Comments

Thank you for this post. A world free of poverty seems so idealistic, and yet, as you say, we are getting closer to the day when it is reality. It will be a grand day, and I hope a day I live to see. Please continue writing about the global social safety net!

Yesterday's stories about fraud in AusAID projects were 'shock-horror' stories and certainly brought out a lot of negative comments that are potentially very damaging to public support for foreign aid. The stories, I agree, do illustrate Terence's point about negative stories in the media. I also agree that they diminish AusAID's achievements in fraud detection and management. For those who worked hard to achieve that result, it must be very galling indeed. On the other hand, I am sure that if they had a voice, the poor and other intended beneficiaries would be happy to see such exposure of corruption. In answer to Terence, yes, I do recall Adelaide's Sunday Mail running a good news story about the AusAID project in Flores, Indonesia, but that was back in 2002. Since then, I have not been a regular consumer of Australian newspapers having been in Indonesia almost continuously. So, I would agree that the balance appears to be on the negative side. Yet, I still feel very uncomfortable about the issue. There are two reasons for this. First, it does not seem entirely reasonable "that the media should be focusing on the overall effectiveness of Australian aid – how it makes a difference to the lives of people in poor countries and what can be done better" when, at the same time, the donors have not vigorously promoted their own successes in the press, and worse, neglected them in their own subsequent projects. To cite some cases of this neglect: the successful AusAID projects in NTT, the NTT-Primary Education Partnership (NTT-PEP) and in East Java, the Indonesia-Australia Partnership in Basic Education (IAPBE) were not scaled up in either the now concluding Australia Indonesia Basic Education Program nor in the new Education Sector Support Program (ESSP). This is despite the fact that they built on an earlier sequence of very successful projects, in the case of IAPBE this was USAID's Managing Basic Education Project. IAPBE, in turn, contributed to later projects including the EU project implemented by UNICEF, the Mainstreaming Good Practices in Basic Education Project (MGPBE). Having funded MGPBE, which was largely intended to verify and disseminate good practices developed and implemented in Indonesia by Indonesians -- at Government of Indonesia request -- the EU, which is a partner of Australia in the new ESSP has, along with AusAID, turned its back on the success and future-oriented lessons learned from MGPBE (and earlier & current projects) and embarked on a new project that seeks to implement, yet again, developmentally weak and problematic strategies from the past. This use of weak and problematic strategies leads to my second point: it is these weak strategies -- particularly, the top-down approach, school construction, and large scale training -- that provide just the opportunities for corruption that are far less likely to occur, if at all, in the good practice projects named previously here. To reiterate my point from yesterday's comment: "The potential to really damage the generosity of taxpayers and donors is not media negativity, but the incompetence and corruption of both ‘givers’ and ‘receivers’ in the wider aid industry." Why create unnecessary opportunities for corruption and fraud at all? Is it because these 'big' strategies of construction and large scale training are an effective way to move huge sums of donor dollars quickly and to 'look good'? If such weak strategies are to be used, then don't shoot the messenger when things go wrong!

Hi Robert and Matt, Sorry for my delayed and brief reply - I'm havin internet issues. To clarify my position: 1. Yes the media should report bad news stories about aid. but 2. If the public is ever going to have a full understanding of aid it needs to also hear of the slow and qualified, but real, achievements too. This clearly doesn't happen enough. and 3. The media needs to be responsible in it's reporting. As Matt mentions the latest round of stories sounds like a beat up. This will hardly be the first time. Robert, I have a question for you: your article on schools was published in the Australian, while your more positive article was published in the JP. Can you ever recall the Australian running a positive story on aid? Or any of the Australian Murdoch owned papers for that matter?

