section_path: Background and history/World Bank involvement
section_name: World Bank involvement
paragraph_text: World Bank involvement
  
  In 1951, David Lilienthal, formerly the chairman of the Tennessee Valley Authority and of the U.S. Atomic Energy Commission, visited the region to write a series of articles for Collier's magazine. Lilienthal had a keen interest in the subcontinent and was welcomed by the highest levels of both Indian and Pakistani governments. Although his visit was sponsored by Collier's, Lilienthal was briefed by the state department and executive branch officials, who hoped that Lilienthal could help bridge the gap between India and Pakistan and also gauge hostilities on the subcontinent. During the course of his visit, it became clear to Lilienthal that tensions between India and Pakistan were acute, but also unable to be erased with one sweeping gesture. He wrote in his journal:
  
  India and Pakistan were on the verge of war over Kashmir. There seemed to be no possibility of negotiating this issue until tensions abated. One way to reduce hostility... would be to concentrate on other important issues where cooperation was possible. Progress in these areas would promote a sense of community between the two nations which might, in time, lead to a Kashmir settlement. Accordingly, I proposed that India and Pakistan work out a program jointly to develop and jointly operate the Indus Basin River system, upon which both nations were dependent for irrigation water. With new dams and irrigation canals, the Indus and its tributaries could be made to yield the additional water each country needed for increased food production. In the article, I suggested that the World Bank might use its good offices to bring the parties to an agreement and help in the financing of an Indus Development program.: 93
  
  Lilienthal's idea was well received by officials at the World Bank (then the International Bank for Reconstruction and Development) and subsequently, by the Indian and Pakistani governments. Eugene R. Black, then president of the World Bank, told Lilienthal that his proposal "makes good sense all round". Black wrote that the Bank was interested in the economic progress of the two countries and had been concerned that the Indus dispute could only be a serious handicap to this development. India's previous objections to third party arbitration were remedied by the Bank's insistence that it would not adjudicate the conflict but rather work as a conduit for agreement.
  
  Black also made a distinction between the "functional" and "political" aspects of the Indus dispute. In his correspondence with Indian and Pakistan leaders, Black asserted that the Indus dispute could most realistically be solved if the functional aspects of disagreement were negotiated apart from political considerations. He envisioned a group that tackled the question of how best to utilize the waters of the Indus Basin, leaving aside questions of historic rights or allocations.
  
  Black proposed a Working Party made up of Indian, Pakistani, and World Bank engineers. The World Bank delegation would act as a consultative group, charged with offering suggestions and speeding dialogue. In his opening statement to the Working Party, Black spoke of why he was optimistic about the group's success:
  
  One aspect of Mr. Lilienthal's proposal appealed to me from the first. I mean his insistence that the Indus problem is an engineering problem and should be dealt with by engineers. One of the strengths of the engineering profession is that, all over the world, engineers speak the same language and approach problems with common standards of judgment.: 110
  
  Black's hopes for a quick resolution to the Indus dispute were premature. While the Bank had expected that the two sides would come to an agreement on the allocation of waters, neither India nor Pakistan seemed willing to compromise their positions. While Pakistan insisted on its historical right to waters of all the Indus tributaries and that half of West Punjab was under threat of desertification, the Indian side argued that the previous distribution of waters should not set future allocation. Instead, the Indian side set up a new basis of distribution, with the waters of the Western tributaries going to Pakistan and the Eastern tributaries to India. The substantive technical discussions that Black had hoped for were stymied by the political considerations he had expected to avoid.
  
  The World Bank soon became frustrated with this lack of progress. What had originally been envisioned as a technical dispute that would quickly untangle itself started to seem intractable. India and Pakistan were unable to agree on the technical aspects of allocation, let alone the implementation of any agreed-upon distribution of waters. Finally, in 1954, after nearly two years of negotiation, the World Bank offered its own proposal, stepping beyond the limited role it had apportioned for itself and forcing the two sides to consider concrete plans for the future of the basin. The proposal offered India the three eastern tributaries of the basin and Pakistan the three western tributaries. Canals and storage dams were to be constructed to divert water from the western rivers and replace the eastern river supply lost by Pakistan.
  
