23 August 2022
PDF Version [566KB]
Dr Angela
Clare
Foreign Affairs, Defence &
Security
Executive
summary
- Development has been part of Australia’s international relations
since the Second World War. The early focus of Australia’s aid was on the
administration of Papua New Guinea under a United Nations Trusteeship and
support for the Colombo Plan, which provided social and economic assistance to
Asian and Pacific countries.
- Like most other OECD donor countries, Australia’s aid serves both
strategic and development purposes. Its core aim is to reduce poverty, promote
development and meet humanitarian needs, but it has also been used to advance
Australia’s strategic interests and as an expression of Australian values on
the international stage. The Pacific Step-up, for example, has been at the
heart of Australia’s strategic response to China’s rise in the region, while
also contributing to the region’s development goals.
- China’s growing influence has highlighted the increasingly
strategic role of Australia’s aid. The China–Solomon Islands security agreement
announced in April 2022 saw some commentators accuse the Morrison Government of
‘dropping the ball’ in its relations with the Pacific, arguing that the
agreement showed that the Pacific Step-up had failed to achieve one of its core
– if implicit – objectives: to ‘make sure the Pacific Islands don’t embrace
China’.
- In some of its first steps in coming to office, the Labor
Government made a series of visits to Southeast Asia and the Pacific, pledging
deeper cooperation across diplomatic, security and economic spheres and
flagging its intention ‘to weave together our collective interests and
purpose’.
- The foreign policy reset reflects increased recognition in
Australia of the need for greater policy coherence to address international
challenges of unprecedented scale and complexity. Part of this reset involves a
clearer articulation of the role aid can play alongside defence, security and
diplomacy in Australia’s relations with the region.
- Aid analysts caution that drawing aid into an increasingly
strategic context means that ‘more and more aid is given to the strategically
important rather than either the poor or the performing’. At the same time,
analysts see potential advantages in aligning development outcomes with
Australia’s broader foreign policy goals, arguing that greater policy coherence
can achieve better security and development outcomes and strengthen Australia’s
relations in the region.
- Greater foreign policy convergence can also help expand the kinds
of assistance that can be mobilised for development, including opportunities
for trade, labour mobility and remittances to developing countries, and
innovative forms of development finance.
Contents
Executive
summary
Introduction
Australia’s foreign aid
Australia’s aid in the region – current challenges
Development, diplomacy and defence
Beyond ODA?
Conclusion
Introduction
Australia’s foreign aid
Development has been part of Australia’s
international relations since the Second World War. The early focus of
Australia’s development assistance was on the administration of Papua New
Guinea under a United Nations Trusteeship, which included development and
humanitarian requirements, and support for the Colombo Plan, a major
Commonwealth initiative established in 1951 to provide social and economic assistance
to Asian and Pacific countries.[1]
Like most other OECD (Organisation for
Economic Co-operation and Development) donor countries, Australia’s aid serves
both strategic and development purposes.[2]
Its core aim is to reduce poverty, promote development and meet humanitarian
needs, but it is also used to advance Australia’s strategic interests and as an
expression of Australian values on the international stage.[3]
The Coalition Government’s Pacific
Step-up, for example, has been at the heart of Australia’s strategic
response to China’s growing influence in the region, while at the same time
contributing to the region’s development goals.[4]
There has largely been bipartisan support
for aid in Australian politics, but the major parties have brought different
emphases to the program.[5]
Over the last 2 decades Coalition governments have tended to be slower to ‘come
around’ to foreign aid, as aid policy analyst Jonathan Pryke has observed. But
this has not always translated directly into overall funding: the Howard Government
was ‘quick to slash’ the aid program when it came to power, Pryke notes, ‘only
to reverse course in the face of unprecedented regional crises such as
Timor-Leste in 1999, Solomon Islands after 2003, and most notably the 2004
Indian Ocean tsunami’. The Government’s response to these crises saw a doubling
of the aid program during its decade in office.[6]
More recently, the Morrison Government’s ‘temporary
and targeted’ measures to support the region’s COVID-19 response stabilised aid
spending after substantial cuts in real terms in its early years in office.[7]
Australia’s aid is primarily directed
towards Pacific Island and Southeast Asian countries, which in 2020–21 received
around 58% and 31% of the bilateral aid spend respectively.[8]
In 2022–23 Australia’s official development assistance (ODA, or aid) totals an
estimated $4.6 billion.[9]
In Opposition, Labor was critical of the Coalition
Government’s cuts to aid, particularly to Southeast
Asia, and has committed to ‘rebuild’ the aid program.[10] It has not confirmed an overall target for aid funding,
however, which sits at an historically low 0.2% of gross national income – down
from 0.33% in 2011–12.[11]
Despite Labor’s additional funding commitments, Australia’s aid program is set
to decline over forward estimates, according to ANU analysis (Figure 1).[12]
Figure 1 Aid volumes, Coalition and Labor (2022–23 prices, $A
million)
Source: Cameron Hill and Huiyuan Liu, ‘Aid campaign wrap: Labor promises to cut by
less than the Coalition,’ DevPolicy
(blog), 20 May 2022.
