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Australia's foreign aid policy: New paradigm or more of the same?

Australia's foreign aid policy: New paradigm or more of the same?
Published 19 Jun 2014 



Yesterday's dense fog in Canberra was the perfect backdrop for the launch of Australia's new foreign aid policy by Foreign Minister Julie Bishop at the National Press Club. Just as the fog started to lift, Minister Bishop was attempting to lift the fog on what has been a slow reveal of the full extent of the Government's radical ambitions for the $5 billion aid program.  

It is commonly accepted that groundbreaking events and decisions (whether disastrous or positively extraordinary) provide, in their wake, unique opportunities to create something better. They are pivotal in the way they offer new and fresh perspectives. Last year's demise of Australia's aid agency, AusAID, and the aid program's integration into the Department of Foreign Affairs and Trade soon after the Abbott Government came to power, was such an event. 

But while the pivotal event had been created, a clear policy framework guiding this new integrated program was missing. Until yesterday, the unveiling of the new aid policy had been piecemeal and was largely in the form of speeches by Foreign Minister Bishop. 

And so what did yesterday's launch reveal? When the fog cleared outside, Canberra had not changed. Similarly, inside the Press Club, nothing much new was revealed. Instead, yesterday's event simply puts into one place everything the Foreign Minister has been saying since the government came into power. Economic development and the role of the private sector remain this government's catch cry. 

There were two new announcements, although these were more cosmetic than game-changers: the involvement of Australia in the new Global Development Innovation Ventures program and, correspondingly, the creation of an Innovation Hub within DFAT. These are inextricably linked to the Government's determination to support private sector development and to strengthen human development.

With hindsight, no one can say we didn't know. [fold]

Just one day before the AusAID/DFAT integration last October, Bishop gave a seminal speech which provided the first post-election detail of what was envisaged for the aid program. She made it clear that the focus of the program would be squarely on the Indo-Pacific, and that at the heart of the Government's foreign policy approach was economic diplomacy. She argued that if economic growth and poverty reduction were to be long-lasting, functioning states and a strong and growing private sector to ensure job opportunities were essential. Involvement of the private sector was critical in achieving results and broader economic reform to help make growth and poverty reduction permanent. 

So the question now is whether this emphasis on private sector development is going to work. Bishop is enthusiastic and keen that it does, but the answer is that no one knows. 

There is an extensive body of research that has attempted to identify if and how foreign aid contributes to economic growth and development. Finding a conclusive answer has not been straightforward and depends on a range of case-by-case factors. As Roger Riddell reveals in his paper, Does foreign aid really work?, the results of a plethora of studies have differing, even opposing conclusions. 'Some suggest that aid has had little to no effect on growth, others that aid has had a positive effect'. It seems that success or failure comes with a myriad of caveats that makes a definitive answer difficult to achieve. 

This inadequacy of information has been long and widely appreciated by donor countries, including Australia, which have increasingly invested in research and evaluation to identify how to deliver more effective aid programs. 

Shadowing this ever-expanding international focus on aid and growth is the persistent international debate about whether aid for development works at all. In his recent book The Great Escape, Angus Deaton has argued that aid gets in the way of development. He argues that the giving of aid is inspired by the question of what the developed world 'should' do. He asserts that it is not 'we who must do something'. After all, 'who put us in charge?', Deaton asks.

But he doesn't rule aid out completely. Scornful of the aid effectiveness agenda — 'about as effective as most New Year's resolutions' — he suggests that aid could do better if it came with conditions to ensure its success, and country selectivity was applied in determining eligibility for aid. However, his main argument is that the difficulties with aid come from its unintended consequences within recipient countries.

He suggests that aid would be more beneficial if implemented at a distance, staying out of the recipient countries. Instead, aid budgets should be used to address a range of external, even global issues which hinder development including supporting applied scientific research to address some of the developing world's critical health problems, dismantling trade barriers, encouraging innovative financing mechanisms, providing technical advice and in trade negotiations and opening up our borders to include workers from developing nations. 

What does this mean for Australia's aid program? 

Getting aid to make an effective contribution to development isn't straightforward, particularly if, as sketched out yesterday by Foreign Minister Bishop, it has several objectives. The Government wants the aid program to pursue our national interest and extend our influence; promote growth and reduce poverty; take advantage of Australia's value-add and leverage; and make performance count.

This is a big agenda that will need informed and decisive steering to stop it floundering against too many expectations. And because of the competing priorities inherent in each of these objectives it will be often impossible for the program to be successful in meeting each of them simultaneously.

This should encourage the government to look at the lessons coming from an earlier experience when the aid program laboured under the demands of multiple and competing objectives.  This was identified in the 1997 Simons Report, commissioned by the Howard Government to look at the aid program. The reviewers, headed by the then chairman of Woolworths, Paul Simons, noted that:

The managers of the aid program struggle to satisfy multiple objectives driven by a combination of humanitarian, foreign policy and commercial interests. The intrusion of short-term commercial and foreign policy imperatives has hampered AusAID's capability to be an effective development agency. 

Of course AusAID doesn't exist anymore but those within DFAT charged with implementing the Government's new aid paradigm are likely to find themselves in the same difficult position as their predecessors, trying to balance priorities and expectations which in many cases will counter each other. 

It doesn't help that inside DFAT, the recent stripping of development expertise through a raft of staff departures has diminished significantly the department's knowledge of how to turn an aid project into a good development activity with long-term benefits to the recipients rather than just the donor. 

But perhaps that not such a priority anymore. 

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