Robert, Thank you for sharing an interesting perspective on the role of the media in ensuring greater accountability of aid programs and in partner countries. The media beat up today on aid fraud highlights the point that Terence makes about the media having a scandal and pessimism bias, rather than objective critics of the aid program. AusAID has an excellent track record on controlling corruption in aid and doesn't deserve shock headlines such as 'Millions lost in AusAID foreign aid scam' or 'Foreign aid program stifled by corruption'. The numbers in their own stories don't even back up the headlines! http://www.news.com.au/national/millions-lost-in-foreign-aid-scam/story-e6frfkvr-1226027078871#ixzz1HUrtUcAg http://news.ninemsn.com.au/national/8228294/foreign-aid-program-stifled-by-corruption That AusAID is transparent about the 175 cases of fraud and keeps levels of malfeasance to such low levels--0.017 of 1 per cent of the $20 billion that was spent between 2003 and 2010--are very much to the credit of the aid program. Rather than beat up non-stories, the issue that the media should be focusing on the overall effectiveness of Australian aid--how it makes a different to the lives of people in poor countries and what can be done better. It's a shame that today's stories suggest that some of Australia's press isn't yet willing to provide 'high quality evidence' for this kind of analysis, and that's bad news for both the aid program and our democracy.

Terence Wood laments that he does not know what the solution is to ensuring that good news stories about aid get more media coverage than those reporting the failures and the problems. I share this concern. It was mainly because of this concern that I wrote, with a colleague, a really ‘good news’ story in 2007 about successes in an Indonesian education project supported by USAID, the Managing Basic Education project, (http://www.thejakartapost.com/news/2007/04/07/cherishing-wonder-indonesian-schools.html). That story attracted no comment whatsoever! In contrast, the critique I wrote about Australia’s planned aid to Indonesian education and the potential for waste in The Australian on 10 January this year (http://www.theaustralian.com.au/news/opinion/thats-no-way-to-aid-indonesia/story-e6frg6zo-1225984624088 ) continues to attract comment and citation, including in the blog by Terence Wood. Negative newspaper reporting reflects the way the media world operates. To take Indonesian education as an example, day-by-day millions of children attend schools supported by development partners, they receive enhanced tuition in better-managed schools, and countless small miracles are performed in classrooms by dedicated teachers that are never recognised, never reported. Why? Because it is expected that these kinds of outcomes will be achieved and so they are not newsworthy. However, when there is evidence of malpractice, incompetence, corruption, and evidence that plans are not achieved the media takes a much greater interest. This media interest is essential in a democratic system, especially in a young democracy like Indonesia. The Indonesian press is currently doing a very good job of this kind of reporting and casting light into the dark corners of malfeasance that have been under-reported for far too long, thus allowing the corrupt and the incompetent to lead very comfortable lives at the expense of the poor in their own communities. Corruption is also discussed in the international media, for example, in the recent edition of The Economist (http://www.economist.com/node/18399113?story_id=18399113). Terence rightly notes this important watchdog role for the media. Currently, the Indonesian press is highlighting the failure of the majority of Indonesia's District governments to distribute funds to schools (http://bectrustfund.wordpress.com/2011/03/19/sanctions-await-regions-over-delayed-bos/) and has reported that the Ministry of Education has now been referred to the National Ombudsman by Indonesia Corruption Watch over this matter (http://bectrustfund.wordpress.com/2011/03/22/govt-mismanages-bos-fund/ ). Yet it is these same districts and central