Stepping up as a development partner

Australia's wider region has made remarkable strides along the path to prosperity. In three decades, rates of extreme poverty in East Asia and the Pacific have fallen from 60 per cent to 4 per cent. This is a stunning achievement, supported in part by the development assistance of Australia and other regional providers.

Still, in a region as large and diverse as the Indo-Pacific, many citizens have not shared inclusively in these gains. State fragility continues to present challenges for countries in the region. Remaining pockets of precarity are still in themselves significant, particularly in Southeast Asia and the Pacific. And the economic crisis emanating from the pandemic is returning millions to the conditions of extreme poverty they had recently escaped. It follows that there remains significant need for development assistance regionally, notwithstanding the gains of many in an aggregate sense.

Recognising this, Australia has stepped somewhat up to the task. We have scaled up assistance towards regional recovery, and increased our contributions to the Pacific. We are and will foreseeably remain the Pacific's largest donor, in appreciation of our particular responsibilities in assisting our closest neighbours.

Nevertheless, an emphasis on these points can disguise the way Australia's aid program has been progressively hollowed out. Our support to the Pacific may have increased by some counts, but aid funding overall has been steadily cut since its peak in 2012-13. Indeed, when measured as a share of national income, our aid contributions are at their lowest point in history. And this at a time when the region faces its greatest economic stress in over a decade.

At first glance, this stands out as a failure of our moral obligations.

But it is also a failure of strategic vision. Providing development assistance is not simply an act of decent global citizenship; it is a long-term investment in our neighbours' stability, prosperity, and resilience. In that sense, effective aid is really a down-payment on the future security of the region. The corollary is that, in underfunding it, we miss out on the strategic dividends that flow from our neighbours' flourishment.

Restoring Australia's development program is therefore a strategic imperative. We must renew its centrality as a co-equal pillar of Australian foreign policy. And we must better integrate our development program with other levers of national influence.

To that end, Australia will:

Commit to seeing our Official Development Assistance (ODA) reach 0.5% of GNI by 2030. We will aim to legislate this target as an appropriate long-term baseline for Australia's aid generosity. We will also strive to achieve the 0.7% ODA/GNI target advocated by the UN and achieved between 2013-20 by the UK.

Rebalance the weighting of Australia's development partnerships. Our increased support to the Pacific has been welcome and necessary. In practice, however, it has come the expense of our support to Southeast Asia. Australia's development program can and must find room to equitably deliver on our obligations to partners in both regions. With our planned increases to aid funding, Australia will be able to re-energise its development partnerships in Southeast Asia while continuing to increase support to the Pacific in absolute terms.

Rebuild Australia's development capability at the personnel-level. It is estimated that 2000 years of development expertise may been lost by the DFAT-AusAID merger. If we are to increase our provision of aid, it follows that we must rebuild our capacity to design and deliver it. Australia will therefore look to significantly expand the number of development professionals embedded in Government, particularly at DFAT. We will also work with universities and overseas counterparts to train new and upskill existing development experts in Australia.

Energise and refocus Australia's aid program with a new, ten-year partnerships strategy. While Australia must increase aid towards urgent issue areas, such as climate resilience and gender equity, the mainstay of our development program should continue to consist in long-term bilateral partnerships. As our current Partnerships for Recovery program nears culmination, we must accelerate the design of a new strategy to guide the next decade of Australian development cooperation. The strategy should be shaped in consultation with other partners, and should ultimately be geared towards addressing the priorities they identify in effective, long-term ways.

Prioritise locally led development. Locally led development empowers in-country individuals, civil society, private entities, and governments to set their own agendas and solutions to the development problems in their communities. Entities such as USAID have recognised that local leadership and ownership are essential to gaining sustainable results through foreign aid and development programs. To ensure Australia contributes to the best development outcomes, DFAT will therefore support locally led initiatives and prioritise co-design in its wider development program.

Reduce Australia's reliance on contracted delivery. Aid contracting is a symptom of Australia's declining development capability. But it is also a cause. The outsourcing of aid delivery has made it less efficient and accountable, and less effective in achieving long-term outcomes. As we restore Australian capability at the organisational and personnel-level, it is critical that our government agencies re-assume primary responsibility for the delivery of aid, while still prioritising local partnerships in-country.

Re-establish and build up DFAT's Office for Development Effectiveness. The recent disbandment of DFAT's ODE leaves Australia without a dedicated and independent capability to evaluate the effectiveness of Australian aid programs. If left unaddressed, this will bear negatively on aid outcomes and, by extension, our reliability and attractiveness as a development partner. Australia will therefore re-establish the ODE in the first instance, and then gradually work to build up ODE's capability to the point of matching (at least) its original high-water mark.

Rejuvenate the Trilateral Infrastructure Partnership. Our partnership with Japan and the US has significant potential to yield multiplier effects in regional development outcomes. Australia, Japan, and the US should therefore re-invigorate efforts to deliver on the Partnership's original ambition. Two outstanding priorities ought to animate our renewed attention: realising the Blue Dot Network, which would catalyse greater private investment in regional infrastructure by way of a transparent project certification system; and fast-tracking the delivery of promised infrastructure projects in Papua New Guinea.

Enhance coordination with the Quad. Complementing our cooperation under the TIP, Australia will work with Quad partners to synergise development assistance across the areas of infrastructure, COVID recovery, and climate finance.

Unlock Australia's sovereign wealth fund as a development finance vehicle. Australia will issue a new ministerial directive that expands mandate of the Future Fund to invest in non-financial assets. This will allow the Fund to support regional development by taking on equity in overseas infrastructure projects, consistent with other mandated responsibilities (e.g., its benchmark return target).

Increase the capitalisation of existing, Australian-funded financing facilities. Aid in its traditional form as grant-based ODA is decreasingly effective in meeting the needs of middle-income and emerging economies. By contrast, concessional finance facilities, such as the Private Infrastructure Investment Group and the Emerging Markets Impact Investment Fund, have proven increasingly relevant. They support a diverse array of blended financing options that better suit our partners' contemporary demands, particularly with respect to infrastructure development. Australia will therefore increase the share of development assistance that we direct via these facilities.

Work towards an Australian Development Finance Institution. Australia will follow the lead of our partners in the UK, US, and Canada in establishing a sovereign DFI. While Australia's export credit agency was recently given many of the same nominal powers, it would be more effective to establish a separate agency with a focused development mandate and dedicated development expertise. This is, however, a longer term goal, as we must build up the enabling capabilities first.