Aid concerns

So, I mentioned that I’d had some thoughts about the recent announcement by the Australian Government to provide a $1 billion “package” to Indonesia in the wake of the December 26 tsunami.

I’ve been thinking about a couple of things. Firstly, there’s the concerns raised by Kofi Annan and Oxfam about donor pledges actually being fulfilled. This has been fairly well covered I think, so I won’t expand on that one.

Then there’s the issue of debt. As most people are aware, the “package” that the Howard Government has offered to Indonesia involves $500 million in aid and $500 million in loans. I’ve heard mention of wiping existing debt would be a much better approach freeing up funds for reconstruction that would previously have gone into debt repayments. Foreign debt takes two forms: debt owed by the government of the country and debt owed by the private sector (corporate debt).

According to AFP Indonesia already owes Australia $1bn. It is unclear how much of this is government debt.

Efforts to wipe government debt are admirable, IMO, and depending on the amount of debt currently owed by the government has the potential to more effectively improve the government’s ability to rebuild than providing further debt that weighs down the government in the future.

Secondly, most of the criticism I’ve seen about the package is on the loan amount, further burdening the Indonesian government with debt. A wiping of existing debt would probably have freed up more long-term funds and is arguably a better option. However, scrutiny should also be extended to the aid package.

In many circumstances aid packages are not directly distributed to the government or people in question, but instead are used to fund Australian organisations to provide services to the recipient country. Although sometimes this is a necessary precaution to ensure that the money is spent in accordance with the aid package’s goals (especially in countries where expertise is lacking, or corruption is rife), it also has some negative effects.

Some examples: the recipient country may have little say in how aid money is spent, resulting in misdirected funds and activity – in a worst case the money could be spent with the benefit of the donor country in mind, with little effect on the intended recipieints. If the money is paid to donor country organisations, the folowing effects may occur: cost may be higher due to higher labour costs; skills and knowledge are not passed onto people in the donor country; employment opportunities in the donor country are not created.

In Australia, multi-million dollar packages go to organisations such as GRM International which is part of the Packer group of companies. How many Australian’s are aware of that? And how many would be comfortable with the knowledge that a corporation owned by one of Australia’s richest individuals was receiving significant aid contracts? Yet the connection is rarely reported.

This is why organisations such as AidWatch are so important. We should be watching closely where our tax dollars (after all, that is where the funds are coming from) are going. There was much made of the connection between the handing out of reconstruction contracts to US companies in Iraq. We should also be watching closer to home.

All in all I think that a lot of good can come from the generousity of the government, obviously spurred on by the outpouring of support by the public (witness recent criticism of the government’s aid record). The package has received zero criticism from Labor (the Dems have noted some concerns).

The slated funds can have a massive impact in the affected regions. However, we shouldn’t simply let things slide because of the gravity of the moment – we must continue to be diligent to ensure that the money is spent wisely and in a way that has a lasting benefit for the intended recipients, not the corporation heads of Australian companies.