government agencies that are meant to be organising themselves to manage and participate in the big, new Australian project. Why should we have any confidence that Australia's Indonesian partners will be able to do this when this current matter, and other field experience, suggests that it is unlikely? Does this kind of ‘negative’ reporting not tell us something important about Indonesian government administrative competence that can feed into Australian plans and strategies? My hunch is, and I have no empirical evidence for this at all, that media reporting of aid is now also much greater in Australia than at any time in the past. This kind of reporting is almost certainly the case in Indonesia since the overthrow of Suharto. Whether this hunch is correct or not, I do believe that a much earlier public awareness of the issues around aid may have prevented some of the worst of aid failure of the kind documented by Steve Berkman in The World Bank and the Gods of Lending (Kumarian Press, 2008) and by William Easterly in The White Man’s Burden (Penguin, 2006), and provided a better chance for millions more to graduate from poverty – and very much sooner – than has been demonstrably achieved to date. Yes, I agree with Terence that a lot of aid has worked. What I am saying here is that greater exposure and public discussion of the failures and successes might have led to better outcomes in developing countries a lot sooner. I suggest that the evidence supporting this position is illustrated by the fact that donors are still providing development funds to countries like Indonesia more than 60 years after aid began! Australia’s support for development in Indonesia has continued and dates back to at least the inception of the Colombo Plan in 1950 (see: Auletta, A. [2000]. A retrospective view of the Colombo Plan: Government policy, departmental administration and overseas students. Journal of Higher Education Policy and Management, 22, 48-58.) I do not see the issue of aid-induced pessimism in quite the same way as Terence. If such pessimism leads to the kinds of extreme reaction we have seen by some to stop aid, then I do have concerns with it. If it causes aid to be ‘more prone to being withdrawn in times of fiscal stress’ – and if that aid is poorly conceived and implemented – perhaps it should be withdrawn. How do we justify spending money on aid because it feels good or is seen as ‘the decent thing to do’? But if the pessimism causes the aid industry and political leaders to be more professional in the way they use the available evidence to support and carry out high quality, high impact programs, then newspaper pessimism is a potential force for good. The potential to really damage the generosity of taxpayers and donors is not media negativity, but the incompetence and corruption of both 'givers' and 'receivers' in the wider aid industry. The media can play a major watchdog role in demanding more robust and evidence-based strategies for development than some strategies we have seen proposed for Indonesia in the recent past. But herein lies another fundamental difficulty – where is the high quality evidence of what works or otherwise in specific sectors? Why have donors generally been loath to undertake and publish rigorous, independent and continuing research and evaluation of how aid works in specific sectors such as in Indonesian education? Why is independent project evaluation usually such a last-minute, rushed affair without time for more representative data gathering and deeper analysis? And this is not the only challenge. We also need to ask why donors ignore the existing available evidence on what does work. Specifically, in the case of the new Australian education program, both Australia and its partner, the European Union (EU), have ignored the accumulating evidence over the past decade of what works, including from the EU’s own recently concluded and successful project, implemented by UNICEF, the Mainstreaming Good Practices in Basic Education Project. <em>Robert Cannon is an education development specialist who has worked in this field in universities and in the aid sector since 1974.</em>