Australia’s aid in the region – current challenges
China’s growing influence in the region has
seen increased focus on the role of aid in advancing Australia’s interests. The
China–Solomon Islands security agreement announced in April 2022 saw some
commentators accuse the Morrison Government of ‘dropping the ball’ in its
relations with the Pacific, arguing that the agreement showed that the Pacific
Step-up had failed to achieve one of its core – if implicit – objectives: to ‘make sure the Pacific Islands don’t embrace
China’.[13]
Commentators have maintained that while
supporting development outcomes such as health and education remains important,
simply increasing aid is not enough if Australia is to achieve a ‘shared
understanding of regional collective security’. It has been suggested that Australia
instead needs to mobilise all its foreign policy tools to build trust and
provide meaningful support for the region’s security and development priorities
– particularly in areas where it can offer unique advantages, such as labour
mobility and greater economic integration.[14]
Former High Commissioner to PNG, Ian Kemish, suggests:
… to focus on the
size of Australia’s development assistance is to ignore these countries’
aspirations. Most Pacific governments would rather focus on economic
integration and market access in talking about the relationship with Australia
– areas where they feel they can be on more of an equal footing.[15]
In some of its first steps in coming to
office, the Labor Government made a series of visits to Southeast Asia and the
Pacific, pledging deeper cooperation across diplomatic, security and economic
spheres and modest increases in development assistance.[16]
The Minister for Foreign Affairs’
July 2022 speech to the International Institute for Strategic Studies in Singapore emphasised
Australia’s intention ‘to weave together our collective interests and
purpose’.[17]
Analysts
have largely viewed these
moves positively, welcoming the shift in Government narrative away from
treating the region ‘as a theatre of great power competition’ and towards
closer engagement ‘on the basis of shared interests’.[18]
Development, diplomacy and defence
The reset also reflects growing recognition in
Australia of the need for foreign policy coherence to address global challenges
of increasing scale and complexity.
Part of this reset involves a clearer
articulation of the role
aid can play alongside defence, security and diplomacy in Australia’s
relations with the region.[19]
Presenting Labor’s 2022 election policy
agenda, then shadow Minister for International Development and the Pacific, Pat
Conroy, noted that international development assistance is ‘a key part of our
commitment to a strong and principled approach to national security and a
self-reliant and ambitious foreign policy’. Rebuilding the aid program ‘isn’t
just the right thing to do’, he noted, it has ‘strategic implications for our
region and for our own security … as evidenced by the security pact recently
signed between China and the Solomon Islands’.[20]
Conroy also called for ‘more strategic and joined-up thinking’ between
diplomacy, defence and development.[21]
The previous government also acknowledged
the importance of foreign policy coherence. In 2021 Prime Minister Morrison
spoke of using ‘all the tools of statecraft’ to secure Australia’s
future, while then Minister for Foreign Affairs Marise Payne described
Australia’s COVID-19 strategy in the region as a ‘whole-of-government framework
… drawing on the full suite of our development, diplomatic, and defence
capabilities’.[22]
The push for greater recognition of
aid as a foreign policy asset has recently been seen in both the US and the UK.
President Biden appointed the former Ambassador to the UN,
Samantha Power,
as USAID administrator and elevated the role to the National Security Council to,
in the President’s words, ‘ensure our development agenda is a
core pillar of our foreign policy’.[23] In
2021 the
UK released its Integrated review of security, defence, development and
foreign policy, pledging that the UK would ‘remain a world leader in
international development’ and return to its ‘commitment to spend 0.7% of gross
national income on development when the fiscal situation allows’.[24]
Aid
analysts caution that drawing aid into an increasingly strategic context means that ‘more and more aid is given
to the strategically important rather than either the poor or the performing’.[25] Some
analysts, for instance, have questioned the development value of
Australia’s aid to the Pacific: Carolyn Hunt has
argued that ‘decades
of aid has done little to filter down to the way most Pacific islanders live’
and that ‘throwing more aid money into the Pacific
will do little to halt the rise of China’s influence’. The Australian Government’s decision to
divert aid funding away from regions of significant need – such as South and Southeast Asia – ‘surely warranted far more public
debate, lead time and scrutiny than it has been afforded’, she argued.[26]
At the same time, aid advocates see
potential advantages in aligning development outcomes with broader foreign
policy goals.
