Private Sector The Key To A New Aid Approach

A new report from the Australian Strategic Policy Institute says Australia’s aid approach to the Pacific Islands region should change, and that the focus should be on the private sector.

 

And it is a proposal that has been generally welcomed by at least one business organization, the Fiji-Australia Business Council.

 

In “Hercules or Sisyphus: Building capacity in the Asia-Pacific” Roland Rich writes that in relation to its aid to Melanesia and East Timor, “Australian aid faces dilemmas of African proportions.”

 

Rich uses the analogy of Hercules (who completed 12 labors to redeem himself) and Sisyphus (condemned to push a boulder uphill for all eternity) to describe the dilemma facing Australia as an aid donor. He asks will Australian successfully assist donor recipients, or be “destined to work tirelessly at this task for the foreseeable future without achieving the sought after result?”

 

He says this is particularly important given that Australia’s A$2 billion aid program is projected to double by 2010. While this figure includes “migration management”-that is, the operation of the detention center holding asylum seekers on Nauru and debt cancellation for Iraq, the proportion of Australian assistance to Pacific nations has increased.

 

Rich says Australian aid planners and delivers are deeply affected by a crisis of confidence-as are their counterparts in other parts of the world- and that Papua New Guinea, Fiji and Nauru have squandered US $75 billion since independence because of poor governance.

 

He quotes a recent Australian treasury paper that stated that the historical level of aid to Papua New Guinea is higher than aid to Africa, while average incomes in PNG and the Solomon Islands are only marginally above sub-Saharan levels.

 

Rich says the solution—in part—is to induce through the taxation system, the private sectors of donor countries to strengthen the private sectors of partner countries. He says this would provide a kind of assistance—and generate jobs and profits—that state-based programs have no chance of delivering.

 

“We need them (private companies) to identify like-minded companies in fragile states, to form personal relationships with their counterparts, to follow their commercial instincts unconstrained by bureaucratic cultures and thus to help build the capacities of private sectors of fragile states.

 

“The Australian government should amend the tax rules to encourage companies to become directly involved in building private sector capacities in developing countries by allowing them to deduct from their taxable income the costs incurred in providing such assistance.”

 

Rich suggests that the Australian tax system should allow inflated deductibility of 150 percent of the total costs involved in becoming directly involved in building private sector capacities in developing countries, comparing it to the Government’s system to encourage corporate research and development.

 

He acknowledges the risks: that the private sector won’t be interested, that the wrong sort of people will be attracted (i.e. con artists that prey on fragile states as an invitation to rip off local businesses) but says this could be mitigated through the design of the tax rules, “although ultimately self regulation through chambers of commerce and business councils is best.”

 

Fiji-Australia Business Council President Caz Tebbutt says “anything that would support economic development in Pacific Island countries would be welcomed.”

 

Tebbutt says the private sector does need to be the subject of focus for sustainability in the islands, and that “we can’t stick our heads in the sand; development needs to come from within.”

 

Tebbut has previously said that there is a misconception amongst some that all Pacific Island countries are aid driven. She says in Papua New Guinea and Fiji at least, they are private sector/trade driven, and so anything that would assist from that perspective should be encouraged.

 

 

Roland Rich makes several other suggestions to improve the effectiveness of Australia’s aid to the region.

 

One is a mandatory 4-6 week course for any Australian civil servants being sent overseas for “capacity building” responsibilities.

 

He also says the rhetoric about aid objectives—phrases such as ‘eliminating poverty’, ‘eradicating preventable diseases’ and ‘establishing democracy’ need to be scaled down.

Rich says they articulate goals that are unachievable through the aid process.

 

“By placing the responsibility for achieving such important results concerning income, health and education on the shoulders of the development assistance process, the heroic aid rhetoric subtly disempowers the local elites. It shifts responsibility for development from the locals to the foreigners. It infantilizes the locals who become dependent on aid budgets, aid advisors and the foreign know-how they bring with them,” Rich writes.

 

“When things go wrong, as they so often have, local leaders can very easily absolve themselves of the blame and place it on the donors who are caught by their own impossible rhetoric. The unrealistic rhetoric simply feeds criticism about neo-imperialism, recolonization and other conspiracy theories in developing countries and stokes skepticism among the taxpayers of donor countries.”