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Changing aid for a changing world: address to the National Press Club



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CHECK AGAINST DELIVERYChanging Aid for a Changing WorldRc 3 3 John Kerin MPMinister for Trade and Overseas DevelopmentNational Press ClubTuesday, 10 November 1992I have had a long interest in aid and development and, coming to the portfolionearly a year ago, I was struck by a sense of deja vu.It seemed that I was hearing the same sort of public discussion about aid as Ihad heard in the 1970s. There was little public recognition that ourunderstanding of the problems, and solutions, of development has become moresophisticated; or of how Australia's agenda for Aid has evolved in response.The end of the cold-war and political and economic changes in many countriesthrough the 1980s have profoundly changed the dynamic of relations betweendeveloped and developing countries.We must freshly define the issues and future directions for overseas development."Changing Aid for a Changing World" provides the stimulus for this process.The collapse of European and Soviet communism has left a gigantic industrial andsocial wasteland and development challenge at a time of slowdown in westerneconomies. This has dramatically reinforced the fundamental notion that thecreation of wealth is a prime requisite for development.The simplicities of the 1960s and 1970s have gone. Debates about 'trade notaid' 'trickle down' 'tying versus untying', 'stages of economic growth' and'market versus command economies' have either been superceded or rendered morecomplex.We now know that we need comprehensive national approaches by developedcountries involving aid, trade, investment and the public and private sectors.We also know that effective development co-operation involves consultation,co-operation and political sensitivity in designing differentiated programs forrecipient countries.WHY AND HOW WE GIVE AIDThe basic moral principle that people should assist others worse off thanthemselves is a fundamental component of our humanity. It is embedded in ourcultures and our religions.So soon after the era of "Greed is Good", this principle may often seem at oddswith other human behaviour, but it is in no way diminished by this. In fact, itmakes it all the more important that it be upheld.In the international society of nations, Australians uphold this principlethrough the official Overseas Development Cooperation program administered byAIDAB, and by supporting non government organisations which provide their ownassistance programs overseas.In 1992/93, the government will spend $1.38b on overseas aid. When you add thefunds raised publicly by non-government aid organisations, total directAustralian contribution to overseas development would approach $1.5b.Australians from community-based aid organisations are doing excellent workaround the world. Their projects are frequently of the highest calibre. Theircommitment and dedication seem boundless. COMMONWEALTHPARLIAMENTARY LIBRARYMICAH

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Australian consultants and companies working with the aid program are achieving progress, often in difficult conditions. And the Australian public, despite hard economic times, has continued to give generously to locally-based aid

organisations.

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Against this backdrop,

changed over the years have changed, and as assistance has changed.

both our official and non-government aid programs have as the needs have changed, as our strengths and skills the philosophy of ethical and effective development

And our development assistance will continue to change in the years ahead. Changing Aid for a Changing World takes this as one of its major premises.

THE DEBATE

The policy document describes some areas in which important changes have already been made:

* In our aid to PNG we are moving to program aid, phasing out budget aid by the year 2000;

* In Indo-China we are moving to emphasise infrastructure, education and training support;

* In Africa we are moving towards a sectoral emphasis to apply Australia's particular expertise where it can do best;

* This is amplified in our increased attention to health services, especially HIV/Aids, where our expertise is among the world's best and the problem is of major proportions;

* By accentuating our environmental management skills - as we have this year through the DIFF scheme - we are continuing this sectoral emphasis;

* The needs of women in developing countries and their contribution to the development of their societies have long been ignored by aid programs. We have recognised this and begun the process of turning it around.

Changing Aid for a Changing World also points to directions for change that we are considering but which we need to investigate further, including through exchanging information and ideas.

By such a process of informed public debate I strongly believe we can best choose our options for aid in the 1990s.

This must come together in an Overseas Development Cooperation Program to go forward as part of the Budget process. This process of public policy discussion and development is valuable and necessary, regardless of the electoral cycle.

And the coalition became irrelevant to this debate when they released Fightback.

Their plan to cut the aid budget by $209m would reduce aid spending to the lowest level ever contemplated by any Australian government.

No amount of cynical promises and lazy rhetoric can hide this fact, as Senator Hill's outdated and contradictory statement on aid last week showed.

