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Foreign Affairs, Defence and Trade References Committee
27/11/2015
Australia's bilateral aid program in Papua New Guinea

SCHAEFER, Mr Stuart Martin, Director, International Programs, Save the Children Australia

[09:59]

CHAIR: Welcome. Would you like to make a brief opening statement before we go to questions?

Mr Schaefer : Thank you. Save the Children Australia is part of a global organisation that supports programs in Asia and the Pacific. We have offices in the Pacific, including in Papua New Guinea. For your background, Save has been in Papua New Guinea for 25 years, and in our next strategy period, 2016-18, we will be focusing specifically on health, education and child protection programming. Our submission outlined the projects that we focus on in Papua New Guinea—in summary, a sexual reproductive health program, a home based malaria-management program, early childhood care and development programs, and also a child protection technical unit.

I joined Save the Children in August 2014 after 16 years working for AusAID and then DFAT. In that time, I led the programs in Afghanistan and the Solomon Islands, from Kabul and Honiara respectively. I also spent 6½ years in Papua New Guinea in a variety of roles: as a truce monitor in 1997 on Bougainville, in the high commission responsible for governance programs in the early 2000s, on secondment to the Department of National Planning, and as head of the Australian aid program from 2012 until the middle of 2014.

Save the Children Australia welcomes the inquiry into aid into Papua New Guinea. There needs to be much more debate and understanding in Australia on the aid program, the return on investment for Australia, and the countries in which Australia works. Given the size of Australia's investment of aid dollars in Papua New Guinea, there cannot be a discussion on the value of aid, without an informed debate about development in Papua New Guinea.

As we note in our submission, alongside defence and diplomatic engagement, Australia's aid program is an important diplomatic tool to promote regional stability and, over time, to promote economic growth. I want to emphasise that we do get a return on our investment in aid. We do not know what Papua New Guinea would look like without the investment Australia has made through the aid program. We do know, however, that the social and economic indicators in Papua New Guinea remain very poor. Now is not the time to reduce our investment, but time to focus on those interventions that will give Papua New Guinea and Australia the greatest return.

Five hundred and fifty million dollars per annum is a lot of money. But, as has been noted here this morning, it is just eight per cent, and falling, of the PNG government's spend. The overall spend of Australia and Papua New Guinea equates to just $1,000 per person. Let me give you an example of the quanta involved. The health spend is less than $100 per person in Papua New Guinea. Let us assume it is $100, and the economy grows, and government and private expenditure grows at six per cent per annum. In 2050, Papua New Guinea health expenditure will be less than $800 per person. Australia's total health expenditure is currently around $6,600 per person. Spending on police services is currently about $20 per person in Papua New Guinea. The Australian government spends on average $440 per person.

Five hundred and fifty million dollars would purchase just 20 kilometres of the Pacific Highway upgrade currently taking place in northern New South Wales. With expenditure so low and indicators so poor, the return on investment in social capital—expenditure on health, education and child protection—is high. The small amount of support relative to Papua New Guinea expenditure means that we must consider, even more importantly, ways of potentiating Papua New Guinea's expenditure.

On Wednesday we marked White Ribbon Day. I congratulate Minister Ciobo for his personal commitment to stopping domestic violence. Sexual abuse and exploitation of children is a major concern in Paua New Guinea. Family and sexual violence is endemic. Papua New Guinea has one of the highest rates of violence against women and children in the world. MSF estimates that 70 per cent of women and girls will be raped or physically assaulted in their lifetime. In 2014, MSF reported that 87 per cent of rape cases presenting at family support centres in Port Moresby were perpetrated against children or people under the age of 18.

Papua New Guinea's under-five mortality rate is the highest in any country in the Pacific. Over 13,000 people die each year before the age of five, largely from preventable courses. Preventable and treatable diseases such as pneumonia, diarrhoea, measles and malaria are the biggest causes of child deaths. Fourteen per cent of children are wasted as a result of insufficient food and diseases such as diarrhoea, while stunting rates are 35 per cent in urban areas and 50 per cent in rural areas—well above the global average.

