1301.0 - Year Book Australia, 2008  
ARCHIVED ISSUE Released at 11:30 AM (CANBERRA TIME) 07/02/2008   
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Contents >> International Relations >> Australia's overseas aid program


Australia's overseas aid program assists developing countries to reduce poverty and achieve sustainable development, in line with Australia's national interest. The aid program's principal focus is on the Asia-Pacific region. Australia has a strong aid program with an international reputation for flexibility, responsiveness and effectiveness.

The Australian Agency for International Development (AusAID) manages Australia's overseas aid program on behalf of the Government. AusAID is an administratively autonomous agency within the Foreign Affairs and Trade portfolio.

The Australian Government's 2006 White Paper Australian Aid: Promoting Growth and Stability established a strategic framework to guide Australia's aid program, organising it around the themes of:

  • accelerating economic growth
  • fostering functioning and effective states
  • investing in people, and
  • promoting regional stability and cooperation.

Prime Minister Howard announced in 2005 that Australia's aid would double from 2004 levels to about $4b by 2010, subject to assurances of its effectiveness. To this end, the White Paper framework also provides strategies to improve the aid program's effectiveness by:
  • strengthening the performance orientation of the aid program
  • combating corruption
  • enhancing Australia's engagement with the Asia-Pacific region, and
  • working in partnership with regional governments and other donors.

In 2007-08, the Australian Government will provide $3,155.3m in official development assistance (ODA). The ratio of Australia's ODA to gross national income for 2006 is estimated at 0.30%, equal to the preliminary international donor weighted average.

The approaches Australian aid will take - including details of the $2.5b package of new aid initiatives through the 2007-08 Budget designed to take forward the implementation of the White Paper - are described below. Details of ODA levels and the focus of assistance for individual partner countries/regions in 2007-08 are provided in Country and regional programs.
Accelerating economic growth

Generating broadly based and sustainable economic growth is the single most important challenge for Australia's aid over the next ten years. The evidence shows clearly that regions which have seen the fastest poverty reduction are those which have grown most quickly.

In 2007-08, a range of new initiatives will support accelerated economic growth, through investments in infrastructure, environment and climate challenges, and rural and enterprise development.


A new Infrastructure for Growth initiative will invest $505.8m over four years, with $85.1m in 2007-08, to help partner countries address critical infrastructure constraints to economic growth through programs that strengthen market access, promote regional trade and integration, and increase productivity.

The initiative will support partner countries to build and maintain better key economic infrastructure, and remove impediments to private investment in infrastructure. Improved infrastructure networks with increased coverage will facilitate market access, private sector growth and trade. Investments will be targeted to integrate lagging areas into regional growth centres, linking producers to markets to lift productivity, as well as increasing access to services.

This initiative will build on current Australian assistance in the infrastructure sector and will have a particular focus on the Mekong region, Indonesia, the Philippines, PNG, the Pacific and East Timor.

Environment and climate change

Economic and population growth in the Asia-Pacific region pose major challenges to the environment. Effectively addressing environmental challenges is crucial to sustaining growth and reducing poverty.

The 2007-08 Aid Budget includes $196.9m in major new investments to address the pressing environment challenges of deforestation and forest degradation, climate change, water and environmental governance, through two new initiatives - the Global Initiative on Forests and Climate, and Climate Change Partnerships.

The Australian Government has committed $200m to the Global Initiative on Forests and Climate that will combat climate change and protect forests. As part of this initiative, Australia will deliver through AusAID $164.4m over five years (with $27.3m in 2007-08) in cost-effective abatement of global greenhouse gas emissions by improving the management of tropical forests in developing countries and supporting new forest planting.

Through AusAID, Australia will also invest $32.5m in 2007-08 for joint initiatives with the World Bank, the Asian Development Bank and other international organisations to support climate adaptation and mitigation initiatives, in particular in improved water resource management and energy management. The central elements of the initiative are new adaptation work in Asia targeting freshwater catchment areas of regional significance, and new mitigation work in Asia promoting better management of energy.Rural and enterprise development

Despite growing urbanisation, poverty in the Asia-Pacific region is still overwhelmingly a rural phenomenon. Integration of the rural poor into the economy by increasing rural productivity, employment and income growth is essential to reduce poverty.

The White Paper strongly emphasised the importance of the private sector as a driver of rural growth and it foreshadowed the development of a pilot program in support of private sector-led rural enterprise development. The Enterprise Challenge Fund ($20.5m) was launched in September 2007, initially in PNG, Fiji, eastern Indonesia and the southern Philippines. It will provide grants through open competition to business projects that can demonstrate results that benefit the poor and will become commercially viable within three years.

