Breaking down the winners and losers in the 2013-14 Australian aid budget

Australian Prime Minister Julia Gillard. Photo by: Senator Kate Lundy / CC BY-NC-SA

On the eve of the release of the Gillard government’s third budget last week, Australian foreign minister Bob Carr revealed that Canberra would further defer its pledge to hike aid spending to 0.5 percent of gross national income. According to Australia’s top diplomat, the country’s uncertain fiscal outlook prompted the move.

“We are going to be increasing our aid but not at the rate we had hoped in economically more buoyant times … You can’t spend money you haven’t got. You can’t borrow money to sustain an aid budget,” Carr said.

The Australian foreign aid budget for 2013-14 postponed the Gillard government’s 0.5 percent aid spending commitment to 2017-18, two years behind the target set by then-Prime Minister Kevin Rudd in 2007. For 2013-14, the Gillard government has set aside AU$5.7 billion ($5.6 billion) for Australian foreign aid, representing 0.37 percent of GNI and an increase of 10 percent above current levels.

Australia’s center-right opposition led by Tony Abbott has pounced on the 2013-14 aid budget’s diversion — for the second year in a row — of AU$375 million for domestic asylum seeker costs. Prime Minister Julia Gillard’s Labor Party is currently behind in the opinion polls ahead of September’s federal election.

“This idea that they can raid the budget to the tune of 375 million dollars because of a blowout in their asylum-seeker budget is outrageous,” Deputy Leader of the Opposition Julie Bishop told the Australian Broadcasting Corp.

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Should Canberra stay the course on its 0.5 percent aid spending commitment, Australian aid spending in 2017-18 is projected to top AU$9.4 billion, an 83 percent jump above current levels. Abbott has pledged to deliver on the 0.5 percent aid spending commitment in a Coalition government, albeit without setting a firm timetable. In the aftermath of the global financial crisis, Australia has been one of several donors that have continued to significantly increase their aid budgets.

A Devex analysis of the latest Gillard aid budget reveals that while Canberra’s total aid spending will grow substantially in 2013-14, nearly half of the 38 Australian country and regional assistance programs will remain at current levels or even diminish over the coming year. Overall, only 20 country and regional assistance programs — most of which are in East Asia and the Pacific — have been slated for increased funding in 2013-14.

In keeping with the Gillard government’s pledge to enhance engagement with East Asia, the vast majority of Australian country assistance programs in the region are expected to see sizable increases in their budgets in 2013-14. Ahead of the Pacific region, East Asia currently garners the largest share (37 percent) of Australian foreign aid.

Elsewhere, however, the Gillard government appears much less keen on bolstering its aid engagement. Australia’s regional assistance programs in South and West Asia, the Middle East and North Africa, sub-Saharan Africa, Latin America, as well as the Caribbean will be slashed in 2013-14. Meanwhile, Canberra’s assistance to Papua New Guinea — which accounts for the bulk of Australian aid to the Pacific region — is expected to remain roughly flat over current levels.

Below, Devex examines the impact of Australia’s 2013-14 budget on some of its major aid programs.

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WINNERS

Indonesia

Australia has set aside AU$646.8 million in foreign assistance to Indonesia in 2013-14, 19 percent above current levels. For the third year in a row, Australia’s closest Asian neighbor will be the largest recipient of foreign aid from Canberra. The Gillard government’s comprehensive aid policy framework, which was released in May 2012, forecast that Australian aid spending in Indonesia would grow to AU$950 million by 2015-16. The 2011 independent review of Australian aid effectiveness had urged Canberra to significantly expand its development partnership with Jakarta.

During a visit to an Australian-funded Islamic school in Jakarta last month, Carr reaffirmed the Gillard government’s backing for its flagship aid initiative in the country, the AU$448 million Australia-Indonesia Education Partnership. Telling reporters in Canberra that “charity begins at home,” Abbott in 2011 had called upon the Gillard government to defer the initiative to pay for flood relief efforts in Queensland. In addition to the education sector, infrastructure and social protection are priority sectors for the Australian aid program in Indonesia.

Myanmar

Acknowledging the country’s progress in its democratic transition, Carr pledged last year to double Australian aid spending in Myanmar to AU$100 million by 2015-16. Toward that commitment, Canberra has allocated AU$82.8 million in foreign aid to Myanmar in 2013-14, representing a 29 percent increase from current levels. Australia and Myanmar recently signed a memorandum of understanding on developing cooperation — the first such agreement between the two countries.

