Comments

You are heading in the right direction with these views. Having worked in the aid supported trade and investment promoting regional I can confirm the following: 1. There is a huge amount of hot air, papers, meetings, reports etc that achieve nothing, cost a huge amount and are an extremely inefficient attempt at promoting development. Over 30% of the time and money spent in aid supported trade & investment bodies can be spent on reporting rather than achieving. 2. The Pacific is made up of island micro nations with micro economies while most economic theory is based on experience in large developed continental nations. The exception is PNG where the arguments can be made either way - a successful job creating sugar industry has survived thanks to its granted monopoly and export trade benefits yet PNG suffers from overpriced cement and fuel due to open ended protectionism offered to foreign investors. PNG often offers overly generous terms to attract FDI. 3. Often the cost of delivering trade assistance, aid, and support far outweighs the value and benefit of what is delivered. Money is spent on activities that deliver nothing and when there is a tangible delivery the delivery cost is much too high. 4. The Pacific can't afford inefficiency with its limited resources. Costs of goods and materials need to come down but this is difficult in micro markets that can only support limited competition in many areas. Inefficient and wasteful governance is seen in government, trade and aid bodies, and regional organizations. 5. The economic text books and theory need to be rewritten to suit isolated micro island micro economies. Officials in Canberra, Wellington,Geneva & New York needs to understand that we don't live in a one size fits all world.

Terence, I don't agree with all you say, but you're spot on with your conclusion. PACER Plus is an irrelevance. Unfortunately, neither Australia nor NZ nor any of the island economies appear prepared to come out and admit to this.

Thank you for the comments. Robert, have a look (if you haven't already) at the Independent Completion Report on the Indonesia Basic Education Program, which can be found <a href="http://www.ausaid.gov.au/publications/pubout.cfm?ID=9890_5853_7042_3555_1061&Type=PubEvaluationReports&FromSection=Publications" rel="nofollow">here</a>. I think that document provides compelling evidence that the modality chosen (implementation through the govermment) worked very well in this case.

Stephen, I think any confusion in this area stems largely from the lack of clear and comprehensive information from AusAID. Hopefully this will change under the new Transparency Charter recommended by the Aid Review. However I'm not sure that the issue of "boomerang aid" or the larger issue of aid getting to the poor has been solved, despite the share of aid to private contractors decreasing.

Thank you for the post for and clarifying several issues. I am interested in your assertion that "Funding to recipient governments now has lots of strings attached, and works well. The Indonesia schools program is the best example." Can you clarify why you believe the Indonesia program is the best example and how the 'strings' ensure this is so? With thanks.

Thank you for setting out these significant shifts in aid delivery. Your blog suggests that AusAID is increasingly giving consideration to the most appropriate channel for aid delivery based on the particular program objectives, rather than simply defaulting to use contractors. This is definitely a good thing. However, I think your discussion of the greater scrutiny of contractors isn't correct. Firstly, evaluations of multilateral activities aren't on AusAID's website, but they are the websites of the multilaterals. While it varies across organisations, many have strong evaluation policies and practices and there is little point in AusAID duplicating this function. Similarly, many NGOS have strong approaches to evaluation and increasingly these are available publically. See for example http://www.careevaluations.org ; CARE’s Electronic Evaluations Library which contains over 400 evaluation reports from CARE projects from all over the world. You suggest that the fact that contractors bid for projects increases the level of scrutiny on their work. Of the new Australian Government grants CARE received last year, 72% were won through competitive processes. In addition, Australian NGOs go through a rigorous accreditation process with AusAID, renewed every 5 years, to ensure that we have the capacity to effectively and efficiently deliver aid. There is a lot of scrutiny on NGO work, although some of it operates differently to the scrutiny on contractors. Thanks for an interesting post. Julia

