The results of a yearlong parliamentary inquiry into Australia’s aid program show a dramatic room for improvement, providing 37 recommendations including the removal of “red tape” which is impacting development outcomes.
The Joint Standing Committee on Foreign Affairs, Defense and Trade on Monday tabled the report, “Partnering for the Greater Good”. Minister for Foreign Affairs Julie Bishop announced in February 2014 the inquiry, which was designed to look into the role of the private sector in promoting economic growth and reducing poverty in the Indo-Pacific region.
The implementation of recommendations could see Australia’s funding methods change to maintain greater control of how and where funds are spent but become more open and transparent to businesses wanting to partner in the aid program.
Processes for managing and reporting on the aid program within the Department of Foreign Affairs and Trade would also see a dramatic shift.
In the latest in our series on top donor agency partners, Devex ranks DFAT Australia's top NGO partners. As in the case of the agency's top private contractors, Australia-based NGOs far outnumber their local counterparts on this list.
The development sector, according to Beth Sargent, head of policy for the Australian Council for International Development, welcomed the report, including the recognition of the value of nongovernmental organizations working alongside the private sector and government to deliver development outcomes.
Sharman Stone, Liberal member of Parliament and head of the subcommittee responsible for the report, discussed exclusively with Devex some of the key recommendations and why they are important for the future of Australia’s aid program.
Improving partnerships for better development outcomes
The importance of partnering with the private sector has been a strong message of the Australian government since the announcement of the new aid paradigm in June 2014.
The report rejects the idea of creating a government-run development finance institution in favor of continued partnerships with banks such as Westpac and ANZ. It offers recommendations to strengthen country legislative frameworks, law and order, and legal and judicial systems aimed at increasing the possibility of private investment in developing countries.
“Australia is renowned for excellence in governance and an honest public service,” Stone said. “This is important for investment in countries and it is important we continue to build better governance in aid to facilitate the work of the business sector.”
She said the Australian public is already expecting businesses to be “ethical,” pointing to the success of the fair trade label.
Nick Savaidis, director of etiko, cited his company as an example of this.
Providing footwear and clothing with the fair trade label has seen etiko develop a loyal following in Australia; the company is planning to expand its brand into retail stores based on its success.
“The company is growing organically, and we want to keep investing and take it further,” he told Devex.
It is not uncommon for Savaidis to receive requests from businesses asking for advice on how they can do good through their brands.
Countries and NGOs, though, are equally important partners in the strategy to create economic sustainability for Australia’s neighbors in the Indo-Pacific region.
“We want to partner with a country as an equal partner in delivering a solution,” Stone told Devex. “It is important to listen very hard to the communities and their priorities, what they want and why. They can then accept you as a partner.”
Shared knowledge to improve capability
The inquiry highlighted concerns from the private sector on the ability of DFAT to understand and communicate with the private sector.
“Private companies have wondered if DFAT has the appropriate commercial experience to work in this new environment,” Stone said.
To effectively work with new private sector partners, there will need to be change within DFAT. And the committee recommends that secondments will develop the knowledge needed to improve Australia’s aid program.
In the latest in our series on top donor agency partners, Devex ranks DFAT Australia's top private contractors. We found that 11 of the top 15 private contractors are based in Australia, proof positive of the competitive advantage they hold in the Australian aid industry despite Canberra's long-standing untied aid policy.
“DFAT has no experience working in business enterprise, but an exchange with organizations can benefit both DFAT and the businesses trying to understand operating in a developing country,” the committee said.
Likewise, the committee recommends using volunteer programs to facilitate the sharing of business knowledge. Australian government volunteer programs should be focused “firmly” on supporting private sector development, according to the committee, which ties the volunteer program to the government’s new development policy focus.
“We want to encourage people experienced in business to volunteer,” Stone said. “We want volunteers who can share their commercial experience to improve understanding of consumer demand and services that can support their products.”
Reducing red tape
In submissions to the enquiry, Tess Newton Cain, a nonresident fellow at the Lowy Institute for International Policy, said donor programs were “administratively intensive,” creating a burden on the often small management teams.
With already limited capacity for scoping, designing, monitoring and evaluation work, implementing groups have little time left for reporting.
“The burdens of red tape need to be pared back to improve DFAT’s tendering processes, communication flows and transparency,” the committee recommended.
Stone said reporting requirements need to be considered in line with the programs.
“How do you measure poverty reduction in six months?” she asked. “Reporting requirements need to be reasonable.”
