Australian Aid—Investing in Growth, Stability and Prosperity
Eleventh statement to the Parliament on Australia's development cooperation program, by The Hon Alexander Downer, MP, Minister for Foreign Affairs
Parliament House, Canberra, September 2002
In 1996, I commissioned a major independent study—the Simons review—of Australia's aid program. It is now five years since the Government's response to the Simons review, Better Aid for A Better Future, was tabled, marking a turning point for the aid program.
In 1999 the OECD Development Assistance Committee found that Australia's development cooperation program has "gone through an impressive process of restructuring and renewal ... (with) Australia in the vanguard" of OECD practice.
Today I would like to table a new policy statement on the aid program, Australian Aid: Investing in Growth, Stability and Prosperity. The statement sets out a renewed policy framework for our development assistance, demonstrates how our aid is reducing poverty and promoting growth, peace and stability in the region, and identifies ways in which the Government will strengthen its impact.
Why do Countries Succeed?
For the first time in history we are making unprecedented gains in reducing poverty. Over the past forty years average life expectancy in developing countries has increased by 20 years; adult illiteracy has been almost halved; and maternal mortality has been cut in half.
Most importantly, despite a rapidly growing world population, the number of people living in absolute poverty has begun to fall—a reduction of 200 million since 1980.
There are some notable achievements in individual countries, including in our region. In just a few decades, countries such as Korea, Malaysia and Singapore have transformed. For example, Malaysia's poverty fell from over half the population to around 7 per cent in the 1990s.
More recently, Vietnam and China have made remarkable progress. In Vietnam, per capita GDP doubled in the 1990s, and levels of poverty halved. In China, there has been a large reduction in the numbers of people living in poverty from 270 million in 1978 to 200 million now.
Elsewhere, Chile, Uganda, Mauritius and Botswana have performed impressively.
Other countries have not fared so well. In South Asia and sub-Saharan Africa, the number of people living in poverty has grown by tens of millions.
The reasons why some countries succeed is clear:
Strong economic growth drives development and reduces poverty. East Asia for example, has achieved average growth rates of 7.7 per cent over the last two decades, while the economies of Sub-Saharan Africa have either declined or remained stagnant. Of course, the quality of economic growth is important for reducing poverty sustainably. There must be investment in human capital, particularly in education and health. And there must be an environment that encourages the private sector, generating jobs for the poor and incomes.
Outward looking states—those countries that have taken advantage of globalisation and integrated into the world economy by liberalising trade and investment—have achieved much higher rates of growth. Developing countries embracing trade have achieved average per capita GDP growth of 5 per cent a year during the 1990s, compared with only 2 per cent for developed countries.
Good governance—sound policies, mature institutions and accountable systems—is also a prerequisite for sustained economic growth and reductions in poverty.
Adopting these three strategies—growth, openness and good governance—helps countries attract investment, which in turn generates innovation and further economic and social development.
The role of Aid in Development
Aid—at some $90 billion (US$50 billion) a year—constitutes only a small portion of the resources available to support development. International trade provides developing countries with export earnings of close to $3.6 trillion (US$2 trillion) a year. And foreign direct investment from developed to developing countries totals almost $360 billion (US$200 billion) annually.
Nonetheless, aid can play a critical role:
- Aid can help policy reform and good governance
- Aid can help develop the environment for private sectors to grow
- Aid can support investments in health, education, agriculture and public infrastructure
Our Policy Framework
Australia's aid has a clear, single focus—to advance Australia's national interest by assisting developing countries to reduce poverty and achieve sustainable development. To do this, our aid concentrates on five areas:
- Good governance, not just in central governments, but in local administrations, in the private sector and in civil society
- Helping countries benefit from open and accountable trade regimes, and access to new information technologies
- Effective basic services, particularly in health and education
- Building capacity to prevent conflict and manage transboundary challenges
- Sustainable resource management
Investing in good governance—where we have doubled our budget—is now the centre-piece of Australia's aid program. Those investments have helped countries improve economic and financial management, strengthen public sector institutions, strengthen democratic systems, operate with more accountability and transparency, and entrench the rule of law.
Australia's aid program is focussed on the Asia Pacific, where the majority of the world's poor—some 800 million people—live, and yet which receives less than one third of total aid flows. Indeed, under the Howard Government the proportion of our bilateral aid directed to high-priority countries in East Asia and the Pacific has increased. There is wide international recognition that we are a lead donor in the Asia-Pacific region.
The priorities in our aid program mean that Australia has been able to respond to often wrenching changes in a dynamic region. Our aid has played a critical part in responding to the Asian financial crisis, to the emergency in East Timor, and to conflict and instability on Bougainville, the Solomon Islands and Fiji.
Our aid has played a critical part in helping developing countries address the challenges and opportunities of globalisation, and participate in the new round of global trade negotiations at the WTO, with its explicit development agenda.
