Shifting Patterns of Aid Conditionality A case study of Australian aid to PNG Flint Duxfield and Kate Wheen, Hanoi Reality of Aid Conference 2007

Presentation Outline Local Ownership or Continuing Conditionality?  End of Nationally-Tied Aid  Shift to ‘locally owned’ aid in PNG Issues of Concern with Australia’s AE efforts  Rise of Performance-based aid  Sector wide approaches (SWAPS)  Good governance through civil society

Aid Effectiveness in Australia (1997) ‘Simonds Review of Australian aid recommends: (1997) ‘Simonds Review of Australian aid recommends: “One Clear Objective: Poverty Reduction” (2006) White Paper on Aid signifies commitment to Aid Effectiveness principles (2006) White Paper on Aid signifies commitment to Aid Effectiveness principles Australia’s aid is officially untied from national procurement conditions Australia’s aid is officially untied from national procurement conditions AusAID’s objective remains : “To Assist developing countries to reduce poverty and achieve sustainable development in line with Australia’s national interest ” AusAID’s objective remains : “To Assist developing countries to reduce poverty and achieve sustainable development in line with Australia’s national interest ”

Tied Aid: The boomerang continues Australian Aid remains ‘project-tied’ Australian Aid remains ‘project-tied’ Informal barriers inhibit local organisations tendering equally with Australian companies Informal barriers inhibit local organisations tendering equally with Australian companies Private Aid contractors retain close ties with AusAID Private Aid contractors retain close ties with AusAID Over 90% of Australian aid still delivered by Australian or New Zealand Companies Over 90% of Australian aid still delivered by Australian or New Zealand Companies

Shift to ‘locally owned’ aid programs Dissatisfaction with past aid provision resulted in PNG Joint Aid Review (2004) Dissatisfaction with past aid provision resulted in PNG Joint Aid Review (2004) (2006) PNG-Australia Development Co-operation Strategy (DCS) emphasizes its origins in PNG’s Medium Term Development Strategy (MTDS) (2006) PNG-Australia Development Co-operation Strategy (DCS) emphasizes its origins in PNG’s Medium Term Development Strategy (MTDS) Concerns raised as to whether DCS is actively oriented towards MTDS priorities, or simply laid over the top Concerns raised as to whether DCS is actively oriented towards MTDS priorities, or simply laid over the top

The Development Co-operation Strategy compared with PNG’s Medium Term Development Stratey MTDS Priorities (PNG) Informal adult education Income Earning Opportunities Law and Justice Basic Education Transport Infrastructure Primary Health Care HIV/AIDS Prevention White Paper Priorities (AUS) Strengthen Political Governance Tackle Corruption Stimulate Broad Based Growth Promote Stability DSC Priorities Improved Governance and Nation building Broad based Economic Growth and productivity Improved Service delivery and stability Strengthened response to HIV/AIDS ? ? ? ?

Performance Based Aid Introduced in PNG-Aus Treaty of Co-operation (2000) Introduced in PNG-Aus Treaty of Co-operation (2000) Joint Aid Review finds: “The benchmarks did not serve to improve sector funding, PNG participation, central agency ownership of service delivery outcomes as envisaged. Nor did failure to achieve benchmarks result in any review of aid allocations.” Joint Aid Review finds: “The benchmarks did not serve to improve sector funding, PNG participation, central agency ownership of service delivery outcomes as envisaged. Nor did failure to achieve benchmarks result in any review of aid allocations.” DCS emphasises performance targets were developed by PNG DCS emphasises performance targets were developed by PNG this seems inconsistent with development priorities set out in PNG’s Medium Term Development Strategy (MTDS) this seems inconsistent with development priorities set out in PNG’s Medium Term Development Strategy (MTDS) Australia has been reluctant to set ‘mutual’ targets as to when conditionality will be removed Australia has been reluctant to set ‘mutual’ targets as to when conditionality will be removed

