Government's Response to the Independent Review of Aid Effectiveness

Statement by the Minister for Foreign Affairs, the Hon Kevin Rudd, MP

Check against delivery, E&OE

6 July 2011

I wish to update the House on the future directions of Australia's aid program.

As Members will be aware, in November 2010 the Government commissioned an Independent Review of Aid Effectiveness.

This was the first independent review of Australia's aid program since 1996.

It was time to take a comprehensive look at the management and quality of our aid, and to give direction to the future of our aid program.

The panel submitted its report to me at the end of April.

Today, in releasing the report, I wish to advise the House on the outcomes of the Review, and to outline the Government's response to the recommendations contained in it.

For more than half a century, Australian Governments of both political persuasions have supported the Australian aid program.

Australians are deeply concerned about people living in poverty and abject disadvantage.

But we want assurance that an aid program is well spent, that it reflects value for money for the taxpayers dollar, that it is as effective as it can be.

Background to the Review

The Review was commissioned against the backdrop of an expansion of Australia's aid program in recent years, and the Government's commitment to further increase the proportion of our Gross National Income spent on aid to 0.5 per cent by 2015-16. Meeting this target would put us equal with the average OECD commitment.

I welcome the fact that this commitment is shared by the Opposition.

The terms of reference for the Review were to examine the effectiveness and efficiency of the Australian aid program, and make recommendations to improve its structure and delivery.

As I said in announcing the Review, our overriding objective should be to make a good aid program even better.

The Review was conducted by a panel of eminent Australians chaired by Mr Sandy Hollway AO.

Other members of the panel were Ms Margaret Reid AO, Mr Bill Farmer AO, Dr Stephen Howes, and Mr John Denton.

The panel consulted extensively, both domestically and internationally, including with governments in Asia, the Pacific and Africa, non-government organisations, think tanks, bilateral and multilateral donors, Australian business and private sector representatives as well as a range of Australian Government departments.

The panel also received around 300 public submissions from a wide cross-section of the Australian and international community.

I would like to take this opportunity to place on record my appreciation to the members of the panel for the dedicated and professional approach they have brought to this task.

They delivered the report on time and on budget.

A proud record to date

Since 2007, the Government has taken a range of steps to improve the effectiveness of our aid program.

We have, for instance, consolidated our projects and programs around internationally agreed development goals – education, health and food security.

While the aid program has increased by almost two-thirds since 2006-07, this has not resulted in an increase in the number of individual aid programs.

Indeed, since 2007, the number of aid programs managed by the Government fell from 1,884 to 1,349.

This has meant less time spent on administering small programs, and more resources devoted to building effective long-term partnerships and delivering better results for the poor.

Since 2007, the Government has also enhanced our strategic focus in key countries.

In three of Australia's largest country programs - Indonesia, Papua New Guinea, and East Timor - we have sharpened our focus on key development sectors and reduced the number of individual projects.

And we have become more innovative through the introduction of new partnerships for development with countries in the Pacific.

These provide a framework for accelerating progress against the Millennium Development Goals and these countries' own development priorities.

Review findings and recommendations

The Independent Review found that Australia has a good aid program that is effective by global standards.

It found that the program is capable of improvement, and that many of these improvements are already well underway.

The Review makes 39 recommendations to improve the aid program.

The Review highlighted that Australia continues to be recognised internationally for the important leadership role we play in the Asia-Pacific region on development issues.

It noted our strong record in areas such as disability-inclusive development, performance management, and transparency.

The Review found that fraud in the aid program was very low and that AusAID has strong systems for fraud detection and prevention.

It also found that AusAID is well led and that its staff are generally highly motivated and capable.

The Review also provides the basis to ensure a good aid program delivers even better outcomes. This commitment is set out in a document I am pleased to have launched today, titled An Effective Aid Program for Australia: Making a real Difference – Delivering Real Results.

The overall theme of this document is very simple - how to maximise the effectiveness of the Australian aid program.

