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Australia’s foreign aid program: a post-surgical stocktake

The Coalition government’s changes to Australia’s foreign aid budget for 2013-14 were finally confirmed in January by means of a rudimentary spreadsheet. This showed A$650 million in cuts at the level…

Australia made a generous contribution to the relief effort in the Philippines, but has significantly reduced humanitarian and emergency response funding for 2013-14. DFAT

The Coalition government’s changes to Australia’s foreign aid budget for 2013-14 were finally confirmed in January by means of a rudimentary spreadsheet. This showed A$650 million in cuts at the level of countries, cross-regional programs and major international organisations.

While the information provided is broad-brush, it does give some insight into the government’s aid priorities.

Refocusing on the Asia-Pacific

The cuts, as widely expected, signal a significant shift away from Africa and the Middle East. Aid to these regions will fall by almost 40% on 2012-13 levels, from $329 million to $200 million. If these are considered the domain of European donors and multilateral organisations – as it was in the Howard government era – further cuts might well follow in the 2014-15 budget.

All other changes in geographic allocations at the regional level are 5% or less, with little change from 2012-13 for most countries in the Asia-Pacific. Generally, their allocations have been reduced by no more than 10%. In some cases, such as Indonesia and Fiji, the allocations have in fact increased where no need was evident.

Mongolia gets a 52% increase, which is smaller than the former Labor government’s planned 75% boost but strangely large. It might be that this reflects a desire to pursue “mining for development” activities there. If so, this could be the first indication that the government intends to embrace Labor’s initiative.

As for aid to Australia itself, Labor’s controversial allocation of $375 million for onshore asylum seeker costs was removed from the baseline. It was, therefore, not cut at all, even though this is among the first cuts the government might have been expected to make.

Australian NGOs, which do most of their work in our region, have had their funding cut by 7% relative to the 2013-14 budget. They will still receive 24% more than in 2012-13. The government can reasonably claim to have kept its commitment to protect allocations to NGOs.

No aid for action on climate change

Oddly, the smallest and most vulnerable states do badly. Aid to the smaller Pacific Island countries has been collectively cut by 22%, and by 18% to Bhutan and the Maldives. One possibility is that this reflects an end to planned assistance for climate change adaptation, which might also explain the large cut of 27% to Bangladesh.

At the same time, the government has allowed no funding for global environment programs and has reduced funding for cross-regional environment programs to only $500,000. Labor had allocated only $6 million for these purposes in any case.

It is too early to conclude that climate change and the environment are now off limits for aid funding. Global environment programs will not incur costs, in cash flow terms, until 2014-15. That is when provision will need to be made, or not, for contributions to the sixth replenishment of the Global Environment Facility and possibly for the initial capitalisation of the Green Climate Fund.

Smaller countries vulnerable to the impacts of climate change, such as the Maldives, have had their aid funding cut significantly. niOS

Cuts to humanitarian aid

In one very significant change, humanitarian and emergency response funding has been cut by almost 30% relative to the 2013-14 budget and by 16% relative to 2012-13.

At a time when calls on humanitarian and emergency funding are increasing, this large cut will undoubtedly lead to a lessening of support for programs deemed to be of low public interest. We have already seen this in the remarkably low contribution to the UN’s recent Syria appeal, which contrasts with the generous response to the typhoon in the Philippines in November 2013.

The reduction will also mean that whenever this budget line is depleted, bilateral allocations will likely have to foot the bill for emergencies at the expense of long-term development programs.

Where does Australia stand in the donor league table?

Australia was the eighth-largest OECD aid donor in 2012 (the last year for which comparative data are available) and was rising toward sixth largest within a year or two. With a steady-state aid budget of around $5 billion now and into the future, Australia will probably sit at about ninth place.

Australia’s aid as a proportion of Gross National Income will fall from an expected 0.37% to 0.33% and will probably stabilise at 0.32% for the next several years. Australia’s ranking on this measure will likely be unchanged at 13th.