Thanks Matt - great comment I know blog comment sections are meant to be the domain of feisty debate, but I agree with most everything you say. There is a definite transparency issue here. Saundra, the blogger at good intentions are not enough covers this problem excellently re the NGO sector in a post you can read here: http://tinyurl.com/4hs2fkm And the same is true in the case of government agencies. The irony being in the New Zealand case that NZAID was very diligent about honest reporting of overheads. This, I think, was probably a product of relatively strict public finance rules in NZ and definitely a product of the agency existing in an environment where overheads were monitored but weren't used as a tool for political point scoring. Those were the good old days. Now they're getting whacked as a byproduct of following best practice. If ever these was a good example of a bad incentive structure being set up... Your suggestion about more timely access to aid data is good too. I'm forever frustrated by the fact that here we are in 2011 and the most recent aid data I can get from CRS is provisional 2009 information. The most recent finalised data is from 2008. Of course generating quality aid data requires staff, and software, which need to be funded from -- wait for it -- overheads. And I agree with you that there should always be contestability. In the same way that less isn't always more when it comes to overheads; more isn't inevitably more either. But let's decide on the basis of the best available advice, not a priori beliefs about what the optimal level of overheads should be.

Terence, Thanks for another thought provoking blog. The issue of overheads and the operating efficiency of aid agencies deserves more attention and you highlight some important issues on the costs and benefits of cost-cutting. I have a few additional points. First, how do we know how much donors spend on overheads? Your article quotes 12% of total budget for New Zealand, 4% for the UK. The recent QuODA report, using DAC data on reported donor administrative costs in 2008 as a percentage of country programable aid: New Zealand (14%), UK (8%) and Australia (5%)--making Australia the third best performing DAC donor. A problem with these headline numbers is that they may not be an accurate reflection of the administrative costs of a donors. Australia's reported administrative costs for 2008 (US$101m committed) did not include the cost of a large number of staff funded directly from the aid budget (see <a href="http://www.anao.gov.au/director/publications/auditreports/2009-2010.cfm?item_id=1DE4FFFE1560A6E8AAB11534130FF623#2E6681AB1560A6E8AA8D00A3B5DBB821" rel="nofollow">ANAO report</a> summary para 41) and a lot of country operating costs that are also buried in aid spending. For example, <a href="http://www.aiddata.org/search/results;jsessionid=90B6FAC680472EB48F0781D599275168?recipients=232&keywordSearch=&donors=5" rel="nofollow">aid data for PNG</a> reveals that <a href="http://dl.dropbox.com/u/6190378/%27Multisector%27%20aid%20to%20PNG.xlsx" rel="nofollow">US$43 million</a> was committed in 2008, under the heading of 'multisector aid' for a range of overheads (leasing, residential maintenance, security, local staff)--none of these are reflected in the 5% headline number, perhaps that is the correct accounting approach, but it does need discussion. Second, and related to the first point, donors need to improve aid transparency. Australia is to be commended for the detail of the data that is reported to DAC on it's aid spending, without which the previous observation would not have been possible. But there are a couple of areas where Australia could further improve. 1) It could make the DAC data available to the Australia public in AUD and in line with the Australia financial year. 2) It could make this data much more up to date and publish disbursements. The UK, for example, now publishes it's expenditure data monthly. Thirdly, who is scrutinizing overhead costs? If accounting and transparency are improved, we also need to have an effective way to scrutinize overhead costs--e.g to minimize waste, ensure there is a good business case, identify savings from streamlining processes etc. Some improvements might be: 1) Australia's budget process focuses mainly on new spending initiatives, so perhaps it also needs to look at base spending, including overheads, a bit more. 2) If clear and up to date data is accessible, then it would make it easier for the Australian public and parliamentarians to ask questions about how taxpayers money is being used. Fourthly, I agree with your point that there can be strong business case for increasing some overheads (e.g in fragile states). I'd just add that aid agencies need to clear about the business case for doing this and there needs to be contestability (of ideas and in terms of the opportunity costs). In conclusion, I agree with your main points, and would add that: 1) we don't really know whether donor overhead costs are too high, because we don't really know how big they are; 2) I see aid transparency as an important pre-requisite for better analysis of overhead costs; 3) There needs to be greater scrutiny of all aid spending and overheads; and 4) aid agencies need to be clear about the business case for varying overheads in different operating environments.

Hi Malcolm, Thanks for your post. It was interesting and I learned something new reading it. You make a good case for budget support. I thought I'd offer a slightly different perspective though. To my mind, everything else being equal, budget support is the best modality for bilateral and multilateral aid. For a start it's more efficient and, as you note, it brings with it the potential to strengthen government systems. Unfortunately, the trouble is that, in development, everything else isn't equal. And, of particular relevance to budget support, governments, political economies and institutions (especially the interaction between formal and informal institutions) change significantly from country to country (and within countries too). While I think there's good reason to believe that budget support is a very good idea in reasonably well governed countries, I'm not at all sure this is the case in countries where governance is particularly poor. In well governed countries budget support will likely lead to more efficiency and stronger state systems, but in poorly governed countries, where the relationship between the state and society is extremely complex and not at all like it is in our own home countries, I'm not sure this is likely. Take for example the case of Papua New Guinea. I'm no expert, but it seems to me that the state society relationship there is distinctly different from that assumed in arguments for budget support. Specifically, the state does little in the way of providing public goods and services but rather much of it's revenue is extracted and distributed through clientelist relations between politicians and citizens. These relations are strong and have proven largely resistant to external efforts to change them (they're also economically rational, given the lack of a cohesive national polity). Given this, I don't think the conditions we could impose as a quid pro quo for budget support will override them anytime soon. Which means that budget support would actually augment (grow the pie) one of the most destructive aspects of PNG politics. Which is an issue not only because the money involved will be diverted from its original purpose but also because it may actually lead to worse governance. For this reason I couldn't support an intellectual prescription that strove for budget support in all cases. I think that, first and foremost, context matters. Start with that and then let the aid modalities follow. Thanks again for an interesting, thought-provoking comment. Terence

If you are interested in the UK aid reviews, you may also like Paul Collier's excellent blog assessing the new UK aid agenda - http://ht.ly/497BW

