THE AUSTRALIAN: Rational approach to aid long overdue 21Sep13 September 21, 2013

by Greg Sheridan     -     The Australian     -      21 September 2013

IT is a fair bet that many of us have no idea of some of the weird and wonderful things that Australian taxpayers pay for through our foreign aid budget.

For reasons that are completely baffling, the Australian taxpayer is liable for $150,000 of the cost of a statue in New York commemorating campaigns against slavery in Africa and the Caribbean. Spot the Australian connection?

Then there are the millions of dollars Australian taxpayers have generously stumped up for the Palestinian Union of Agricultural Works Committees. A number of the board members and office-holders of this group are intimately associated with the Popular Front for the Liberation of Palestine, one of the key progenitors of terrorism against Western targets, pioneering especially attacks on passenger aeroplanes. An obvious place for the rewards of the sweat of boilermakers in Wollongong to end up.

Then there is the subvention given to Gareth Evans’s old think tank, the International Crisis Group. The ICG does some good work, but how exactly is a rich think tank in Brussels the responsibility of the Australian taxpayer through the foreign aid budget?

There are still aid programs delivered from Australia to China, though China has international reserves of more than $US3 trillion ($3.15 trillion). I suppose there is some kind of circular efficiency in borrowing money from the Chinese in order to send it back to China.

Or can you guess which single agency of any government is the third-largest recipient of Australia’s foreign aid budget? The answer is the Australian Immigration Department.

The Rudd and Gillard governments had committed to the target of overseas aid reaching 0.5 per cent of gross national income. Originally this target was to be reached by 2015, but the dire budgetary situation forced the government to keep putting that date off. A technicality meant the government could spend money on asylum-seeker processing within Australia and still label it foreign aid – I suppose because the people being processed were foreigners – so in order to maintain the illusion it was approaching the GNI target, it made the Australian government the third largest recipient of Australian foreign aid.

As Shakespeare said: “That way madness lies.”

Tony Abbott’s government, under a policy initiative led by Foreign Minister Julie Bishop, has decided to reform Australia’s overseas aid program.

There is an overwhelming case for such reform.

So far, the reform has moved through two distinct phases. Before the election, Bishop announced the Coalition would take $600 million out of this year’s aid budget, which had increased radically. After that, across the next four years of the forward estimates, the aid budget will increase only by the amount of the Consumer Price Index.

Australia will still be giving in the order of $5 billion a year.

This cut points to deep Coalition policy reflection that just measuring how much money you spend is an extremely crude guide to an aid program’s effectiveness. It is the old problem of big government – measuring inputs with no serious evaluation of outcomes. You see, the objects of Australian aid policy are supposed to be the alleviation of poverty and the promotion of economic development, and the furtherance of Australia’s national interests.

This week, the Coalition announced the second big step in its reform of aid: AusAID will be reintegrated fully within the Department of Foreign Affairs and Trade.

Since the early 1970s, AusAID and its predecessors have been a separate agency. Since 2010 they have reported exclusively to the foreign minister, not to the secretary of DFAT.

Some people within AusAID view the integration announcement as akin to the apocalypse.

Many in DFAT, on the other hand, are delighted, as it is the first significant step to bolster DFAT’s role in national policy since the amalgamation of the departments of foreign affairs and trade in the 1980s.

Peter Varghese, the secretary of DFAT, put out an internal statement to DFAT and AusAID staff saying: “The decision reflects the government’s view that bringing our operations together is the next logical step in ensuring the alignment of our aid, foreign policy and trade objectives.”

He said the government’s vision for an expanded DFAT was of “a single department which not only strategically aligns our foreign, trade and development objectives but also carries a pre-eminent role in guiding Australia’s international engagement”.

Varghese also said the process of integration would not be rushed. He is right that it should be done properly, without inefficient haste. But there should be no bureaucratic foot-dragging either. This is an irreversible decision. Bishop expects it will be completed well within a year.

The exact final structure of DFAT is yet to be worked out. But AusAID staff will be integrated as regular DFAT staff. AusAID’s name may be changed, but whatever it is called, it is likely ultimately to be overseen by a regular deputy secretary of DFAT. Its staff at Australian embassies overseas will be fully integrated into the diplomatic network.

The integration is not driven primarily by the desire to save money, but it should result in significant savings. At a press conference, Abbott said: “We want Australia’s aid program to be fully integrated into Australia’s overall diplomatic effort. We don’t want our diplomacy going in one direction and our aid program going in another direction. We do intend to trim the size of the commonwealth public sector by 12,000 through natural attrition over the next three years … So, yes, there may well be fewer people working in AusAID in three years’ time than is now the case.”

