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ADB signals funding approach shift to Indian states bordering China

LiveMint logoLiveMint 30-06-2017 Utpal Bhaskar

New Delhi: In what signals a shift in multilateral lending agencies’ approach to finance infrastructure projects in Indian border areas that abut China, the Asian Development Bank (ADB) on Thursday articulated its willingness to fund projects in India’s north eastern (NE) states, including Sikkim and Arunachal Pradesh.

This is significant because previously multilateral lending agencies, including the World Bank, have been unwilling to fund projects in the so-called disputed border states of India. The ADB stand follows Japan’s ambassador to India Kenji Hiramatsu’s statement in February that his country was willing to help India develop infrastructure in its northeast region—seen as sensitive as parts of the region are claimed by China.

In response to a query from Mint during a press briefing in New Delhi, Kenichi Yokoyama, ADB’s country director, said that some of the northeastern states can be categorized as less developed states—the Manila-headquartered agency’s focus area as part of its new country strategy for India.

ADB plans to invest $5 billion over the next five years for creating infrastructure in less developed Indian states.

“It has to be demand driven,” added Yokoyama.

As part of Japan’s growing engagement with India, the Japan International Cooperation Agency (JICA) had first signalled its willingness in 2015 to finance infrastructure projects in Indian areas bordering China.

The stance may strengthen India’s stand on its frequent border disputes with China. India has stepped up efforts to accelerate development of infrastructure along the country’s frontier in the backdrop of Chinese troops making repeated incursions into Indian territory.

The latest case in point was Beijing accusing New Delhi of sending troops into its territory and obstructing the construction of a road in Sikkim. The issue has the potential to snowball, with Chinese foreign ministry spokesman Lu Kang on Thursday showing pictures accusing Indian troops of trespass in the Sikkim section at a press conference.

“We once again urge the Indian side to abide by the existing boundary convention, respect China’s territorial sovereignty, and immediately bring the border troops that have crossed into China back to the Indian side of the boundary, so as not to worsen the situation and land itself in a more passive position,” Kang said at the press conference.

China claims 90,000 sq.km of Indian territory in Arunachal Pradesh and occupies around 38,000 sq.km in Jammu and Kashmir. Also, under a China-Pakistan boundary agreement signed in March 1963, Pakistan illegally ceded 5,180 sq.km of Indian territory in Pakistan-occupied Kashmir (PoK) to China. Also, there is Japanese unease over Chinese claims over islands with Japan in the East China Sea.

India and China have also sparred over hydropower projects in Arunachal Pradesh, the state that borders China and has the highest potential for hydropower generation in India.

In 2009, China protested the inclusion of a water management project in Arunachal Pradesh, parts of which India’s northern neighbour lays claim to, as part of a $2.9 billion loan that ADB had promised India.

ADB’s willingness to fund such projects now also comes in the backdrop of growing engagement between India and the US, and the identification of China as a common challenge in the joint statement released during Prime Minister Narendra Modi’s fifth US visit earlier this week.

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India received US support on its critical stand on China’s showpiece “One Belt One Road” (OBOR) infrastructure initiative, also referred as the Belt and Road Initiative, during this visit.

OBOR, first unveiled by Chinese president Xi Jinping in 2013, aims to fund a raft of infrastructure projects, including railways, ports and power grids across Asia, Africa and Europe. India, on its part, has questioned China’s intentions in developing the China-Pakistan Economic Corridor (CPEC), part of OBOR, since it cuts through Gilgit and Baltistan areas of PoK.

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