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Jul 12, 2010

Who profits from our foreign aid?: the 'technical assistance' making business rich

Australia's "boomerang aid" has been making corporate Australia very rich for years. In a new Crikey series, the Australian Centre for Independent Journalism will reveal the huge gap in accountability for taxpayers' foreign aid funding

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“Boomerang aid” is the name Michael Somare claims he invented to describe the propensity of Australian aid to PNG to end up back in Australia, courtesy of highly-paid Australian consultants and firms specialising in “technical assistance” in the delivery of aid projects. For a small number of firms, it has provided a taxpayer-funded path to massive success.

This week, the Australian Centre for Independent Journalism and Crikey will reveal the background to one of Australia’s most successful “technical assistance” companies and the gap between the rhetoric of accountability for taxpayers’ money and its reality in our aid spending.

“Technical assistance” is a billion-dollar business funded by Australian taxpayers. This year, we will spend $4.3b on foreign aid. Under the Government’s commitment to increase foreign aid to 0.5% of Gross National Income, that is scheduled to rise to $8-9b in five years’ time.

Technical assistance over the last decade has accounted for 40-50% of the entire aid budget.

A small number of Australian firms have done very well from this:

  • Coffey International, the Chatswood, Sydney-based “global professional services consultancy”, garnered over $300 million in contracts in calendar year 2009 alone, Ausaid records show;
  • Cardno ACIL secured at least $270 million, as did GRM, “a leading international development management company”;
  • Queensland companies GHD and JTA International, both reaped over $100 million.

Boomerang aid has long been a basis for criticism of AusAID and our entire foreign aid program, particularly in relation to PNG, our largest aid recipient. In 2003, Michael Somare suggested over 60% of Australian aid simply went to Australians or Australian companies.

That year, the Senate Foreign Affairs, Defence and Trade References Committee considered the issue as part of its report on Australia’s relationship with PNG and the Pacific, saying that the “most common concern raised with the Committee in relation to the delivery of aid was for the tendency for AusAID to use consultants, typically from Australia which lead to the perception of ‘boomerang aid’.” A number of submissions to the committee raised the issue, including those from the Business Council of PNG and from Oxfam Community Aid Abroad.

In response, AusAID rejected any criticism, declaring the “Australian aid program ensures that PNG citizens benefit from commercial opportunities, skills formation and capacity building.”

But the ground was moving beneath AusAID. In December 2004, the Howard Government removed the prohibition on PNG firms competing for AusAID tenders, although few PNG firms would have had the detailed knowledge and connections necessary to navigate Canberra’s complex tender processes. And in the Howard Government’s 2006 aid White Paper, intended to accompany its significant increase in foreign aid, it admitted problems around technical assistance.

Donor experience shows, however, that heavy reliance on foreign technical assistance to pursue governance reforms and build capacity has had some success, but not to the extent desired. Some of this has to do with the short-term nature and external sourcing of technical assistance.

By this time nearly half our entire aid budget was being spent on technical assistance.

Abandoning its position that it was giving recipient countries “commercial opportunities, skills formation and capacity building,” AusAID responded to the White Paper by trying to reduce its reliance on technical assistance.

The ANAO had investigated AusAID’s reliance on contractors for aid delivery in 2001-02, and criticized a number of aspects of the agency’s approach to contract management and ensuring effective project delivery. In November last year, the auditors revisited the issue and examined whether AusAID had improved since the 2006 change of approach. Its conclusions were damning.

Based on available data concerning use of technical assistance, aid program reviews, and the perceptions of AusAID staff in program delivery areas, the ANAO found that AusAID has not yet achieved the objective of using technical assistance more strategically and effectively in the region.

It wasn’t only the ANAO. In March last year, Kevin Rudd and Michael Somare agreed to review Australia’s aid to PNG. The review was released shortly after this year’s Budget. It too was critical of the continuing reliance on technical assistance:

Depending on how it is measured, technical assistance makes up about half of the aid program, perhaps more. The aid program employs about 360 technical assistance personnel. There have been technical assistance success stories, and, despite dissatisfaction with the reliance of the aid program on technical assistance, there is a strong demand for advisers from different parts of the Government of PNG. At the same time, several sources of evidence, from the decline in national governance indicators to a wealth of evaluation materials, and from international analysis as well, suggest that the “capacity building through advisers” model is not working.

In the wake of that review, Steve Lewis and Nic Christensen covered the issue well in the News Ltd tabloids and tried to initiate a debate about a new approach to foreign aid that relied less on generous contracts for Australian firms and influential “consultants”.

The Government launched a review of technical assistance as part of this year’s Budget. AusAID itself seemed to finally get the picture. As the ABC reported, AusAID Director-General Peter Baxter (the veteran diplomat appointed to head the agency last year) told a recent Senate Estimates hearings that the level of technical assistance funding had fallen below 40% under this Government.

But even if technical assistance does form a smaller part of the future Australian aid budget than during the Howard years, the scheduled increase of our foreign aid budget between now and 2015 will ensure that a small but highly lucrative mini-industry of consultants and advisers will continue to channel aid away from recipient countries and back to Australia.