Fostering functioning and effective states

The effective functioning of a state's institutions is central to development. Governments provide the enabling environment for private sector development and hence growth and employment generation. The White Paper's strategic framework outlines approaches to fostering functioning and effective states in the region through initiatives to improve leadership and governance, and establish incentives for better government performance.

Better governance and leadership

The ability of citizens to hold government accountable and the way in which leadership is exercised are key issues for governance. Key aspects of Australia's response to this challenge will be addressed through a new initiative, Better Governance and Leadership.

A Better Governance and Leadership initiative will invest $41.0m over two years, with $16.6m in 2007-08, to focus on the region's next generation of leaders and build community demand for improved government performance. This initial two-year program will form the basis of a long-term approach to promoting better governance and leadership. A Pacific Leadership Program will work with a wide variety of current and emerging leaders in the region to develop their leadership potential and engage them in improving standards of leadership and governance. New investments in civic education will help communities to access information on the role of government in providing services. New investments in government accountability will strengthen community access to information on government performance, working with leading mainstream community organisations.Performance incentives

The growth prospects of many of Australia's development partners depend on them improving institutions and implementing better policies. However, the pace of reform in these areas is often slow or stalled. This can constrain the effectiveness of Australian assistance.

Australia is expanding the use of incentives in aid relationships to help partner governments lift their performance and progress key reforms. Australia will invest $115.6m over two years, with $41.3m in 2007-08, in a Performance Incentives initiative that will support the implementation of essential economic and governance reforms in selected countries.

To encourage faster, better and more sustainable reforms, Australia will provide additional resources to partner governments when they achieve pre-agreed milestones. Milestones will be agreed for priority reforms in areas such as education management, improved budget management, utility regulation, private sector development and sub-national government administration. Additional Australian support that partner countries achieve by meeting agreed milestones will be directed towards priority areas such as roads, health and education.

Performance arrangements are expected to be developed with the Philippines, Indonesia and Vanuatu. Existing arrangements with PNG and Vietnam are also expected to expand under this initiative.

Emergency and humanitarian response

An Enhanced Australian Emergency and Humanitarian Response Capacity initiative will invest $93.2m over four years, with $21.3m in 2007-08, to increase the capacity of Australia and key partners to manage and respond to humanitarian emergencies and natural disasters in the Asia-Pacific region. Three key programs will develop:
  • An enhanced Australian response, supporting early and effective Australian responses to emergencies in the Asia-Pacific region that are better equipped, better coordinated across government, with improved access to relief stores and skilled response personnel.
  • An enhanced partner response, strengthening the systems and capacity of key regional partners to plan for and manage crises. This will help emergency responses to be more effective and make better use of Australian assistance during crises.
  • Better analysis and risk reduction, building Australia's capacity to assess risk and prepare for high risk scenarios in recognition that prevention is likely to be less costly in human and financial terms than response.

Investing in people

Health and education services allow people to participate in the economy and find employment and income-generating opportunities. In 2007-08, Australia's approach to investing in people involves significantly increased investments in health and education.


The Asia-Pacific region faces many health challenges and is characterised by low investment in health and under-performing health care systems. Every year nearly 11 million children die globally, mostly from preventable causes. Women in developing countries face high risks. Of the nearly half a million deaths globally each year resulting from pregnancy and childbirth, 99% occur in developing countries.

Flawed systems, inadequate basic management and low per capita spending result in inadequate health services. Addressing the fundamental causes of failing health systems is critical to achieving and sustaining health gains, including against specific diseases.

The Australian aid program will significantly increase its support to help improve the health and wellbeing of people in the Asia-Pacific region, particularly the most vulnerable. New funding of $530.8m over four years through a Delivering Better Health initiative will strengthen the delivery of basic health services and address the key causes of premature death, contributing to global health goals of reducing by three-quarters the maternal mortality ratio, and by two-thirds the mortality rate among children under five, while beginning to reverse the incidence of malaria and other major diseases. These investments will be in line with the policy for Australian development assistance in health, Helping Health Systems Deliver, launched in August 2006 by the Minister for Foreign Affairs. The policy focusses on:
  • strengthening health systems, through improving health policy, accelerating reform, and working towards sustainable financing
  • addressing priority health needs of women and children, including reproductive health, nutrition, and preventative and care measures for childhood diseases
  • tackling diseases in the Pacific, helping partner governments better manage the burden of non-communicable diseases such as diabetes through detection and prevention, and supporting malaria control measures.

