Despite modest growth, Kiwi aid not put on backburner

Men check building supplies for shipping for the Primary Infrastructure Project in Solomon Islands. Unlike Australia, the reintegration of the New Zealand Agency for International Development did not result in massive cuts to the country’s development assistance. Photo by: New Zealand Ministry of Foreign Affairs and Trade

New Zealand’s reintegration of the New Zealand Agency for International Development, its formerly semiautonomous aid program now known as the International Development Group, into the Ministry of Foreign Affairs and Trade in 2008 sparked fears that its assistance to developing countries would take a backseat in its budget.

But unlike its neighbor Australia, whose amalgamation of AusAID into the Department of Foreign Affairs and Trade in 2013 has resulted in massive cuts across its development assistance to its partner countries, New Zealand “left much of the aid program intact,” according to Terence Wood, a research fellow at the Development Policy Center who used to work for NZAID.

With New Zealand’s multiyear appropriation expiring this June, or the end of its fiscal year, a new plan will be put in place. The new appropriation will see an increase of 180.27 million New Zealand dollars ($128.4 million) largely as a result of the New Zealand Aid Program Strategic Investment, a new policy initiative that will focus on agriculture, renewable energy, and information and communications technology.

While this increase is welcome, Wood pointed out that an emphasis on these sectors suggests that New Zealand takes a “supply-driven approach to aid,” in which it capitalizes on areas that it has business strengths on, instead of addressing the needs of the countries it supports. The Organization for Economic Cooperation and Development’s overview of Kiwi aid in its 2014 development cooperation report seems to confirm this aid-for-trade bent: Wellington has recently been building on its public-private partnership capabilities in developing countries by drawing from the experience of New Zealand businesses.

Still, this may be a rather sweeping assessment of assistance from New Zealand.

In 2014, at least 30 percent of its official development assistance went to the least-developed countries, putting New Zealand just behind the United States and Finland, which gave 32 percent and 31 percent, respectively, to the poorest countries in the same year. In New Zealand’s case, these LDCs are mostly island states from the Pacific.

Since 2009, New Zealand’s aid program has focused on small island countries and sectors that directly support sustainable economic development. And it makes sense to link these two together. The limited private sector activity in these countries, after all, has kept out investors who may otherwise spur business in these island states.

But beyond reinvigorating private sector activity, domestic tax reform in Pacific island countries has also been a priority for New Zealand. In March 2014, MFAT published an evaluation of donor assistance for taxation systems in the Pacific from 2002 to 2012 conducted by the Sapere Research Group, which concluded that while donors support the initial stages of taxation reforms through technical assistance, training, equipment and infrastructure support, “in some cases [they] may be withdrawing capacity support before changes have fully embedded.”

New Zealand is guilty of this. A practitioner from the Solomon Islands who was interviewed for the report, for example, noted that “New Zealanders are always coming here to impose their tax system on us. They do not stay long and we see them off. We desperately need someone here to drive policy change.”

That New Zealand has not put its development assistance on the backburner and has even been transparent about its shortcomings is a positive sign for a donor that, while unable to fill the gaps left by the significantly larger aid program of its neighbor Australia, seems intent on continuing aid for its partner countries.

A closer look at the budget that New Zealand released late last month, however, reveals that the aid increases are more modest than they seem.

When nominal ODA from New Zealand is adjusted for inflation, aid increases are more modest.

Nominal ODA from fiscal years ending June 2015 to June 2019 amounts to NZ$588.2 million, NZ$602.9 million, NZ$635.7 million, NZ$650.2 million and NZ$650.2 million, respectively.

But when ODA is adjusted for inflation, the increases are actually meager — and, at least within the same period, are only expected to last until fiscal 2018.

Aid will increase from NZ$588.2 million in fiscal 2015 to NZ$593.5 million in fiscal 2016. Then, assistance will have a more marked rise to NZ$612.7 million in fiscal 2017 before it climbs slightly to NZ$614.2 million in fiscal 2018. In fiscal 2019, aid will drop to NZ$601.6 million.

As New Zealand prepares a new aid strategy that, based on a presentation made by Jonathan Kings, the MFAT-appointed administrator of Tokelau, aims to maximize impact by bolstering policy engagement and demand-driven programs in developing countries, these are some issues that it might consider.

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About the author

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    Anna Patricia Valerio

    Anna Patricia Valerio is a former Manila-based development analyst who focused on writing innovative, in-the-know content for senior executives in the international development community. Before joining Devex, Patricia wrote and edited business, technology and health stories for BusinessWorld, a Manila-based business newspaper.