Working for a better world - the role of Australian foreign aid Case Study Click on the following links for further information about this case study: Teacher's Notes Student Activities Introduction Mass poverty continues to be one of the most important economic and social problems facing the world in the 21st century. About 1.3 billion people, nearly a quarter of the world's population, continue to live in extreme poverty trying to survive on less than a dollar a day. Over half of these poor are in the Asia-Pacific region. Even in countries that have been developing rapidly, many people are much worse off than people like us who live in the developed world. The challenge for most developing countries, is to provide their people with basics such as food, clean water and education for their children. These countries are in the process of developing their human and physical resources in order to improve the standard of living of their people. Meeting this challenge has proven to be no easy task. One way Australia can assist economic development in developing countries is to provide aid. Why Australia provides development aid The Australian Government's aid program aims 'to advance Australia's national interest by assisting developing countries to reduce poverty and achieve sustainable development'. The idea is to help people in low income/developing countries raise their standard of living and to use their resources more effectively to promote sustainable economic growth. While in Australia there is some relative poverty, Australians in general have access to health care, an education system, safe water and sanitation as well as unemployment and sickness benefits. The majority of people in developing countries do not have these advantages. In many of these countries, one baby in ten does not survive. Access to education is limited and there are fewer chances of finding paid employment. And people who have a job earn so much less than Australian workers. For example, the average income of people living in Indonesia is about 6% of that in Australia. People in China earn only 3% on average of what we do. Some of these differences are highlighted in Table 1. Table One: Some of the differences between Australia and developing countries   Australia Developing Countries Infant mortality 6 in 1000 52 in 1000 Life expectancy 78 years 63 years Illiteracy Less than 5% 33% One important motivation for overseas aid is based on humanitarian compassion. Australians believe in a fair go for all. Further, Australia's commitment to assisting with economic development overseas reflects a realisation that in an increasingly globalised world, it is in our self-interest to help. Not to do so would harm our economy. By promoting economic growth in developing countries, the aid program helps foster economic and political stability and expands trade and investment opportunities for Australia. Australia is situated in a developing part of the world. Our standard of living is much higher than the vast majority of our neighbours in Asia and the Pacific Islands. The prosperity of our region is clearly in Australia's national interest - we pride ourselves on being a good neighbour. How much aid In its 2000-01 budget, the Australian Government provided $1.6 billion for overseas aid. This is an increase of $100 million over the 1999-2000 budget figure of $1.5 million and represents a four per cent increase in real terms. Australia's official development assistance (ODA) to gross national product ratio in 2000-01 will be 0.25%. This places Australia above the latest (1998) average of donor countries of 0.24%. This is one percent of total Australian Government expenditure. In dollar terms, our aid program costs each Australian approximately the cost of a loaf of bread each week. The volume of aid spending has always and will always be a difficult issue. The amount of aid provided by Australia has consistently been more than the international donor average. Future levels of aid funding like all aspects of government expenditure, will be subject to budget considerations. Australia will continue to support the United Nations (UN) 0.7% ODA/GNP target and endeavour to maintain our aid at the highest level consistent with our own economic circumstances and capacity to assist. Who gets our aid Australia's aid program focuses on the Asia Pacific region, with Papua New Guinea, the Pacific and the poorest regions of East Asia being the areas of highest priority. Australia also contributes selectively to the development needs in South Asia, Africa and the Middle East. Table Two: Australian Aid Flows ($AUD million) Top 5 destinations in 2000-01 Country Funding Papua New Guinea 323.7 Indonesia 120.5 Vietnam 73.2 Philippines 63.1 China 57.5 Source: Aid budget Summary 2000-01 What our overseas aid is used for Australian overseas aid is distributed in a number of forms. However the two main forms are bilateral aid and multilateral aid. Bilateral aid is given in a partnership between governments of two countries, in this case, Australia and a developing country. In designing an aid program for an individual country, Australia works closely with the country's government and its communities. The idea is to make sure that each program reflects the country's development priorities, our aid policies and our capacity to assist. These programs can incorporate a wide range of activities from small community-based projects to large regional development schemes. Bilateral aid is distributed as: Aid for specific projects such as improving water supplies, enabling reforestation or eradicating disease Emergency assistance such as medicine, food, shelter materials, clothing, etc… which is made available to people who are the victims of natural disasters, famine and/or war. Often this assistance is distributed by non-government aid organisations Food aid such as Australian rice or wheat which is made available as emergency aid during crises and/or this food aid may be supplied to governments of developing countries who can sell the food to fund development projects or use it as payment for project workers Education and training programs such as supplying teaching materials, the training of teachers or providing scholarships for students to study in Australia Technological aid in the form of equipment or expert knowledge provided for agriculture, industry or other activities Community based projects, such as those involving the construction of roads, bridges, schools, as well as community health care assistance. The Australian Government's policy statement 'Better Aid for a Better Future' (1997) has identified six key principles, five priority sectors and two critical cross-cutting issues to guide its aid policy. Each project takes these criteria into account. The six key principles are: focus on partnerships responsiveness to urgent needs and development trends practical approaches greater targeting reflect Australian values ie remain identifiably Australian outward looking. The five priority sectors are: health education agriculture and rural development infrastructure governance. The two cross-cutting issues focus on gender equality and the environment. Multilateral aid is given by governments of many countries and is commonly distributed through international organisations such as the United Nations, the World Bank and the Asian Development Bank. Multilateral aid is used to fund: Emergency relief projects, such as those assisting large numbers of refugees Transboundary issues such as those involving research into global warming and fighting diseases Large-scale development projects such as the building of railways and roads. Australia traditionally spends about 28 or 30% of the aid budget on multilateral global programs. Making a difference Australian aid is making a difference to the lives of many people in developing countries by helping to raise living standards. It plays an important role in regional stability and security. It also encourages economic growth at home because Australian companies are employed to manage and deliver most of our development projects. As a result, about 80% of our aid budget is spent buying Australian goods and services for developing countries - which means more jobs for Australians.   Top © Commonwealth of Australia