Australian Aid: Promoting Growth and Stability
Introduction
Australian Aid: Promoting Growth and Stability was instigated by the Minister for Foreign
Affairs in March 2005 and provides the strategic framework to guide the direction and delivery
of Australia's overseas aid program over the next ten years.
The White Paper provides a comprehensive account of how the Australian Government will
approach the doubling of Australia's aid budget to around $4 billion annually by 2010, as
announced by the Prime Minister in September 2005.
This is the first White Paper produced on the Australian aid program, and the first time any
Australian Government has announced a multi-year increase in aid funding. The White Paper
underlines the Government's commitment to poverty reduction, sustainable development
and progress towards the Millennium Development Goals (MDGs). Over the past 12 months,
there has been extensive domestic arid international consultation to guide the White
Paper's preparation.
Australia has a strong aid program with an international reputation for flexibility, responsiveness
and effectiveness. But the Government is not resting on its laurels. The White Paper outlines
strategies in which questions of aid effectiveness, strengthened governance and tackling
corruption in developing countries are addressed robustly. Australian taxpayers expect no less.
Australia's aid program is informed by our values as a nation, such as our commitment to
economic and political freedom and our humanitarian spirit, demonstrated so clearly in our
response to the 2004 Indian Ocean tsunami. We also believe in supporting people's self-reliance
by building their capacity to stand on their own.
At the same time, Australia's peace and security is inextricably linked to that of our neighbours.
By helping to reduce poverty and promote sustainable development, the aid program is an
integral part of Australia's foreign policy and security agenda.
Operating environment
Over the past 20 years, more than 500 million people in the Asia-Pacific region have been lifted
out of poverty, but another 700 million live on less than $1 a day and 1.9 billion live on less than
$2 a day, including over half the population of Indonesia. Asia is making progress towards the
human development MDGs, but much of the Pacific is not, and even in Asia there is no room
for complacency. Alongside strongly growing states such as China, Thailand and Vietnam, are
countries that will have to overcome serious challenges to achieve and sustain growth and reduce
poverty — including Papua New Guinea (PNG), most of the Pacific island nations, East Timor,
Cambodia, Laos, Indonesia and the Philippines.
Generating broad-based growth will be critical, to shoring up democracy and stability in the
region. Difficult economic prospects and weak governance may see the risks of instability
increase and, among other consequences, allow transnational crime and terrorist networks
to flourish, further undermining development and efforts to reduce poverty.
Other threats to development have emerged or are intensifying. The Asia-Pacific region is
vulnerable to natural disasters, as has been sadly witnessed over recent years. It is also vulnerable
to infectious disease because of its dense and interconnected populations. Some 8.2 million
people in Asia are living with HIV/AIDS; in the absence of effective action, trie Asia-Pacific
region will account for 40 per cent of all new infections by 2010. PNG is a particular concern.
Avian and pandemic influenza also threaten widespread disruption.
Rapid economic and population growth is placing increasing pressure on the natural
environment. Tensions over access to and management of natural resources, including
water and energy, are growing and will need to be managed.
Development lessons
Decades of experience in development have revealed a number of key lessons about what
makes countries successful:
- Economic growth is central to poverty reduction.
- Countries that have engaged with the global economy have grown more quickly than
those that have not.
- While growth, is necessary for poverty reduction, it is not sufficient. Attention must also
focus on how growth can be shared and sustained, including by providing opportunities
through better health and education.
- Countries are more likely to achieve sustained growth if their governments enforce property
rights, manage conflict, establish macroeconomic stability, align economic incentives with
social benefits, and maintain law and order.
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While there are common fundamentals to development, there is no universal policy
prescription to achieve it. Each country's situation is unique, as is its path to reform and growth.
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Aid is only part of the growth and development picture — both developing and developed
country policies play a significant role.
Countries emerging from conflict or whose economies are stagnating pose particular challenges.
Experience suggests that these states stay fragile for a long time, the spill-over effects are costly
for their neighbours, and there is little chance of improvement without outside intervention.
Australia's leadership role in the regional intervention in Solomon Islands is attracting positive
international attention as an example of an innovative and successful approach.
Strategic framework
The strategic framework that will guide Australia's aid program recognises the evolving regional
environment and Australia's values and interests, and draws on the experience of over 50 years
of delivering aid to the region.
The framework centres on the objective of Australia's aid program:
To assist developing countries to reduce, poverty and achieve
sustainable development, in line with Australia's national interest.
In order to achieve this objective, the aid program will be organised around four themes:
1) accelerating economic growth
2) fostering functioning and effective states
3) investing in people
4) promoting regional stability and. cooperation.
Trie effectiveness of the aid program will be ensured by:
1) strengthening the performance orientation of the aid program
2) combating corruption
3) enhancing Australia's engagement with the Asia-Pacific region
4) working in partnership with regional governments and other donors.