I agree with Bob’s view that the important progress on climate finance made in Cancún was enabled in part by significant previous steps made in Copenhagen and throughout last year (including the work of the AGF). I’d just like to comment on a couple of the big questions raised in the post about the financial architecture. First, on how money gets into the Green Climate Fund: designing the Fund will be a major challenge for the lead-up to COP17, and the Transitional Committee has such a heavy workload that it may have little chance to make much headway on longer-term sources of funding this year. At the international level it is possible that the task of identifying sources will be left in part to a new Standing Committee on finance (also agreed to in Cancún), but unfortunately there is no timetable yet for how and when it will be set up, and its mandate remains vague. At the domestic level, however, Australia and other countries that are likely to contribute to the Fund can already start building on the work of the AGF to develop new funding sources, some of which may not rely on international agreement (e.g. earmarking revenue from a carbon pricing scheme or redirecting fossil fuel subsidies). Second, on how money will flow from the Fund, I agree that it will be important to use effective established bodies wherever possible. Another channel to consider is the Kyoto Protocol Adaptation Fund. The Adaptation Fund is widely supported by developing countries and is increasingly attracting developed country contributions (including from Australia), and it will be important to ensure this innovative mechanism is able to play a significant role in distributing adaptation funding as the broader architecture emerges.

I agree that the article is supposed to be about reporting, but is also heavy on insinuation about the performance of PNGSDP and Ok Tedi, and selective in it's use of evidence. If your article had stuck to just the GRI reporting issue that might be OK, but you go further that this. If you want to cast aspersions on PNGSDP and Ok Tedi, you should be prepared to back it up with rigorous analysis, specifically evaluations of PNGSDP and/or doing a cost-benefit analysis of Ok Tedi. If that evidence doesn't exists, you should limit your analysis to identifying the gaps. Others may wish to add comments on sources of evidence/data on Ok Tedi, OTML and PNGSDP performance.

I'll reply under Matt's three headings. 1. "Evaluating PNGSDP – John’s analysis is partial and misleading". Steady on, my blog does NOT evaluate PNGSDP but, in the first instance, OTML's claim to 'adopt the reporting of key GRI (Global Reporting Initiative) indicators' in 2006. This claim, as I said, does not stack up. I then more briefly look for evidence of similar reporting by PNGSDP. I said it did not report its project evaluations, NOT that it wasn't doing a good job. I said it doesn't publish the evidence for us to say. 2. "Cost-benefits of Ok Tedi – Again John’s analysis is partial and misleading". (a) Well, no, I don't do a cost benefit analysis of Ok Tedi - I refer to my previous answer. (b) Matt says: "Quite why John ignores [the PNG Treasury, large payments made to governments and macroeconomic stability] is unclear." This is simple; none of these things are mentioned in PNGSDP's mission statement (http://www.pngsdp.com/index.php/mission-and-values). This has broad values about improving the quality of life and four 'actions' by which these will be achieved: . investing its income wisely . undertaking projects that provide significant benefits . meeting the best financial, physical, cultural, social and environmental standards in all activities . working together with the people of Papua New Guinea I commended it for the 1st. I said PNGSDP didn't publish evidence for the 2nd. On the 3rd, see below. I didn't say anything about the 4th. 3. "Counterfactuals". Matt mentions alternative scenarios. As I explained at (1) above, my blog was NOT about evaluating the mine of PNGSDP, but about the adoption, or otherwise, of sustainability reporting. A discussion of the alternative scenarios would be another blog (and I dare say well too long for this format). Matt says a Google search for 'environmental report site:oktedi.com' turns up "the extensive 130 page 2009 annual report on environmental issues (including impact and remediation)". To be specific, the web site has annual environment reports for 2003-07 and 2009. (The link to 2008 is a 404 error.) The trouble is none of them contain the keywords 'GRI', 'Global Reporting Initiative', or 'sustainability reporting'. On the question of impacts, two important ones are excluded: "OTML ... has undertaken to perform an independent external environmental audit of the site every year ... The scope of the audit specifically exclude[s] both social impacts of OTML’s operation, and any review of the site’s riverine impacts (2004 environment report, p. 124)" I repeat that the blog is about sustainability reporting. There are various international frameworks for this, but the GRI, with its industry consultation-generated GRI Mining and Metals Sector Supplement, is considered to be the accepted starting point, as OTML said ('widely adopted by mining and other industries throughout the world'), as mandated for ICMM members, and as recommended by the MCA. It isn't rocket science to fill in a GRI report, but you absolutely can't do it with this kind of lead in the saddle.