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Dollar Diplomacy? Australian Government Engages Private Sector to Deliver Aid Projects

Australian Minister for Foreign Affairs Julie Bishop announced this week (31/08/15) a government initiative to better involve the private sector in Australian overseas aid and development programs. The strategy, entitled Engaging the Private Sector: Creating Shared Value through Partnership, stresses the importance of private sector funding and involvement in driving development programs and fostering sustainable economic growth in the developing world. Bishop announced three new initiatives as part of the strategy. It comes on the back of severe cuts to aid programs in the past two federal budgets. Australian governments have in recent years increasingly looked to public-private partnerships as a means to achieve positive overseas development outcomes.

This strategy looks to make use of private sector wealth and expertise to outsource some of Australia’s overseas development work. It externalises the cost of aid projects at a time when low funding is increasingly stifling the government’s ability to carry this work out on its own. The official line in the 2014-15 budget was that the aid budget would be stabilised at $5 billion in 2015-16, and then increased annually to match inflation. In reality we have seen a proposed reduction to $4 billion in 2015-16, with further cuts to follow.

This outsourcing of aid programs is not a new phenomenon. NGOs are supported by the government to work in target countries given their expertise and presence on the ground. However, a cut to aid translates into cuts for NGOs. Save the Children, for example, has had to pull out of Afghanistan after funding ceased for their ‘Children of Uruzgan’ project. The project had secured visible change in the region by training teachers and health workers, refurbishing schools and providing vital supplies.

The question now is whether the private sector can step in to meet development needs. There is a void left by the exit of NGOs and the decline in direct aid from government. There is potentially much to be gained by harnessing private sector expertise and resources to generate growth in developing countries, and there is already evidence of success. There has also been criticism of this approach, specifically related to its lack of focus on people and the equation of the development of a country’s private enterprises with positive development outcomes for the broader community.

Some have stressed the need to maintain a focus on humanitarian and human-focused aid as opposed to private sector development. Thulsi Narayanasamy – Director of independent aid monitor AID/WATCH – has made a particularly scathing assessment of the shift towards greater private sector involvement. He argues that current policy is not focused on poverty reduction, and that instead it is centred on Australia’s interests. He contends that aid is being “used to support the Australian private sector, secure Australia’s trade interests in the region and bolster the ongoing policy of maligning asylum seekers for domestic political gain”.

Others – such as Marc Purcell of the Australian Council for International Development – highlight the great potential for poverty reduction by involving private companies in the aid delivery process.

Some of the difficulty in quantifying the effectiveness of private sector cooperation in this area is related to deficiencies in monitoring and evaluation of development projects overseen by business. Margaret Callan and Robin Davies of the Australian National University outline these issues in a discussion paper on public-private partnerships in the aid sector, pointing to a lack of available information and reporting on development outcomes as a major barrier to understanding its impacts.

As resources for government-delivered aid decline, it is natural to look to the private sector to fill the gap. It remains to be seen whether such an initiative can have the same impact as more traditional forms of aid, and while data remains scarce it will be difficult to make any accurate assessments. It must not be forgotten that the primary focus of development aid should be people and the improvement of their personal circumstances and opportunities. It is essential that privately delivered aid, with its focus on private sector development, does not lose sight of this. Ongoing research and public debate in this area is crucial as the government continues to increase engagement with the private sector in delivering is aid program.

Sebastian McLellan is the former Australian Foreign Policy Fellow for Young Australians in International Affairs.

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Image credit: Department of Foreign Affairs and Trade (Flickr: Creative Commons)

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