A scandal with the Global Fund, allegations of misappropriated school support in Indonesia…once again the issue of aid and corruption is front and centre in the media. And, once again, serious types are asking what can be done to eliminate the risk of Australian aid being captured by the corrupt and unscrupulous.
This is a perennial issue; one which has plagued aid for decades. Yet it is also an issue that has defied solutions. People have bemoaned the problem, but no one has actually managed to come up with a way of solving it. Until now, that is. Because I have a solution: a means of finally eliminating the risk that Australian aid might be put to corrupt purposes.
My solution is this: All official Australian development assistance should be given to New Zealand.
This might seem like an unorthodox approach. But the reasoning behind it is impeccable once you think about it.
In the late 1980s and early 1990s New Zealand embarked on a series of bold political reforms. Key institutions such as the Central Bank were placed at arm’s length from the political process. Watch-dogs were set up. And the public was empowered through mechanisms such as the Official Information Act. Governance in New Zealand was transformed. As a result your antipodean neighbour now ranks near the top in just about every international anti-corruption index. In the latest Transparency International Corruption Perception Index it scored first equal with Denmark. If keeping your aid money out of the hands of wretches and knaves is your goal, then New Zealand is the place to send it. Indeed, aid money devoted to New Zealand would actually be safer than money left in Australia which, cough, only ranked 8th in the same Transparency International study.
It’s true that there’s not much need for new hospitals and schools in New Zealand. Vaccinations are pretty well covered. But the sports teams could do with some help (maybe an AFL franchise?). So if eliminating the risk of Australian aid being put to corrupt ends is your goal, you won’t find a better place to donate your money.
It’s a near perfect solution. It is also completely ridiculous, of course.
The reason why it’s ridiculous is because, at the end of the day, eliminating the risk of Australian aid being misappropriated really isn’t the reason why aid is given. The actual reason is to eliminate poverty and promote development.
This is a rather different objective. Although the good news is that if eliminating poverty and aiding development is our end goal I still have some thoughts about how we should think about the issue of aid and corruption.
First, if we’re going to give aid we’re going to have to get used to the idea that some of it will get siphoned off by the corrupt. This is just inevitable given the governance environment in places such as PNG and Indonesia.
Second, everyone likes a good scandal, but media frenzies really aren’t that helpful. For a start, as the recent Global Fund controversy illustrated, they are often disproportionate to the scope of the problem.
Fraud plagues global health fund
GENEVA (AP) —A $21.7 billion development fund backed by celebrities and hailed as an alternative to the bureaucracy of the United Nations sees as much as two-thirds of some grants eaten up by corruption, The Associated Press has learned. [Emphasis added]
As Bill Savedoff, a senior fellow at the Center for Global Development, with more than 20 years of experience working on economic and social development issues, points out: the two-thirds of ‘some grants’ is $10m, which is hardly a plague. Oh, and AP ‘learned’ about it because the Global Fund released the information – last year.
Sensationalist reporting also tends to punish those agencies that are the most transparent. In the Global Fund’s case it’s unlikely the media would have found out about the problem had the Global Fund not been open about it in the first place. Think about the incentives here. If donor transparency is rewarded by perennial controversy, do you think there will be more or less transparency? Just to be clear, I’m not saying newspapers shouldn’t report these issues. I’m just asking that, when they do, they keep things in perspective, and aim for accuracy. And maybe balance the negative reports with the positive too.
Third, trade offs are involved. Aid agencies could dramatically reduce the corruption of aid spending if they delivered and monitored every dollar themselves. But if they did this, all their staff would ever be doing would be delivering and monitoring aid. Which would raise overheads and curtail substantive work. So when you consider the cost of corruption you need to weigh this up against the cost of curtailing it.
None of which is to say that we should simply shrug our shoulders and do nothing about the misappropriation of aid. Far from it. And there is one form of corruption that we should have absolutely zero tolerance for. This is the corruption of aid spending that occurs in donor countries; the so-called boomerang aid that is awarded to contractors because of their political connections. (I wrote about my worries of this type of corruption taking place in the New Zealand aid programme on Development Policy blog last year). We can, and should, put an end to this sort of corruption.
