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Tuesday, 15 August 1972
Page: 120

As indicated in the table on the next page, a total of $220,086,000 has been provided for expenditure on economic aid to developing countries in 1972-73. This is $20,262,000, or 10.1 per cent, greater than actual expenditure in 1971-72.

The totals shown in this table differ from those quoted in Statement No. 4 - Estimates of Expenditures, 1972-73 by virtue of the inclusion of direct expenditures of an economic nature by various Commonwealth Departments and instrumentalities in or in connexion with Papua New Guinea (which are subsumed under other headings in the Budget); the inclusion of the voluntary contribution which Australia makes towards the technical assistance activities of the International Atomic Energy Agency; the exclusion of expenditures on the training of military personnel under Special Aid to the Khmer Republic; and the exclusion of expenditures relating to developed countries under the Commonwealth Cooperation in Education Scheme.

Multilateral Aid

Expenditures on multilateral aid programmes are estimated to increase by $6,20 1 ,000 to a total of $17,901,000 in 1972-73.

Although the agreement governing the third replenishment of the resources of the International Development Association has still not entered into effect, calls on Australia's previous contributions to the Association, including the voluntary contribution of $US16 million made in November 1971, are expected to total $8,398,000 this year, or $1,534,000 more than in 1971-72. An amount of $3,036,000 has been provided in the Budget to meet the first instalment of the paid-in portion of the proposed increase in Australia's subscription to the capital stock of the Asian Development Bank as set out in the Asian Development Bank (Additional Subscription) Bill now before Parliament: no similar payment was made in 1971-72. Total calls on Australia's existing contribution to the Multi-Purpose Special Fund of the Asian Development Bank and a proposed further contribution of $US250,000 to its Technical Assistance Special Fund this year are together expected to result in expenditures $1,223,000 greater than in 1971-72. The estimates also provide for increases in Australia's pledges to the U.N. Children's Fund, the U.N. High Commission for Refugees and the U.N. Development Programme in 1973. The estimated increase of $283,000 in expenditure on the International Rice Research Institute at Los Banos in the Philippines in 1972-73 relates to the design, purchase and installation of a phytotron to assist research activities at the Institute.

Bilateral Aid (excluding Papua New Guinea)

Expenditures on bilateral aid programmes (excluding bilateral aid to Papua New Guinea) are estimated to increase by $6,042,000 to a total of $57,446,000 in 1972-73.

The provision for expenditure on multifarious aid projects undertaken in developing countries in South and South East Asia under the Colombo Plan will be increased by $5,271,000, while that for the training of overseas students and officials from these countries in Australia will be $423,000 greater than in 1971-72. Special Aid to Indonesia, which is basically used to finance ad hoc gifts of commodities, Devisa Kredit (D.K.) aid and the costs of shipping to Indonesia the large quantities of wheat and flour given to that country as part of Australia's commitment under the Food Aid Convention of the International Wheat Agreement, will be increased by $2,051,000 to $12 million in 1972-73 to complete the current three-year aid commitment to that country. Plans are underway for the CSIRO to help establish a major animal husbandry research institute in Indonesia in the near future.

In all, bilateral aid worth more than $20 million will be provided to Indonesia in 1972-73, compared with $17,824,000 in 1971-72, making that country by far the largest recipient of aid from Australia at the present time, excluding Papua New Guinea.

Expenditures on the South Pacific Aid Programme and the Commonwealth Co-operation in Education Scheme are estimated to increase by $604,000 and $152,000, respectively, in 1972-73 in accordance with the programme to provide a total of $15 million in bilateral aid to developing countries in the South West Pacific in 1972-73 and the following three financial years. Fiji is expected to be the major recipient. A total of $2 million, or 5485,000 more than in 1971-72, will be provided for Rehabilitation and Relief Aid to Bangladesh in 1972-73;

(a)   To the extent that these expenditures relate to the purchase of Commonwealth assets in Papua New Guinea their effects on the Budget in 1972-73 will be offset by equivalent receipts. in addition, at least $2 million worth of food aid in the form of wheat or flour will be provided to that country this year. Finally, the provision for Special Aid to the Khmer Republic has been increased by $134,000 to cover the cost of supplying earthmoving machinery, telecommunications equipment and other aid items to that country, as well as the pledge by Australia to contribute $US1 million in 1972 to the Exchange Support Fund which was recently set up to help stabilise the Khmer economy. Other aid will also be provided to the Khmer Republic under the Colombo Plan in 1972-73.

