Speech

11 August 2004

Australian Aid: Creating Prosperity

A Speech to the ACFID-AIIA Aid Forum, Canberra

Introduction

Distinguished guests, ladies and gentlemen,

I would like to thank you for the opportunity to speak to you this evening.

I appreciate the chance to talk with ACFID and AIIA members…

…because we are all working towards the same goals.

We all want to see sustainable development achieved and poverty reduced.

And we all want to see the Millennium Development Goals achieved.

The question is: how Australia can best assist in this process?

My colleague the Treasurer spoke to you last week reaffirming many of the 'big picture' conclusions on what we have learned about growth and its link to poverty reduction.

I too strongly agree that the policy and actions that are required from both developed and developing countries to reduce poverty…

…and achieve progress against the Millennium Development Goals.

This includes the need for developing countries to participate in the global economy…

…and create the conditions for private sector development and to build sound institutions…

…and the need for developed countries to promote stable global growth, open trading regimes…

...and to provide effective aid to respond to human suffering and to help create the settings needed for prosperity in developing countries.

Growth is clearly the "poverty buster". But growth by itself is not always sufficient.

As Bill Easterly's study "Growth without Development" notes, while Pakistan had per capita economic growth of 2.2% per annum from 1950-1990 and tripled its per capita income over that period…

…its basic social indicators did not improve commensurately.

The appropriate domestic policies and institutions to maximise the opportunities that greater growth provides are also crucial.

Certainly, those countries that have pursued growth and opened up to trade have been far more successful in reducing poverty than those that have not.

But what else makes a country successful?

First, we should note that there is no single universally applicable path that leads to national prosperity and poverty reduction.

The progress of Uganda is different from that in China.

Samoa's experience varies from that of Vietnam.

But there are some common principles or preconditions that are a feature of prospering countries.

I would like to touch on three that I see as fundamental to encouraging growth and ensuring its benefits are widely shared….

…namely, security and stability, governance, and investing in people…

…and outline the way in which Australia is helping developing countries in our region address these issues.

Stability and Security

Security is at the very heart of development.

From the personal level - security from hunger, from disease, from injustice - to the global level, stability and security remain the key enablers of prosperity.

In our own region we have seen the impact that violence and instability have on growth and progress.

The coups in Fiji in 1987 and 2000 had a sharp and immediate impact on Fiji's growth and the welfare of its poorest citizens.

Similarly, long-running conflict on Bougainville not only extracted a social cost, but represented a serious drain on PNG's finances…

…diverting resources that could have been used in education or health care.

More recently, terrorism and the threat of terrorism have undermined efforts to reduce poverty.

Terrorism deters investment and increases costs and, as we saw in Bali, impacts on the poor through lost employment opportunities.

Conflict and insecurity are not merely obstacles to development; they cause otherwise viable countries to slide into poverty.

The populations affected by conflict are in the greatest need of assistance, but they are also the most difficult to reach or affect…

…as the current situation in Darfur shows.

We witnessed this too in Solomon Islands, where conflict led to the flight of employers, the collapse of exports and serious damage to government services.

As the Solomon Islands descended into chaos, Australia worked to address people's basic needs - for example through mobilising support for basic health care via local NGOs.

But without action to end the anarchy in Honiara and to restore the Government's ability to address its own people's needs, such assistance was unsustainable.

The people of Solomon Islands were not asking for progress against the Millennium Development Goals.

They were asking for security.

Because they recognised that violence and instability were driving the country into abject poverty.

Australia's provision of increased support for policing - backed by a military presence - under the Regional Assistance Mission to Solomon Islands was key to the success of the mission's first phase…

…and which is enabling implementation of a comprehensive program designed to restore peace and create prosperity in Solomon Islands for the long-term.

Solomon Islands is not the only country with which Australia is working to build peace and security.

In the Philippines we are supporting post-conflict rehabilitation in the South and building government capacity to address terrorism.

Similarly we are working very closely with Indonesia on counter-terrorism capacity building, particularly in the areas of law enforcement and reform.

