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Australia, Aid, Global Development

How effective is Australian aid? Is Australia doing enough?

SPC Public Forum with Marc Purcell, Executive Director Australian Council for International Development.

Tuesday 16 August 2011.

In a comprehensive overview of our overseas aid, Mr Marc Purcell reported that Australia was making a much more significant contribution to helping developing countries, but that the challenges to improve human wellbeing in many countries remained daunting, especially with the effects of the global financial crisis.

Mark spoke firstly about the current political context and how it was affecting attitudes, secondly about the global context, and finally about the recent Government review on aid.

The political context

In November 2010 the Government announced an aid program of $500 million to build schools in Indonesia, to fund the training of teachers as well as help educate students. There was a sharp reaction against this scheme in the mistaken belief that it would fund fundamentalist religious extremism. Talkback radio went ‘feral’. Marc insisted that the education program in Indonesia was very worthwhile, but that even Labor MPs found it difficult to rebut critics.

The populist outcry receded, but revived again after the Queensland floods and the need to help fund the recovery. One Nation Queensland started an email campaign arguing in livid language that the aid funds should be transferred to use in Australia. This view was hitting hard, especially with Coalition members, and the email campaign took on a life of its own. In response, the Coalition announced it would cut aid, and would put major provisos on the Indonesian program. However, in the end, the bi-partisan approach survived to lift aid to 0.5% of Gross National Income by 2015 – up from the then current c.0.3%. Nevertheless, there was increased concern about the level of understanding in Coalition ranks of the aid issues.

Marc compared Australia’s aid policy to that of the UK which has a bi-partisan approach to maintaining overseas aid at 0.7% of GNI, despite the UK’s less favourable financial position.

The origin of bip-artisan policy in Australia dates from the 2000 global Millennium Summit which endorsed the Millennium Development Campaign to achieve specific goals by 2015, including halving global poverty. The Australian Government agreed to this, but without at the time putting in real dollars. By 2005, better informed public opinion had contributed to a significant change. Feeling confident about Australian’s financial strength, Prime Minister Howard committed his Government to increase aid by $2 billion by 2010.

Other governments also increased their commitments at the 2005 meeting of the G8 at Gleneagles in Scotland. Many agreed to cancel debts or take other measures, and to coordinate aid programs more effectively. The Make Poverty History initiative was achieving significant results, so much so that in the 2007 election campaign, aid was a minor issue. The Labor leader, Kevin Rudd, intended to increase Australia’s aid to 0.5% of GNI by 2015. This goal is being pursued by the current Minister for Foreign Affairs and Trade, Stephen Smith.  In dollar terms, Australian aid is doubling from $4.3 billion to about $8 or $9 billion – or about 1.5% of the annual federal budget. However, scaling up the aid program by this magnitude presents challenges.

The global context

Marc noted an historic change with the rise of the so-called BRICs, Brazil, Russia, India and China, with China now the second largest economy in the world.  Economic development is the largest driver for improving poverty. The bottom billion of the world’s poorest is now mainly in middle-income countries such as India (456 million) and China (208 million).  Many others, like Indonesia and Nigeria, have ‘substantial power-house economies’, and yet also entrenched poverty.

This raises questions for donors – these countries have resources which in time should enable them to lift them to of poverty.  Different aid programs need to be provided to them than to a country like East Timor.

Internationally, some new donors have emerged, especially wealthy philanthropists like Bill and Melinda Gates, and their contributions are about half that from OECD countries.  NGOs are also important, and total private donations are about equal to that of governments.  Some new donors like China and India claim they donate without conditions.  Cambodia liked Chinese aid without strings attached, such as conditions on governance, labour standards or environmental protection.  China offers largesse, but in return seeks access to resources and for mines.  He said many recipients think this is still a good deal.  Yet despite the large amount of unemployed labour in host countries, China at times will bring unskilled Chinese labourers, but who are often working with very poor safety standards and wages.

There has also been increased scrutiny on aid and its effectiveness.  Marc instanced how small countries like Nauru and Kiribati may have only three people monitoring aid donors because of minimal government resources, even though many countries may be offering aid.  To help overcome these difficulties, donor countries are putting greater effort into coordinating their aid programs.

Marc pointed to serious questioning of the benefits of aid.  Some, such as the economic rationalist, Dambisa Moyo, author of the recent book, Dead Aid: why Aid is not working and how there is a better way for Africa, argue that normal economic growth is the best way to lift living standards, through the “trickle down” effect, with the process largely left to self-driving markets. Another, Paul Collier who wrote The Bottom Billion, argued that aid planning was ineffective and should allow more room for initiative and spontaneity.  From other perspectives, one of the leading economists behind the Millennium Development Goals campaign, Jeffrey Sachs, also has criticized the mode of aid provision.