This will be supported by further funding of $54.4m in 2007-08 for Global Health Partnerships, enabling Australia to engage the expertise and scale of effective international partners including the Global Fund to Fight AIDS, Tuberculosis and Malaria, and UNICEF to address priority health concerns, particularly maternal and child health.HIV/AIDS

The HIV and AIDS epidemics present serious threats to development with profound humanitarian, security, social and economic impacts. Nearly 40 million people are living with HIV around the world and about eight million of these are in the Asia-Pacific region. Despite unprecedented funding from the global community, the situation continues to worsen in most countries and women and girls are increasingly affected.

The Australian Government has already committed $1b to 2010 to tackle HIV/AIDS in the Asia-Pacific region. The commitment is underpinned by Australia's International HIV/AIDS Strategy and supports large bilateral programs in PNG and Indonesia, regional approaches in the Pacific and south-east Asia, as well as global initiatives such as the Global Fund to Fight AIDS, Tuberculosis and Malaria. 2007-08 will see new and expanded approaches in line with the White Paper including increased funding for the Global Fund to Fight AIDS, Tuberculosis and Malaria of up to $45m in 2007-08.


Education has a central role in reducing poverty, providing the foundations for economic growth, and yielding additional benefits including in health and gender equity. Worldwide, 77 million children remain out of school, of whom a third live in the Asia-Pacific region. Weaknesses in education are frequently driven by a shortage of resources, poor policy and weak management. Many developing countries' budget allocations for education often cover little more than teacher salaries, with school infrastructure and teaching materials left under-resourced.

By 2010, Australia aims to help increase by 10 million the number of children attending school, and to assist improving the quality of education for an additional 50 million children. A new Delivering Better Education initiative will direct an additional $540.3m over the next four years to improving education in the region. In line with the education policy, Better Education, the initiative will focus on:
  • helping education systems deliver by improving their governance and strengthening service delivery
  • targeting specific education needs, including improving the relevance of vocational and technical education, expanding support for Islamic education to help raise the employment prospects of Islamic school graduates, and helping improve teaching of English in schools and through broadcast initiatives.

In addition to the Delivering Better Education initiative, the Government's Australian Scholarships initiative is providing $1.4b over five years from 2006 to enable future leaders from developing countries across the region to undertake postgraduate study in Australia. Scholarships foster enduring people-to-people links and have benefits across many sectors, well beyond the education sector.
Promoting regional stability and cooperation

Stability is a critical pre-determinant for growth and poverty reduction. New challenges to stability are emerging, most notably transboundary threats such as avian influenza, competition for resources, and natural disasters. Transboundary threats can only be managed effectively through regional networks and cooperation. At the same time, opportunities exist to enhance growth and streamline the costs of government through greater regional cooperation and integration.

Following hosting APEC in 2007, Australia is continuing support for APEC's role in advancing regional economic integration, promoting economic policy dialogue and facilitating human security cooperation. To advance these objectives, the aid program is supporting capacity building for developing member economies, and pandemics and emergency preparedness, structural reform and anti-corruption initiatives. Implementation of a $10.5m package of support for East Asia Summit economic and trade priorities is underway. The aid program will also continue to assist developing countries to participate in regional and multilateral trading systems. Australia will continue practical support for Pacific Plan implementation, as well as support for key regional institutions including the PIF and the Secretariat of the Pacific Community.

Strengthening aid effectiveness

Increased aid effectiveness is being pursued through four interlinked strategies: strengthening the performance orientation of the aid program, combating corruption, enhancing Australian engagement with the region, and working with partners.

Strengthening the performance orientation of the aid program

The Australian Government established the Office of Development Effectiveness in March 2006 to monitor the quality and evaluate the impact of the Australian aid program. It is guided by a Development Effectiveness Steering Committee, chaired by AusAID's Director General and also comprising deputy secretaries from the departments of Prime Minister and Cabinet, Foreign Affairs and Trade, Treasury, and Finance and Administration. An Annual Review of Development Effectiveness (ARDE) is the central element of an enhanced performance assessment approach. Information from a new performance framework and the evaluation program will feed into the ARDE, the first of which is scheduled for completion by late 2007. This will ultimately cover the experiences of all Australian agencies delivering ODA. The ARDE will be integrated into the Government's budget cycle and will provide a practical link between aid allocations and aid effectiveness.

AusAID has also established a three-year program to revise all country and regional strategies. Country strategies provide the overall policy and implementation framework for Australia's aid program for each partner country. They translate the White Paper's overall guiding themes and strategies into programs tailored to individual country circumstances and priorities. Country strategies are developed and agreed jointly with partner governments.Combating corruption

Corruption damages development prospects in many countries, undermining the efficient allocation of resources and impacting on economic growth, income equality and poverty reduction.

