Comments

Thanks for these comments. Garth raises the posssibility that, if you controlled for other variables (such as the varying reasons for giving aid), you would find an association between exposure to fragile states and aid quality as measured by QuODA. It's possible, but I doubt it. It would be difficult to find the controls, and, from the graph above, there's not even a hint of a relationship between the two variables of interest. There is evidence that aid quality is higher in better governed countries. For example, if you look at World Bank project ratings, they tend to be highest in East Asia and lowest in Africa. But QuODA is at best a very partial measure of aid quality, which is probably why we don't see a correlation between it and exposure to fragile states. Tom makes the point, I think, that I do in my first paragraph, namely that overall Australia comes 8th out of 23 bilateral donors. I agree that that's not bad at all, and I stand by the characterization of the aid program by the Independent Review as "good but improvable." But that is different from claiming that Australia is a "world leader" or "among the world's best." No doubt we are in some areas, but there isn't the evidence to substantiate this as an overall claim. I'm not sure what to make of the ATPC comment. I do actually think that the best way to look at aid effectiveness is through in-depth case studies. But these need to be balanced and rigorous.

I would think that world standard question that would be answered if there was an Olympic event to gauge each participant in the Aid-game. In that context Aus-Aid used of Aust.Technical college in the Pacific (http://www.aptc.edu.au/support/index.html) would be a good point to begin with. The game of using DFAT resources to fund an institution, that is majority staffed by Australians and getting paid using Australian standards of income ($Aus) to these expatriates who enjoy tax free incentives, a generous package of having their Mcmansions, top of the line vehicles and entertainment allowances, and school fees for the kids paid for. Of course these funds are channeled using Australian banks. Students who travel to host countries are set up with bank accounts with ANZ, Airline travel for students (where possible) is through Qantas. The website of these Technical College's have their servers in Australia and maintained by Australians. All personal data for these Pacific island students are in these cloud servers in Australia and data mining via echelon is prevalent. While the local staff are paid the local minimum rate and won't be upskilled so that these expatriate positions are perpetually held by Australians and even though there are localization mandates in the immigration policies of these island Governments; these plans have been put on the back burner due to convenient excuses of lack of qualified personnel in the host country. That is the effectiveness of Aus-Aid. Are those practices right in the moral sense?

Hey Stephen, thanks for this analysis. I'm not sure that the way in which you've chosen to critique the ODE's analysis is that meaningful. Of course, the "2nd out of 6" measure might be questionable, but it seems to me that Australia does relatively well in two measures of what constitutes a good aid policy - a) how much of the aid is effective, and b) how much of the aid is going to the countries who need it most. As you say, there will be trade offs between these two measures because aid delivered to fragile states might be difficult to deliver to a high standard. However it seems that AusAID strikes a fairly good balance here.

Thank you Stephen for this post - it highlights the relatively arbitrary nature of the comparison used by ODE. I am confused though by your focus on the lack of association between quality score and exposure to fragile states.There are a large number of factors that influence aid programs and many of these have little to do with maximising aid quality. Therefore is it not possible that it may be harder in both theory and reality to score a high QuODA score when aid is predominantly focussed on fragile states, but that in reality there does not appear to be an association between fragility exposure and QuODA score because of all the other (non-quality) factors shaping donor actions. In other words isn't the relevant chart one which compares fragility exposure and degree of difficulty in scoring high on QuODA?

This post provides a useful analysis of the various transparency and monitoring initiatives AusAID has been included in recently. It might be helpful to clarify that the reason we didn’t score “sometimes” and “collected answers in the 2011 pilot Index is because we are asking for comprehensive disclosure of aid information. Partial and unsystematic disclosure means you only get a snapshot of what donors are doing and you cannot compare and use this information in any meaningful way. We were also unsure of the quality of the "sometimes" and "collected" data so it would not have been appropriate to include it in the final results. If readers would like to use this data and/or change the weightings used then there is a tool on the Publish What You Fund website that allows you to do this: http://www.publishwhatyoufund.org/resources/index/2011-index/visualise/

The referenced policy brief should be required reading for all development partners, scholars and practitioners working in Public Finance Management (PFM) and related areas, including public procurement. While political economy analysis is highly relevant to the design and implementation of new initiatives to strengthen Central Finance Authorities (CFA), it is equally relevant to current initiatives. Concepts such as fully understanding the drivers and dynamics of the reform process, the importance of mobilizing internal capabilities, the full engagement of leaders/stakeholders, focus on ‘best fit’ rather than ‘best practice’ models, the importance of effective change management and project management practices, and focus on human resources management are fundamental to any sustainable reform. I look forward to development partners, scholars and practitioners using a political economy analysis in their design and implementation of PFM/CFA strengthening efforts. E. John Blunt is a Procurement and Institutional Expert with extensive experience in leading public procurement reforms in a variety of international development environments. He is currently working with the Southern African Development Community Secretariat in Botswana.