Changing Aid for a Changing World is a comprehensive document. I am not intending to be so comprehensive in my remarks today. I will turn to some of the key proposals later. P,

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Before I do, I want to ventilate some key premises underlying the Aid Debate so that we see them more clearly.

I will discuss the need to evaluate Australia's Aid program in its full internationa l context.

Also, the issue of how we decide what is the greatest need and how this should be reflected in our Aid program.

I want to discuss the question of commercial interest in the aid program.

And I want to discuss the relationship between the official Aid program and the work of NG0s.

THE INTERNATIONAL CONTEXT

The crisis in Somalia has highlighted what is generally well-known: that international coordination of development cooperation and emergency relief is almost nonexistent.

The patterns of aid flows often reflect former colonial links, or security and commercial interests, more than geographic proximity or nature of need.

Coordination amongst and between donor countries and NGOs seems to be more the exception than the rule. Indeed, it is not unusual for relations between aid deliverers to be characterised by rivalry and/or suspicion. The result, of course, is wasted effort on the ground.

One of the issues raised in the document goes to this problem. We propose a stronger international system to coordinate aid efforts, especially in relation to emergency relief. There are strong arguments for a bigger role for the UN in this.

The UN system has a chance of playing a more powerful, co-ordinated role in both economic development and security matters now that super-power rivalry has passed. Global environmental issues also require an approach that can only be dealt with by the UN or a similar body.

However, any move by the UN to a position of greater influence in these areas must come as part of a strengthening of its role in world affairs. This will only be possible with the financial and political commitment of all member states.

The international context is essential in another aspect of the debate over shaping our aid program. That is, as a field of reference.

Too often, public discussion of the apportionment of our aid spending is conducted as if Australia's overseas development program was the only one on the globe.

The 1992 report by the UNDP estimated that the annual total of aid from industrialised countries was around $US54b. Australia contributes roughly 2% of that total.

When we consider how Australia can best direct its aid, we must also consider how and where the other 98% of international aid is used.

A case in point is the argument that more of our aid should be spent in Africa. Currently about 7% of our total aid goes to Africa. Given the enormity of Africa's problems, in isolation it could be argued that we should increase this proportion.

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However, according to the UNDP Report, total per capita aid flows into At are at least three times the size of the flows into South East Asia.

ten developing countries with the highest number of poor, in Africa, one (Brazil) is in South America, and the other eight

Based on these figures, I believe that the geographic targetting of our aid is broadly correct, and is quite compatible with its central humanitarian purpose. I know some of you differ with that idea. I am sure there are other figures to be considered, other factors to be quoted, other parameters to be invoked. However, it is clear that for informed debate our aid must be seen in the light

of the full international picture.

THE GREATEST NEED

Another common premise for debate on aid matters is the suggestion that aid

volumes should be directed to areas of greatest current need, where human suffering is at its worst.

On that basis, the people of Somalia and southern Africa would currently qualify as the most deserving. But within the tight clamp of budgetary restraint, picking a winner for the right reasons then means choosing a loser for no reason at all.

We are fully aware of the human suffering in Somalia. And I believe that the situation in other African states will soon be just as bad if the devastating drought there does not ease.

I gm also aware that Burmese refugees in Bangladesh are suffering deeply.

The Iranians have coped with 3.5 million refugees with virtually no help from the rest of the world.

Young women in rural Thailand are every day being sent by their families to work in the brothels of Bangkok. Children are living in garbage dumps in Manila and Bombay. The floods in Pakistan and the Cairo earthquake have left many homeless. In many parts of the South Pacific, illiteracy, dietary deficiencies, and endemic disease are major problems. Cambodia has been all but destroyed. The people of former Yugoslavia have a long, hard winter ahead. The list goes on.

I find it difficult to decide between these needs. In giving aid, we give more than food or education, more than health care or water supply - we also give hope to people. And no matter what degree of desolation people endure, they deserve assistance and the hope that assistance brings.

This raises the fundamental question of how much of our total aid effort should go to meeting emergency needs of hunger and shelter, and how much to longer term development assistance which will help solve the causes of this suffering.

The answer is balance and mix, achieved in consultation with developing countries, with other donors in the international context, and with NGOs and industry in Australia.