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6 comments

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6 thoughts on “Who profits from our foreign aid?: the ‘technical assistance’ making business rich

  1. Mark Duffett

    Much of this boils down to the question of what exactly the goals of Australian foreign aid are. If the primary aim is ‘capacity building’, then the critique is probably justified. But if the main goals are the actual building of physical infrastructure like bridges, roads, sewerage systems, power lines etc, then highly specialised engineering expertise like Coffey and GHD provide is always going to give the biggest bang for the buck, at least in the short term (which I’m betting is how the success of aid programs is currently measured). Recipient country equivalents of such consultancies don’t really exist, except maybe as branch offices.

  2. jungarrayi

    Eerie is the feeling I got reading this article.
    Take out all references to PNG and replace with “Remote Aboriginal Australia”
    Take out all references to Foreign Aid and replace with “Closing the Gap”,
    and what have you got? A story about the Northern Territory Intervention!
    As the French say “c’est pareil”.
    Or in Warlpiri “yangka-piya”.

  3. Mr Squid

    it’s not only the boomerang aid aspect of it. Another problematic side of all aid to PNG is the distortions it causes in public policy and implementation. PNG bureaucrats probably spend as much as 50% of their time trying to manage aid rather than advising their own government on policy and then implementing that policy.

    many, many aid projects have no relationship to the actual needs or capacity of the nation, let along fitting in with the PNG Government’s own development program.

    my favorite is an Ausaid project to strengthen PNG’s law and order capacity. several years ago these clowns built a police station and watch house at Daru. They built it right on top of one of the town’s rotten old water mains. the water main burst, and as far as I know the police station is still afloat. they also bought a couple of new, very expensive high-speed police launches for patrolling Torres Strait. the police had no fuel for them. there was no way to get the boats serviced when the broke down. no one knew how to operate them properly. So far as i know they are still sitting there, slowly rotting away.

    then there is the ignorance of the people who do go to png on aid projects. few of them have the first clue about the country, its people, its culture, its economy, its systems and processes or anything else that might be relevant to their work. most come for a year or three with some dreamy do-good views and then depart with the same dreamy do-good views, having achieved exactly nothing.

    and finally there is the profound ignorance and incapacity of our political leaders and senior public servants.

    A few years ago a group of leading australian-educated politicians including Mekere Morauta, Bart Philemon, Moi Avei and Rabbie Namaliu (every one of them well disposed to Australia)standing round on the floor of parliament during a division, discussing the then Howard Government’s proposed economic and institutional support package (Australia’s most magnificent recent failure of public policy). Someone in parliamentary broadcasting left a microphone live, which allowed those present to hear Bart Philemon’s immortal words of frustration: “what are we going to do with these bastards?”

    Senior Australian public servants are by and large no better: there has been only one competent High Commissioner in recent times. Where foreign affairs, defence, trade and other relevant agencies get their senior staff from is beyond my understanding.

    there certainly is no indication that anything is about t change.

  4. EngineeringReality

    There is no worse a parasite burrowing its way into the hide of government than the “consulting” or professional services” industries.

    It is staggering how much public money government departments and organisations throw into the gaping maw of the horde of professional consultant.

    The theory the expenditure is based on, is of course, sound. Your average public servant professes to lack skills or ability in a certain area – and so they must bring in those skills. The problem is they pay ridiculous amounts for consultants providing knowledge and expertise that, in a lot of cases, isn’t much more than a few presentations off the internet and the dropping of a few industry buzzwords.

    One or two people turn up and the department or organisation shells out the equivalent of 5-6 full time employees for this temporary consultant “dog and pony show”. Wasteful, yes – productive and useful – perhaps. But you can accept it as a sign of the times. If it helps you can tell yourself that its actually “Best Practice” and move on.

    But to waste such a large proportion of the aid budget in this way is wrong, morally bankrupt and unacceptable!

    Foreign aid is about helping those suffering crippling poverty, disease and violence. Yes there has to be a balance between providing food and material and the more strategic education, teaching & support for improved social & government systems – but to waste almost half of our aid budget to a few highly paid talking heads to head over to our less well off regional neighbours, stay at a 5 star hotel and make the occasional foray into the jungle to lecture the “natives” about “strengthening accountability” and “improving governance”.

  5. mike bazan

    I have no problems with the concept of foreign aid ending up in the pockets of Australian business provided that the money was received in payment for services that were provided efficiently, competently, and successfully. If Ausaid & the recipient country decide that money would be well spent on building a power plant, or a new bridge, or a school then what is the harm in Australian companies providing the expertise that the recipient country lacks? Hopefully part of the brief would include training local expertise so that foreign aid becomes less of a requirement for future projects. Throwing money at a country will not provide a good long term benefit however investing in infrastructure and training will.

  6. Glen Fergus

    It’s easy to kick, but what do you suggest? For all its faults the aid industry does actually deliver meaningful results. Often. Two disparate examples:

    1. A Highlands Highway that you can actually drive on (often at peril – but not from the road engineering). That was all aid-delivered; all consultant-designed; and managed.
    2. The young Aussie copper and his Fijian off-sider that I met living in a rough house way out in the back-blocks of Guadalcanal. They were actually rounding up the troublemakers; making a real difference for real people.

    There are hundreds more.

    G.

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