Comments

A timely and urgent plea, Terence, with which many furiously agree, but dare not utter publicly. But while reading the political tea leaves is all well and good, let's see some action rather pin our hopes on signals and shadow puppetry. It's not at all clear whether, despite her rhetoric supporting women's empowerment, Julie Bishop's chief role has been to ameliorate the stakeholders affected by cuts rather than put their case in Cabinet against said cuts. Bishop has never uttered one public statement questioning the cuts, other than to use them as an excuse to whack Labor and blame the all-purpose "budget emergency". As deft a politician as we have seen, Bishop has managed to deflect any personal responsibility for any of the negative consequences of the changes wrought during her tenure. If her power has increased with Turnbull's ascension, we will either see some turnaround here or else her actions will have done her talking for her.

Hi Ashlee and Stephen, Many thanks for your blog. It's great to see the Pacific remittances issue receiving due attention. My company, Developing Market Associates (www.developingmarkets.com), on behalf of DFAT and MFAT, manage the SendMoneyPacific (www.sendmoneypacific.org) website that you have referenced. Over the past seven years we have recorded an overall reduction in cost but not to the extent that we would have liked - i.e. attaining the G20 5% remittance target. However what we have seen over the past seven years are significant cost reductions in the higher volume, more competitive corridors to Fiji, Samoa and Tonga that are dominated by Money Transfer Operators (MTO's) rather than bank dominated (such as PNG which you have focused on). Bank costs have barely changed over the six years we have monitored costs, falling by just 2% (to 18.1%) by June 2015. MTO costs on the other hand have fallen by almost 35%, and for some of the most competitive/high volume corridors by over 50% for sending AUD/NZD 200 (e.g. Australia to Fiji: 17.99% in January 2009 to 8.24% in June 2015; NZ - Tonga: costs down 57% from 16.25% to 6.99%). For these competitive corridors, MTO costs are now approaching 5% for sending $200. For AUD/NZD 500 transfers, MTO costs are now below 5% for NZ - Samoa and Tonga, and at 3.79% for Australia - Tonga. Cost variations between providers for the same corridor continue to be very significant. The latest data for November for Australia - Samoa (AUD 200) reports a range between 2.59% to 26.99% - the difference between receiving WST 360 and WST 276 for the same value transfer! A further significant development in recent years has been the increase in available digital remittance services, particularly services paying out to mobile wallets in Fiji, PNG, Samoa and Solomon Islands. Since 2012, digital MTO services have doubled, from 17 to 34, across the 16 corridors covered from Australia and New Zealand. The growth in digital MTO services comes at a critical time during a fraught period for MTOs in Australia and New Zealand as they face operating difficulties or in some instances, closure, due to the de-risking issue. Unfortunately at this stage there is limited disclosed data on the actual volumes being sent via digital services, rather than traditional cash based MTO services and bank transfers. However, there is anecdotal information, via the surveys we conduct for SendMoneyPacific, seasonal worker surveys and interviews, and other communication that we regularly have with Pacific Diaspora communities through our outreach programmes for SMP, that Pacific remittance senders are increasingly using digital services. Please feel free to get in touch if you would like to explore the different services used by Pacific remitters that I have highlighted. We will also shortly be completing Q4 data collection and analysis. Many thanks, Jonathan

[These comments reflect personal views and do not in any way represent official positions of the NZ Government] Hi Ashlee and Stephen, I think there are a few factors at play. On your question about why Pacific costs are stagnant relative to global declines, a lot of that "inertia" in price movements in the Pacific is probably explained by structural constraints such as low scale and volume. Other things constant, compared to the Saudi Arabia / UAE - Phillippines corridor or the UK - Nigeria corridor remittances from A/NZ to the Pacific are always likely to be more expensive. Many global innovations, especially electronic platforms that more efficient and effective "bunching" of smaller remittance transactions by remittance service providers, have had an impact in the Pacific (especially if you move your data set out a few years before 2011). But ultimately they face the same structural constraints - larger corridors can "bunch" more volumes, so they end up benefitting more from these solutions in relative terms to the Pacific. There are also strucutral banking constraints, such as high fees relative to other high-volume corridors. For money to move across borders, especially in the Pacific, most (but not all - e.g. Western Union) remittance service providers still need a financial institution to do that for them (most often a bank) that is a member of the SWIFT transfer system. The impact of regulatory issues is still uncertain, and it will be interesting to see the results of the World Bank's G20 survey on de-risking. Regulators seem to be taking this issue seriously, with a number of global regulators and coordinating bodies issuing statements commiting to investigate the extent to which regulatory settings may be affecting the remittance services market. It's great to see reimttances get some airtime on the blog - there's a lot more we could be doing to discuss and understand this issue. Cheers Vinny

The Lancet's World Report of 14 Nov 2015 gives a readable analysis: http://www.thelancet.com/journals/lancet/article/PIIS0140-6736%2815%2900959-9/fulltext

Further to my last comment, I note I have overlooked the blindingly obvious: the key output against admin costs is expenditure of the ODA budget. Yet, I don't find this a satisfactory result measure to assess efficiency against. The most efficient way to spend aid would then be to simply give it all to the UN in a single transfer (for example). This could involve an extraordinarily low admin cost for a donor ODA programme. But I don't think many people would think this was necessarily an efficient way to spend donor taxpayers' money (although, one could argue strongly that it is). There has to be a better result against which to assess efficiency.