The Australian Council for
International Development’s (ACFID) 2022
election policy agenda
called for development to be elevated to
the ‘heart of Australia’s foreign policy’ as a ‘practical expression of
Australia’s values on the international stage’. ACFID argued:
Effective and inclusive development, alongside strengthened
diplomatic and defence engagement, can help Australia work with neighbours,
allies, friends, and communities to shape the world that we and our partners
want to see.
ACFID argued Australia needed a new
development policy that focuses on poverty reduction as its core goal and that articulates
long-term ‘whole-of-government’ and ‘whole-of-society’ strategies. It also
called for a
Minister for Development Cooperation and Humanitarian Assistance to be included
in Cabinet and its National Security Committee.[27]
The Asia-Pacific
Development, Diplomacy & Defence Dialogue (AP4D), a collaboration
between Australian development, diplomacy and defence analysts, aims to generate
more effective approaches to advancing Australia’s influence in Southeast Asia
and the Pacific.
One of its key themes is the importance of a
foreign policy narrative that ‘break[s] down silos’ between development, diplomacy and
defence.[28]
This
approach would deliver both strategic and development benefits, according to
Program Lead at AP4D, Melissa Conley Tyler: bringing in different perspectives
on strategic issues would allow Australia to better respond to the challenges
facing the region and be
a more effective security partner.[29]
AP4D claims that currently, Australia’s
strategic decision-making system focuses too heavily on ‘immediate hard security threats’ and gives ‘inadequate attention to a
wider range of issues, threats and opportunities’.[30] Instead, says Conley Tyler, human security and state
security should be seen as complementary rather than competing paradigms, a view that may allow Australia to find common ground with its neighbours and ‘facilitate
cooperation for peace and security in the region’.[31]
On the development side, equally, AP4D
asserts that ‘coherency between
security interests, economic interests and issues of development such as
justice and the rule of law’ is needed to achieve development objectives in
‘the future complex world’.[32]
Beyond ODA?
Greater foreign policy convergence can also
help expand the traditional kinds of assistance that can be mobilised for
development, analysts suggest. This may include opportunities for trade, labour
mobility and remittances to developing countries, or innovative forms of
development finance, including concessionary and market loans and equity
investments, guarantees and insurance.[33]
The UN’s 2030 Agenda for Sustainable
Development provides one of the best known examples of this approach. The 17 Sustainable
Development Goals (SDGs) presented a universal agenda that called for an
expanded policy framework for development, the mobilisation of resources beyond
ODA and a wider scope of development policy ‘to concern all countries,
irrespective of their developmental status, and to take into account the full
range of policies that can contribute to sustainable development in all its
dimensions, not only basic needs …’.[34]
The OECD has estimated that the gap
in financing the SDGs has widened by some 70% as a result of COVID-19, and now
sits at US$4.2 trillion.[35] ACFID has
pointed out that public funding alone – including official donor aid – cannot
meet this gap, and that the mobilisation of development finance should include non-traditional
approaches such as blended finance. This refers to the use public
or philanthropic funding
as a catalyst to increase private sector investment in
sustainable development.[36]
Despite their relatively high dependence on
aid, non-ODA forms of assistance and finance are important to many small island
countries in the Pacific. For countries such as Tonga and Samoa, remittances
‘are increasingly becoming a dominant and critical feature of national incomes’,
comprising 39%
and 19%
of their GDP respectively (2020).[37]
Australia’s labour mobility schemes and plans for permanent migration for
Pacific Island workers are widely seen to have the potential to
make important contributions to the region’s economic development, through both
skills acquisition and the ability to send money home.[38]
ODA remains a valuable form of assistance,
however. An OECD study acknowledged that while ODA ‘cannot replace strong
domestic public financial management systems and resources’, it can nonetheless
play an important role in a country’s economic development – particularly in times of crisis. The
authors argued that the need for concessional development finance such as ODA was
‘unparalleled’ in 2020, when COVID-19 had reduced non-ODA sources of development
financing and exacerbated financial gaps and public debt in developing
countries. ODA is especially valuable in these situations:
In nearly every decade since ODA
began in the aftermath of World War II, the world has encountered significant
economic crises. Throughout these challenges, ODA has proven the most stable
source of external financing, particularly compared to private flows, which are
more sensitive to economic shocks. Even though ODA may not be able to offset
drops in other flows, its dependability is crucial to enable long-term planning
within developing countries.[39]
ODA’s
value also lies in its capacity to make strategic investments in key areas of
government, the authors submit. Drawing on the example of ODA support for
health and social protection systems in some developing countries, Ahmad et al.