  While the Indian side was amenable to the World Bank proposal, Pakistan found it unacceptable. The World Bank allocated the eastern rivers to India and the western rivers to Pakistan. This new distribution did not account for the historical usage of the Indus basin or the fact that West Punjab's Eastern districts could turn into deserts, and repudiated Pakistan's negotiating position. Where India had stood for a new system of allocation, Pakistan felt that its share of waters should be based on pre-partition distribution. The World Bank proposal was more in line with the Indian plan, and this angered the Pakistani delegation. They threatened to withdraw from the Working Party, and negotiations verged on collapse.
  
  However, neither side could afford the dissolution of talks. The Pakistani press met rumors of an end to negotiation with talk of increased hostilities; the government was ill-prepared to forego talks for a violent conflict with India and was forced to reconsider its position. India was also eager to settle the Indus issue; large development projects were put on hold by negotiations, and Indian leaders were eager to divert water for irrigation. In December 1954, the two sides returned to the negotiating table. The World Bank proposal was transformed from a basis of settlement to a basis for negotiation and the talks continued, stop and go, for the next six years.
  
  One of the last stumbling blocks to an agreement concerning financing for the construction of canals and storage facilities that would transfer water from the western rivers to Pakistan. This transfer was necessary to make up for the water Pakistan was giving up by ceding its use of the eastern rivers’ waters. The World Bank initially planned for India to pay for these works, but India refused. The Bank responded with a plan for external financing. An Indus Basin Development Fund Agreement (Karachi, 19 September 1960) was a treaty between Australia, Canada, West Germany, New Zealand, the United Kingdom, the United States with the International Bank for Reconstruction and Development (IRDC) and Pakistan who agreed to provide Pakistan a combination of funds and loans. This solution cleared the remaining stumbling blocks to the agreement and the IWT was signed by both countries on the same day in 1960 applicable with retrospective effect from 1 April 1960 but "Indus Basin Development Fund Agreement" provisions do not affect the IWT in any way per Article XI(3). After signing the IWT, then prime minister Nehru stated in the parliament that India had purchased a (water) settlement. The grants and loans to Pakistan were extended in 1964 through a supplementary agreement.
  
  In 1951, David Lilienthal, formerly the chairman of the Tennessee Valley Authority and of the U.S. Atomic Energy Commission, visited the region to write a series of articles for Collier's magazine. Lilienthal had a keen interest in the subcontinent and was welcomed by the highest levels of both Indian and Pakistani governments. Although his visit was sponsored by Collier's, Lilienthal was briefed by the state department and executive branch officials, who hoped that Lilienthal could help bridge the gap between India and Pakistan and also gauge hostilities on the subcontinent. During the course of his visit, it became clear to Lilienthal that tensions between India and Pakistan were acute, but also unable to be erased with one sweeping gesture. He wrote in his journal:
  
  India and Pakistan were on the verge of war over Kashmir. There seemed to be no possibility of negotiating this issue until tensions abated. One way to reduce hostility... would be to concentrate on other important issues where cooperation was possible. Progress in these areas would promote a sense of community between the two nations which might, in time, lead to a Kashmir settlement. Accordingly, I proposed that India and Pakistan work out a program jointly to develop and jointly operate the Indus Basin River system, upon which both nations were dependent for irrigation water. With new dams and irrigation canals, the Indus and its tributaries could be made to yield the additional water each country needed for increased food production. In the article, I suggested that the World Bank might use its good offices to bring the parties to an agreement and help in the financing of an Indus Development program.: 93
  
  Lilienthal's idea was well received by officials at the World Bank (then the International Bank for Reconstruction and Development) and subsequently, by the Indian and Pakistani governments. Eugene R. Black, then president of the World Bank, told Lilienthal that his proposal "makes good sense all round". Black wrote that the Bank was interested in the economic progress of the two countries and had been concerned that the Indus dispute could only be a serious handicap to this development. India's previous objections to third party arbitration were remedied by the Bank's insistence that it would not adjudicate the conflict but rather work as a conduit for agreement.
  