And, of the (Ethiopia) is are in Asia.

But any major shift in resources must be gradual to ensure that assistance is provided as widely and consistently as possible wherever there is a real need.

COMMERCIAL INTEREST

The issue of commercial interest in the aid program is raised critically in two opposing ways.

As an angle on our domestic economic difficulties, some populist commentators proclaim that we should look after our own people before we care for others. This is venal tabloid stuff that denies the fundamental issues, denies Australians' support for overseas aid organisations, and ignores the facts.

The fact is that at least 80% of aid spending comes back to Australia - either directly as payment for Australian food grains and other goods and services, or indirectly through longer-term fostering of trade opportunities and other spin-offs.

The other criticism of Australia's commercial interest in our aid program goes to the other extreme: that there is too much emphasis on it. This centres on the DIFF scheme, which will account for $120m of our aid spending this year. DIFF supports development of government capital, infrastructure and other priorities - eg. power generation.

It is true that DIFF offsets the disadvantages facing Australian firms when they are competing with aid-subsidised finance packages offered by other donor governments.

It is true that, up to 1990191, $300m of DIFF spending resulted in $850m in direct exports by Australian companies and a further $451m in follow-on direct exports.

But it is also true that, whatever the commercial benefits from DIFF, they are secondary to the scheme's development assistance impact. DIFF is principally about overseas development, its export enhancement function is secondary.

DIFF projects have to satisfy developmental criteria, including those set by the recipient country. DIFF projects are subjected to the same scrutiny for developmental soundness as applies to all our aid projects.

As many of you would be aware, this year we have earmarked around $12m of DIFF funds for environmental projects. Given Australia's expertise in this area and the great need in many developing countries for improved environmental management, there could be scope for increasing this component of DIFF. I look

forward to hearing views on this.

The remaining view on DIFF is that it should be part of Export Market Development and there should be more of it. This reflects the 'Magic Pudding View' of the Aid Budget, that it should be used for any purpose where other Government funds are not available. This view must be resisted at all times.

COORDINATION AT HOME

While we may agree about the need for greater coordination of development assistance and emergency relief on the international level, we must also foster the same idea at home.

The relationship between AIDAB and Australia's NGOs suffers from the difficulties that come between most government agencies and their private sector constituencies. There are problems, despite the undoubted goodwill on both sides. The problems arise from the very nature of the job at hand.

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We all deal with competing demands and limited resources. We see urgent needs, but we must also have rigorous accountability and project evaluation.

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Bureaucracies have a bad name and can easily be criticised or issue organisations approach their missions with fervour, but the process of public accountability and competing priorities.

These factors will not diminish. How we manage them has to improve. We raise several ideas regarding NGOs in Changing Aid for a Changing World. All would contribute to closer relations with AIDAB and each other, while also providing better integrated and ongoing structural, financial, and personnel support to NG0s.

At the same time, AIDAB needs to communicate openly and positively with the public at large and with NG0s.

AIDAB is adaptive, and will become more involved with strategic policy issues in other areas as they develop. For the aid program has to remain consonant with our external economic policy, and with our international relations and strategic developments - particularly as they affect our region.

Industry has also to be closely involved with AIDAB and NG0s. Aid is business because of the amounts being spent and the development role played by commercial activities. Investment decisions by the private sector are just as important as decisions by governments in determining the economic development of nations.

The major economic decisions made by recipient country governments are crucial in determining the level of investment by the private sector. Hence advice and government-to-government and agency consultation are very important.

SOME KEY ISSUES

Let me briefly touch on some of the key issues raised in Changing Aid for a Changing World.

Growth: One set of challenges for aid through the nineties is posed by the growth of a number of the ASEAN economies. Changing Aid for a Changing World foreshadows the transition of Malaysia from the aid program. Malaysia will not be the first - Singapore and South Korea once received substantial shares of Australian aid.

Although Thailand and Indonesia are experiencing strong growth, they continue to suffer major development problems, with very large numbers of people living in poverty. We therefore need to pursue programs which recognise this transitional phase in our aid relationship.

Our efforts should balance our interest in building strong economic links with our continuing concern to help broaden the benefits of growth to those still living in poverty.

