Two birds

On 28 May, the Sydney Morning Herald’s Debra Jopson reported that Australia, the land of the fair go, has been inflating its foreign aid figures. A report by the Aid/Watch organisation shows that about a third of all Australian development aid is what Ian Wishart, the national executive director of Plan Australia, calls ‘phantom aid’.

The most egregious example is the A$644 million development assistance to Iraq for 2006 and 2007.

The $644 million aid to Iraq never left Australia and is really an export debt for wheat bought from Australian farmers more than 17 years ago. A Pitt Street government insurance agency which indemnifies exporters in risky markets paid out claims to grain growers 15 years ago. The Government paid the agency, the Export Finance and Insurance Corporation, and took on the debt, which it now classifies as aid.

"They always count the Iraq money when they show how their aid is increasing ... They are pulling the wool over Australians' eyes because the average Aussie wouldn't think that paying off a wheat debt, which in effect is just a book transfer ... [is] a good form of aid," Mr Wishart said.

In Aid/Watch report, released last month, Fighting Poverty or Fantasy Figures?: The Reality of Australian aid, Flint Duxfield and Kate Wheen, write,

Incredibly, 57% or $381 million of the debt is in fact the interest accrued on the principal sum. Since UN sanctions prevented Australia from pursuing repayment, the interest simply increased over the intervening period.

Another embarrassing element of Australian overseas development aid is that

“Assistance to refugees” in an Australian context includes funding the mandatory detention of asylum seekers in detention centres in Australia and offshore in Nauru and Christmas Island. The funds Australia spends to repatriate asylum seekers back to countries like Afghanistan and Iraq is also counted as ODA.

And if that wasn’t cynical enough,

Having spent $2.08 million in 2001 on Operation Gabardine, the so-called ‘children overboard’ affair, the government then claimed this as refugee funding under OECD criteria, and yet the asylum seekers involved were refused refugee status.

The Herald claims to have uncovered these additional scams

· A $27,758 payment AusAID made to the Australian law firm Sparke Helmore for legal assistance during the Cole inquiry into legal breaches of the UN oil-for-food program has been counted as foreign aid.

· Another $81,993 described as foreign aid to Afghanistan between 2002 and 2004 was an Immigration Department assistance package for temporary protection visa holders in Australia.

· Half a million dollars of last financial year's $23.4 million in aid for Nauru was to be spent on co-ordinating aid, while $1.3 million went on "logistics", providing housing, transport and other costs for Australian officials.

Duxfield and Wheen further point out that A$150 million takes the form of scholarships for study in Australia.

Certainly scholarships benefit the people who are fortunate to receive them. However… scholarships can contribute to the ‘brain drain’ phenomena, in effect decreasing capacity as promising students are lured away from their home country to pursue careers in developed countries…the money could be better spent on…primary education or building the capacity of tertiary institutions in-country…the opportunity cost of 375 Australian Development Scholarships in Papua New Guinea is to deprive another 2,135 students a year of the chance to study at university [in PNG].

Although the Australian government claims to focus on the poorest nations in the region,

AusAID revealed last year that of the 2,863 students studying on Australian Development Scholarships, 40 are from East Timor, 390 from PNG, and 35 Solomon Islands. Of the 179 Scholarships for Australian Leadership Awards offered commencing in 2007 only 14 are for PNG, 5 for the Solomon Islands and 2 for East Timor.

The Australian government’s commitment to the environment is not only evidenced in its principled stand not to sign onto the Kyoto protocols on the grounds that it would be ‘bad for the economy’.

AID/WATCH research has shown that during the decade to 2004 EFIC funded over $7.6bn worth of fossil fuel related investments, while only $67m in support was provided for renewable industries – a ratio of over 100 to 1.

Nearly 60% of the aid budget is administered through contracts with just ten private profitmaking companies that farm projects out to consultants.

A major influence on the contracting of Australian aid is the significan reliance on ‘technical assistance’ (TA) also known as Technical Co-operation (TC). Principally invoked as a mechanism for ‘capacity development’, many of the AusAID projects managed by Australian companies fall into this category, which also includes research, advisory or consultancy services funded through the aid program.

Expatriate consultants being payed upwards of $1,000 a day to work in environments where people barely have enough food to eat is one of the most criticised aspects of international development assistance. Not only do the high wages of foreign technical consultants frequently create resentment amongst local staff, they have also been shown to increases the cost of aid by at least 25%.

A lot of people experience a warm visceral glow at the mention of ‘foreign aid’ or ‘development assistance’. There are always calls for ‘more aid’, and usually at the same time, ‘cancel the debt’. Well, now the Howard government has learned how, AusAID claims strictly within the OECD guidelines, to kill two birds with one stone.