  Black also made a distinction between the "functional" and "political" aspects of the Indus dispute. In his correspondence with Indian and Pakistan leaders, Black asserted that the Indus dispute could most realistically be solved if the functional aspects of disagreement were negotiated apart from political considerations. He envisioned a group that tackled the question of how best to utilize the waters of the Indus Basin, leaving aside questions of historic rights or allocations.
  
  Black proposed a Working Party made up of Indian, Pakistani, and World Bank engineers. The World Bank delegation would act as a consultative group, charged with offering suggestions and speeding dialogue. In his opening statement to the Working Party, Black spoke of why he was optimistic about the group's success:
  
  One aspect of Mr. Lilienthal's proposal appealed to me from the first. I mean his insistence that the Indus problem is an engineering problem and should be dealt with by engineers. One of the strengths of the engineering profession is that, all over the world, engineers speak the same language and approach problems with common standards of judgment.: 110
  
  Black's hopes for a quick resolution to the Indus dispute were premature. While the Bank had expected that the two sides would come to an agreement on the allocation of waters, neither India nor Pakistan seemed willing to compromise their positions. While Pakistan insisted on its historical right to waters of all the Indus tributaries and that half of West Punjab was under threat of desertification, the Indian side argued that the previous distribution of waters should not set future allocation. Instead, the Indian side set up a new basis of distribution, with the waters of the Western tributaries going to Pakistan and the Eastern tributaries to India. The substantive technical discussions that Black had hoped for were stymied by the political considerations he had expected to avoid.
  
  The World Bank soon became frustrated with this lack of progress. What had originally been envisioned as a technical dispute that would quickly untangle itself started to seem intractable. India and Pakistan were unable to agree on the technical aspects of allocation, let alone the implementation of any agreed-upon distribution of waters. Finally, in 1954, after nearly two years of negotiation, the World Bank offered its own proposal, stepping beyond the limited role it had apportioned for itself and forcing the two sides to consider concrete plans for the future of the basin. The proposal offered India the three eastern tributaries of the basin and Pakistan the three western tributaries. Canals and storage dams were to be constructed to divert water from the western rivers and replace the eastern river supply lost by Pakistan.
  
  While the Indian side was amenable to the World Bank proposal, Pakistan found it unacceptable. The World Bank allocated the eastern rivers to India and the western rivers to Pakistan. This new distribution did not account for the historical usage of the Indus basin or the fact that West Punjab's Eastern districts could turn into deserts, and repudiated Pakistan's negotiating position. Where India had stood for a new system of allocation, Pakistan felt that its share of waters should be based on pre-partition distribution. The World Bank proposal was more in line with the Indian plan, and this angered the Pakistani delegation. They threatened to withdraw from the Working Party, and negotiations verged on collapse.
  
  However, neither side could afford the dissolution of talks. The Pakistani press met rumors of an end to negotiation with talk of increased hostilities; the government was ill-prepared to forego talks for a violent conflict with India and was forced to reconsider its position. India was also eager to settle the Indus issue; large development projects were put on hold by negotiations, and Indian leaders were eager to divert water for irrigation. In December 1954, the two sides returned to the negotiating table. The World Bank proposal was transformed from a basis of settlement to a basis for negotiation and the talks continued, stop and go, for the next six years.
  
  One of the last stumbling blocks to an agreement concerning financing for the construction of canals and storage facilities that would transfer water from the western rivers to Pakistan. This transfer was necessary to make up for the water Pakistan was giving up by ceding its use of the eastern rivers’ waters. The World Bank initially planned for India to pay for these works, but India refused. The Bank responded with a plan for external financing. An Indus Basin Development Fund Agreement (Karachi, 19 September 1960) was a treaty between Australia, Canada, West Germany, New Zealand, the United Kingdom, the United States with the International Bank for Reconstruction and Development (IRDC) and Pakistan who agreed to provide Pakistan a combination of funds and loans. This solution cleared the remaining stumbling blocks to the agreement and the IWT was signed by both countries on the same day in 1960 applicable with retrospective effect from 1 April 1960 but "Indus Basin Development Fund Agreement" provisions do not affect the IWT in any way per Article XI(3). After signing the IWT, then prime minister Nehru stated in the parliament that India had purchased a (water) settlement. The grants and loans to Pakistan were extended in 1964 through a supplementary agreement.