Fourteen per cent of primary-school-age children are not attending school, despite the government providing free primary education to all children. Girls face higher barriers, with lower enrolments and attainment of secondary or higher education. Out of 100 students who start elementary school, eight boys and five girls will finish grade 12.

The current priorities of the aid program are to transition away from basic service delivery. This in itself is laudable. It is the sovereign responsibility of a government to provide basic services for its people. A balance, however, needs to be maintained between the negative effects of reduced service delivery over the longer term on the next generation, on health and education and, ultimately, on economic growth.

Let us reflect on the impact of stunting: poor concentration at school, less ability to learn, less ability to develop to their full potential and, ultimately, individuals who will not be able to work to maximise economic growth. We need to work with the Papua New Guinea government and health and education providers to make sure Australia's exit from basic service delivery does not impact on the poorest—the families and children who will not be able to find alternatives.

We are unconvinced that a compelling case has been made to reprioritise 30 per cent of the aid program to the private sector led growth and aid for trade. This is not because economic growth does not matter—quite the contrary—but because the return for economic growth over the longer term will be higher from investments in health, education and child protection. There is a role for private sector in service delivery. We know that the capacity of government is weak. It should be encouraged to focus its limited capacity on setting policy directions, on legislation and on monitoring service delivery. Non-government service providers, NGOs and the private sector, already deliver many social services. This can be further encouraged.

Change in Papua New Guinea will take a long time to take effect. We need to take a long-term approach to support Papua New Guinea. A significant part of the approach needs to be maintaining and building community support for improved social indicators through improved service delivery. Finally, better data is key to improving the supply of services and the demand for them. Better data is key to the measurement of the effectiveness of aid programs. We encourage the Australian government and the PNG government to build datasets in Papua New Guinea that can lead to improved service delivery. For our part, we will undertake a child rights governance survey next year and an assessment of nutrition also. With these brief comments, I am happy to take questions.

CHAIR: Thank you, Mr Schaefer. The challenge that the committee faces is that we cannot help but almost get a bit angry when we hear all of these stats come out after a large amount of Australian taxpayers' money has gone in. Given the statistics that you have reported about women, are there any programs that empower women to take control over feeding their children and having some economic security around those early childhood years?

It is fine to talk about governance and all the rest of it, but the problem is that they are eating two-minute noodles instead of proper food. The average Australian taxpayer, if they were privy to all of the information we have here, would be absolutely incensed that we spent $500-plus million dollars a year and kids are growing up stunted at rates which are growing. The growing rate of stunting is unbelievable in an economy which has been enjoying quite considerable growth trajectory. The government cannot do it. We are spending $500 million, so why can't we do it? Why can we not have a program that feeds the bloody children, for Christ's sake?

Mr Schaefer : I suppose I would have a slightly different view, in that we are talking about a budget that is actually pretty small—not just the Australian $500 million, but also the Papua New Guinea contribution. It is actually a pretty small budget for a population of seven million that is growing at about 3.5 per cent. When you look at it per capita we are talking about small amounts of money. We would very much encourage the Papua New Guinea government to spend more on those sorts of things, but ultimately we are still going to end up with a relatively small amount of money being spent on them. I think that to do that—to help encourage the Papua New Guinea government to help the Australian government to push on some of its policy objectives—I would certainly encourage a greater debate among the Australian public about the aid issues in Papua New Guinea. I think we hear a lot about corruption and a lot about what is not working, but I think we need to have a broader debate about some of those issues.

CHAIR: What is working? That is what we are trying to find—what is working—so that we can build on it.

Mr Schaefer : As the previous witness said, there are pockets of things that are working. There are some systematic improvements. We need to think about this stuff over the longer term. We are talking about a weak governance environment. Individuals are individuals and will always seek to maximise their own sort of rent, if you like, in those sorts of environments, whether they are in Papua New Guinea, Australia or any other country in the world. So we have to take a long-term view. I think we have to promote different sorts of accountability. The fact that it is a bilateral relationship brings with it its own tensions, so it is sometimes more difficult to have those stronger conversations with the Papua New Guinea government. I think a broader level of public accountability within Papua New Guinea and within Australia is very important. I also think we need to remember that this is a long-term venture. We cannot expect to see changes quickly, but we do need to deliver the message and be very focused on making small and continuous incremental change.

