Comments

The question about 'why we were as a nation unable to sustain our increased generosity' is an important one. Duncan Green suggests in this <a href="http://oxfamblogs.org/fp2p/why-is-britain-such-an-outlier-on-aid/" rel="nofollow">blog post</a> that one reason the UK has been an outlier is because it is has a rich ecosystem and 'busy Aid and Development cluster'. This he argues has led to not just sustained campaign pressure, but also an 'underlying critical mass of knowledge, interest, concern and consensus'. Is this what Australia currently lacks, and if so could we all be doing more to help create it?

Thanks Stephen You're right. It isn't fair and it's pretty bad, but it could be worse. Given the general policy direction of the coalition government, however, I think we probably need to assume that things will get worse before they get better.

It looks like my call that 'it looks likely that the UK will have a weak, coalition government' was wrong: such are the pitfalls of punditry and listening to pollsters! The results: Conservatives won 331 seats and a slim majority; SNP had a virtual clean sweep in Scotland; Labour and the Lib Dems were devastated; and right-wing UKIP won just one seat. After the elections, Radio Australia <a href="http://m.radioaustralia.net.au/international/radio/program/pacific-beat/reelected-conservatives-unlikely-to-change-aid-policy-despite-slim-majority/1445844" rel="nofollow">asked me</a> whether the new UK government will target foreign aid in the same way the Abbott government has done in Australia. As explained in my blog, I don't think this is likely: - the UK's 0.7% of GNI aid target is enshrined in law; - the Conservatives have made a strong case for aid and have ownership of DFID's success; and - politically, they only have a narrow majority and other challenges to deal with (EU, Scotland). Yesterday, David Cameron announced his new Cabinet: retaining Justine Greening as Secretary of State for International Development. I think this is a good move and one that will provide continuity for the delivery of the UK’s (GBP12.6bn, approx. AUD25bn) aid program. The transition was less smooth for DFID's junior minister. If you had a bad day yesterday, spare a thought for <a href="https://twitter.com/DesmondSwayne/status/597697961737453568" rel="nofollow">this guy</a>...

Update on damage estimates: The Vanuatu Council of Ministers on Friday issued a statement that referred to the establishment of a ‘fund mobilisation strategic framework’ to raise revenue of approximately 50 billion Vatu. No further detail was provided, and it is unclear whether this revenue would be spent by government. It is nonetheless probably safe to say that this figure is based on the (not yet released) economic damage assessment that has been underway for several weeks. Damage in the order to 50 billion Vatu equates to around $590 million AUD, or 56 percent of Vanuatu’s GDP, making the damage caused by this cyclone considerably greater than Cyclone Evan in 2012.

Thanks Tony. You raise a number of good points. I agree that the debt/GDP ratio considered on its own is potentially misleading, particularly in the medium term. Revenue raising capability is clearly an important consideration – as can be seen in the fact that Samoa has managed to accommodate a large debt (well over 50 percent of GDP last time I checked) – and is lacking in Vanuatu. I wouldn’t go so far as to say that debt to GDP is merely academic, though (and I say that as an academic!) It still features prominently in budget documents and the article IV reports. Debt to GDP is useful as an indicator of the government’s ability to repay debt over the long-term, as the government can widen its revenue base in the future (and in the case of Vanuatu, the government should really expand its revenue base in the long-term). The long-term implications of these loans are important, given that they are of a 30-40 year duration. Other indicators have their own problems, of course, which are partly due to how they are reported in the budget. The budget forward estimates include data on debt servicing, but only to 2017. We chose not to use them, as they don’t provide any information on the loans now being taken out, given that these loans include grace periods that extend beyond 2017 (and so are not reflected in debt servicing forecasts). Thanks again. Matt

Hi Stuart, Good to hear from you, and thanks for this contribution. I don't have a problem with the government spending more on aid for growth or trade, as long as it is well-spent. PNG is in desperate need of many things, as you point out, but one of them is employment creation, which is presumably what aid for trade would aim at. I do want to take exception with your praise of the free health policy. As our extensive field-based research has shown (under the PEPE project with NRI), free health is only going to make a bad system worse. See <a href="https://devpolicy.org/financing-health-facilities-and-the-free-health-policy-in-png-challenges-and-risks-part-2-20140715/" rel="nofollow">this blog</a> and the report on which it is based. I noticed that the World Bank in its recent East Asia and Pacific Update also praised PNG's free health policy. It's a pity when policy judgments are made ignoring the available evidence. Regards, Stephen