Australia is firmly committed to helping our partner countries address fundamental issues of security and stability as an essential pre-requisite for growth, poverty reduction and improved social outcomes.

Governance

The second key feature that marks a successful country is standards of governance.

In my observation, over more than eight years as Minister, I would assess that a far greater influence on reducing poverty than any basic resource transfer is the quality of governance and effective economic, legal and social structures.

By this I mean promoting economic stability and sound fiscal management…

…maintaining the rule of law and property rights…

…enhancing public sector effectiveness and service delivery…

…strengthening democratic processes and institutions…

…and combating corruption.

In turn, this contributes to greater attractiveness to investors, generating growth and employment…

…and a more efficient and effective use of resources, helping to meet public service delivery goals such as in education and health.

I have promoted and advocated the importance of good governance now for many years.

And I shall continue to do so.

In 2004-05 Australia will contribute around $674 million towards good governance in the region.

Our spending on governance has a direct and sustainable impact on poverty in the countries in which we operate.

Some have criticised Australia's strong support of governance reform as part of development, saying we should instead be spending more on basic services such as health and education.

But to me this is a false and misleading dichotomy.

Strong financial systems free of corruption are absolutely vital to providing better health and education services.

It means better funding for education and health systems for a start…

…but also sound law and order allows people to attend work and school without fear…

…and, more broadly, as governance improves and encourages investment and growth, governments are able to commit ever greater resources to building up services for the long term.

Often the key issue is making sure local resources are spent well…

…for these represent far more than donors can provide.

Ladies and gentlemen

Promoting good governance practices in the design and delivery of health policy; in government procurement systems; in policing and justice; and in resource management, also contributes to development and growth.

The Enhanced Cooperation Program (ECP) with PNG is our largest intervention in this area.

The ECP will, inter alia, deliver stronger government, better public sector performance, better and more affordable services…

…and, importantly, it will focus on improving the law and order situation, which has been recognised as a pressing problem by both governments.

Australia will provide $800 million in new money over the next four years and 300 Australians will work with the PNG police and public service.

This initiative represents a tailor-made approach - in concert with PNG - to overcome major constraints to stability and growth.

The Australian aid program is also providing targeted, practical support to governance in places like Indonesia…

…where we have a dedicated governance program - the Technical Assistance Management Framework - which assists Indonesia with a range of reform programs in its financial and legal sectors…

…and we are supporting governance in other regional developing countries, including East Timor, Kiribati, Fiji, China, and the countries of the Mekong region.

Investment in People

The final feature I see that characterises successful countries, and particularly the experience of East Asian economies, is the size and quality of their investments in people.

Poverty reduction can be accelerated when the poor have the necessary tools and opportunities to participate in growth.

Those who receive a good education and are generally healthier are more productive.

This is critical for developing countries to compete in the global economy and maximise the gains from globalisation.

Australia provides substantial support to education and health in the region, in recognition of the need to develop populations' own capacity.

We have also provided vital support to regional health programs, including - for example - through the eradication of polio in the South Western Pacific.

Importantly, the World Bank notes that outcomes in education and health may be determined as much by what happens outside the sector as within.

This highlights the inter-relatedness between social outcomes and what I have just been talking about - namely security and stability, and governance.

We are also taking on the most profound health threat to the region - HIV/AIDS.

Globally, 8000 people die of AIDS and 14,000 are infected each day.

If current infection levels are maintained, by 2010, 40 % of all new infections will take place in our region...

…11 million children in the region will be HIV orphans…

…and the impact on already vulnerable developing countries - for example PNG - would be truly horrific.

In response to this, Australia is working to reduce the spread of HIV/AIDS in the region and to mitigate its effect on those living with the virus and their communities.

On 11 July I announced a more than doubling of Australia's funding for international HIV/AIDS programs and the appointment of Annmaree O'Keeffe as Australia's first Special Representative on HIV/AIDS.

On education, I have also increased aid devoted to basic education, with a particular emphasis on reaching girls and minority groups.