CHAIR: I will put it to you very bluntly: are women better at governance than men in Papua New Guinea? Do they deliver better outcomes when given projects to manage?

Mr Schaefer : Sorry, could you please say that again?

CHAIR: Are women better than men at managing governance and projects in Papua New Guinea?

Mr Schaefer : I think men and women in weak governance environments will face similar pressures. I certainly encourage more women to be involved in decision making in Papua New Guinea. I think they will bring more dimensions to decision making, and hopefully that will result in improved decision making for themselves.

CHAIR: I say that because I spoke with the former Liberal Premier of South Australia about the Anangu Pitjantjatjara Yankunytjatjara lands, and he said it was the best case for affirmative action he had ever seen. In other words, the people who were sitting on the executive were not making the right decisions, but when there were more women involved in that executive they did make the right decisions. Is there any evidence that we are actually getting the right people in governance areas in some of these projects? I accept that they can tell us what to do.

Mr Schaefer : Sorry, Senator?

CHAIR: They run their country and they can tell us what to do, but we can choose where to invest.

Mr Schaefer : I think there are examples where women have had better representation on decision making bodies and decision making has improved. There is evidence in some of the distribution of royalties and other benefits from some of the mines where there have been mandated levels of women in some of those community groups. The resulting distribution of those funds has improved. I think we should be very strong in our messages to the Papua New Guinea government that we believe that having more women in decision-making positions is not about making life easier for women. It is much more than that. It is about making Papua New Guinea a better place for all.

Senator BACK: I am open in my admiration of the work that you have done over time and what you have told us. I understand from the secretary that there are about 7½ million people in Papua New Guinea and their revenue budget would appear to be not that far off $7½ billion—$1,000 per person. That is what we are talking about in ballpark figures. We learned that of that $7½ billion—it is probably a bit under that—111 federal members of parliament, if that is what they call them, are given $9 million each. That frightens me. It would frighten me in the Australian context. Is there any accountability for the expenditure by each of those members of parliament? $9 million is a vast sum of money. We just learnt from Dr Standish that a lot of them are not successful next time. Probably an awful lot of them do not need to be successful next time if they salt a good deal of that $9 million away. Is that a starting point in terms of corporate governance and accountability for expenditure?

Mr Schaefer : Certainly. The amount of money that goes to MPs now is greater than the Australian aid program that goes to Papua New Guinea. It is a very useful place, if you like, to focus attention on governance. I would say there is limited accountability for that money at this point in time. Notionally, MPs need to report back on what they have spent their money on. Notionally, they do not get further tranches of that money unless they have reported on what they have spent their money on. I understand that those systems are not necessarily working as well as they should be. That is a political reality, and we now need to think about how we can strengthen those systems. The community sector, first of all, has a big role to play in being made aware that MPs have that money and then demanding from those MPs information about what they are spending that money on, and not just what they are spending it on but what the returns on that money are. Then they need to become informed voters over time, so that there is pressure for MPs to spend that money better.

CHAIR: Is there a published disclosure document where they need to report over time on what they have spent it on and what the parameters are about what they can spend it on? They cannot just be given $9 million saying, 'Do what you like.' There must be a document. Is that a public document? Can we see that?

Mr Schaefer : I am not 100 per cent sure, but I would think that it is public money so it should be accounted for through the Public Accounts Committee. But the Public Accounts Committee does not work fantastically well.

CHAIR: It should be transparent.

Mr Schaefer : It should be transparent. That is the other side of the ledger. We can have community organisations and communities demanding better governance, but also the accountability needs to be pushed harder in organisations such as the Public Accounts Committee.

CHAIR: We are talking about innovation and leveraging funds. That is what the foreign minister is saying now. If there is a transparent, publicly disclosable tranche of funding in every electorate and we are putting funds in, presumably, in the same electorates, you would think that there would be some synergies. If they had enough to do half the project and we wanted to do the lot and we bring the governments with us, you would think that would take a $500 million expenditure and make it $1½ billion, wouldn't you? Maybe that is an opportunity.

