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
“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”;
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.