Hi Hugh, Thank you for thought-provoking comment, one aspect of which is in need of a response. You write that: "So which matters more – individual wealth or aggregate national wealth? Of course it depends on what we are trying to measure. Per capita GDP is more important when we are measuring individual welfare, and of course that counts. But national wealth is important when we are interested in the capacity of a country to achieve national goals. In my line of work – defence – it is important as a measure of the country’s capacity to build armed forces. But is also helps us understand a country’s capacity to fund other national priorities – including, for example, education. My piece in The Age a couple of weeks ago that prompted Stephen’s reply mentioned the Indonesia school program. My point was that Indonesia is wealthy enough as a country to build schools for itself, so out funding for schools simply diverts Indonesia’s own spending to another, presumably lower, priority." GDP may be more relevant in assessing defence capabilities, when what matters is the absolute size of one's army vis a vis one's opponent's army, but in education surely what matters most is GDP/Capita, which reflects a country's wealth with respect to the actual size of the task confronting it. Indonesia may have quite a lot of money available to spend on education but it also has many, many more students than Australia, which makes its task harder. Also, in this comment, and in previous comments you make bold claims about aid fungibility -- i.e. "so out funding for schools simply diverts Indonesia’s own spending to another, presumably lower, priority" -- yet the certainty of your claims here is not in line with the actual empirical evidence on the matter, which is ambiguous. Fungibility is a theoretical possibility but, on the ground, the available evidence suggests that it is not a practical inevitability. Finally, you fall into the trap of talking about a state, in this case Indonesia, as if it were a homogeneous unit, as opposed to an amalgam of competing groups whose success or not in accessing resources is a reflection of their relative power. Elites in Indonesia may prioritise military spending but I rather suspect the poor place much higher value in education, and benefit from it a lot more. Yet the poor are also relatively disempowered, and so are unlikely to be able to shift spending priorities with related to domestic revenue. Should we really punish them for this by ceasing to fund their schooling? I'd suggest that instead there is a perfectly legitimate role for aid here: targeting funding to enhancing their welfare. cheers Terence

Hugh states that Australia's "funding for schools simply diverts Indonesia’s own spending to another, presumably lower, priority." I think this merits reconsideration, as while aid often does displace public spending, this is not always and not necessarily in a bad way. A classic example of this is the Rockefeller Foundation's investments in agricultural productivity in Asia. As this article in the WSJ (http://online.wsj.com/article/SB118556810848880619.html) states, "The Green Revolution's benefits reverberated well beyond food, allowing developing nations like India to set aside fears of famine and focus more on building modern economies by investing in other industries." It's not inconcievable that AusAID's school-building efforts enable the Indonesian government to refocus its public expenditure in a similarly productive way. Furthermore, it seems unlikely that a self-interested and relatively functional democratic government like Indonesia’s would stop investing in its voting poor just because AusAID put a few million dollars into Indonesian schools. As Stephen Howes' post (https://devpolicy.org/bigger-but-poorer-something-to-get-used-to/) points out, more than half of Indonesia's population is obviously poor. Any government that wants to stay in power will have clear incentives to keep poverty reduction a high priority, whether AusAID is building schools or not.

Maxim seem to be doing some good work on aid. See their recent Devpolicy blog post here - https://devpolicy.org/specialising-in-effective-aid/

The more comprehensive the reporting the better, but no need for so much detailed monthly monitoring and reporting that no-one actually has time for any output!

Surely it is a key question to ask (if not the only question) what the link is between economic growth and the achievement of poverty outcomes and the Millennium Development Goals. As ODI's Claire Melamed and others have argued this depends on the degree to which 'the opportunities and benefits created by growth support the human development of the poorest people'. This includes an 'equitable distribution of the benefits of growth, in the form of progressive taxation and pro-poor public spending on health, education and social protection'. See http://www.odi.org.uk/resources/details.asp?id=4892&title=millennium-development-goals-equitable-growth-policy-brief Is part of the debate really therefore about what type of economic growth brings about pro-poor change, and the degree to which aid supported pro-poor public spending also contributes to that growth?

I don't agree with Hugh that overcoming poverty necessarily means overcoming income poverty, therefore I can't agree with him that 'the key question for the effectiveness of the aid program ... is: how much does aid help economic growth?'  For example, if a person survives, gains an education and goes on to live a longer, more healthy and fulfilling life as a result of aid assistance, have they been assisted to overcome poverty, even if their country's GDP has not increased?   I also think Hugh, with the PNG reference, is commenting on an extreme example of poor aid performance and that there are many examples of aid helping to build better ‘nets’ – just look at the improving health and education services of almost every other developing country in our region.   I do agree, however, that the Review has failed to clarify how best to use aid.  This is partly because of the need to balance all the humanitarian, economic, security and feel-good objectives of the aid program. We will always have compromises as a result of these competing demands.   But I think it is also because the Review failed to look at the question of which types of aid intervention are most effective – arguing instead that aid effectiveness was only a product of the recipient, the donor and the interaction of the two.   This ignores the clear evidence that aid can be very effective at providing services (such as health, education, water and sanitation) and at boosting the incomes or welfare of the poor, but that it is a far less reliable tool to boost economic growth or transform governance directly (for example see Charles Kenny’s book Getting Better).   The Aid Review set out a useful process and set of guidelines to better manage the aid program, but it did not provide all of the answers.  It is now time, as the Government develops its 4 year aid plan and new country strategies, that we incorporate the evidence on which types of aid are the most effective to ensure that we maximise the return on this investment and make sure we can help as many poor people as possible overcome poverty.