The Lukautim Pikinini (Child Protection) Act was passed in 2007 and revised in 2009. This contemporary, rights-based legislation focuses Government priority on the prevention of child abuse and neglect through the strengthening of community child protection mechanisms. The violation of child rights is a child protection risk that warrants a statutory response. The Australian Government would do well to assist PNG with implementation of the Act, a very challenging and difficult task. Australia can make a huge difference to assisting PNG with the prevention of diseases like diarrhoea which is a major killer of children under 5 years, through the development of water and sanitation programs including the elimination of open defecation as is practised throughout PNG. As Stuart Schaefer says, no child should die from preventable illnesses, especially when there are simple and low-cost solutions that can help. Eliminating open defecation must be central to our development efforts.

Thanks for an interesting article on the challenges Vanuatu faces following cyclone Pam, which are very real. I am not sure though that debt to GDP is a useful metric in relation to the stress that Vanuatu is likely to face over the medium term. Debt to GDP as a metric for debt stress assumes that government revenues are responsive to nominal GDP. If the taxation system is not responsive to growth, or worse is declining relative to GDP, then debt to GDP becomes a bit academic. Something like debt servicing or interest relative to domestic revenues would be a better metric for Vanuatu.

Tony, thanks for the comment. I think we’re broadly in agreement. Construction activity (which is largely aid-funded) has driven economic growth in Vanuatu for years, so we would also want the government to ensure that there was no ‘gap’ in between construction projects. That is a consideration at any time in Vanuatu, but an especially important one in the aftermath of the cyclone (and in the next year or so). That is why we acknowledge the need to consider the impact on the private sector in our post. I also agree with your points on the importance of the tourism industry. And the three projects you mention are ones that we would also argue in favour of, given strong concessional elements and grant finance, and the likelihood that these project will be able to incorporate a reconstruction element. I don’t think it necessarily follows that all projects in the pipeline must be implemented, though. As argued above, there are good fiscal reasons for not proceeding with all projects in the pipeline, especially where they involve substantial borrowing on less concessional terms and are less advanced. If postponing a future project enables the government to borrow funds for reconstruction activities, the net result would not necessarily be a decline in economic activity, but rather a shift in employment/investment from the construction project to another (re)construction activity. Admittedly, all of these decisions are plagued by many uncertainties, which means the government has a very difficult task ahead. Thanks again for your thoughts.

Hi Paul, Thanks so much for the interesting insight provided on the PNG's 2014 Final Budget Outcome. The medium term fiscal strategy has not been adhered to and this is so worrying for PNG. The most challenging part for the government is the huge fiscal deficit which stood at 9% of GDP.

South Korea and the other so-called Asian tigers were garrison states in the Cold War. That has meant that: 1) And most crucially, Taiwan and South Korea had the policy space to allow land redistribution, which seems to be, in my eyes, a crucial first step. If you look at much of Latin America, there is always some huge and unremitting hostility to the idea of effectual land reform. Not only from the great landowners there, but also by international actors. 2) They had easy access to US markets, and were able to insert themselves into the international supply chain. On the broad topic, we should not ignore the challenges of the governing situation. It's much easier to govern smaller entities like Taiwan or Singapore than it is Indonesia. Give small countries with at least rudimentary management capacity huge amounts of money, and they can go all Sim City on you. Nigeria, otoh, does not benefit from the oil wealth as much as the United Arab Emirates, because the managerial tasks are simply overwhelming. Governance has to be improved first, there. Lastly, a lot of how wealth brings about better governance when it comes to Western countries, is simply about internal bargains about less domestic elite predation if the upper middle classes support imperial projects.

t’s not difficult to identify the counterparts of Van Leur’s peddlers in modern-day west New Guinea. But what of his dominant group, concerned not so much with trade as with ‘war, booty and political tribute’? Could Van Leur possibly have foreseen the circumstances of modern Indonesia’s Papuan provinces, rich in tropical timber, fisheries and mineral resources, and governed since 1963 by an administration top-heavy with senior military figures who commit the public resources of the Indonesian state to the cause of private enrichment?