The friction between China and India last year over multilateral financial aid to projects in Arunachal Pradesh, an Indian state that China claims as its own, has forced the Asian Development Bank (ADB) to introduce a disclaimer in its recent project documents which, while stating that it has no position on territorial disputes, effectively discourages the applicant from pushing for assistance for projects in disputed areas.
ADB says it will now take note of territorial concerns, and given the ambiguity of this statement, experts say the onus is on India to move proposals involving Arunachal Pradesh to ADB to see what happens.
The disclaimer was introduced some time in the past six months. Mint couldn’t ascertain the exact date when this was done. However, it was never reported. The matter came to light when ADB’s country director Hun Kim called off a scheduled interview with Mint on 22 March after the paper declined to drop questions relating to Arunachal Pradesh.
ADB’s head office in Manila played it safe while responding to Mint’s queries.
“ADB’s India country strategy 2009-2012 has been given broad support by ADB’s board of directors and will be implemented during the period 2009-2012,” Ann Quon, principal director, department of external relations, ADB, said in an emailed statement. “Individual projects and programmes will require separate approval on a case-by-case basis by ADB’s board of directors.”
Last year, China protested the inclusion of a water management project in Arunachal Pradesh in ADB’s country assistance strategy for India.
ADB’s board has cleared a three-year country strategy through which India can draw up to $7.97 billion (Rs36,343 crore) of the bank’s resources to support different projects. The projects, including the one in Arunachal, would have to be cleared by ADB’s governing board.
“Now that the (disclaimer) policy is in place, when a country objects (to something being done by another country), it has to be taken note of. What it means is that there is a contentious issue,” said a person familiar with the developments, who did not want to be identified given the sensitivity of issue.
The disclaimer is in keeping with ADB’s original charter which said the bank would have no position on any territorial dispute.
“I think what is happening is they (government) don’t want to go to ADB unless they are sure the board will approve it,” said Brajesh Mishra, India’s former national security adviser. “In case there is rejection (of the Arunachal project), their case (that the state is part of India) will be weakened internationally.”
In 2008, India borrowed $2.9 billion, or 27.4% of the total loans issued by ADB that year, making it the largest borrower for the period. The next year, ADB’s India business plan would have recieved $150,000 for the water management programme in Arunachal Pradesh. In December 2008, ADB released a draft plan for 2009 which included details of the assistance for the Arunachal project.
The reference and subsequent discussions within ADB on India’s business plan for 2009 triggered a sharp reaction from China.
According to the British Broadcasting Corp.’s website, on 19 June 2009, the Chinese foreign ministry spokesperson told a news conference: “China has expressed strong discontent. 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.”
Following China’s protest, ADB issued a three-year (2009-12) Country Partnership Strategy (CPS) for India for $7.97 billion on 17 July, which did not refer to the bank’s assistance for the water management programme in Arunachal. The document said ADB’s board agreed to release an “abridged” version by invoking a clause in its communications policy.
The Indian government however denied any setback.
According to Anup Pujari, joint secretary in the finance ministry, who is a part of the team that represents the ministry during talks with multilateral institutions, there was no mention of a specific project in Arunachal Pradesh, but only references to the state in general in the partnership document. He added that this was a broad policy framework and that these references were not liked by “certain countries”.
The finance ministry had issued a press statement on 6 March in response to a story published in The Economic Times which claimed that India had succumbed to Chinese pressure at the World Bank board and agreed to not seek assistance for projects in Arunachal Pradesh. “It is categorically stated that India has made no commitment to anyone including the World Bank that India would not pose projects pertaining to Arunachal Pradesh for funding from any multilateral development bank.”