As in Indonesia, Australia’s most visible aid engagement in Myanmar is in the education sector. The Gillard government has set aside AU$80 million of Australia’s aid budget for Myanmar from 2012 to 2016 for basic education and tertiary scholarship programs. Australia has also joined the United Kingdom in establishing the four-year Myanmar Education Consortium, which aims to support the country’s nongovernmental education sector, including monastic schools.

Fiji

The largest aid donor to Fiji, Australia has budgeted AU$58.2 million in assistance to the South Pacific island nation, a jump of 18 percent from current levels. Canberra had committed to double the size of its direct aid program in Fiji from 2011-12 to 2013-14, a commitment which it has kept. Australian aid to Fiji focuses on health, economic development and governance programming.

Following the 2006 coup that ousted the democratically elected government in Suva, Australia announced that it would press ahead with the bulk of its aid program in Fiji. Canberra has asserted that its assistance to Fiji has been directly aimed at mitigating the economic and social impact of the 2006 coup. In the years since, however, the Gillard government has been under increasing pressure to reconsider its aid engagement with Fiji in light of the country’s much-delayed democratic transition. Fiji’s military rulers have promised to hold elections by September 2014.

LOSERS

Papua New Guinea

Despite maintaining its standing as Canberra’s second-largest aid program, Papua New Guinea arguably isn’t in the winning circle in the 2013-14 Australian aid budget. For 2013-14, the Gillard government has set aside AU$507.2 million in foreign aid to Papua New Guinea, a mere 1 percent increase over current levels. Countries including Bangladesh and Mongolia, which historically haven’t enjoyed Papua New Guinea’s pride of place in the Australian aid agenda, are poised for much larger increases in Canberra’s aid budget. The Gillard government now appears likely to miss its target of expanding the Australian aid program in Papua New Guinea to AU$650 million by 2015-16.

Earlier this month, during her first visit to Papua New Guinea as prime minister, Gillard signaled that Australia was gearing up to refocus its engagement with Port Moresby from aid to trade. The Australian prime minister and her Papua New Guinean counterpart Peter O’Neill also signed a joint declaration that emphasized the trade and economic links between the two countries. Health and HIV, education, law and justice, as well as transport infrastructure are currently priority sectors for Australian aid to Papua New Guinea. Australia is Papua New Guinea’s largest aid donor.

Sub-Saharan Africa

For the second consecutive year, deep cuts have been slated for Australian aid spending in sub-Saharan Africa, currently Canberra’s third-largest aid program. For 2013-14, the Gillard government has budgeted AU$355.1 million in foreign aid to sub-Saharan Africa, down 8 percent from current levels. Australian aid engagement with the region has recently focused on health, humanitarian and disaster response, as well as agricultural development. In October of last year, the Australian government opened the first African regional office of the Australian International Food Security Center in Nairobi, Kenya.

Looking beyond 2013-14, however, sub-Saharan Africa is likely to figure more prominently in the Australian aid program. The just-released Gillard government aid budget reaffirms Canberra’s commitment to pursue membership of the African Development Bank, and also anticipates an initial contribution of AU$160.9 million to the bank beginning in 2014-15. The 2011 independent review of Australian aid effectiveness had recommended that Australia expand its aid engagement in sub-Saharan Africa by joining the AfDB.

China and India

Also in line with the recommendations of the 2011 independent review of Australian aid effectiveness, neither China nor India will be on Canberra’s aid portfolio beginning in 2013-14. Citing both countries’ “considerable economic capacity,” then-Australian foreign minister Kevin Rudd first announced the Gillard government’s plans to wind down its aid programs in China and India in July 2011. In the current fiscal year of 2012-13, Australian aid spending is expected to reach AU$15.4 million in China and AU$17.1 million in India.

Yet even as Canberra concludes its assistance to China and India, the Gillard government has also increasingly looked to both countries as strategic partners of the Australian aid program. In April, Carr and Chinese Minister of Commerce Gao Hucheng signed an agreement paving the way for China and Australia to jointly address regional development challenges, including health and water resource management. And in October of last year, Gillard announced the AU$12 million India-Australia Water Science and Technology Partnership to enhance cooperation between Canberra and New Delhi on water management in South Asia.

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About the author

  • Piccio

    Lorenzo Piccio

    Lorenzo is a former contributing analyst for Devex. Previously Devex's senior analyst for development finance in Manila.