Australia can and should do better.

The recommendations of the aid effectiveness Review will help us deliver that.

They deal with:

  • the purpose of our aid program
  • the effectiveness of our aid program
  • what type of aid program we deliver
  • where we will deliver our aid, and
  • how we deliver our aid.

The cornerstone of entire reform – is the maximisation of aid effectiveness.

Why we give aid

We have accepted the Review's recommendation that there should be a clearly-defined purpose for Australian aid.

It is:

“The fundamental purpose of Australian aid is to help people overcome poverty.

This also serves Australia's national interests by promoting stability and prosperity both in our region and beyond.

We focus our effort in areas where Australia can make a difference and where our resources can most effectively and efficiently be deployed.”

This is an important statement.

It goes to three core principles:

  • That poverty eradication is our core objective.
  • That as well as being the right thing to do, it is in our national security interests.
  • We focus on those areas where we can make a real difference.

In doing so, we align ourselves with the Millennium Development Goals.

1.4 billion members of the human family (one fifth of our number) today suffer the degradation of poverty.

And two thirds of these are within our region.

We believe it is right to do what we can to help our fellow human beings out of poverty – because as Australians it is not in our nature to be indifferent to the sufferings of others.

Our belief in a fair go does not stop at the Australian continental shelf.

Our aid program is therefore a product of our values.

But we are also hard-nosed enough to do so in a manner which supports our nation's interests.

We want to build stability in our region because that enhances the security of us all.

The aid program helps to uphold this system of global cooperation.

Also, both as an expression of our values and our interests we also believe in good international citizenship.

Increasing our assistance will enhance Australia's international reputation and influence in global and regional affairs.

Australia has a strong interest in enhancing a global and regional system that promotes cooperation and partnership between countries.

An effectively functioning global system brings with it benefits for Australia by: strengthening economic management; improving security; improving environmental management; promoting human rights; coordinating development assistance; and delivering humanitarian assistance.

The aid program helps to uphold this system of global cooperation.

We want to sustain and enhance an international system that deals with global changes in an orderly manner.

Through global agencies that deal with economic development.

That deal with natural disasters.

That deal with humanitarian conflict.

The alternative would be absolute chaos.

Every person, and every country, simply fending for themselves through a beggar thy neighbour approach.

The massive, destabilising dispersals of peoples from one point of the world to another, of the type we have seen throughout much of world history, would continue on grander scale than ever before.

And with potentially disastrous consequences for us all.

We therefore have a deep national interest and values at stake in building a global rules-based order that deals with poverty; that deals with humanitarian representatives that deals with human rights.

Making Australian aid more effective

This commitment will build on reforms already underway, to make effectiveness a cornerstone of Australia's aid program.

We have already made a good start on this by reducing the number of technical advisers by 25 per cent over the next two years and further reducing unreasonable remuneration levels for ongoing advisers so we get maximum return on our aid dollars.

We must also maintain what the aid effectiveness review describes as the "serious and systematic approach within AusAID to fraud management".

AusAID maintains zero tolerance towards any fraud in the aid program to minimise fraud.

For example in the 2010-11 financial year, the estimated potential loss due to fraud was 0.021 per cent of AusAID's appropriated funds.

In other words that is 21 cents for every thousand dollars spent.

This is a much lower rate of loss than that recorded by most other government agencies, private sector companies and other aid donors.

This has been a strong achievement by AusAID given so many of the countries in which Australian aid operates have weak probity systems and rate poorly on most international corruption indicators.

The Government is committed to further strengthening AusAID's already robust fraud management scheme.

In addition to fraud management, AusAID also has a four point performance management system which deals with any quality challenges with the program as they arise.

This involves AusAID's own internal quality reporting system, the Office of Development Effectiveness, Australia's National Audit Office and OECD development assistance committee peer review system.

The strength of these systems was endorsed, for example, in the 2009 ANAO review that concluded AusAID has managed the expansion of the aid program in a way that supports the delivery of effective aid.