Mr Schaefer : It is an opportunity. Part of the issue with the dispersal of funds to all of those electorates is that what you are effectively encouraging is 111 different systems to be developed, potentially. The Australian government's strategy is potentially the only one in terms of trying to identify those MPs and those organisations that spend money well, championing those people and encouraging others to spend likewise. It can champion them not just through advocacy and things like that but also through offering to partner with them with additional money. In the Highlands, when I worked there, some of those MPs were looking to spend money on health facilities and we offered to match some of their funds if they were going to spend that money on health facilities. There are those sorts of things. We also need to publicise those and say, 'This is what you can do for your people with that sort of money.'

Senator BACK: I ask it in the context of your 13th recommendation, which is effectively to multiply our aid budget tenfold from $500 million to $5 billion. I sit on the board of a philanthropic foundation in another South-East Asian country, which I will not name. Last year there were massive floods in that country. The central government came to the board of the foundation and said, 'Can you address the issues of the people affected by these floods?' We did, and we accounted for it down to the last dollar. Local politicians were outraged, because previously those funds would have been given to them in those flood-affected areas and they would have dispersed the money. In fact, in that parliament at the moment there is an attempt to have our foundation either closed down or severely curtailed. We all know the reason why. Every last unit of currency was accounted for in that situation. I am a bit sensitive to accountability and this type of thing.

I think I heard you say that health, education and child protection would appear to be your three highest priorities. Nothing we have heard in this inquiry would put us at variance with what you have recommended. It then becomes a question of two things. One, what is the appropriate level of financial support that Australia can give, if we agree that those are the three main areas? And—this is the question that the two of you were just discussing—how do we lever that to get the greatest level of effect? You tend to think that over the period of time we have gone backwards. We have not advanced. As a senator, I simply reflect that if 226 of us were all given the equivalent sum of money it would be a disaster. It would be a disaster in this country, considering the ease and speed with which there could be corporate accountability, et cetera. We know very well that even in well-structured economy like ours it would be nil. By the time someone had salted away $7 million of their $9 million, or whatever it would be, they would be long gone. So for us to expect that there is going to be effective expenditure of that money is wishful thinking. That then raises the question of to what extent we, representing the Australian taxpayer, should be recommending that Australia's aid money be directed in those areas. We are so frustrated to think that there needs to be far more done, but at this moment, based on the way the expenditure goes now, I would not be putting my hand up to say, 'Let's increase it tenfold,' because I would not have confidence that in 10 years time another committee like this would be hearing any different evidence.

Mr Schaefer : Just to clarify that recommendation, that is to restore the aid program to the size it was before, not just for Papua New Guinea. We are not saying that should all be for Papua New Guinea.

Senator BACK: I understand that.

Mr Schaefer : The accountability of those constituency funds is a real concern. I think we do need to put a lot of effort into assisting the Papua New Guinea government to make sure it gets accountability for them. We talked about a couple of public accounts committees and we talked about community engagement, but there is also the strengthening of, in particular, the procurement functions of the district authorities which are being established to manage these funds. There are a lot of them, so you probably cannot do all of them at the same time. There are opportunities for some training and opportunities to demonstrate which ones are working and then to use some of the skills from there across the country.

Senator BACK: Having worked, as you have, across several theatres, we have started looking at—at least I have—our aid to recipient countries not only in dollar terms but as a percentage of their GNP. Clearly, when you look at our aid to Indonesia as a percentage of their GNP, it is infinitesimal. In the case of Papua New Guinea and our Pacific Islands, of course it is a very significant proportion—eight per cent. I reckon in the case of the Solomon Islands and others it is getting up into the 20s and 30s. Would it be your advice based on your experience that a greater proportion of Australia's aid should be directed at Papua New Guinea—and that would then suggest at the expense of other recipient countries?