An Anti-Corruption for Development initiative will invest $16.7m in 2007-08 to support high priority work to tackle corruption in the Asia-Pacific region. It will do this through better coordinated Australian anti-corruption efforts, and increasing targeted support in line with the three mutually reinforcing elements identified in the Tackling corruption for growth and development policy:
  • building constituencies for anti-corruption reform, including assisting institutions, groups and individuals that support good leadership, and sharing information about the costs of corruption
  • reducing opportunities for corruption by supporting changes that bolster transparency and accountability, including improving public financial management and procurement systems. This will help make corrupt behaviour more difficult as well as easier to identify and stop
  • changing incentives for corrupt behaviour by supporting timely investigation and prosecution of corrupt behaviour, while also strengthening positive incentives for transparent and accountable conduct.

New resources through this initiative will support specific anti-corruption work in 2007-08 primarily in Indonesia, the Philippines, East Timor, PNG, Vanuatu and the Solomon Islands. Support will also be provided to regional and global anti-corruption initiatives.

Enhancing Australia's engagement with the Asia-Pacific region

Non-government organisations (NGOs), volunteer and community programs are valuable components of Australian aid. NGOs provide specialist skills, respected networks and strong links to communities. The aid program will continue to support the work of the NGO community, supporting activities that are aligned with the focus and priorities of the White Paper and Australia's various country strategies. Overall aid program funding through NGOs and volunteers is expected to rise by 15% in real terms over the 2006-07 expected outcome to an estimated $176m in 2007-08.

People-to-people links are further supported through an expanded Australian Volunteer Program that is aligned with aid program priorities and linked with country programs. In 2007-08, the Australian Youth Ambassadors for Development program will continue to place young Australian volunteers aged 18-30 years on short-term assignments in developing countries throughout Asia and the Pacific.Working with partners

Australia supports the principles of the 2005 Paris Declaration on Aid Effectiveness. These reaffirm partner-country ownership over the development process and promote harmonisation and coherence among donors. Internationally and domestically, Australia is pursuing stronger partnerships with developing country governments, bilateral donors, and multilateral and international organisations. Australia will strengthen existing partnerships with other development cooperation agencies, including the UK's development cooperation agency (DFID), UNICEF and the German development agency (GTZ) to work together on priority concerns including maternal and child health in eastern Indonesia.

Effective partnerships with the multilateral development banks will enable Australia to leverage the banks' considerable technical and financial resources to focus on issues of core interest to Australia. Through partnerships with effective multilateral organisations, Australia is able to extend the reach of its aid program and participate in projects on a scale and scope beyond that achievable bilaterally. Australia is acting to ensure resources continue to be available for a strong concessional lending program through the International Development Association (the concessional lending arm of the World Bank Group).

Overarching principles

Along with working in partnership with regional governments, the White Paper identified promoting gender equality and untying Australian aid as overarching principles that reinforce the strategic framework within which Australia's aid is delivered.

Gender equality is integral to achieving growth, governance and stability. As well as integrating gender equality across the aid program, specific initiatives to promote equality and empower women will also be scaled up from 2007-08. A new gender policy, Gender equality in Australia's aid program - why and how, launched in March 2007 outlines how Australia will support partner countries to achieve greater gender equality over the next ten years. Programs in 2007-08 will reflect the implementation of this policy. The key priority is to integrate gender equality into country and regional strategies. The Better Governance and Leadership initiative outlined above has a particular focus on the role of women in governance. The Delivering Better Health initiative outlined above has a considerable focus on maternal and child health. Through the new Delivering Better Education initiative outlined above, Australia will continue in 2007-08 to assist education systems that reduce gender disparities in primary and secondary education, support programs promoting equal access to vocational and technical education, and provide scholarships so that women can increase their opportunities to work and earn an income.

The Australian aid program was officially untied in April 2006 to coincide with the launch of the White Paper. Untying aid is the process of opening up bidding for implementation of development activities to firms from any country, beyond just Australia and New Zealand. The impact of untying continues to gather momentum with an increasing number of international firms competing for AusAID contracts either in their own right or in conjunction with Australian development contractors.
Country and regional programs

Details of assistance for individual major partner countries/regions in 2007-08 are summarised in the following, along with levels of total Australian ODA from all agencies and programs to each country/region.

