Shifting Patterns Shifting Patterns of Aid of Aid

ConditionalityConditionalityA case study of Australian aid A case study of Australian aid

to PNGto PNG

Flint Duxfield and Kate Wheen, Flint Duxfield and Kate Wheen,

Hanoi Reality of Aid Hanoi Reality of Aid Conference 2007Conference 2007

Presentation OutlinePresentation Outline

Local Ownership or Continuing Local Ownership or Continuing Conditionality?Conditionality? End of Nationally-Tied AidEnd of Nationally-Tied Aid Shift to ‘locally owned’ aid in PNGShift to ‘locally owned’ aid in PNG

Issues of Concern with Australia’s AE Issues of Concern with Australia’s AE effortsefforts Rise of Performance-based aidRise of Performance-based aid Sector wide approaches (SWAPS)Sector wide approaches (SWAPS) Good governanceGood governance through civil society through civil society

Aid Effectiveness in Aid Effectiveness in AustraliaAustralia

(1997) ‘Simonds Review of Australian aid (1997) ‘Simonds Review of Australian aid recommends: recommends:

““One Clear Objective: Poverty ReductionOne Clear Objective: Poverty Reduction””

(2006) White Paper on Aid signifies (2006) White Paper on Aid signifies commitment to Aid Effectiveness principlescommitment to Aid Effectiveness principles

Australia’s aid is officially untied from Australia’s aid is officially untied from national procurement conditionsnational procurement conditions

AusAID’s objective remains AusAID’s objective remains : “To Assist : “To Assist developing countries to reduce poverty and developing countries to reduce poverty and achieve sustainable development achieve sustainable development in line with in line with Australia’s national interest ”Australia’s national interest ”

Tied Aid: The boomerang Tied Aid: The boomerang continuescontinues

Australian Aid remains ‘project-tied’ Australian Aid remains ‘project-tied’

Informal barriers inhibit local organisations Informal barriers inhibit local organisations tendering equally with Australian companiestendering equally with Australian companies

Private Aid contractors retain close ties with AusAIDPrivate Aid contractors retain close ties with AusAID

Over 90% of Australian aid still delivered by Over 90% of Australian aid still delivered by Australian or New Zealand CompaniesAustralian or New Zealand Companies

Shift to ‘locally owned’ aid Shift to ‘locally owned’ aid programsprograms

Dissatisfaction with past aid provision resulted in Dissatisfaction with past aid provision resulted in PNG Joint Aid ReviewPNG Joint Aid Review (2004)(2004)

(2006) (2006) PNG-Australia Development Co-PNG-Australia Development Co-operation Strategy operation Strategy (DCS)(DCS) emphasizesemphasizes its its origins in PNG’s origins in PNG’s Medium Term Development Medium Term Development Strategy Strategy (MTDS) (MTDS)

Concerns raised as to whether DCS is Concerns raised as to whether DCS is actively actively orientedoriented towards MTDS priorities, or simply laid towards MTDS priorities, or simply laid over the topover the top

The Development Co-operation Strategy The Development Co-operation Strategy compared with PNG’s Medium Term compared with PNG’s Medium Term

Development Stratey Development Stratey MTDS Priorities MTDS Priorities

(PNG)(PNG)Informal adult educationInformal adult education

Income Earning Income Earning OpportunitiesOpportunities

Law and JusticeLaw and Justice

Basic EducationBasic Education

Transport InfrastructureTransport Infrastructure

Primary Health CarePrimary Health Care

HIV/AIDS PreventionHIV/AIDS Prevention

White Paper White Paper Priorities (AUS)Priorities (AUS)

Strengthen Political Strengthen Political

GovernanceGovernance

Tackle CorruptionTackle Corruption

Stimulate Broad Stimulate Broad

Based GrowthBased Growth

Promote StabilityPromote Stability

DSC PrioritiesDSC Priorities

Improved Governance and Improved Governance and Nation buildingNation building

Broad based Economic Broad based Economic Growth and productivityGrowth and productivity

Improved Service delivery Improved Service delivery and stabilityand stability

Strengthened response to Strengthened response to HIV/AIDSHIV/AIDS

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Performance Based AidPerformance Based Aid Introduced in PNG-Aus Introduced in PNG-Aus Treaty of Co-operation Treaty of Co-operation (2000)(2000)

Joint Aid Review finds: Joint Aid Review finds: “The benchmarks did not “The benchmarks did not serve to improve sector funding, PNG participation, serve to improve sector funding, PNG participation, central agency ownership of service delivery central agency ownership of service delivery outcomes as envisaged. Nor did failure to achieve outcomes as envisaged. Nor did failure to achieve benchmarks result in any review of aid allocations.”benchmarks result in any review of aid allocations.”