And our aid has played a critical part in helping regional countries respond to a range of trans-boundary issues such as HIV/AIDS, the illicit trade in drugs and small arms, and illegal immigration and people smuggling, which threaten regional development and security.
In sum, our aid program expresses Australia's strong engagement with the region, and our commitment to helping the region address its considerable development challenges—especially in reducing poverty.
Achieving Results
The statement I am tabling today contains numerous examples of the impact of our aid:
- We have helped the government in Samoa achieve sustained economic growth of 6.5 per cent, whilst reducing tariffs and taxes
- We have helped strengthen prudential supervision and regulation in the Bank of Thailand, contributing to greater economic stability
- We have helped the Government of Vietnam disseminate a new enterprise law that, in only 18 months, has resulted in 27,000 new businesses employing more than 500,000 people being registered
- We have helped China's accession to the WTO by training more than 1,700 officials in trade policies and practices that are expected to generate an additional 1 to 2 per cent annual GDP growth
- We have helped train more than 45,000 primary and high school teachers, built or refurbished at least 1,200 schools and education centres, and helped over 2 million children gain an education
- And, as a final, poignant example, we have helped deal with the scourge of landmines in Cambodia, reducing mine casualties from over 3,000 per year to around 800
Papua New Guinea and the countries of the South Pacific, of course, are some of Australia's most important development partners. The international community and the Australian public expect Australia to play a leadership role in assisting South Pacific countries in their development efforts. We are doing that through assisting national governance reform efforts, strengthening the rule of law, and supporting stability and national unity through the effective delivery of basic services.
Strengthening Impacts
The Government is committed to making Australia's aid even more effective:
- We want to make sure our aid programs mesh with the development agendas of each of our partner countries
- We want to make sure that specific projects are delivered in a way that support local systems and structures, and minimises administrative burdens on the those we are trying to help
- We want to focus on what we do best, with our particular bent on reducing poverty, with systems that demonstrate clearly how effective we are
- And we want to make more use of incentives that will support our core priorities in governance and other reform efforts, by rewarding good performance
As part of our continuing reform effort, the Government will strengthen its relationships with international development organisations, with the Australian NGO community, and with individuals and firms that deliver aid—so that our assistance yields better outcomes.
Dealing with Poor Performers
There has been much discussion lately of so-called "'poor performing states". Some of our Pacific partners and neighbours, mostly in Melanesia, are beset by problems that will continue for the foreseeable future.
Australia cannot simply walk away from our neighbours—for humanitarian, developmental and broader security and national interest considerations. To do so would allow instability to worsen, conflict to escalate, and services, especially in health and education, to deteriorate.This would prove far more costly in the long term. And in the short term, it would affect those most who can least bear the burden—the poor.
Today, I would like to set out a strategy for our aid—to reduce the impact of state failure on the poor, and to encourage governments to reform:
- Firstly, our assistance will be based on thorough analysis of the underlying causes of state failure, or conflict
- Second, we will focus on humanitarian assistance that directly targets the poor and reduces their vulnerability, especially in delivering essential services such as health and education
- Third, where government systems are failing, we will look at channelling our assistance directly to community organisations, non-government organisations and other civil society groups
- Fourth, a continued priority will be to strengthen the institutional capacity of legal and police systems, including community-policing efforts to improve the safety and security of people and communities
- Fifth, we will continue to engage governments on good governance. This does not mean taking a hectoring approach, or behaving like a colonial power. It does mean supporting efforts to grapple with appropriate approaches to good governance issues and offering incentives for them to do so. It is my strong belief that civil society, including the media, can also be a powerful advocate for accountability and reform. Australia will continue to invest aid funds in projects that support civil society
- Sixth, we will engage with other donors to strengthen our leverage, including by adopting a leadership role in coordinating donor engagement.
In circumstances where the failure of government is due to conflict, we will draw on our experience in working with the parties to resolve conflict and offer a "peace dividend" through the resumption of basic services and assisting a return to stability and prosperity.
It is important that the Australian community understands that dealing with state failure will be a difficult and long-term task. Progress may be a long time coming. We will need to match our expectations with the reality on the ground, including in our aid assistance.
We also will need to accept that fully sustainable outcomes are unlikely to be achieved in poor performing environments. This is not to say that sustainable poverty reduction should not be our over-arching goal. It should. But in order to get to the point where this is possible, creative approaches, and opting for more intermediate goals, may become necessary.
Conclusion
Development is a difficult, complex and long-term undertaking. Development gains can easily be eroded due by conflict, economic crises or failures of governance.
Australia's aid is playing an important role in supporting our partner countries own development efforts. It is also engaged in promoting growth, peace and stability in the region and addressing issues which are directly linked to Australia's own prosperity.
I am confident Australia's aid is addressing fundamental development problems, is making an impact, and is playing an important role in meeting the Government's priorities in the Asia-Pacific, and beyond.
Australians can be proud of the contribution we are making.
A copy of the 62-page AusAID policy document that accompanies this statement is available on the Ausaid website at http//www.ausaid.gov.au.
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