argue that these systems have been critical to developing countries’ ability to
target assistance to those most in need and respond effectively to the COVID-19
crisis.[40]
Australia’s $1.5 billion concessional loan
to Indonesia in November 2020 – although relatively small in the context of the
country’s economy – helped bring stability and confidence to Indonesia’s
finance system, which saw large outflows of international capital with the onset
of the pandemic. The loan was used to support the country’s response to
COVID-19, including social protection initiatives and health system
development.[41]
Australia’s direct budget assistance to
Pacific Island countries to help maintain essential services in response to
COVID-19 was also seen as an important contribution to those countries’
economic stability and recovery efforts, although critics argued more support
was needed to strengthen health systems and support economic recovery in the
region.[42]
Conclusion
Aid analysts contend that the new government has a great
deal of work to do to develop a strategy for the aid program that articulates
how competing strategic and development demands will be addressed in the
increasingly challenging global environment, and how Australia’s development
assistance will fit into its broader foreign policy priorities.[43]
With mounting global demand for humanitarian and economic
relief, heightened security concerns in the region and growing budget pressures
at home, the Australian aid program will likely come under considerable
pressure.
[1]. Nicholas Ferns,
‘Australian
Foreign Aid in Historical Context’, Australian Policy and History, 5 October 2020; ‘The History of Colombo Plan’, The Colombo Plan
Secretariat.
[2]. Britannica, Foreign Aid – Types and
Purposes, online.
[3]. Dane Moore, ‘Why
Australia’s Aid is a Key Soft Power Asset’, The Strategist (blog), 6 November
2018.
[4]. Department of
Foreign Affairs and Trade (DFAT), Pacific
Step-Up; Alan Tidwell, ‘With
the Pacific Step Up, a Chance to Step In’, The Interpreter (blog), 30 September
2019.
[5]. See, for example,
Andrew Rosser, ‘What
Does a Coalition Government Mean for Australian Aid Policy?’, The
Conversation, 10 September 2013.
[6]. Jonathan Pryke,
‘Australian
Aid: How Low Can it Go?’, The Interpreter (blog), 12 May 2021.
[7]. Cameron
Hill and Stephen Howes, ‘Additional
COVID Funding Postpones Aid Cuts’, DevPolicy (blog), 30 March 2022; Australian
Aid Tracker, ‘How
much aid do we give?’, Devpolicy (blog).
[8]. DFAT, Australia’s
Official Development Assistance: Statistical Summary 2020–21,
(Canberra: DFAT, February 2022).
[9]. DFAT, ‘Australian
Official Development Assistance Budget Summary 2022–23’.
[10]. Pat Conroy (Shadow Minister for International Development and the
Pacific), ‘Speech
to 2022 Election Policy Forum on Aid and Development’, 9 May 2022.
[11]. Australian Aid
Tracker, ‘Generosity: Australian Aid as a
Percentage of GNI’, Devpolicy (blog).
[12]. Cameron Hill
and Huiyuan Liu, ‘Aid
Campaign Wrap: Labor Promises to Cut Aid by Less than Coalition’, Devpolicy
(blog), 20 May 2022.
[13]. Andrew Tillett
and Michael Smith, ‘China
Shelves Pacific Island Security Pact’, Australian Financial Review, 31 May 2022; Colin
Clark, ‘China
Says Solomon Islands Security Pact signed; Critics Knock Morrison Government’, Breaking Defense,
19 April 2022; Peter Layton, ‘Fixing
Australia’s Failing Pacific Step-up Strategy’, The Interpreter (blog), 26 April
2022.
[14]. Mihai Sora, ‘Australia
Needs to Find the Right Role in the Pacific’, The Interpreter (blog), 29 April
2022.
[15]. Ian Kemish, ‘China’s
Plans for the Pacific Do Not Stop with Solomons’, Sydney Morning Herald, 25 April
2022.
[16]. Susannah
Patton, ‘New
Directions in Australia-Southeast Asia relations’, The Interpreter (blog), 27 June
2022; Penny Wong (Minister for Foreign Affairs), ‘Visit
to Samoa and Tonga’,
media release, 1 June 2022.
[17]. Penny Wong
(Minister for Foreign Affairs), ‘Special
Lecture to the International Institute for Strategic Studies – A Shared Future:
Australia, ASEAN, and Southeast Asia’, 6 July 2022.
[18]. Melissa Conley
Tyler, ‘Australia’s
Shared Interests with Southeast Asia’, University of Melbourne Pursuit, 12 July 2022.