In terms of aid per capita – a measure invoked last year by foreign minister Julie Bishop – Australia, at US$215 per head in 2011 prices, ranks tenth. This is not bad, but not enough to make us “one of the most generous per capita aid donors in the world”.

At present, therefore, Australia’s reduced aid effort is roughly commensurate with its standing among world economies, but not more than that.

The future remains uncertain

It is entirely unknown what impact the announced cuts will have at the level of individual activities within country, regional and global programs, and how those programs will be reshaped over time to reflect the government’s avowed sectoral priorities. Those include infrastructure and private sector development, important but expensive areas to work in.

For the 2014-15 budget, it is hard to see how the government could walk away from its clear commitment to maintain aid at just over $5 billion in real terms. Bishop has repeatedly underlined this commitment and criticised the previous government for constantly shifting goalposts.

The outlook for future years is less certain. The government’s deficit-reduction objectives obviously cannot be guaranteed to remain consistent with its aid volume commitment. And its determination to link aid to “performance benchmarks” could lead to budget cuts or underspending against budgeted amounts.

Another substantial unknown is whether the government’s determination to “leverage” private sector involvement in development amounts to a return to tied aid, which was jettisoned during the Howard era.

There have been too few signals about this to draw any conclusions. It was novel, though, to see Australia’s trade and investment commissioner in Indonesia recently announcing an aid-financed initiative in Jakarta and Makassar to improve water management “using Australian technology”.

More encouragingly, the allocation to “other cross-regional programs” of $35 million (an increase of over 400% relative to 2012-13) creates a small, flexible pool of funding that might well be used to support an Asia-Pacific private sector development initiative. This could possibly be along the lines of the Enterprise Challenge Fund, an initiative that dated back to Alexander Downer’s time as foreign minister and expired late last year.

It is good to have some information on the public record, but it is only a little information. We have yet to gain sight of and understand the real impacts of the cuts, the diplomatic blow-back and the policy underpinnings of the government’s aid program.

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21 Comments sorted by

  1. David Coles

    logged in via Facebook

    Sad. Here we are one of the best off countries in the world now not prepared to provide limited assistance to those who are struggling. The previous government found foreign aid to be an available target but this one is taking our mean spirited approach to a new level. So much for the nation of the fair go for all.

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  2. John Crest

    logged in via email @live.com.au

    What do we get by providing aid to Indonesia?

    Help with stopping people smugglers? Er, no...

    Must be a bit of slack from their politicians when we are caught spying (as all countries are wont to do)? Er, no...

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    1. R. Ambrose Raven

      none

      In reply to John Crest

      A few general ponts are worth making on this topic.

      Neurotic obsession with boat refugees is costing us several billion dollars, damaging our relationship with Indonesia, politicising the military, stressing the Navy, causing thousands of people to languish in concentration camps designed for brutality, encouraging increasing arrogance and insolence by a Minister supposed to represent the people rather than himself, dividing our community, attracting international condemnation, and marginalising…

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    2. John Crest

      logged in via email @live.com.au

      In reply to John Crest

      None of those issues have anything to do with the reason we provide aid to Indonesia (that I can see anyway).

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    3. George Takacs

      Physicist

      In reply to John Crest

      John,

      I thought aid was given for the benefit of the recipient, not the giver. Perhaps I am naive.

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    4. John Crest

      logged in via email @live.com.au

      In reply to John Crest

      I'd suggest so.

      After all, what is a "gift" but an obligation in disguise?

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    5. Suzy Gneist

      Multiple: self-employed, employed, student, mother, volunteer, Free-flyer

      In reply to John Crest

      Wow, that statement says a lot about your own beliefs! Others see a gift just as such and free of obligations otherwise it would be a trade, not a gift.

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    6. John Crest

      logged in via email @live.com.au

      In reply to John Crest

      And your obverse view says a lot about your beliefs too. So?

