COVID economic landscape. Why are we seeing such divergence of monetary policy, even among countries that are so geographically close to each other? And for how long do you think this chaos will continue?

OBE: Asia has grown wealthier, and South Korea is indeed wealthy. It's already a very wealthy country. In one measure it's wealthier than Japan. And China has a huge middle class. So in that sense, all these countries look similar, but they have different economic systems. Japan has a reserve currency and insists on its monetary policy sovereignty or independence. And South Korea relies a lot on China. And it's actually, its economy is vulnerable to slowdown in China. So the country also has other challenges, like it experienced capital outflows or the currency crisis in 1998, and 2008. And so people are aware of it, and the central bank is aware of it and then has to take steps to prevent such a risk. The country also has, like South Korea also has a housing market bubble in Seoul. So on one hand, it has to keep, keep rates high to attract, you know, keep the currency strong, but on the other hand, it has to protect the economy from the slowdown in China. So it's in a tight spot. And other Asian countries are also concerned about capital outflow as much as inflation. So they, you know, their central banks tend to keep pace with the U.S. in te -- and, but at the same time, their economy is not as strong as the United States in terms of their ability to withstand higher interest rates. So those central banks also have a difficult choice to make. So the situation, this policy divergence, is likely to continue between Japan and the U.S., between the China and the U.S., of the rest of the rest of Asia. This means potentially more turmoil in the financial markets.

FRENCH: Thank you very much to Mitsuru for chatting to me about his story. You can read his full piece on Asia's central banks on Wednesday on the Nikkei Asia website.

This has been Alice French, with the Tokyo Dispatch, for Asia Stream. Mata ne!


KHAN: That's it for Asia Stream this week.

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KHAN: As always, I encourage you to head to Nikkei Asia at for more in-depth coverage of Pakistan and all things related to Asia. If you enjoyed this podcast, please share, subscribe and leave us a review -- and hopefully a five-star rating! And a last reminder that Nikkei Asia is currently offering an exclusive discount for our podcast listeners: to get the discount, click the link in the episode description. This episode was produced by Monica Hunter-Hart. I'm your host, Waj Khan.

We'll stream again next week -- don't swim too far downstream, cause we'll be back soon with an episode on the Iranian protests, where we'll even be talking to a brave woman who's been demonstrating on the ground against another Islamic Republic. Talk then.

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