The business of Australian foreign aid

The Australian aid program has evolved considerably under Tony Abbott’s Coalition government. Funding for foreign aid has been dramatically reduced in addition to Australia’s geographic sphere of influence. The amalgamation of what was then the Australian Agency for International Development with the Department of Foreign Affairs and Trade in November 2013 has seen a dramatic shift in policies — climate change is now seems to be a thing of the past with new policies aiming to encourage a greater focus on innovation, women, disability, health and trade. A recent parliamentary inquiry into foreign aid, producing recommendations outlined in the report “Partnering for the Greater Good,” is also set to see a shift in policy, with DFAT currently preparing a response to recommendations. But what will all of these mean for those who do business with DFAT and the Australian aid program? The wheels are still in motion within DFAT to determine how these changes will impact the business of foreign aid. Consultations are still ongoing, but a DFAT spokeswoman told Devex the resulting outcomes will be reflected in each country and regional aid investment plan. These plans are expected to be finalized by Sept. 30, 2015, and will be posted to DFAT’s website shortly after. What we know The information released so far provides valuable insight into the changes, current and expected, in the Australian aid program as well as the direction for the future. 1. Program focus. Since the May budget, there have been a range of policy announcements, including on disability, health and aid for trade. And the new policies are still coming, with “a statement on engaging with the private sector in aid and development” expected to be released this month, the DFAT spokeswoman said. Australia has streamlined its geographic areas of focus as well, with most aid programs now focused on the Pacific. Other regions will mainly receive support through Canberra’s funding to multilateral organizations. These changes will most definitely have an impact on the projects that will be available for tender and the business expertise required. 2. ANCP funding. Requirements remain unchanged under the Australian NGO Cooperation Program, a major source of funding for Australian nongovernmental organizations. NGOs funded under this scheme have already been informed of their funding for the year with work currently occurring. But the Office of Development Effectiveness will soon evaluate ANCP, which when released might have an impact on the programs and its requirements in coming years. 3. Volunteer programs. After volunteer programs saw a 30 percent reduction in funding under the May budget, DFAT has since been working with partners of the Australian Volunteers for International Development on revisions to the program. This includes NGO delivery partners and NGOs as host organizations, as well as DFAT posts and other partners. The recent partnership announced between DFAT and the Australian Red Cross will see ARC integrate international volunteering within its broader humanitarian and development partnership with the Australian government, but new agreements with other NGOs have yet to be formed. DFAT told Devex the AVID program remains a central part of Australia’s aid program, with 1,400 volunteers working overseas this financial year. NGOs and partner agencies can expect to be called on to assist in finding cheaper options for the future of the volunteer program. 4. Innovation and partnerships. In March, Australia announced a new division within DFAT: InnovationXChange. Its directive is to develop innovative ways of delivering aid. The term “innovation” has found its way into new policies released since then, showing this is not an idea that will fade within DFAT. The InnovationXChange program will deliver funding for ideas that aim to deliver innovative solutions in poverty reduction. These ideas could aim to better utilize technology, find cheaper alternatives to current aid solutions and more. But they should aim to deliver sustainable solutions that will reduce poverty in the long term, with the focus on Australia’s neighbors. An increased focus on innovation and the private sector also means more organizations will be in line to receive a slice of Australia’s foreign aid pie. Business opportunities through tenders and grants will become increasingly more open and competitive, allowing more businesses to take part in delivering Australia’s foreign aid program. 5. Reporting requirements are set to increase. With more partners doing business with DFAT, more stringent reporting requirements will likely be imposed on businesses as well. “As DFAT engages more with a wider range of partners, including in the private sector, and actively seeks more innovative ways to deliver aid, there will be a need to ensure business processes are fit for purpose, including risk management, due diligence, monitoring and reporting and results measurement,” the spokeswoman said. “As we pursue innovative aid delivery approaches and expand the partners we work with, some processes will necessarily reform and this will occur in close consultation with aid delivery partners.” What we can conclude The information released by DFAT only provides a limited understanding of the business on NGOs and partner organizations — the true impact will be more extensive. But there has been enough information released to draw conclusions on how extensively doing business with DFAT will change. 1. Programs, planning and reporting. While we know what the new program focus is, partner organizations are still in the dark as to how this new focus will affect the aid program. From the information that has been released, it appears that there is demand within DFAT for a stronger focus on programs that are all-inclusive. This means there should be a focus on gender, disability and health, for example, as part of a program that aims to reduce poverty in the long term. What this means in practical terms is that Australia’s implementing partners will most likely write funding proposals for projects whose areas of focus cut across multiple programs. Reporting requirements will also likely include impact assessments of various target demographics and programs, with results shown for each. 2. Engaging the private sector for long-term solutions. The focus on the private sector in aid delivery is increasing by the day — NGOs and other partner organizations should themselves be thinking of how they can utilize the private sector as part of their programs. This will not only reduce project delivery costs but it will also be looked on favorably by DFAT as part of future funding rounds. 3. Australian-based focus. A key focal point for Australia joining the Asian Infrastructure Investment Bank was the possibility of improving business opportunities for Australian companies in the international market. “It is a significant opportunity for Australia,” Treasurer Joe Hockey told media in June. “Asia has an estimated $8 trillion infrastructure shortfall over the next 10 years. The AIIB will work with the Asian Development Bank; will work with the World Bank and a range of other banks, to ensure that we try and get the infrastructure into Asia that helps to address our concerns. Because if there are more ports in Asia, if there are more railways, more electricity grids and more essential infrastructure in Asia, then that means we can get our raw produce to those markets. It’s better for our minerals exports, it’s better for our agricultural exports. And certainly it represents huge opportunities for our services exports.” The recent parliamentary inquiry echoed these sentiments. Sharman Stone, head of the subcommittee responsible for the parliamentary report, spoke to Devex and highlighted the importance of Australian companies providing goods as part of the aid program rather than simply giving money. “Look at the World Food Program as an example,” Stone told Devex. “Providing subsidized food helps with badging and marketing Australia.” With DFAT having a strong focus on Australia’s interests, politically and economically, it is likely the department will look at improving opportunities for Australian businesses as well. As part of tendering and grant processes, local businesses may have a leg up on their international counterparts competing for the foreign aid dollar. Problems for business The key problem with the changing Australian aid program, according to the development sector, is the lack of time NGOs and partner organizations will be given to deliver outcomes. In just eight months, NGOs and partners will be required to comprehend the impact of new policies, plan their programs and deliver outcomes for the 2015-16 financial year. Outcomes will still need to be reported upon and likely with stricter reporting requirements expected to track progress, putting extra pressure on organizations to complete paperwork rather than achieve development goals on the ground. For NGOs and partner organizations, the preference is for changes to be implemented over the long term rather than immediately, allowing time to restructure projects and allocate staff. But until DFAT is clear on how its goals and objectives will affect its foreign aid partners, the business changes are still a guessing game. Check out more insights and analysis for global development leaders like you, and sign up as an Executive Member to receive the information you need for your organization to thrive.