The framework will be reinforced by promoting greater gender equality in development, and
through untying Australian aid to improve efficiency and competitiveness, A fundamental
tenet of the aid program is that Australia's assistance is jointly agreed and. implemented with
its developing country partners.
Where Australia will work
Australia's focus on the Asia-Pacific region will continue. There will be growing focus on linking
allocations to performance in major partner countries. Programs will align with the four themes
of accelerating economic growth, fostering functioning and effective states, investing in people,
and promoting regional stability and cooperation.
Australia provides more support to Indonesia than to any other Asian country. This aid
partnership will continue to be maintained at high, levels to assist Indonesia's efforts to cement
its democratic institutions and build security and prosperity. The Government believes that
the challenges faced by the Philippines, another close neighbour, are particularly serious,
and Australia will intensify its development efforts accordingly. This White Paper outlines
a particular focus on eastern Indonesia and the southern Philippines, given their very
high rates of poverty and challenging development prospects.
The Mekong countries will continue to be an important priority for the aid. program, with
infrastructure, health and education being central to Australia's engagement. Future efforts
will also place more emphasis on promoting regional approaches and integration, as well
as on addressing shared challenges, such as HIV/AIDS and access to water. In East Timor,
Australian aid will support the fledgling nation's efforts to build the policies and institutions
needed for trie effective use of future oil and gas revenues and to address critical health needs.
The importance of India and China to the region's development means that the Australian aid
program will maintain a strategic footprint with them on key issues such as trade, clean energy
and HIV/AIDS, and engage with them as emerging donors. In other parts of South Asia, the aid
program will deepen engagement on selected issues, such as education and improving the
core functions of government.
Australia is keenly aware of the challenges facing the Pacific — particularly Melanesia and the
microstates. Australian aid to the Pacific will continue to operate within very long timefram.es
change will be slow and incremental, and progress will require greater regional integration and
the pooling of functions to promote efficiency and transparency in government and, in the
provision of services. Increases in aid allocations will be linked to performance.
Australia remains deeply committed to development in PNG. While significant effort is
required to support improved governance, economic growth, and the delivery of basic health
and education services, expectations of development need to be realistic. This White Paper
proposes a potentially substantial increase in the aid allocation to PNG, subject to meaningful
reform and continued improved performance by the PNG Government.
Australia will continue a pragmatic: engagement with Africa, based on humanitarian
concerns and key issues such as HIV/AIDS.
What the aid program will focus on
Accelerating economic growth.
Generating shared and sustainable economic growth is the single most important objective
for the Asia-Pacific region over the next ten years. The aid program will encourage growth, by:
- improving the policy environment for private sector growth. Initiatives include a
collaborative and demand-driven Pacific land mobilisation program to explore ways
to overcome the major land tenure constraints to growth in the region.
- promoting trade through assistance for trade analysis, trade policy and trade facilitation,
such as more efficient customs and quarantine services
- supporting the drivers of growth by:
- investing in infrastructure. Poor infrastructure is a binding constraint to growth in Asia,
while in the Pacific access to infrastructure in rural environments (where 80 per cent of
the population lives) is a priority. A. major infrastructure for growth initiative, providing
expertise on policy and other key issues as well, as targeted financing, will help address
these barriers. This will include a partnership with the development banks, with
estimated support of up to $800 million over the next five years.
- building skilled workforces in PNG and the Pacific, focusing on. technical and vocational
programs, including the establishment of an Australia-Pacific technical college to
deliver Australian-standard qualifications in areas that meet domestic and international
employment needs.
- strengthening support for private sector-led rural and business development.
- addressing environmental challenges to growth through an environment strategy
focusing on climate change and adaptation, water, and strengthening environmental
regulatory regimes.
Fostering functioning and effective states
Sound policies and institutions are central for growth and development. Existing governance
support will be enhanced by:
- focusing on political governance by targeting leaders from, all facets of society through
a Pacific leadership program and by building demand for better governance
- providing incentives through allocating additional funding (up to 10 per cent of the aid
budget over time) to those countries able to achieve agreed improvements in areas such
as governance and addressing corruption
- making more selective and effective use of technical assistance to promote reform,
and undertaking an integrated approach to law and justice support
Recent years have seen an increasing demand on Australia to respond to emergencies.
By virtue of our location and capacities, Australia is playing a leadership role in responding
to disasters. Australia is establishing an enhanced emergency response capacity to strengthen
civilian capacity to respond effectively to unexpected crises.
Investing in people
Health and education enable the poor to participate in growth, make the workforce more
productive, and lead to a better informed citizenry able to demand better government performance.