DEVELOPMENT FINANCE:

I have directed AIDAB to research the question of introducing a loans program.

There is one view that loans are well suited to particular sorts of activity -those which will show the most rapid economic return, for instance -particularly when a country's economy is starting to do well.

There is an opposing view that all aid should be on grant terms - that poor countries are already suffering under impossible debt burdens which skew their attention to debt servicing rather than to meeting the needs of the poor.

However, the growing and productive use of small loans schemes at commercial rates of interest gives the lie to this.

I look forward to some passionate argument on this topic from the NCO, business

and academic communities.

SOUTH PACIFIC & PNG:

In the South Pacific, the stereotype view of our island neighbours has them living in paradise, not poverty. The facts paint a rather different picture.

In several countries I visited earlier this year, infant mortality rates are high and life expectancy is low. In some, more than half the adult population is illiterate. Only half the people have access to safe water, and intestinal disease and malaria are endemic. The countries are very small, with limited natural resources.

This is an area where our size and influence do count. It is imperative that our aid programs - which in some islands represent a very substantial part of government revenue and development projects - are totally effective.

To that end, we are placing greater emphasis on policy dialogue with island governments, aimed at enhancing their capabilities in macro and micro economic reform, in expanding their trade, and in developing their private sectors.

We have always enjoyed good relations with our Pacific neighbours (Kiwi jokes notwithstanding). Occasionally irritations creep in; we're often accused of big brotherly behaviour.

But my view is that by speaking frankly about Australia's policies and interests in the region and calling the shots as we see them, we do contribute to regional stability and harmony.

In PNG I have set in train what I believe is the most profound change in the history of the Aid Program. From 1994195 to the year 2000 we will progressively phase out our annual $300m budget aid and phase in 'program aid' with a target of $300m annually by the end of the century.

In full consultation with the PNG Government we have agreed to target our program assistance in the Law & Order, Agriculture, Health, Education, and economic infrastructure sectors.

These programs will provide opportunities for practical Women In Development activities and involvement, and expanded scope for HGOs in the delivery of Aid.

The policy and bureaucratic complexity of such a:transformation in the bilateral Aid Program cannot be underestimated. But I have no doubt we will meet those challenges.

POPULATION:

The population explosion is both a product and a cause of poverty. High birth rates are found in places where the infant mortality rate is also high, where subsistence agriculture is the dominant way of life, and where women are illiterate and unskilled.

Access to reliable, safe contraception is only the last part of a complex jigsaw. As Indira Ghandi once said, "Development remains the most effective contraception".

In the 1990s, world population will rise by around one billion. This sobering statistic emphasises the size of the task of merely maintaining average living standards across the developing world, let alone improve them.

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NEW' AID ISSUES:

Recently recognised aid issues such as environmental management, HIV/Aids, and Women in Development require detailed approaches. They especially require an understanding of the societies into which aid is directed so that the value

judgments of developed societies are not indiscriminately or inappropriately imposed upon them.

There is little sense in applying environmental standards on the basis of guilt, punishment or the incomprehension of what is possible. Environmental requirements are a cost as well as a benefit and no decisions are cost free.

The concept of women in development and the empowerment of women in development can be both a goal in itself as well as a practical approach to economic, social and cultural development.

TRADE LIBERALISATION:

There is a clear linkage between aid, trade and investment, and economic growth and stability.

Trade liberalisation within a rules-based rather than a power-based system of international trade would provide a very substantial boost to developing countries, as well as to the developed world.

Until developing nations can gain a fair return for their commodity exports, their social and economic development and political and economic autonomy will be both constrained and threatened.

Rich industrial countries cannot legitimately complain of the lack of political will in developing countries when their own decisions are marked by political expediency, greed, and lowest common denominator policies driven by the

immediacy of the media and self-reinforcing opinion polls.

Likewise, Australia's capacity to maintain and increase its contribution as a donor will, in part, be dependent on our ability to trade.

Anyone concerned about the future of development should be vitally involved in the effort to liberalise world trade.

There are several more issues I could raise.But I am constrained by time and today I have had to impose my own priorities.

I commend Changing Aid for a Changing World to you and invite you to take part in the debate which will ensue. I am sure you have many questions to ask.