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    7. Suzy Gneist

      Multiple: self-employed, employed, student, mother, volunteer, Free-flyer

      In reply to John Crest

      Yes, i don't have a problem with being known as straightforward or honest - a gift is just that, if I expect something in return, it isn't a gift and I know now never to accept a 'gift' from you.

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    8. John Crest

      logged in via email @live.com.au

      In reply to John Crest

      To be fair, it's not like I was ever going to give you one...

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    9. Suzy Gneist

      Multiple: self-employed, employed, student, mother, volunteer, Free-flyer

      In reply to John Crest

      I wasn't expecting one either, but I'm sure others have been recipients of your 'gifts with expectations' - in politics or industry it would be considered a bribe...

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    10. R. Ambrose Raven

      none

      In reply to John Crest

      You obviously haven't been paying attention.

      "Foreign minister Julie Bishop announced the cuts for the groups as well as a complete defunding of international environmental programs. The government is redirecting a pared back aid budget towards the region and maintenance of spending on countries such as Papua New Guinea, Indonesia and Nauru, whose co-operation is necessary for the success of its asylum policy."

      Can you see now, or would a pair of bifocals assist?

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  3. R. Ambrose Raven

    none

    Abbott joined with Canada in rejecting a decision by the CHOGM summit in Colombo in ’13 to push for a Green Capital Fund (part of a collective 2020 goal that would see $100 billion in what is called climate financing) to help vulnerable island states and poor African countries address the effects of rising sea levels, prolonged droughts, or catastrophic weather incidents, caused by climate change. Abbott arrogantly deemed it “socialism masquerading as environmentalism” and a mere wealth transfer…

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  4. Andrew Winter

    -

    Should we be providing development aid at all? (Note: I separate this from emergency relief aid).

    I would probably be described as being from the far left of politics, but having studied international development at a post-grad level and worked in humanitarian emergencies, I do question whether we should be doing any development aid at all.

    The problems that keep countries and their people poor are, on one hand related to the global system in which they are located, and on the other, related to their internal political systems and how wealth is distributed within their country.

    Aid does not address either of these issues but merely provides a moral band aid (and often with tied-aid, an economic boost) to the donor country as it continues along its merry way.

    In the countries in which I have worked, change will never come about through foreign aid. There is probably even a strong argument that aid provides a disincentive for domestic political change.

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    1. Adam Johnson

      n/a

      In reply to Andrew Winter

      Andrew, you mention development aid and distinguish emergency relief aid.

      How do you consider humanitarian aid such as food, medical assistance directly to those in need? Would this come under emergency relief or under development?

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    2. Andrew Winter

      -

      In reply to Andrew Winter

      Hello Adam - I'd consider this emergency aid. I separated this type of aid from development aid, as it deals with situation in which the host country is overwhelmed by an urgent event such as natural disaster or war.

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    3. John Crest

      logged in via email @live.com.au

      In reply to Andrew Winter

      What is international aid but poor people in rich countries giving money to rich people in poor countries?

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  5. Sam Jandwich

    Policy Analyst

    Thanks for the article Robin.

    Something I expected you to discuss here was the dissolving of AusAID and its incorporation into DFAT. In view of this change I was expecting there would be cuts across the board, as it seemed that aid was simply an area this government has little interest in (and it's certainly barely rated a mention either in the election campaign or subsequently).

    So I was a little surprised to note that with the exception of drastic reductions to environmental, humanitarian…

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    1. Robin Davies

      Associate Director, Development Policy Centre, Crawford School of Public Policy at Australian National University

      In reply to Sam Jandwich

      The integration of AusAID into DFAT is a large and separate topic that I and others have covered fairly extensively on the Development Policy Blog (see this selection of pieces: http://devpolicy.org/?s=AusAID+integration&submit=Search).

      Integration, budget reductions and staffing reductions are three largely separate moves: you can integrate without reducing anything; you can cut program budgets without integration or, up to a point, staffing cuts; and you can reduce staff without integration…

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