Australia has also been commended in the most recent OECD DAC peer review of the AusAID program.

To strengthen the comprehensiveness of these measures, the Government has committed that all overseas development assistance funds spent by Australia will be subject to quality process, not just those spent by AusAID.

Moreover, AusAID will provide a ratings system for all of its international development partners in order to ensure that we maximise the use of those agencies which rate highest.

We will establish a new Transparency Charter in order to provide more accessible information on what we fund and the results we achieve.  We will use this to encourage debate and contestability and, in turn, improve our effectiveness.

We will develop a four–year, whole-of-aid budget strategy covering the aid efforts of all relevant Australian Government agencies under one coherent plan that outlines the key results we aim to achieve.

We will review annually our progress against the results in the four–year budget strategy.

We will undertake a substantive external review every five years.

We will act quickly and decisively where we find that aid programs are not delivering.

And we will further enhance the capacity of AusAID, the Government's lead agency in the fight against global poverty, to manage an increasing aid budget effectively.

What We Will Deliver

Consistent with the Review's recommendations, the Government will make its decisions based on three sets of criteria:

1. Poverty and need

2. Effectiveness and the capacity to make a real difference, and

3. Our national interest.

Looking ahead, we will continue to align our aid program with our commitment to achieving the Millennium Development Goals.

Within this, we will focus our efforts on five strategic goals:

  • saving lives through improved access to water and sanitation, better maternal and child health, and combating disease
  • promoting opportunities for all through education, gender equality, and disability inclusive development
  • investing in sustainable economic growth through improved food security, private sector development, and reducing the negative impacts of climate change
  • improving governance to deliver better services and enhance security, justice and human rights
  • preparing for and responding to disasters and humanitarian crises.

The Government has further defined ten specific development objectives that seek to give effect to these strategic goals.

  • Improving public health by improving access to safe water and sanitation.
  • Saving the lives of poor women and children through greater access to quality maternal and child health services; and supporting large scale disease prevention, vaccination and treatment.
  • Enabling more children, particularly girls, to attend school for longer and better education so they have the skills to build their own futures, and in time escape poverty.
  • Empowering women and girls to participate in the economy, leadership and education because of the critical untapped role of women in development.
  • Enhancing the lives of people with disabilities. This is the first time that enhancing the lives of people with disabilities has been incorporated within the core development objectives of the aid portfolio.
  • Improving food security by investing in agricultural productivity, infrastructure social protection and the opening of markets.
  • Improving incomes, employment and enterprise opportunities for poor people in both rural and urban areas, including the development of sustainable mining industries to boost overall economic development.
  • Reducing the negative impacts of climate change and other environmental factors on poor people.
  • Improve governance in developing countries to deliver better services, improve security, enhance justice and human rights for poor people and improve overall aid delivery and partnerships between host government's and aid agencies.
  • We will enhance disaster preparedness and deliver faster, more effective responses to humanitarian crises, given the increased frequency and impact of natural disasters in recent decades.

Human rights, also for the first time therefore, has been formally included within the core development objectives of the Australian aid.

The net impact of this methodology is to maximise focus within an expanding Australian international development assistance program.

This approach will maximise focus within an expanding Australian international development assistance program.

Where We Will Work

The Asia Pacific region remains the area of focus for Australia's development assistance program.

It is the region which we believe that we can be most effective in.

It is the region where two thirds of the world's poverty currently lies.

It is the region where the rest of the world often expects Australia to provide leadership.

And it is the region of the world where our most direct, strategic and economic interests lie.

It is for these reasons that the Asia-Pacific occupies in 2011-12 nearly 75 per cent of Australia's bilateral aid.

Within this, the dominant recipients of Australia's development assistance remain Indonesia, Papua New Guinea and East Timor. This will continue into the future.

In Indonesia, around 30 million Indonesians live on less than $1.25 a day and more than 100 million live on $2 a day or less. Many poor Indonesians do not have access to basic food, education or health services.