DCS emphasises performance targets were developed DCS emphasises performance targets were developed by PNGby PNG this seems inconsistent with development priorities this seems inconsistent with development priorities

set out in PNG’s Medium Term Development Strategy set out in PNG’s Medium Term Development Strategy (MTDS)(MTDS)

Australia has been reluctant to set ‘mutual’ targets as to Australia has been reluctant to set ‘mutual’ targets as to when conditionality will be removedwhen conditionality will be removed

SWAPS: ‘Leveraging without SWAPS: ‘Leveraging without displacing’displacing’

DCS:DCS: “donor resources [Australian funds] will “donor resources [Australian funds] will leverage and not displace Papua New Guinea’s own leverage and not displace Papua New Guinea’s own transparent expenditure commitments”transparent expenditure commitments”

may reduce parallel processes and may reduce parallel processes and duplicationduplication

‘‘Leveraging’ can take the form of constraining Leveraging’ can take the form of constraining independent activities by the recipient countryindependent activities by the recipient country

Focus on Focus on financial sustainabilityfinancial sustainability may prevent may prevent quantity of aid consistent with needs/rights based quantity of aid consistent with needs/rights based approachapproach

Focus on governance of health/education sectors Focus on governance of health/education sectors may result in MDGs becoming mere ‘aspirational may result in MDGs becoming mere ‘aspirational targets’targets’

Good Governance through civil society Good Governance through civil society EngagementEngagement

AusAID: AusAID: “A democratic governance approach “A democratic governance approach involves civil society and the state involves civil society and the state both demanding both demanding and supplying governance and supplying governance that include that include participation, transparency, and accountability.“ participation, transparency, and accountability.“

Potential to meet CSO request for governance Potential to meet CSO request for governance programs that target more than just national programs that target more than just national governments governments

AusAID will spend Au$60m over 3 years on AusAID will spend Au$60m over 3 years on ‘engendering the demand for good governance’ ‘engendering the demand for good governance’

Will this support independent CSO perspectives or only Will this support independent CSO perspectives or only those that promote a particular vision of good governance?those that promote a particular vision of good governance?

CSO engagement viewed as part of ‘nation CSO engagement viewed as part of ‘nation building’ and furthering good governance rather building’ and furthering good governance rather than fostering a robust, independent civil society than fostering a robust, independent civil society

Summary of ConcernsSummary of Concerns Tied AidTied Aid

• Should ensure informal untying is addressed Should ensure informal untying is addressed as well asas well as formal formal untyinguntying

Performance based Aid Performance based Aid • Genuine mutual accountability requires targets for removal of Genuine mutual accountability requires targets for removal of

conditions by donors based on good performanceconditions by donors based on good performance• Incentive programs should be consistent with recipients Incentive programs should be consistent with recipients

development prioritiesdevelopment priorities SWAPSSWAPS

• Sectoral Aid distributions should genuinly follow recipients Sectoral Aid distributions should genuinly follow recipients priorities priorities

• SWAPS should not become a tool for donor monopolisation of aid SWAPS should not become a tool for donor monopolisation of aid programsprograms

• Concerns with financial sustainability/governance should not Concerns with financial sustainability/governance should not sideline necessary funding for MDG-related poverty alleviationsideline necessary funding for MDG-related poverty alleviation

Good Governance through Civil SocietyGood Governance through Civil Society• Should promote diversity and independence in civil society, not Should promote diversity and independence in civil society, not

donor’s agendasdonor’s agendas

Thank You!Thank You!

Flint Duxfield Hanoi Reality of Aid Flint Duxfield Hanoi Reality of Aid Conference 2007Conference 2007

The Development Co-operation Strategy The Development Co-operation Strategy compared with PNG’s Medium Term compared with PNG’s Medium Term

Development Stratey Development Stratey MTDS Priorities MTDS Priorities

(PNG)(PNG)Informal adult educationInformal adult education

Income Earning Income Earning OpportunitiesOpportunities

Law and JusticeLaw and Justice

Basic EducationBasic Education

Transport InfrastructureTransport Infrastructure

Primary Health CarePrimary Health Care

HIV/AIDS PreventionHIV/AIDS Prevention

White Paper White Paper Priorities (AUS)Priorities (AUS)

Strengthen Political Strengthen Political

GovernanceGovernance

Tackle CorruptionTackle Corruption

Stimulate Broad Stimulate Broad

Based GrowthBased Growth

Promote StabilityPromote Stability

DSC PrioritiesDSC Priorities

Improved Governance and Improved Governance and Nation buildingNation building

Broad based Economic Broad based Economic Growth and productivityGrowth and productivity

Improved Service delivery Improved Service delivery and stabilityand stability

Strengthened response to Strengthened response to HIV/AIDSHIV/AIDS

??

??

??

??

Bonus Slide 2 – Untying of Australian Bonus Slide 2 – Untying of Australian AidAid

Why Did Australia Untie its Aid? Why Did Australia Untie its Aid? ““The European Union recently passed The European Union recently passed legislation that provides for untying aid legislation that provides for untying aid procurement on a ‘reciprocal basis’. procurement on a ‘reciprocal basis’. Untying Australia’s aid program will Untying Australia’s aid program will therefore have the added benefit of therefore have the added benefit of allowing access for Australian firms and allowing access for Australian firms and individuals to the massive European Union individuals to the massive European Union aid procurement market of about $12.7 aid procurement market of about $12.7 billion per year (€8 billion).”billion per year (€8 billion).”

((AusAID, White Paper 2006)AusAID, White Paper 2006)

Tied Aid: The boomerang continuesTied Aid: The boomerang continues