[19]. Bridi Rice and
Melissa Conley Tyler, ‘Building
Coalitions for Development: Australia’s Turn’, Devpolicy (blog), 6 April 2022.
[20]. Conroy, ‘Speech
to 2022 Election Policy Forum’.
[21]. Pat Conroy (Shadow
Minister for International Development and the Pacific), ‘AP4D Southeast Asia
Symposium – A Message from Pat Conroy’, 10 February 2022.
[22]. Scott Morrison
(Prime Minister), ‘A
World that Favours Freedom: Address to the Perth USAsia Centre’, 9 June
2021; Marise Payne (Minister for Foreign Affairs) and Alex Hawke (Minister for
International Development and the Pacific), ‘Standing
with our Region in response to COVID-19’, media release, 23 October 2020.
[23]. Morgan
Chalfant, ‘Biden
Appoints Samantha Power to Lead USAID’, The Hill, 13 January 2021.
[24]. HM Government, Global Britain in a Competitive Age – Integrated Review of
Security, Defence, Development and Foreign Policy, (UK: HM Government, March
2021), 5.
[25]. Stephen Howes,
‘Stefan
Dercon on Foreign Aid’,
DevPolicy (blog), 29 June 2022; see also ‘Using the Aid
Program for Geostrategic Competition: Good, Bad or Indifferent?’
Development Intelligence Lab, 23 June 2022.
[26]. Carolyn Hunt, ‘Aid
to the Pacific is the Least Value for Money’, Devpolicy (blog), 11 February 2020.
[27]. Australian
Council For International Development (ACFID), Elevating
Development to the Heart of Australian Foreign Policy, Policy Brief, (Canberra:
ACFID, 2022).
[28]. AP4D, ‘What
does it look like for Australia to be a … Strategically Coherent Actor in
Southeast Asia’,
Options Paper, 2022.
[29]. Melissa Conley
Tyler, ‘Development,
Diplomacy and Defence Experts Imagine a Shared Future with Southeast Asia’, The Mandarin,
10 February 2022.
[30]. AP4D, ‘Strategically
Coherent Actor in Southeast Asia’.
[31]. Conley Tyler, ‘Development,
Diplomacy and Defence Experts’.
[32]. AP4D, ‘What
does it look like for Australia to be an Effective Partner for a Secure and
Peaceful Pacific’,
Options Paper, 2022; Rice and Conley Tyler, ‘Building Coalitions for
Development’.
[33]. Andrew Rogerson
and Homi Kharas, ‘Don’t
TOSSD the Baby Out With the Bathwater: The Need for a New Way to Measure
Development Cooperation, Not Just Another (Bad) Acronym’, Brookings Institution, 25 April 2016.
[34]. UN Department
of Economic and Social Affairs, ‘New
Forms of Cooperation and Increased Coherence to Implement the SDGs’, 2016 Development
Cooperation Forum Policy Brief, no. 15, March 2016.
[35]. Organisation
for Economic Co-operation and Development (OECD), Global Outlook on Financing for
Sustainable Development 2021, (Paris: OECD, November 2020).
[36]. ACFID, Mobilising
Development Finance for Economic Growth and Social Impact, Policy Brief,
(Canberra: ACFID, 2022).
[37]. Jessica
Collins, ‘Labor’s
Pacific Plan: Ticking the Economic Box’, The Interpreter (blog), 27 May 2022.
[38]. Joint Standing
Committee on Foreign Affairs, Defence and Trade, Strengthening
Australia’s Relationships in the Pacific, March 2022: xxiii.
[39]. Yasmin Ahmad et
al., Six
Decades of ODA: Insights and Outlook in the Covid-19 Crisis, OECD iLibrary,
Development Co-Operation Profiles, 2022.
[40]. Ahmad et al., Six
Decades of ODA.
[41]. Australian
Government, Treasury
Annual Report 2020–21, (Canberra: The Treasury, 2021), 122; Roland
Rajah, ‘Putting
Real Australian Money on the Table to Help Indonesia’, The Interpreter (blog), 16 November
2020.
[42]. DFAT, Pacific
and Timor-Leste COVID-19 Immediate Response Package; Alexandre Dayant and Shane MacLeod, ‘Helping
the Pacific Recover from COVID’, Lowy Institute, undated.
[43]. See, for example,
Richard Moore, ‘The
Simons Report 25 Years On – One Big Mistake’, Devpolicy (blog), 24 May 2022;
Terence Wood, ‘Where
now for Australian Aid?’,
Devpolicy (blog), 7 June 2022.
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