What then, Marc asked, is really effective aid?  What works and what does not? Fundamentally, what type of world is aid trying to achieve?  Marc highlighted several issues:

  • Economic issues loomed very large. To put this in context, if the world stumbles through the wake of the Global Financial Crisis and achieves 3 per cent growth, it will outpace population growth over four decades.  By 2100 the global economy would reach 80 times that of the GNI of 1950.  It is difficult to imagine such a large economy, with the resulting amount of consumption, let alone the resources needed to sustain it all.
  • here is great inequality – a fifth of the world’s people have only 2 per cent of global income.  We need trade and economic policies to tackle inequality.
  • Climate change presents very significant challenges.
  • Population growth will continue until about 2050, with some 75% of this being in developing low- or middle-income countries.
  • We have seen problems in places like East Timor, with high youth unemployment in urban settings causing political unrest and disorder.
  •  Urbanisation will accelerate.  In Africa, over 35% of people now lived in cities, but this is expected to rise to 70% by 2050.  We are seeing the rise of mega-cities, and many in cities will be living in slums. Aid will still have to go to rural communities but increasingly aid work will be in improving slums. Some urban programs have been successful, for example by making payments to parents to ensure their children go to school.
  • Increasingly large flows of migration and the resulting remittances back home are becoming very important, and equal the entire flow of overseas aid.

So aid is only one tool to assist in development efforts, and other tools are important.  For example, in the Pacific region, aid agencies have worked with Australian banks to reduce the cost of transferring money, as the costs of financial transfers through Western Union were very high.

Marc noted that with the ageing of the Australian population, there were consequences for the tax base, and continued immigration will be very important to increase the work force.  New Zealand has developed a system of importing Pacific islanders for temporary labour, which has proved very successful, much more so than the recent Australian scheme.  Schemes for migratory labour could work well in the future for both poor and rich countries.

There has been a steady increase in natural disasters, droughts, floods and earthquakes, as well as conflicts within countries. In Haiti, the earthquake took a huge toll of lives because of the densely crowded slums. Marc said that the impact of these factors demanded big changes in the responses through Australia’s aid program.

The Independent Review of Australian aid and the government response

In November 2010, the Minister for Foreign Affairs, Kevin Rudd, commissioned an independent review of Australia’s aid program. Marc said the Government had made a commitment to double aid, but had no real plan.  There was increasing criticism coming from groups like One Nation.  So the Government announced an inquiry on what makes aid effective, and how do we increase our aid. The Independent Review was released in July 2011.

Marc first set out ACFID’s aims for the review (ACFID’s submission is available at www.acfid.asn.au/what-we-do/independent-aid-review/).

In ACFID’s view, aid programs had several problems.  In many countries where government was weak or absent, non-government organisations often provide many of the social services. For example, in Papua New Guinea the churches provide 50% or more of the services, education or healthcare.  In Indonesia civil society was significant, and also contributed to the downfall of Suharto.  In Burma, non-government organisations had often been dissolved in the 1960s, but are now recovering.  These are significant developments but the Australian Government aid provision had no framework for managing this network of relationships.  So ACFID argued that our government needed a policy framework for engaging with civil society, and not just deal with governments.

Secondly, ACFID wanted to address inequality and to reduce poverty as key aims.  The Australian Government had previously emphasised certain national interests (which could sometimes include projects such as supporting pandas from China at Adelaide Zoo), but ACFID continually argued that our priority should be on reducing poverty and inequality.

Marc also considered the agencies that dispersed Australia’s aid. Most aid has been distributed through AusAid but some has also been spent by the Department of Immigration (e.g. in establishing the detention centre on Nauru), or by the Department of Foreign Affairs and Trade. In Afghanistan the Australian Defence Force plays a critical role with Australia’s aid projects. However these organisations are not necessarily good development agencies and so aid does not always achieve its aims.  ACFID advocated a whole-of-government approach, with greater transparency and clearer evaluation of the effectiveness of projects.

Finally ACFID argued for a rights-based approach.  Australia’s aid programs should reinforce this, but not in a hectoring way. Rather our emphasis should be on supporting the rights of the marginalised, women, children, the poor and disabled. Our aid should be designed with such groups especially in mind, and about improving their wellbeing.

So, how successful were ACFID’s lobbying efforts?

The committee undertaking the Independent Review reported in June 2011 (see www.aidreview.gov.au/report/index.html) and the government response followed (see www.ausaid.gov.au/publications/pubout.cfm?ID=5621_9774_1073_3040_2380&Type).

Of 39 recommendations of the Review, the Government accepted 37.  Marc considered they were generally very good recommendations, including:

  • Establishing a single clear objective on poverty alleviation
  • Endorsing a whole-of-government approach on a 4-year plan with a secure funding commitment
  • Setting up an evaluation committee
  • Committing to a transparency charter
  • Agreeing to a civil society framework
  • Developing greater partnership with the Australian community, especially with academics, think tanks etc
  • Recognising the critical role of the business community, and
  • Setting clear criteria for effectiveness.

There were some disappointments:

  •  Human rights are not really included as a guiding framework, nor were the MDGs adequately considered.
  • There was not a high emphasis on reducing inequality.
  • The report did not focus on planning and development.
  • There were some unexplained hurdles at the level of federal Cabinet, and Marc wondered if this could lead to a future government reversing the effort to reach stipulated aid targets by 2015.

Marc emphasised the need to inform public opinion more adequately about our aid program and show how it is working, so that the community can respond robustly to “shrill” anti-aid critics.  Fortunately a large majority in Australia see overseas aid as fulfilling our duties as a good international citizen.

Marc considered that the Australian Government and development groups had made significant steps not only to increasing Australia’s aid but taking steps to improve the delivery, effect and quality of the aid. In his view, there was still room for improvement, but Australian aid was moving in the right direction.

He concluded by drawing attention to ACFID’s latest pamphlet Myths Busted – The Facts about Australian Aid (August 2011) available at http://www.acfid.asn.au/resources/docs_resources/myths-busted-the-facts-about-australian-aid

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