Indonesia and East Asia ($970.4m)
  • Indonesia ($458.8m) - priorities include increasing and sustaining economic management and growth including addressing environmental challenges, supporting the transition to democracy, enhancing human security and stability, and increasing the accessibility and quality of basic social services
  • Philippines ($100.6m) - under a new country strategy, support will focus on three pillars: economic growth; basic education, with significantly increased support; and national stability and human security
  • Vietnam ($90.8m) - assistance will focus on strengthening the governance of the institutions required for a competitive market economy, and improving livelihoods of the rural poor
  • Cambodia ($54.0m) - assistance will focus on strengthening the rule of law, increasing productivity and incomes of the rural poor, and improving health service delivery
  • East Timor ($72.8m) - building a functional and effective state, strengthening economic development and management, and improving delivery of services
  • China ($39.3m) - governance (policy reform), environment (initially water management), and health (communicable diseases)
  • Other East Asia (including Laos, Burma, Mongolia, Thailand and regional) ($154.1m) - supporting regional approaches, including Australia's agenda for APEC 2007, to address transboundary threats such as avian influenza, and strengthen economic integration in Asia. In Laos, improving education, economic integration, and reducing vulnerability of the poor. In Burma, meeting humanitarian needs; assistance in Mongolia will include targeted scholarships.

Papua New Guinea and Pacific ($872.5m)
  • Papua New Guinea ($355.9m) - improved governance and nation building, sustainable broad-based economic growth and increased productivity, improved service delivery and stability, and a strengthened, coordinated, and effective response to the HIV/AIDS crisis
  • Solomon Islands ($223.9m) - contributing to a safer and more secure Solomon Islands, repairing and reforming the machinery of government, encouraging sustainable broad-based growth, helping the Solomon Islands Government to better serve the Solomon Islands people, and building strong and peaceful communities
  • Vanuatu ($44.5m) - addressing governance constraints to growth, strengthening the delivery of primary health care, and supporting education
  • Fiji ($28.7m) - support for basic health and education, and community development
  • Tonga ($15.7m) - good governance and public sector reform, income generation, rural and outer island development
  • Samoa ($23.3m) - activities in support of a draft joint strategy with New Zealand, to improve opportunities for employment and investment, and to improve service delivery
  • Kiribati ($15.0m) - improving education, technical and vocational training, including a nurses' skills upgrading program, and supporting public sector management and performance
  • Other Pacific (including Tuvalu, Nauru, Micronesia, Cook Islands, Niue, Tokelau and regional) ($165.4m) - through regional programs supporting stronger broad-based growth; more effective, accountable and democratic government; improved law and justice and security; and enhanced service delivery. Through other bilateral programs supporting budget reforms, targeted scholarships and selected trust funds.
South Asia, Africa and Other ($382.0m)
  • Bangladesh ($47.6m) - improving livelihoods of the rural poor, increased support for education, and increased support for health services
  • Sri Lanka ($25.0m) - humanitarian and conflict resolution, along with education, health and natural resource management
  • Pakistan ($27.1m) - increased support for basic health care and education, building human capital through support for tertiary scholarships, and technical and vocational education, and continuing reconstruction following the October 2005 earthquake
  • Other South Asia (including India, Nepal, Maldives, Bhutan) ($49.1m) - focusing on HIV, education, health and water and sanitation. Regional program partnerships including with the Asian Development Bank, World Bank, Joint UN Programme on HIV/AIDS, and UNICEF
  • Africa ($94.4m) - assistance through a regional development program supporting improved governance, health and food security in selected partner countries through non-government and multilateral organisations. This includes increased assistance through the Australian Fund for Zimbabwe to respond to humanitarian needs and to support the work of effective community-based organisations
  • Middle East and Central Asia ($138.8m) - in Iraq, continuing capacity building in governance and the delivery of basic services, particularly in health and agriculture. Also improving basic services for Palestinians and, in Afghanistan, providing support to complement the Oruzgan provincial reconstruction team.

Global programs

Humanitarian, emergency and refugee programs

The objectives of the Australian humanitarian program are to save lives, alleviate suffering, and maintain human dignity during and in the aftermath of natural disasters and other crises. The program also aims to prevent and strengthen preparedness for the occurrence of such situations. Humanitarian, Emergency and Refugee Programs in 2007-08 amount to $212.8m. This includes $12.0m to support the International Committee of the Red Cross in playing its key role responding to conflict and meeting the needs of conflict and crisis-affected populations.

Multilateral engagement

Australia will continue to work closely with international financial institutions to increase their focus on the Asia-Pacific region, as well as supporting global development efforts. Estimated 2007-08 funding for multilateral institutions is $309.1m in cash disbursements. Estimated 2007-08 funding for UN, Commonwealth and other international organisations amounts to $212.5m, continuing support to core UN agencies and major international organisations with proven track records to deliver priority development outcomes in the Asia-Pacific region.

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