Offsetting these increases to some extent, there will be reductions of $621,000 in estimated calls during 1972-73 on Australia's contribution to the Indus Basin Development Fund; of $188,000 in the provision for Australia's food aid commitment under the International Wheat Agreement, reflecting the fact that slightly more than 223,000 metric tons of wheat or flour equivalent was shipped in 1971-72 with consequential savings this year; of $2,300,000 in Emergency Relief for East Pakistan Refugees in India, since this item is no longer required following the cessation of hostilities and the return of the refugees to their homes; and of $1 10,000 in Special Aid to South Vietnam, since the project for which this item was originally created (viz. the construction of houses for dependants of members of the Regional and Popular Forces in Phuoc Tuy province) has now been completed - other aid will, of course, continue to be provided to South Vietnam under the Colombo Plan and SEATO Aid programme in 1972-73.

Papua New Guinea

Normal grant aid to the Administration of Papua New Guinea will be increased by $13,131,000, or 12.1 per cent, to a total of $121,300,000 in 1972-73.

The basic Grant-in-aid will remain constant at $30 million but the Development Grant will be $8,625,000 greater and the provision for Allowances and Other Benefits for Overseas Officers employed in the Papua New Guinea Public Service will be increased by $4,506,000 to permit an expansion in recruitment and also allow for the flow-on effects of recent wage increases granted in Australia. There will be no payments in respect of the Arawa loan in 1972-73 as this was fully drawn last year. However, an interest-free loan of $3 million repayable over 15 years including a grace period of three years will be provided to the Administration in 1972-73 to enable the Papua New Guinea Investment Corporation to purchase the shares in Commonwealth New Guinea Timbers Ltd (a plywood manufacturing concern at Bulolo) which were previously held by the Commonwealth. In addition, special financial assistance estimated at $3,500,000 will be provided to the Administration this year to enable it to take over the functions previously performed in Papua New Guinea by certain Commonwealth Departments and instrumentalities which are being withdrawn as the move towards self-government and eventual independence proceeds: a large part of this amount will be devoted to the purchase of Commonwealth assets in Papua New Guinea. The provision for on-the-job training of Papua New Guineans in Australia has been increased by $212,000 to a total of $450,000 in 1972-73 and a further $500,000, or $414,000 more than in 1971-72, has been provided for the training of Papua New Guineans in administrative principles and procedures etc., at the Australian School of Pacific Administration (ASOPA), which was recently adapted for this purpose. Finally, expenditure on flying training scholarships for indigenous pilots in Papua New Guinea is estimated to be $50,000 greater in 1972-73.

Other Aid Expenditures

No allowance has been made in the foregoing table for the large subventions which the Commonwealth and State Governments provide each year for various educational institutions in Australia which are attended by several thousand overseas students, most of whom come from developing countries. The imputed costs involved in this 'hidden aid subsidy' are estimated to exceed $10 million per annum at the present time.

Similarly, the figures in the table do not allow for the fact that parts of Australia's contributions to the regular budgets of a number of international organisations (included elsewhere in the Budget) are used to finance aid projects in developing countries - the annual amounts involved here are currently estimated to approach $1 million.

Nor has any allowance been made for the costs incurred in administering Australia's various external economic aid programmes. In all, these costs, which are subsumed in Departmental Running Expenses, are tentatively estimated to be about $8 million per annum at the present time.

Defence Aid

Australia is also providing increasingly large amounts of defence aid to developing countries in South East Asia, not counting expenditures directly related to the presence of Australian forces in certain of those countries.