Bishop will conduct a review of aid priorities over the next few weeks. She and Abbott will honour all of Kevin Rudd’s promises to Papua New Guinea. This will require cuts in other areas of the aid budget.

Bishop is not unhappy about some of the specific projects involved in the PNG commitments. Fixing up Lae International Hospital, an appalling facility where the people recently attacked on the Black Cat Track walking tour were treated, is a good thing. Improving the University of PNG fits well into the Coalition’s New Colombo Plan. Fixing a big highway is a good idea. These projects may begin to wean AusAID off its ideological objection to infrastructure. In reality, infrastructure can be a key to economic development, which is the only route to long-term poverty eradication.

No country ever got rich by receiving aid, although a lot of individuals got rich by receiving aid meant for poor people, and a lot of already rich people continue to live well off the vast, self-serving bureaucracy aid has spawned in Western countries.

Former World Trade Organisation director-general Pascal Lamy has pointed out the percentage of people in the world living in poverty fell from 43 per cent in 1990 to 21 per cent in 2010. This was mostly a period when the world economy was growing strongly and trade rules were being liberalised.

The Coalition’s determination to reform the aid program has a number of parliamentary champions, but this is Bishop’s policy.

It shows the advantage of having senior shadow ministers in a portfolio for a number of years. Bishop has watched the performance of Australia’s and other nations’ aid programs in the Asia Pacific and internationally in the five years she has held the foreign affairs portfolio.

She has been astonished at how little Australia integrates its aid into its overall diplomacy. She has told stories of touring Bougainville on roads built by Australian taxpayers that bear no Australian label, while every Japanese bridge is flagged. She recalls attending a Samoan independence day celebration. Australia is Samoa’s biggest aid donor, but the US, China, even Israel had a much higher profile for their aid. She was in one country where Australia had trained the teachers, but no member of the public knew of this, while China had built a port facility that made it the toast of the nation.

She has much deeper criticism, of course, of the way aid money is spent.

She and Abbott are as one in their determination that their foreign policy will be “Jakarta, not Geneva”, which means it will be focused on the region.

It is likely that under Bishop, aid to Africa, Latin America, the Caribbean and the Middle East will decline, while aid to Australia’s own region, which has loads of poor people, will increase.

Similarly, aid to multilateral bodies, the last resort of an aid agency that could not find ways to shovel the money out quickly enough, is also likely to diminish.

A heightened emphasis on our region would embody plain common sense. Australia now gives aid to countries where it cannot even afford a diplomatic mission. It is quite right that Europe be chiefly responsible for aid to Africa, and the US for aid to the Caribbean, and that Australia concentrate its efforts in its region.

Bishop believes the aid budget was corrupted by being nakedly used to bolster support for Australia’s bid for a seat on the UN Security Council. There were also absurdities, such as Australia becoming the third largest aid donor to Libya, where we had not even had an embassy. This aid allowed Rudd as foreign minister to gain admission to Middle East diplomatic talk fests.

Australia does have a global outlook and global responsibilities, but this level of effort was not consistent with priorities dictated by a serious assessment of our national interests.

After the 2010 election the Gillard government did conduct an inquiry into aid effectiveness. But it did not implement its key recommendation, that the rise in the aid budget to 0.5 per cent of GNI would be extremely steep and challenging, and that annual increases should not be undertaken until benchmarks of effectiveness were reached. It is still Coalition policy to reach 0.5 per cent of GNI as our aid budget. I am highly sceptical about the true efficacy of much aid and somewhat dubious about whether this a good target.

But although the aid lobby has howled about the Coalition’s decisions – and been given an uncontested run on the ABC’s many platforms to do so – the reforms offer aid its best chance for a sustainable, long-term increase.

Countless aid NGOs, of course, receive government money in part to argue the case that they should receive more government money. This is neither very democratic nor conducive to good policy.

The international aid community has its own ideology, which often intensely resents donor governments aligning aid with broader national interests. The sniffily independent British aid agency is the most obvious example.

But New Zealand and Canada have reintegrated their aid agencies into their foreign affairs departments. Bishop had numerous conversations with her NZ counterpart, Murray McCully, on the utility of this move.

Bishop also intends to emphasise aid for trade, as getting the poorest nations involved in productive trade is their best long-term hope.

This is a serious and determined move by the Abbott government to change the culture of Australia’s international aid. It will be a very good thing if it succeeds.