Australian aid budget: Winners and losers

Last week, Australia’s conservative government under Prime Minister Tony Abbott unveiled its 2014-15 federal budget. As widely expected by aid experts and advocates, the Abbott government’s first budget only set in motion the latest round of caps and cuts to Australian foreign aid spending since the change of power in Canberra last September — bringing total official development assistance reductions to 7.6 billion Australian dollars ($7.2 billion) over five years. At the same time, the Abbott government’s 2014-15 foreign aid budget jettisoned Australia’s pledge to increase ODA to 0.5 percent of gross national income, contrary to its pre-election commitment. The budget also postponed the Abbott government’s pre-election promise to grow the Australian aid budget at the rate of inflation to 2016. Australian aid groups were understandably dismayed by the Abbott government’s 2014-15 budget, in part because the Abbott government has imposed some of the deepest cuts on its poorest development partners, including East Timor and sub-Saharan Africa. The budget allocates just over AU$5 billion for Australian foreign aid in 2014-15, flat when compared with 2013-14 levels, which were substantially reduced by the Abbott government in January. The Australian fiscal year begins July 1. Below, Devex breaks down some of the key winners and losers in in Australia’s 2014-15 foreign aid budget. WINNERS Papua New Guinea Despite earlier pronouncements from the Coalition — Abbott’s center-right coalition — that it would be eager to transform Canberra’s relationship with Port Moresby from “aid donor-aid recipient to an economic partnership,” the Abbott government has set aside AU$577.1 million in ODA for Papua New Guinea — an 11.1 percent jump above current levels. Representing 18 percent of Australian bilateral ODA, Papua New Guinea is slated to remain the second-largest recipient of Australian aid, after Indonesia. The Gillard government’s budget last year had called for only a 1.3 percent increase in aid to Papua New Guinea. Good governance, health, education, law and justice, and women’s empowerment are priority sectors for Australian aid to Papua New Guinea. The Australian Department of Foreign Affairs and Trade is currently accepting consultancy proposals for the Ramu highway project in the country’s Madang Province. Pacific countries Papua New Guinea isn’t the only country in the Pacific region slated for a major increase in Australian aid. In fact, 12 of 13 bilateral and regional programs in the region will see increases in the 2014-15 Australian aid budget. Only Nauru will see a decrease in its Australian ODA. Health, education and increasingly women’s empowerment are priority sectors for Australian aid across the Pacific region. Overall, Australian ODA to the Pacific region will increase by 8.5 percent over current levels. Interestingly, the Abbott government has signed off on a 4 percent increase in Australian aid to Fiji, a likely signal to the military government in Suva to press ahead with planned elections in September. Fiji is the third-largest recipient of Australian aid in the Pacific, after Papua New Guinea and the Solomon Islands. As in recent years, the Pacific region will account for the second-largest share (36.8 percent) of Australian bilateral and regional aid, behind East Asia, which would receive 42.4 percent. In contrast, four of nine bilateral and regional programs in East Asia are slated for aid cuts — including Canberra’s second-largest aid recipient in the region, the Philippines, as well as East Timor. A drop-off in humanitarian aid for the response to Typhoon Haiyan seems to account for much of the decrease in Australian aid to the Philippines. Myanmar A year and a half after the Gillard government signed Australia’s first-ever memorandum of understanding on development cooperation with Papua New Guinea, the Abbott government’s first budget suggests that Canberra remains keen to deepen its aid engagement with Naypyitaw — at least for as long as it remains committed to political reform. The Abbott government has budgeted AU$90 million in ODA for Myanmar, representing a 10.6 percent increase over current levels. Canberra is now within striking distance of meeting then Australian Foreign Minister Bob Carr’s 2012 pledge to double Australian aid to Myanmar to AU$100 million by 2015 — a commitment that the Abbott government has been reluctant to reaffirm. Health and education are among the priority sectors for Australian aid to Myanmar. LOSERS Latin America and sub-Saharan Africa Eager to refocus Australia’s aid spending even further on its Asian and Pacific neighbors, the Abbott government’s 2014-15 aid budget begins to reverse the previous Labor government’s drive to expand Australia’s aid engagement to sub-Saharan Africa and Latin America and the Caribbean. When it was still part of the opposition, the Coalition had expressed reservations over the global expansion of Canberra’s foreign aid program, contending that the Australian aid program was already stretched too thin. In line with the recommendations of the 2011 Australian aid effectiveness review, the Abbott government has announced plans to phase out Australia’s aid program in Latin America and the Caribbean. Canberra has budgeted AU$21.1 million for a residual ODA program in Latin America and the Caribbean, 28.7 percent below current levels. Meanwhile, the Abbott government slashes Australian ODA to sub-Saharan Africa by 23.3 percent to AU$186.9 million — but is expected to maintain a modest aid presence in East and Southern Africa. Interestingly, Canberra is keen on strengthening the governance of the extractive sector, among other priorities for its African aid program. Contrary to the recommendations of the 2011 Australian aid effectiveness review, however, the Abbott government has abandoned the previous Labor government’s pledge to join the African Development Bank. Indonesia Amid the recent strain in relations between Jakarta and Canberra, the Abbott government plans to boost assistance to Indonesia by only 0.6 percent — well below the 19 percent increase in last year’s budget. Slated for AU$605.3 million in Australian ODA in 2014-15, Indonesia will nonetheless remain Canberra’s single-largest aid recipient. While then-leader of the opposition Abbott had called for the Labor government to shelve Australia’s flagship education initiative in Indonesia back in 2011, education — along with economic development, gender equality and health — are slated to remain priorities for Australian aid to Indonesia. But Jakarta has yet to rescind its November 2013 “downgrading” of relations with Canberra, prompting fears that Australian aid officials’ working relationships with their Indonesian counterparts could be affected. In July, Indonesians will head to the polls to elect a successor to President Susilo Bambang Yudhoyono — a source of cautious optimism in Canberra that a new government in Jakarta might be more willing to reset relations with Australia. Afghanistan and Iraq As in the case of the United States, Australia has been reducing its development footprint in Afghanistan amid concerns that the NATO drawdown later this year might lead to further deterioration in security conditions. Australia withdrew its combat troops from the war-torn country in December. The Abbott government’s 2014-15 aid budget reduces Australian ODA to Afghanistan by 10.1 percent to AU$134.2 million. Battered by allegations of fraud and mismanagement, the Australian aid program continues to attract considerable scrutiny among lawmakers in Canberra. In 2012, allegations of fraud prompted the Australian government to suspend its Australia Awards scholarship program in Afghanistan. Several years into the withdrawal of Western troops from Iraq, the Abbott government’s 2014-15 budget effectively discontinues Canberra’s aid engagement with Baghdad. The budget sets aside only AU$300,000 in ODA to Iraq, down 92.7 percent from current levels. Join the Devex community and gain access to more in-depth analysis, breaking news and business advice — and a host of other services — on international development, humanitarian aid and global health.