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

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.