Mr Schaefer : Our starting point is that we would see value in the aid program being restored to its previous levels and then increasing. We certainly believe that there are some real development challenges in Australia's neighbourhood. In particular, in the Pacific there are not many countries other than Australia that are ready to commit the resources to deal with those development challenges. We are concerned that while those development challenges exist there is not enough understanding of them within the Australian population. I would certainly encourage you to go to Papua New Guinea to see firsthand for some of those. We took five MPs to Papua New Guinea in the middle of the year. I think they have all had their eyes opened.

CHAIR: Mr Schaefer, I know that your recommendations are around health, education, child protection, gender issues, law and order, corruption and those sorts of issues. I just want to get your view as to where infrastructure fits into the ability of people to move freely through the economy, or for health or for education. There was a hilarious snapshot the other day of a farmer in China driving 1,000 geese down a freeway because it was easy to get to market. He did not have to pack them up. He just drove them down the freeway, shut the traffic down and got to market. That illustrated to me that infrastructure does play a huge role in people being able to lift themselves out of poverty. Is there any evidence that that sort of infrastructure is contributing to an improvement in the wellbeing of people?

Mr Schaefer : I think there is evidence that improvements in infrastructure can lead to improvements in health and education outcomes. There is no doubt about it. If you improve the road to the health centre so that the ambulance can get there, so that people can get there and so that supplies can get there, there are definite opportunities there. The infrastructure needs in Papua New Guinea are huge. I think there are some opportunities through these constituency funds to encourage MPs to put a fair amount of their money on these sorts of things. We are talking about basic roads at the community level. Often, they just need to be graded roads. There can be some significant returns. Where we are coming from is: we need to focus on what the returns are. We do not want to think about infrastructure for the sake of infrastructure, but where we are going to get that return. Let us think about how we going to get a return on education, health and protection.

CHAIR: I have not been to Papua New Guinea and know very little about the place. When an infrastructure proposal comes up, does it have a return-to-the-economy indicator, or is it just done because someone lives at X and someone lives at Y and they want a road? It there a measure of productivity improvement?

We have a good history of that in South-East Asia. I looked at a bridge over the Mekong in Vietnam which, on all the productivity indicators, just blew the world away. It was a no-brainer. Is that sort of assessment done in New Guinea?

Mr Schaefer : I know that, when I was leaving, the Australian government was looking to perhaps assist the Papua New Guinea government in better prioritising its national infrastructure programs on the basis of the return they would get and how they should be sequenced so that that return can be maximised. I think it is a far different job down at the district level, where we are talking about very small roads. But that is possibly something to be included in any project management support that we might give to a procurement of roads and things like that.

CHAIR: We heard in some of the evidence to the joint committee on foreign affairs in relation to aid that the national government sets the policy on health, but the provincial governments are responsible for implementing and funding it. So there seems to be quite a disconnect. Can you describe that. Basically the mining companies and the not-for-profits—religious people—were providing the best health facilities.

Mr Schaefer : Can I describe it to you? No, because I do not think that there is a clear explanation of how it all works. I think that is a significant inefficiency in the situation. As you say, there is national government money; there is money that is going to provinces—and now there is money going to MPs. I think 20 per cent of that money is meant to be earmarked for health stuff and 20 per cent for education. But unless you know who is paying the teachers' salaries, who is meant to be providing the books and who is meant to be maintaining the schools, you can have inefficient use of resources, in effect. If the MP decides to provide all the books, when, actually, you could just ring someone in the education department and say, 'This school needs books', it would be much simpler. So there could be an improvement in the understanding of who is responsible for what in that regard. It is not just about understanding; it is about writing it down. Some of the legislation that has been passed is high-level legislation. Some of the operational aspects of it have not yet been done.

CHAIR: If someone is ill in one of the areas that you are involved in, what actually happens? Are they able to access reasonable health care?

Mr Schaefer : Generally I would say not. Certainly in rural areas there would potentially be some sort of village healthcare worker that will have a basic level of training. One of the problems in Papua New Guinea at the moment is that a lot of these healthcare workers are getting pretty close to retirement age, so there is a potential need for greater investment in terms of the training of those sorts of people. The healthcare worker will be able to open up some sort of healthcare facility. It is probably a clinic. It is going to have some rudimentary stuff inside it and be able to provide some assistance. The idea of being able to suggest that they go to a hospital or something like that is probably quite difficult for most rural health clinics.