In 1972-73, for example, in addition to the substantial amounts being expended to develop Papua New Guinea's Defence Force, a total of $13,547,000 will be provided for defence aid and co-operation with certain South East Asian countries. This figure includes estimated expenditures on the training of military personnel under Special Aid to the Khmer Republic. The principal recipients will be Malaysia, $6,200,000; Indonesia, $3,800,000; South Vietnam, $2,164,000; and Singapore, $963,000. An amount of $250,000 has also been provided for military training in Australia of personnel from other countries.

To the extent that this defence aid releases domestic resources that the recipient countries would otherwise have used for the same purpose, it may indirectly help them to achieve faster rates of economic growth and development.

Historical Growth in External Economic Aid

The following table summarises the growth in expenditures on economic aid to developing countries, including Papua New Guinea, since 1962-63.

Australia's Relative Aid Performance

International comparisons of aid performances by different donor countries are subject to numerous reservations because of conceptual problems and statistical difficulties. Some of these were outlined in Statement No. 8 attached to the 1971-72 Budget Speech.

Nevertheless, leaving defence aid on one side as this does not necessarily contribute to economic growth and well-being in recipient countries, the Development Assistance Committee (DAC) of the Organisation for Economic Co-operation and Development regularly publishes data on this subject in an attempt to provide some measure of burden-sharing and to compare the relative aid efforts by its member countries, including Australia, in helping to raise living standards in developing countries.

The following table compiled by the DAC shows the performance of member countries in recent years in terms of the net flow of total official and private resources to developing countries expressed as a percentage of Gross National Product. On the basis of that yardstick, Australia, with a provisional figure of 1 .27 per cent in 1971 (compared with 1 .22 per cent in 1970) is currently ranked third in the world. However, as the figures for Australia itself and for other countries confirm, such flows can and do fluctuate widely from year to year, largely for reasons beyond the influence and control of governments. In Australia's case, for example, the sharp jump in the figures for 1970 and 1971 resulted principally from the large private capital flows to Papua New Guinea associated with the Bougainville copper project and from a substantial growth in private export credits, primarily related to wheat sales to developing countries, much of which has been officially insured. For reasons which are well illustrated by these examples, this method of assessing relative aid performances leaves much to be desired.


Note: The figures for 1970 and 1971 include estimated contributions by voluntary aid organizations and are, to that extent, not strictly comparable with those for earlier years.

A far more meaningful way of assessing relative aid performances is to compare only the official development assistance provided by each donor country expressed as a percentage of Gross National Product. This concept excludes private investment flows as well as export credits (whether official or private) extended to developing countries and contributions by voluntary aid organizations, etc. It has certain deficiencies, from the point of view of a grant aid donor like Australia, in that it still lumps grants and loans together as if they were the same - which, of course, they are not - and fails to deduct interest payments by developing countries. Nevertheless, it is widely used as a measure of burden-sharing, etc. at the present time.

On this basis, Australia ranked fourth in the world in 1971 with a figure of 0.52 per cent. Comparable figures for all DAC countries in each year since 1968 are shown in the following table:-


The apparent deterioration in Australia's performance in 1971 resulted from a bunching of expenditures in the previous year which had the effect of distorting the underlying trend. Thus, the comparable figure for the financial year 1971-72 was 0.56 per cent. There seems little doubt that the figure for Australia in 1972 will be higher than that for 1971, given the further increases in aid which have been provided for in the Budget.

In addition to volume, increasing emphasis is now also being placed on international comparisons of the terms on which official development assistance is provided, in view of the serious external debt servicing problems which many developing countries face at the present time.

Australia's aid has always been provided on extremely 'soft* terms. Indeed, until a few years ago it was all given in grant form. Early in 1970, however, a loan of $20 million on concessional terms was approved for the Administration of Papua New Guinea to help finance the construction of a new township at Arawa in connexion with the Bougainville copper project. As previously mentioned in this Statement, a further loan of $3 million will be provided to the Administration in 1972-73.

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