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Tuesday, 17 August 1993
Page: 127

(Question No. 240)

Senator Chamarette asked the Minister for Foreign Affairs, upon notice, on 20 May 1993:

  (1) Has the Minister's attention been drawn to the report in the ANU Reporter of 27 May 1992, of an interview with Professor David Lea, in which it is stated, amongst other things, that conventional aid is not working, as is evidenced by the fact that the poorest people in poor countries are getting poorer, much of the Third World's accumulated debt is a direct result of foreign aid and loans from the World Bank and regional development banks and `privileged elites are not really interested in any change'.

  (2) Is Professor Lea's assessment of the aid malaise accurate.

  (3) Will directing more aid through non-government agencies better serve the poor.

  (4) What proportion of Australia's aid and development budget is administered by non-government agencies.

  (5) Will a greater proportion of Australia's aid and development budget be targeted to small scale projects managed by those people who are the intended beneficiaries of the projects.

Senator Gareth Evans —My colleague the Minister for Development Cooperation and Pacific Island Affairs, has provided me with the following answer to the honourable senator's question:

  (1) Yes.

  (2) No. Professor Lea's assessment of the so-called aid malaise, while well-meaning, is out-dated and inaccurate.

  Professor Lea argues that aid has failed to alleviate poverty because its essential purpose is to preserve a system which damages the interests of the poor and supports privileged elites. These arguments had more validity in the past but aid programs now, including the Australian aid program, pay greater attention to poverty alleviation.

  In the post-Cold War period, there is widespread recognition that poverty alleviation is a global priority. Poverty alleviation is now a major theme in the work of multilateral development organisations such as the World Bank and the United Nations Development Program. The links between sustainable development, environmental issues and poverty reduction are highlighted in Agenda 21, the internationally agreed plan of action arising from the 1992 United Nations Conference on Environment and Development.

  Professor Lea asserts that the poorest countries and the poor within many countries are getting poorer. This also is misleading.

  From 1960 to 1990, key human development indicators for the least developed countries, that is the very poorest countries, have shown considerable improvement. Average life expectancy has increased from 39 years in 1960 to 51 years in 1990. Infant mortality has decreased from 170 per 1000 live births to 114 per 1000 in 1991. The percentage of people with access to clean drinking water has risen from 21 percent in 1975 to 47 percent in 1990. Adult literacy has increased from 29 percent in 1970 to 45 percent in 1990. Real GDP per capita has increased from $580 in 1960 to $740 in 1990, based on measures of purchasing power parity.

  Professor Lea argues that much of the Third World's accumulated debt is a direct result of foreign aid and loans from the World Bank and other regional banks. This is not the case.

  The fact is that many developing countries borrowed large amounts from private banks during the 1970s and early 1980s. When real interest rates rose dramatically in the early 1980s, debt-servicing became a major problem for many developing countries. This, in turn, substantially reduced the ability of developing countries to attract private financial resources.

  As a result, private financial flows to developing countries fell from a high of 52 percent of net financial flows in 1980 to 34 percent in 1987. At the same time, official development assistance (ODA) flows to developing countries increased from 29 percent of net financial flows in 1980 to 54 percent in 1987. Thus foreign aid had a critical role in underpinning resource flows to developing countries in this period.

  Loans from the World Bank's International Development Association (IDA) to eligible developing countries are highly concessional, with no interest charges and 40-50 years to pay back the loan, including a ten year grace period. IDA further helps severely indebted countries, particularly in Africa and South America, through its debt-reduction and debt-servicing facility. The Asian Development Bank's soft-lending arm, the Asian Development Fund (ADF), is also highly concessional.

  (3) Providing aid through non-government organisations (NGOs) is one way of directly meeting the needs of the poor. However, NGOs alone are not the answer to poverty. Helping the poor requires a combination of strategies. While small-scale, localised activities directed specifically at the poor have an important role, they also need to be accompanied by measures which result in increased economic activity, improved services and better infrastructure.

  (4) In 1991-92, 4.5 percent of Australia's aid budget was administered by NGOs. In 1992-93, the proportion was approximately 5.7 percent. This compares to 2 percent in 1983-84, 2.6 percent in 1987-88 and 4.3 percent in 1989-90.

  (5) Australia's aid to individual developing countries is based on the needs and requests of recipient governments, and Australia's capacity to assist. This results in a mix of activities, some small-scale and some large, which varies from country to country. There is no merit in deciding at the outset that a certain proportion of Australia's total aid budget will be earmarked for small-scale projects.

  The question of people's participation extends far beyond small-scale activities. The obstacles to the full participation of women in development remain one of the greatest development challenges. For this reason, women's needs are taken into account in the planning and implementation of all Australian aid activities.