CHAIR: Your organisation has been active in Papua New Guinea since independence?

Mr Schaefer : Twenty-five years.

CHAIR: Obviously you would not have too many people who have been there the whole 25 years. But how are we going? Are we plateauing, or are we increasing in areas? Are we treading water, or are we under water? Do we have another 25 years to go before we see some improvement?

Mr Schaefer : To be honest with you, I think we are talking about a 50-year problem. We need to stick at this for a long time. With a population growth of 3.5 per cent, there is going to be a hell of a lot of poor people in Papua New Guinea in 50 years time. The numbers I talked about, in terms of the health care available to those people, did not take into account an increasing population.

CHAIR: Are there any international examples of where we have a similar sort of problem?

Is there another country that is in front of, behind or of an equivalent status with New Guinea?

Mr Schaefer : There are a number of indexes that rank countries. The Human Development Index is one, and Papua New Guinea is fairly low down on it, but there are countries beneath it. I think some of the indicators in Afghanistan are beneath that of Papua New Guinea. Some countries such as the Central African Republic are below that.

CHAIR: But most of those would have different circumstances. Afghanistan probably has been at war for most of the last 25 years, hasn't it? New Guinea certainly has not.

Mr Schaefer : No, it has not. It is a difficult place to do business. I suppose that one of the things that comes to mind from your questioning is: where are the incentives? Are we tapping properly into the incentives for Papua New Guinean leaders to do more for their people and to take advantage of the substantial economic growth that has happened over the last 10 years to make that more inclusive?

Senator BACK: It would have been interesting if some of the $9 million had been linked to achievement of the Millennium Development Goals in each electorate, wouldn't it? I do not think there has been any, from my recollection.

Mr Schaefer : The National Economic and Fiscal Commission, which is the equivalent of our Commonwealth Grants Commission, has done some work in the past on ranking provinces and saying, 'This province is doing well,' and in effect trying to shame those provinces that are not doing well. There could be some more things like that, putting stuff out in the public domain not just for publicity but also potentially linking it to funding opportunities to say, 'We're ready to support provinces that do better.' There is inevitably a small moral hazard in that, in that some of the very poor people still exist in those provinces where those MPs are not doing the right thing by their people.

CHAIR: What about other international donors to Papua New Guinea? What are China doing there? Are they just going in and doing infrastructure projects?

Mr Schaefer : China is a pretty new donor internationally and has focused mostly on infrastructure and things like that. I think a generalisation would be that China can be more transactional than Australia on specific programs. It is developing its development policy now, so it is becoming less like that, but that is the case. The other part of this is that Australia will probably remain the biggest donor by an order of magnitude for many years to come. We are not thinking that China is going to come up behind it.

CHAIR: We have a challenge, and I am increasingly coming to realise that there are no silver bullets here and that we really just need to make sure that the foundation settings are right for that long uphill battle to improve any of the outcomes that we see. You would be aware that there are probably people in this parliament who do not have quite as patient a view as that. They would say, 'The money's not being spent; why are we giving it to them?' We have to get those fundamental settings right. Can you point us in the right direction there—just to summarise in the last two minutes we have—in your area of expertise?

Mr Schaefer : From my time in Papua New Guinea, I suppose there are two things that I think are linked. One is about getting the incentives right for people to think about the long term of Papua New Guinea within Papua New Guinea. In a generalised sense, the way to do that is to improve accountability through demand for services, so community organisations but also within government—public accounts committees or the NEFC and things like that—and also to encourage accountability through the electoral process by making sure that people are aware that, if an MP has not delivered, they get knocked out at the next election. And then it is also through getting better accountability within government to say, 'Let's reward good behaviour.' I think the Australian government can help in that regard.

CHAIR: Thank you very much for that submission and your evidence here today.

Proceedings suspended from 10:39 to 10:50