Contractual arrangements are blamed for most of the administrative red tape. They were also found to be inflexible, making programs less effective.
“Contracts are highly complex and rigid with no flexibility in when the needs of communities change or disasters strike,” Stone said.
Contractual red tape was not only found to impact aid effectiveness but it also limited the number of potential partners Australia could work with.
Current tendering and contracting practices for official development assistance require respondents to carry out an entire program of work. The committee, though, suggests that specialized businesses be allowed to tender for sections of work contributing to the entire program, such as training services.
“Contracts should be disaggregated, transparent and easy to understand without requiring a middleman or woman,” Stone said.
Improving communication to tell the Australian aid story
Recommendations for improved communications from DFAT highlighted the lack of awareness of the aid program among stakeholders, including implementing partners, development experts, aid recipients, the Australian public, business community and even school children.
Taxpayers in particular were identified as a key stakeholder requiring transparency on how money was being spent.
Stone said the committee was concerned the Australian public has no idea about how Australian aid is being spent.
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“When Australians travel, they should be able to know the schools we helped build, the crops we helped grow and the lives we helped save. But it’s a mystery — DFAT’s website is obtuse, not interactive and lacking information,” she said.
The development sector agrees with the recommendation.
Sargent said the lack of transparency and predictability of aid are key impediments to the effectiveness of Australian aid investments. He noted that the transparency of the Australian aid program has fallen in the last year, citing the government’s decision to abolish the AusAID transparency charter and not to release a detailed “Blue Book” on foreign aid activities for the past two federal budgets.
Maintaining control of Australian aid
In its report, the committee was critical of Australia’s focus on providing untied aid to multilaterals.
“In the past, DFAT have been inclined to set off the dump button and send money to organizations to meet reporting requirements,” Stone said. “But supplying untied cash is not in the best interest of Australia. We lose control of where the money goes and can’t allow Australian companies to tender.”
In-kind food aid is instead suggested, with Australian companies tendering to have food delivered to neighboring countries within 48 hours of natural disasters.
“This helps with the badging of Australian products and allows Australian to feel they have personally made a contribution to relief efforts,” she said.
ACFID, though, strongly criticized the recommendation.
In an emergency, it is vital that the response focuses on the immediate needs of the affected populations, rather than aid donors, Sargent argued. Aid, she added, should also be “culturally and environmentally appropriate” and should not adversely impact on local economies.
“In a humanitarian emergency, there are a range of barriers to sourcing food from places like Australia, including intermittent supply routes and blockages at ports,” Sargent said. “These need to be considered by governments and agencies when they determine the best way to meet the needs of populations.”
Private sector versus NGOs
Stone downplayed concerns by some in the aid sector that an increased reliance on the private sector would impact development outcomes..
“NGOs are concerned about losing aid funding from a private sector that appear to be in it for the money,” she said. “But many NGOs are already recognizing the benefit of partnering with the private sector. The benefits of partnering with a company like Coca-Cola to use their refrigerated trucks to transport medicine are obvious, but not all projects will require a business partner.”
David Faulmann, general manager for marketing, communications and stakeholder engagement at Business for Millennium Development, agreed. He said NGOs can also play a critical role in the success of the private sector in developing countries, given their on-the-ground knowledge, connection with political and community leaders as well as understanding local dynamics.
“Inclusive business by definition is about mutual benefit. To create mutual benefit you need a trusted intermediary to design solutions that meet the needs of developing communities and companies and this is where NGOs can provide the most value,” Faulmann told Devex. “Ultimately, NGOs have the potential to design and manage the relationship between buyers and sellers, employers and employees, producers and consumers to ensure equitable outcomes.”
The next steps
The decision on which recommendations to accept and how they will be implemented is still many months away.
Stone said the focus should be on recommendations that will improve the financial stability of Australia’s neighbor and reduce poverty permanently.
Key priorities for the development sector include promoting private sector growth in developing countries and giving particular attention to the role of micro, small and medium enterprise with the longer-term goal of assisting them to transition from informal to formal economic activities.
“We will be keen to see aid-for-trade initiatives foster local job creation, link small and medium enterprises to the value chain, and target sectors where women and other marginalized groups work,” Sargent told Devex.
DFAT had received the report from the parliamentary inquiry but is still reviewing the recommendations, the agency informed Devex. A response to the report will be delivered within three months.
ACFID said it would welcome consultation with DFAT, NGOs and other partners on how to take many of the recommendations forward.
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