Australia will increase investments in health and education significantly. National health systems
will be strengthened through a delivering better health program, particularly focusing on the
needs of women and children. This will include assistance to establish sustainable health
financing and for health workforce development. Australia will help countries confront health
problems that create the greatest burden, and expand existing initiatives addressing major
diseases, including HIV/AIDS, pandemics and a new initiative to tackle malaria in the Pacific,
initially focusing on Solomon Islands and Vanuatu. It is expected that support for health
programs will double by 2010.
Australia will invest further resources in getting more children into school, for longer and to
achieve a better quality education. Australia will strengthen national education systems through
a delivering better education initiative. In view of the importance of education for growth,
stability and poverty reduction, it is expected that support for national education systems
will triple by 2010. Further, a major Australian scholarships initiative targeting future leaders
will see a doubling of the number of education, awards offered by Australia to the region.
Promoting regional stability and cooperation
An array of transboundary issues threatens stability and development in the region. Australia
will promote regional responses through a transboundary threats program. This will support
Australian Government, agencies building networks and expertise in such fields as pandemics,
disasters and transnational crime. Australia will also expand efforts to promote regional
integration and support initiatives that promote regional governance in. the Pacific.
Strengthening effectiveness: how aid will be delivered
The Government is committed to maximising the effectiveness of the aid program and to
placing Australia at the forefront of such efforts internationally. The aid program will pursue
four strategies to this end.
Strengthening the performance orientation of the aid program
The performance orientation of the aid program will be strengthened across all levels and
aspects of Australia's Official Development Assistance expenditure, This will include:
- enhanced country development, strategies to give greater prominence to growth and
performance and provide a single framework for all Australian Government development efforts
- strengthened links between performance and aid allocations within and between countries
and the building of better performance into individual aid activities by linking payments
to delivery, particularly in infrastructure, health and education
- strengthening the performance management function through establishing an
Office of Development Effectiveness, which will improve the effectiveness of aid policies
and programs, including through publishing an Annual Review of Development Effectiveness
to inform the budget process.
Combating corruption
Increases in Australian aid will be conditional on stronger governance and reduced corruption
in partner countries. Australia will adopt a more rigorous approach to corruption by developing
an anti-corruption for development strategy aimed at strengthening coordination across the
range of Australian Government activity in this area, and by increasing its support for regional
and global anti-corruption initiatives.
Enhancing Australian engagement with the Asia-Pacific region.
AusAID will continue to work with other Australian Government agencies to monitor the
impact of broader government policies on regional development, and to ensure coordinated
whole-of-government approaches on. key development issues.
Responses to the region's challenges will need to draw on new expertise and players in
government, business, academia and the community. The aid program will increase support
for development research as a key contributor to better development, and mobilise a broader
range of Australian expertise to help tackle the region's development challenges through an
initiative for mobilising new Australian links to the region.
Working with partners
Aid programs that are owned and driven by partner countries are more likely to be sustainable.
Australia will work towards the principles of trie Paris Declaration on Aid Effectiveness, and look
for opportunities to use partner country processes and systems in aid program delivery.
Australia will work with other bilateral donors to reduce the burden of aid coordination for
already stretched, partner governments, and will identify opportunities to lead other donors
towards coordination. A particular emphasis will be given to engaging emerging donors,
such as China in the Pacific.
Australia has long pursued key interests through the World Bank and the Asian Development
Bank (ADB), including in its programs to the Pacific and in building aid effectiveness. Australia
will strengthen partnerships with the World Bank and the ADB in areas of mutual interest,
given their significant regional financial weight and importance in policy dialogue.
Aid management
Effective aid management will be central to implementing this White Paper. Many things
will need to be done differently, and there are important new emphases. AusAID is producing
an Agency Business Plan setting out how the White Paper will be delivered, focusing on
streamlining business processes, strengthening human resources and enhancing management
information systems.
Australia will continue to provide assistance mainly through grant funding, rather than through
loans. To ensure better aid delivery, and in recognition of the need for greater levels of policy and
operational engagement from AusAiD and other government agencies, more staff will be placed
in the field over time. AusAID and its partners in aid delivery will build staff skills to strengthen
analysis of critical development issues and to ensure that this is supported by a deeper knowledge
of the countries within the region.
Improved external communications will help to capture the achievements of Australia's aid
program and inform the Parliament, the Australian public, opinion makers and development
partners. The Aid Advisory Council will continue to provide independent insights and advice
to the Minister for Foreign Affairs.
Conclusion
Australian aid. is effective and is making a real difference to the people of the Asia-Pacific region.
The changes outlined in this White Paper will give the aid program greater reach and impact in
the coming decade.
The Australian public and. the countries benefiting from, the aid. program can expert the Government
to be even more responsive, professional and accountable in the deliver)' of Australian aid.
The Australian, aid program will not only be larger, but also more effective and transparent.
The scale of the development challenges and the level of Australian commitment to growth
and stability in the region require nothing less.
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