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Phil Goff Writes: How Aid Works

How Aid Works

By Phil Goff, Minister of Foreign Affairs and Trade

In recent years the tourist book image of the Pacific as a tranquil paradise has given way to the growing awareness of the problems of poverty, conflict and poor governance that afflicts parts of the region.

An Australian academic recently challenged whether aid to the Pacific has been effective, suggesting that stopping development assistance might be a better option. Such an extreme view ignores the devastating human impact that it would have on access to basic services such as health and education. It also ignores the destabilising effect on regional security that would result from stopping development assistance.

Aid today is not, as some critics seem to imagine, about handing out wads of cash. It is about investing in the region's development. It involves the provision of things like training, small business funding, advice on how to find export markets, or how to establish eco-tourism projects.

Much of New Zealand's funding goes towards helping poorer countries trade their way out of poverty. A recent Oxfam study on trade showed that if developing countries could increase their share of world exports by just five percent they would generate US$350 billion in additional income – seven times as much as they receive in aid. Sadly protectionism by wealthy countries too often negates the impact of the development assistance they give.

We are also committed to helping developing nations strengthen the foundations that underpin a free and just society. Nearly 40 percent of our aid in the Pacific goes towards building capacity for good governance – effective and honest police forces, functioning judiciaries, professional civil services.

Aid, of course, is only one factor that influences a country's development progress. Around 30 years on from their independence, the progress of Pacific states has been affected by limited resources, population pressure, natural disasters, lack of development of human resources, ethnic diversity and conflict, as well as in some cases mismanagement and corruption.

The small size of most Pacific states is their defining characteristic. Apart from PNG, the Pacific Islands are made up of 500 inhabited islands spread over 30 million square kilometres, with over 250 language groups. PNG alone is probably the most ethnically fragmented nation in the world, with over 800 languages – more than a quarter of the world's total number – in a country with only around five million people. That tests political and social unity.

Development assistance has helped to foster progress, however. NZAID funding has played a key role in peace-building and building structures of good governance in East Timor and Bougainville. We’re helping elsewhere in the Solomon Islands, Vanuatu and in Samoa, where our aid helped strengthen the Justice Department and create a Law Commission.

Samoa now leads reform in the Pacific after introducing wide-ranging tariff and taxation reforms as well as an overhaul of the public sector, contributing to impressive growth by anyone’s standards – an average of six percent per annum over the last several years.

Much of our aid doesn't go directly to governments but is channelled though projects that we manage, or it goes to non-government organisations, the private sector, small-scale local businesses, and provincial administrations to improve access to basic education and health services.

In Tonga, for example, over 70 percent of New Zealand's $5.6 million aid budget goes directly to community-based organisations, village people, students, training courses, and small businesses.

NZAID is the lead donor for two outer island groups, ‘Eua and the Niuas, where we fund school improvements, rural livelihoods, health, energy and tourism projects. Our focus is on the outer islands because that is where there are significant pockets of poverty.

Very little of the remaining 30 per cent goes to the government as actual cash. Most of it covers training or up-skilling courses, and the work of consultants.

For example we are helping Tonga delimit its sea boundaries, and thus meet international law of the sea obligations, by assisting with the analysis of a continental shelf survey.

Other assistance is going to the government's economic and public sector reform programme, but again through the funding of consultants.

NZAID, a semi-autonomous agency in the Ministry of Foreign Affairs and Trade, was created a year ago partly because this government saw a need to tighten the focus of our aid delivery, and to make sure that we could audit each aid dollar.

That’s why we have staff on the ground in Pacific Island countries and in Wellington, plus outside consultants to check up on our projects.

If we have concerns about the effectiveness of a project, we have the capacity to stop funding. We did just that in 2000 when a small group took the Fijian government hostage. We kept our non-government funding going, but we put a hold on government funding.

We did the same in PNG when we cancelled agricultural projects that were being undermined by incompetence and corrupt public servants.

There was a recent report which ‘ranked the rich’ countries on how they helped or hurt poor countries. New Zealand came fourth out of 21 – not because we have the biggest budget but because our aid plus our fair trade approach to the poorest countries, and our constructive attitude towards peacekeeping, immigration and investment all combine to rank us one of the most effective international performers when it comes to poverty elimination.

New Zealand’s aid on its own can’t eliminate poverty or keep a region like the Pacific conflict-free. No aid donor can. But we can and do support the Pacific as it strives to develop peacefully.

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