India disturbs smaller neighbors with plan to tap Asian bank for loans

China's emergence from isolation continues to echo like a sonic boom around Asia. The latest echo is the decision of India to seek loans from the Asian Development Bank (ADB). Until last week, India had refrained voluntarily from borrowing from the Asian multilateral development institution. It had instead obtained loans from the much larger World Bank. This meant that the ADB's loans , which reached a level of nearly $1.5 billion last year, were available exclusively to the relatively smaller nations of Asia --Taiwan, the Philippines, Pakistan, Bangladesh, Indonesia, Malaysia, and so on.

But China has decided to seek funds from the World Bank -- another customer for a limited pool of money.

Moreover, the rising cost of fuel oil has hit India hard. Its oil bill rose from $2 billion in fiscal year 1978-79 to $7 billion in fiscal 1980-81, which has just ended.

So India has decided to diversify its sources of loans to cover a current-account deficit that climbed from $244 million in 1978-79 to $2.8 billion in 1980-81. Finance Minister R. Venkataraman announced at the bank's annual meeting here last week that India would seek loans from the ordinary capital resources of the ADB starting in 1983 and from the Asian Development Fund (the arm of the bank offering loans under special low-interest, long-term conditions) in 1986.

The result was some consternation among the smaller developing nations of Asia. To them, India looked like a giant shoving up to the ADB rice bowl.

"Everybody is concerned," said Cesar Virata, finance minister of the Philippines. "India is so large it is a subcontinent."

If India were to obtain loans on a per capita basis, with its nearly 700 million people it would be entitled to about 70 percent of ADB funds. In a memorandum to the bank's executive directors, however, India indicated it would ask for only 11.3 percent of the $17.8 billion the ADB is expected to lend in the years 1983-87.

Because of the Indian request, the bank is expected to be especially eager to obtain a large replenishment for its rapidly depleting funds from the donor members of the bank, such as the United States, Japan, West Germany, France and so on.

Mr. Virata suggested that perhaps the ADB should specialize in only "one small aspect" of India's development.

What makes the finance ministers of the smaller countries especially anxious is the thought of China's applying for membership in the ADB. It has not yet done so. But if it did, they would have to co mpete with the world's two most populous nations in seeking the bank's loans.

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