Hi Ashlee Would love to get in contact with you. This is a great piece. Please contact @Julie_Ulbricht on Twitter or via julie dot ulbricht @ gmail dot com Here is a recent article I wrote for ABC http://www.abc.net.au/unleashed/3744414.html (note, name is formerly Julie Cowdroy) Thanks Jules

Thanks for the interesting comments. I agree with most of your points. I share you concerns about implementation, and especially the social responsibility levy which I imagine will encourage tax evasion among high income earners (although note the “tough talk” about cracking down on tax evasion in Bainimarama’s speech, which suggests that govt has at least considered this possibility). I also agree that revenue forecasts in the budget seem optimistic. Regarding fiscal sustainability, I guess my argument is that the government is stuck between a rock and a hard place, with a stagnant economy and high levels of debt. I think in that context it has struck the right balance between trying to encourage economic activity (especially through giving the money to households that are more likely to spend it in Fiji) while not significantly worsening debt levels. The budget certainly isn’t perfect - just note the increased allocations to the military. It doesn’t address the microeconomic problems in the Fiji economy. But I do think it improves on previous budgets the regime has implemented.

As a sometime World Bank-watcher, I must admit to not having paid enough attention to Australia’s relationship with it. So, it’s not surprising that I found Banking on Aid a thought-provoking report. One interesting aspect that the report did not delve into is that, over the years, the Australian Government has made only limited contributions to debt relief schemes. Presumably, this is because most Australian aid has been grant based. However, increasing support for the Banks means the Australian Government contributes to rising debt. This is a particularly pertinent issue given the growth in lending by the World Bank in the face of the Global Financial Crisis, which will – if previous examples are anything to go by – result in debt problems in 15 or so years given that, for many of the poorest countries, international financial institutions hold the lion's share of their debt. To take this further, the sub-prime crisis and sovereign debt crisis are connected in a range of ways but a key one is that mainstream banks shifted from consumer to state lending, as states came to be seen as a lower risk. The big increases in World Bank lending since 2009 are likely to be having some influence on global markets. Thus, while many developing countries undoubtedly need additional resources in the face of the current crisis, the question is: will the consequence of new loans be a new round of the debt crisis, shifted back to developing countries? On the debate here about why Australia makes earmarked contributions rather than core contributions, one answer may simply be that IBRD contributions are not counted as official development assistance (ODA) and thus do not contribute to the Government reaching 0.5% of Gross National Income by 2015. In the section on 'critics: economic philosophy', I would have liked to see a little more discussion of the limiting nature of the World Bank's ongoing primary commitment to conservative monetary and fiscal policy and the lack of progress on alternatives to financial liberalisation. The evidence that continues to emerge about the push back into big infrastructure projects, the ongoing use of conditionality and the lack of poverty focus only confirms that Australians concerned about the best use of aid funds should be asking our Government some hard questions regarding support for the World Bank. Susan Engel is the author of The World Bank and the Post-Washington Consensus in Vietnam and Indonesia: Inheritance of Loss (Routledge, 2010)

Thanks for a really interesting post. Great to have some commentary on this stuff. I would, though, have a slightly different analysis of the Fiji budget. Firstly, I'm not sure that there are many efficiency benefits from the tax hhere. The income and corporate tax reductions are to be partially financed through the new Social Responsibility Levy: an additional tax of 23 percent – 29 percent of total income for those earning more than $270,000. This is estimated to provide additional revenues of $9.8 million. The introduction of this levy seems likely to introduce very high marginal tax rates for high income earners, potentially offsetting many of the possible efficiency benefits of the lower income rates, and certainly creating strong incentives for evasion. Tariff and excise measures and new taxes on credit card and telecommunication transactions seem opportunistic, distortionary, and possibly difficult to enforce. The various changes to tariffs and excise also seem to lack a consistent policy intent. Overall, this looks a bit like populist redistributional rejigging, rather than sensible economics. I also think there are some big questions about fiscal sustainability, and I would say that this budget is heading in the wrong direction - It is not clear how substantial corporate and income tax reductions have been reconciled with a projected 0.5 percent increase in direct tax revenues as a proportion of GDP. The projected increase in VAT revenues of 2 percent of GDP is presumably driven by increased incomes in households with a higher propensity to consume - but this seems fairly optimistic. Some boost to revenue is expected from improved compliance. However, even the Budget Supplement notes an “optimistic outturn”, and my cynical take is that these fiscal outturn projections are politically influenced and not likely to be realized. If Fiji wants to engage in deliberate deficit-financed expansion to get over a bad patch, I think they should be transparent about it and have a credible plan for dealing with the underlying structural issues. I'm worried, though, that this budget is about the spending without the transparency or the plan. I think you are absolutely right to point out that civil service reform is the elephant in the room - but I guess my take would be towards seeing this budget as populist politics, aimed at retaining the support of the middle-class and public service, rather than sensible economic reform.

