ADB's Arunachal project funding to contain China's water diversion news
19 June 2009

The Asian Development Bank (ADB) recently cleared a financial package worth $2.9 billion to India despite strong objections by China due to the inclusion of funding for watershed projects in Arunachal Pradesh, parts of which form a disputed territory region. The package covers three years between 2009-12. (See: China fumes at ADB funding of Arunachal project)

ADB cleared the project on Monday where China was the lone dissenter and voted against the plan. The approval had been pending for several months due to China's objections and in March, a discussion on the package had to be postponed due to China's objections.

The project is part of a $2.9-billion programme for flood management and water supply of the water from the Brahmaputra in the northeast state. India's urgency to get the project of the ground stems mainly in bid to offset the ecological and riverine damage due to deforestation and water diversion on the Chinese side.

China has called into question the funding of projects that lie in disputed territories. The argument stems from its objection to military and economic development initiatives being undertaken in such regions by the disputed region's host country.

Last month, the agency declared that ADB's lending plans to India would remain unaffected and that it does not interfere in the political affairs of its members.

''ADB's Charter mandates that it shall not interfere in the political affairs of any member and that only economic considerations shall be relevant to its decision,'' Ann Quon, principal director, department of external relations, ADB, said.

Foreign ministry spokesman Qin Gang said, "The Asian Development Bank, regardless of the major concerns of China, approved the India Country Partnership strategy which involves the territorial dispute between China and India,"  two days after Prime Minister Manmohan Singh met with Chinese President Hu Jintao in Yekaterinburg in russia to discuss ways to enhance ties and resolve the pending boundary dispute.

"China expresses its strong dissatisfaction. The action can neither change the fact that China and India have a huge territorial controversy, nor China's fundamental position on the border issues between China and India," Qin said.

"The bank's move not only seriously tarnishes its own name, but also undermines the interests of its members," he added..

India countered the objections claiming the ADB could not be used as a forum for taking up such issues. India's success in getting the project funds cleared also reportedly came about after a diplomatic effort with countries such as the US, which enjoys the maximum voting share, Japan and South Korea, which possess large voting rights for clearing projects at the bank.

The specific strategy policy that formed part of the dispute is the bank's 'Country Strategy for India' for the period 2009-12. According to the bank, this had been formulated according to India's development priorities as given in India's 11th Five-Year Plan. It was also in accordance with the bank's Strategy 2020.

China objected to the adoption of the India Country Partnership Strategy (2009-2012) as it involved disputed territories between China and India.

ADB's Country Partnership Strategy (CPS) was introduced as a reformative measure for the Country Strategy and Program (CSP) of August 2006. According to the bank's website, the CPS is the primary planning instrument guiding Asian Development Bank's (ADB) operations in a developing member country.

The first results-based CSP was carried out in Nepal in 2004. CSPs have been prepared for other countries like Cambodia, Bhutan, Bangladesh, Mongolia, Philippines, and Uzbekistan.

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ADB's Arunachal project funding to contain China's water diversion