Thousands of teachers and millions of children in the region have already benefited from Australian assistance…

…and this year we are substantially expanding support for basic education in Indonesia - affecting 45 million children.

Underpinning these principles is the fundamental importance of strong and sustained political leadership in pursuing reform.

This is the case not only in seeking to drive through difficult economic reform measures, but also in confronting and defeating emerging threats to prosperity, such as HIV/AIDS.

A Coherent Approach

As well as aid, Australia has adopted policies on trade, investment and debt that are central to progress against the MDGs.

Australia's aggressive pursuit of more equitable international trading arrangements - particularly in relation to agriculture - has the potential to benefit developing countries enormously.

In fact, a pro-development outcome from the WTO Doha Round could reduce the number of people living in poverty by 140 million by 2015.

And to encourage trade, we have provided duty-free and quota-free access to our markets for all 49 Least Developed Countries (and East Timor)...

…and are also providing over $30 million annually in assistance to developing countries to take advantage of the opportunities presented by trade liberalisation.

Also recognising the role that debt relief plays in freeing up domestic resources, we have committed $77 million to the HIPC initiative…

…and will provide 100 per cent bilateral debt relief to all eligible HIPC countries.

We are also party to agreements facilitating responsible Australian direct investment in our region.

The Pacific - A Special Relationship

I want to touch on the special relationship Australia has with our Pacific neighbours.

Our leadership of the Regional Assistance Mission in Solomon Islands…

…our Enhanced Cooperation Program with Papua New Guinea…

…and our agreement to assist Nauru mark a significant shift in Australia's dealings with the South Pacific.

We are now prepared to get more directly involved, in cases where we believe we can have a positive impact.

We are also working to ensure the Pacific Island Forum produces relevant and tangible outcomes for its members.

Australia has been at the forefront of efforts to reform the PIF to focus more strongly on good governance and security issues, including through initiative to pool resources of governance…

…encouraging the region to work together to find sustainable ways to provide the best possible level of resources and services to PIF communities.

And we are seeing sound results.

At the PIF Leaders' meeting just a few days ago, leaders agreed to advance the practical application of pooled regional resources…

…and adopted key findings of an Australian-funded study on reforms to regional transport, particularly the aviation sector.

Some recent commentary suggests that the record of development aid in the Pacific has not been a good one.

This is simply not the case - as my remarks to have underlined.

And we should be very wary of comments which seek to draw generalised conclusions…

…for as we know from our own work in this field of endeavour, the Pacific experience does not lend itself to generalisations.

For instance, growth in the Polynesian countries, particularly Samoa, has been respectable.

Life expectancy rates in the Pacific have climbed much faster than in Sub-Saharan Africa and the Caribbean

There is no denying the very real challenges confronting the Pacific, particularly in the Melanesian countries.

But we are developing comprehensive governance and law and order reform strategies to help address many of these challenges - in partnership with our neighbours.

Governance lies at the core of the Pacific's future prosperity....

..and we will continue to work over the long term with our Pacific partners towards that goal.

Conclusion

Ladies and gentlemen

Australian development assistance takes many forms, and goes beyond traditional notions of aid.

We support the Millennium Development Goals and are committed to helping countries in the region make progress against them.

We support the emergence of stable, prosperous, successful countries, through the provision of support to governance, the delivery of policies supporting trade and growth, and assistance in building countries' human capital.

But, of course, much more remains to be done.

Development is a complex process, requiring different responses in different countries.

There are no silver bullets that will end poverty.

We can't simply buy the Millennium Development Goals through increased aid, just as we cannot rely solely on growth to reduce poverty.

But a great deal can be achieved through partnership and a willingness to try a multifaceted approach based on our experience and those of others.

And we are still learning.

We know more about reducing poverty and effective aid delivery now than we did five years ago…

And I'm certain that we will know more in another five years time.

We need to embrace this learning and continually build our knowledge and debate the interplay of factors that drive or obstruct development.

Australia has a proud history of development assistance...

…and I propose to continue building on that history in the years to come.

Thank you.