Nice work. I think the point about delving into HIES data is well made – alas if only statistics offices would release the full set of the data and not just PDF’s of the aggregates, then people outside of Government may have a shot at this. In terms of indicators, I think it is worth tracking several and over time – or to put this another way there is merit in comparing HIES results over time. Some interesting ones are: - Basic needs poverty; - Basic needs nutrition – this is usually but not always part of the point above; - Relative income distribution (usually Gini stuff); - Relative income distribution within the country – a point you make very well in your paper and something SPC / AusAID could do with the GIS technology available; and - Results relative to reasonable comparator countries (i.e. don’t compare Vanuatu with Singapore) However, I think the real value in your piece is to highlight the excellent way the World Bank link the sectoral and HIES data. They did this in Vanuatu in 2004 and it remains in my mind one of the finest pieces of work I have seen by the Bank. I think though for those who have never seen the type of results this type of analysis can highlight it would have been good if your note had shown some of the results. For example in Vanuatu we got some outstanding data on how people of different income groups educate their children – basically it showed that most of the kids in secondary came from a certain set of income quintile families etc (middle class and above). The picture for primary was similar and this enabled people to lobby more effectively for universal access to primary education. The information on health was also illuminating. I am hoping that somebody will perform the same exercise with the new HIES. The only slight downside with these kinds of analyses, especially in our region, is that you have to make a few “heroic” assumptions from time to time to cater for the quality of data – but that is ok as long as those assumptions are made explicit. We did similar work with Satish Chand when he did the ADB Pacific Island Economic Report back in 2001 I think it was – and last year we managed to take a time series look at some data using his base data set. So for example it was interesting to see the Gini coefficient change over time – showing an increase in inequality in the mid nineties and a decrease in the first part of this century.

PNG on brink of ruin as government hangs in the balance On Monday 12th December 2011, the Papua New Guinea High Court handed down an expected 3-2 judgment that there was no vacancy in the office of prime minister on 2nd August, after a parliamentary vote of 70 to 24 to elect Mr. O'Neill with Sir Michael Somare in hospital in Singapore (Jo Chandler, Court reinstates Somare as PM, The Age, 13 December 13, 2011 refers). ''Sir Michael Somare is to be restored to the office of prime minister forthwith,'' the court ruled. With this decision, the government of PNG has become unworkable. Allan Prentice (Professor Allan Patience (Teaches at Sophia University, Tokyo. He is a visiting scholar at the Asia Institute, Melbourne University), PNG on brink of ruin as government hangs in the balance, The Age, 9 December 2011 refers), in a recent opinion piece said that “this is especially unfortunate because the O'Neill government has shown signs of addressing serious governance failures that have plagued the country for more than 30 years. These failures have led some observers to think that PNG may be becoming a failed state. The omens are all there: escalating crime rates (including murder, drunken violence, illicit drugs, prostitution, burglary, carjacking); horrific violence directed at women (rapes, bashings, torture, killings); some of the worst maternal and infant mortality rates in the world; plunging literacy rates; collapsed health and education systems; endemic tribal warfare in the Highlands; land grabs by foreigners; unsustainable exploitation of natural resources; decaying infrastructure; massive administrative incompetence; and the breakdown of public institutions such as the police and the civil service. Each year the United Nations Human Development Index highlights that PNG is one of the most miserably governed states in the Third World. Equally worrying is Transparency International's annual reporting that levels of corruption among PNG's politicians, public officials and managers are among the world's worst. That means PNG should be placed in a special category of ''ruined states''. Ruined states are the victims of corrupt ruling elites that cannibalise their states' resources for themselves, their families and their tribal cronies. Glaring examples of ruined states include Robert Mugabe's Zimbabwe and Kim Jong-il's North Korea. Leaders of such countries deserve to be labelled the ''new cannibals''. The Opinion makes for interesting reading noting very recent developments in PNG. The Opinion can be sourced at www.smh.com.au/.../png-on-brink-of-ruin-as-government-hangs-in-the... Mr. E. John Blunt is a Procurement and Institutional Expert with extensive experience in leading public procurement reforms in a variety of international development environments. He is currently working with the Southern African Development Community Secretariat in Botswana.