And, of course, we shouldn’t give up on corruption in developing countries where it’s harder to tackle. There is still a lot we can do, ranging from careful design of aid agency monitoring systems, to choosing appropriate aid modalities, to empowering communities in recipient countries to let donors know when aid isn’t reaching them. But as I said, we’re never going to be 100% successful with this. There will always be bad news to be broken. But we (taxpayers, aid workers, politicians, and the media) need to keep it in perspective. If we don’t, the sad paradox is, we may actually make our aid less effective in helping the poor, rather than more.
Terence Wood is a PhD student at ANU. Prior to commencing study he worked for the New Zealand government aid programme.
Two very simple ways in which donors can manage the issue of corruption in Indonesian educational development is to avoid spending money in ways where the risk is very high, such as school construction and ill-conceived training schemes of the kind proposed in the new Australian Education Partnership, and spend it in ways that achieve results but that still work through government systems. Such ways have been demonstrated by the AusAID Indonesia-Australia Partnership in Basic Education that finished in 2007, USAID’s Managing Basic Education Project, 2003 – 2007 and UNICEF’s Mainstreaming Good Practices in Basic Education (2006 – 2010).
Another and more challenging and longer-term task is to assist Indonesia in addressing the alarming processes of “educating” children in corrupt practices that are embedded in the National Examination system.
A study I conducted for USAID in 2009 found congruence between research in the USA on the impact of ‘high stakes’ testing there and the present conditions in Indonesia where the National Examination is considered to be high stakes.
The research finds that as the stakes associated with a test go up, so does the uncertainty about the meaning of a score from that test and so do the distortions, corruption, and negative backwash effects on the quality of education and on students. Briefly, corruption occurs at all levels in the implementation of these examinations, making the results unreliable and invalid, and worse, encouraging and rewarding children to cheat and learn about corruption from an early age.
Now that is an area that Australia has the technical excellence to support and which Indonesian officials have expressed a need for assistance. Instead, money is to be spent, and likely wasted, elsewhere. Could it possibly be because corrupt government officials see the opportunity for corruption and personal benefits and so support these alternative development goals (construction and training) or is this a too cynical and uncharitable suggestion?
Thanks Matt,
I definitely agree with you first suggestion (getting specific evidence on the risks in a particular country).
And I agree for the most part with the strategies you suggest for risk management. Although, I’m suspicious of ‘cash on delivery’: mostly because I think it assumes that governments in recipient countries have more wiggle room vis a vis the social structures that they’re set amongst than is actually the case (i.e. incentivising them won’t change much because they are stuck in a form of political equilibrium that is very difficult to escape). For similar reasons, I don’t think budget support will help at all in very corrupt countries. I agree with your point on alternative delivery mechanisms though.
And that debate between Kaufmann and Khan on Development Drums is great. A must listen.
Thanks Terence,
Attitudes to corruption in aid range from complacent to alarmist. By gently mocking the latter, your article helps to put some perspective around the issue.
I especially liked your comment on disproportionate press coverage being the disincentive for aid transparency and thereby undermining an important initiative to improve aid governance.
Yet we can also say more about the specific things that donors can do to manage the risk of corruption and deliver effective aid. Here are a couple of quick thoughts.
First, get specific evidence about the risks of corruption to better inform aid policy. This mean going beyond ‘media frenzy’ and general measures of corruption – such as TI’s perception index – to zero in on fiduciary risks around public finances, partners and aid.
Secondly, put in place strategies to manage risks. This could include: better ex-ante selectivity of countries and sectors to engage in; making payments for results – such as CDG’s ‘cash on delivery’ proposal; supporting safeguards around public expenditures – and budget support can be a good entry point into discussions with recipient governments on this; and in the worst cases, looking for alternative delivery mechanisms.
There is a lot that could be done, without being either complacent or alarmist.
(Note – to hear an excellent debate the role and importance of tackling corruption as part of a development strategy, check out Daniel Kaufmann and Mushtaq Khan on development drums http://developmentdrums.org/284)