Thanks Camilla. I'm a big fan of legislation in this area. I think formal rules, such as law, can then establish informal rules (norms) of behaviour. These then structure how people behave, and can lead to better quality ODA, including improved monitoring and transparency. I did some research on this subject a few years back. What came out is that the challenge is how to draft, and then get past, a piece of useful legislation, which speaks to some of the issues you raise in your blog. The UK has had a lot of practice, with three Acts on ODA the UK International Development Act 2002 (which superseded the Overseas Development and Cooperation Act 1980); the UK International Development (Reporting and Transparency) Act 2006; and the International Development (Official Development Assistance) Target Act 2015. For the first Act, the people I spoke to suggested that factors for its success were that it was simple and brief, there was strong public support, political factors were aligned, and, crucially, at that time the Labour Party had a large majority in parliament. In the UK the movement of the Bill through to an Act was driven internally. In Canada, the Canadian Official Development Assistance Accountability Act 2008, was facilitated by strong NGO involvement. In my discussions with people, some of the lessons learned from the passage of this Act were the need to draft a technically sound piece of legislation that can withstand interpretation by an unwilling government, strong NGO and public support, and thinking ahead to what compromises may be made so that the Bill doesn't get watered down into an ineffectual Act.

A thought-provoking post, thank you Rachael. In the NZ case the movement of the semi-autonomous NZAID back into the Ministry of Foreign Affairs and Trade was partly touted to be more efficient. Yet administrative costs remain reasonably static (they even went up initially). NZ may be different to other countries, however, as it has strict rules about what can be allocated to administrative functions and what can't. As you argue, there doesn't seem to be much difference in administrative costs according to a separate or internal ODA programme. However, I think further differentiation is necessary, as there are two models of 'integration' - models one and two, which involve different degrees of integration and there may be different admin costs associated with each. There is a broader question here, also. I think the use of administration costs as a proportion of overall ODA misses the point. I know it is the standard approach donors use to measure so-called efficiency but it doesn't say much. It is also easy to game, as the questions Ben raises highlight. I would put efficiency numbers alongside tied aid numbers as some of the most unreliable data DAC has. DAC's own definition of efficiency might be useful to apply here: "Efficiency measures the outputs -- qualitative and quantitative -- in relation to the inputs. It is an economic term which signifies that the aid uses the least costly resources possible in order to achieve the desired results. This generally requires comparing alternative approaches to achieving the same outputs, to see whether the most efficient process has been adopted." This is a useful definition because it assesses the costs against what is achieved. So to actually measure efficiency in an aid programme, one could use the administrative cost but then gauge it against some high-level output or outcome achievements. Anyone know of any agencies that do this? Or have some ideas for what such an efficiency indicator might look like?

The idea of subsidies and monopolies are anti-competition and only serve the hierarchy not the PNG consumers who depend heavily on this commodity (rice). Obviously monopolies increase prices to gain more profit at the expense of citizens. Inflation is already running high in PNG and the monopoly is a bad, bad idea. PNG should look at opening up the market but with good regulatory bodies to prevent corruption, and let the market play its part in reducing price of goods and services to consumers. Jonah

Thanks very much Terence. I really appreciated David Hulme's idea about changing values. And I liked this point that he made in that post: "The MDGs were successful at generating sympathetic media coverage, particularly in rich nations, which helped to build support for aid and development. Today there is much wider recognition that, whilst poverty is slowly being eradicated, inequality is rising – which is a bad thing. The Sustainable Development Goals will provide more of a focus on poverty AND inequality in every country, rather than just extreme poverty in developing nations."

Thanks Cleo, great post. David Hulme's blog is excellent too.

The classification of the UK as the only remaining autonomous aid agency is based on the OECD's 2009 Managing Aid report, which identifies four separate models of aid organization used by OECD-DAC donors. In this report, the UK is identified as a "Model 4" (where a ministry or agency, that is not the ministry of foreign affairs, is responsible for policy and implementation), while Japan is classified as a "Model 3" (where a ministry is responsible for policy formation and separate executing agency is responsible for policy implementation). While you're right that JICA is a separate agency, my understanding is that the key difference in the classification is based on function - while DFID is responsible for both policy formation and implementation, JICA acts as an implementing agency for MOFA policy.

From 2005 to 2010 the AusAID administrative cost averaged 3.9% of ODA (see DAC Online Table 1). The increase in admin ratio from 2011 to 2013 was a sensible build-up in capacity to effectively use the planned increases in ODA volume. It is not surprising that the ratio has now dropped by 30% given the severe cuts to aid implemented by the Abbott Government.