SWAPS: ‘Leveraging without displacing’ DCS: “donor resources [Australian funds] will leverage and not displace Papua New Guinea’s own transparent expenditure commitments” DCS: “donor resources [Australian funds] will leverage and not displace Papua New Guinea’s own transparent expenditure commitments” may reduce parallel processes and duplication may reduce parallel processes and duplication ‘Leveraging’ can take the form of constraining independent activities by the recipient country ‘Leveraging’ can take the form of constraining independent activities by the recipient country Focus on financial sustainability may prevent quantity of aid consistent with needs/rights based approach Focus on financial sustainability may prevent quantity of aid consistent with needs/rights based approach Focus on governance of health/education sectors may result in MDGs becoming mere ‘aspirational targets’ Focus on governance of health/education sectors may result in MDGs becoming mere ‘aspirational targets’

Good Governance through civil society Engagement AusAID: “A democratic governance approach involves civil society and the state both demanding and supplying governance that include participation, transparency, and accountability.“ AusAID: “A democratic governance approach involves civil society and the state both demanding and supplying governance that include participation, transparency, and accountability.“ Potential to meet CSO request for governance programs that target more than just national governments Potential to meet CSO request for governance programs that target more than just national governments AusAID will spend Au$60m over 3 years on ‘engendering the demand for good governance’ AusAID will spend Au$60m over 3 years on ‘engendering the demand for good governance’ Will this support independent CSO perspectives or only those that promote a particular vision of good governance? Will this support independent CSO perspectives or only those that promote a particular vision of good governance? CSO engagement viewed as part of ‘nation building’ and furthering good governance rather than fostering a robust, independent civil society CSO engagement viewed as part of ‘nation building’ and furthering good governance rather than fostering a robust, independent civil society

Summary of Concerns Tied Aid Tied Aid Should ensure informal untying is addressed as well as formal untying Should ensure informal untying is addressed as well as formal untying Performance based Aid Performance based Aid Genuine mutual accountability requires targets for removal of conditions by donors based on good performance Genuine mutual accountability requires targets for removal of conditions by donors based on good performance Incentive programs should be consistent with recipients development priorities Incentive programs should be consistent with recipients development priorities SWAPS SWAPS Sectoral Aid distributions should genuinly follow recipients priorities Sectoral Aid distributions should genuinly follow recipients priorities SWAPS should not become a tool for donor monopolisation of aid programs SWAPS should not become a tool for donor monopolisation of aid programs Concerns with financial sustainability/governance should not sideline necessary funding for MDG-related poverty alleviation Concerns with financial sustainability/governance should not sideline necessary funding for MDG-related poverty alleviation Good Governance through Civil Society Good Governance through Civil Society Should promote diversity and independence in civil society, not donor’s agendas Should promote diversity and independence in civil society, not donor’s agendas

Thank You! Flint Duxfield Hanoi Reality of Aid Conference 2007

The Development Co-operation Strategy compared with PNG’s Medium Term Development Stratey MTDS Priorities (PNG) Informal adult education Income Earning Opportunities Law and Justice Basic Education Transport Infrastructure Primary Health Care HIV/AIDS Prevention White Paper Priorities (AUS) Strengthen Political Governance Tackle Corruption Stimulate Broad Based Growth Promote Stability DSC Priorities Improved Governance and Nation building Broad based Economic Growth and productivity Improved Service delivery and stability Strengthened response to HIV/AIDS ? ? ? ?

Bonus Slide 2 – Untying of Australian Aid Why Did Australia Untie its Aid? Why Did Australia Untie its Aid? “The European Union recently passed legislation that provides for untying aid procurement on a ‘reciprocal basis’. Untying Australia’s aid program will therefore have the added benefit of allowing access for Australian firms and individuals to the massive European Union aid procurement market of about $12.7 billion per year (€8 billion).” (AusAID, White Paper 2006)

Tied Aid: The boomerang continues