In line with the findings of the Review, Australia will increase its aid to Indonesia and more aid will be directed at key sectors where Australia is having the largest impact.

Papua New Guinea is our nearest neighbour. Improving the lives of poor people and promoting stability are central to Australia's interests.

East Timor and Solomon Islands have both experienced violent conflict over the past decade and are still rebuilding their societies to provide people with security and access to basic services.

Elsewhere in the Pacific, Australian aid will increase where we assess it can make the most difference. 

Beyond our region, support for global programs will be used to extend the reach and impact of our aid.

We will increase support for multilateral organisations such as the World Bank, the global vaccine alliance (GAVI), and UN development agencies that we assess as effective, that are consistent with Australian priorities, and that deliver value for money.

Currently 14 per cent of our aid goes to south and west Asia – principally Afghanistan and Pakistan, but also including Bangladesh.

We will continue to play our part in international efforts to bring development to Afghanistan and Pakistan.

Building a lasting peace in Afghanistan will only be achieved if there are decent opportunities and services for the Afghan people.

A further 11 per cent of our development assistance goes to Africa and the Middle East. This is a necessary reflection on recent turbulence within the region and the range of interests which Australia has alive in this part of the world.

The Government accepts the review recommendation to the extent that in Latin America and the Caribbean, increases in aid will be modest and will be primarily delivered through partnerships with effective multilateral and non-government organisations.

We will be ending the bilateral aid program in India and China. Both these countries are amongst the ten largest economies in the world and have considerable resources to meet their own development challenges.

The Government will continue to provide limited targeted assistance to China and India through multilateral organisations and regional programs, where we can make a difference to poor people.

The way we deliver aid

Direct country-to-country delivery will remain our primary vehicle of assistance in East Asia and the Pacific where Australia is a major donor, and where we have a well-established field presence.

In these countries Australia will take a donor-leadership role, particularly in the Pacific, where Australia provides around half of all ODA.

In South and West Asia, Africa as well as Latin America and the Caribbean we will make greater use of effective multi-lateral partners and our partnerships with other donor countries including emerging donors.

Australia will also continue to increase our assistance to civil society organisations, including non-government organisations, where they are effective and provide the best delivery mechanism to achieve results.

In addition to increased funding, reforms to our NGO program include high-level strategic partnerships between AusAID and some of Australia's largest NGOs, including World Vision Australia, Oxfam Australia, Caritas Australia, Plan International Australia and Child Fund Australia.

The Government intends to double the AusAID NGO Co-operation Program, ANCP, which will support more Australian non-government organisations to participate in the overall delivery of the aid program.

The Government will also be making increasing use of Australian Volunteers for International Development.

Currently, we have volunteers deployed in 33 developing countries around the world.

As for the Australian Civilian Corps, this too has recently been brought into being under legislation by the Australian Government.

The first ACC specialists have already been deployed in the field. And the ACC register of those with specialist crisis emergency skills is expected to reach 500 screened and trained personnel by June 2014.

Conclusion

We have made a substantive response to the Independent aid review.

The Government has agreed, or agreed in-principle, to 38 of these recommendations and noted one concerning the formal description of the portfolio – as this forms part of considerations of future administrative arrangements.

I wish to further acknowledge the continued bi-partisan support for the government's objective of increasing ODA to 0.5% of GNI by 2015.

Today I have outlined the Government's commitment to a larger and more effective aid program.

The Government's efforts to strengthen the effectiveness of the aid program, including its response to the Independent Review, represent some of the most far-reaching changes to the aid program in more than a decade.

This will be an enduring effort.

Increasing aid effectiveness is the major objective and will require persistence and ongoing focus.

Above all, I want to see an aid program that is world-leading in its effectiveness, a program that delivers real and measurable results in reducing poverty on the ground, and a program of which all Australians can be proud.

I am therefore very pleased to table both the Independent Review of Aid Effectiveness and the Government's response, An Effective Aid Program for Australia, today.

ENDS

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