Tuesday 24 May 2022 | 00:52 | SYDNEY
Tuesday 24 May 2022 | 00:52 | SYDNEY

There more to development than money

20 July 2011 12:22

 Annmaree O'Keeffe is a Lowy Institute research fellow. She has served as Australian Ambassador for HIV/AIDS and Deputy Director General of AusAID.

There's no doubt about it. Hugh White is right when he wrote in the Sydney Morning Herald and The Age on Tuesday 19th July that economic growth is overcoming long term poverty in the world.

But where I stop agreeing with him is when he dismisses foreign aid as playing any, much less a significant role, in bringing the poverty numbers down. In fact, I'm dismayed by the way he's portrayed aid and economic growth as two separate concepts.

This isn't an either/or argument. Even the most ardent supporters of foreign aid will argue that aid is only one of the factors contributing to successful development. Indeed, even economic growth is only one of the factors that underpin successful development. I'm arguing that now, just as it was argued in the report released earlier this month by the team who reviewed Australia's aid program. As the report puts it :

'There is no single recipe for development progress. Commonly cited development success stories, such as South Korea, Botswana and Singapore, have used different policies and adopted different priorities. But there are some basic principles that underlie development success. These include economic growth, investing in opportunities and building strong institutions'.

The value of aid is more than the financial resources it brings to developing countries. In fact, by far the larger financial flows to developing countries come from other sources. In 2010, foreign direct investment flows to developing economies was around US$525 billion. In the same year, aid flows from OECD donor countries represented about one fifth of this figure (US$129 billion).

The significant value of aid is as a catalyst; a reformer; advocate; banker of last resort; innovator; rescuer; and yes, it can even be in the donor country's own interest. Don't take my word for it, look at these examples.

Example 1: The 2000 Millennium Development Summit provided the crucible for a new global development paradigm — the 2015 Millennium Development Goals – which continues to inspire and shape the approach and objectives of the global strategy for reducing poverty and improving the quality of life. Each of the goals target fundamental factors affecting quality of life — hunger, health, education, gender equity, environment — and the 2015 targets seek to make significant improvements in each. 

While progress hasn't been smooth across all countries, and the global financial crisis played its part in affecting the MDG efforts, 2015 will see major advances in reducing poverty and improving the quality of lives for the poor. The role of aid in achieving these advances is in part through developed country support to developing country services and systems. But a particularly important role the MDG has played, is as the advocate for the poor. How to reduce global poverty is now in the thinking of domestic and international policy makers because they are aware of it, and the pressure is on to do something about it. This wasn't always the case.

Example 2: One of the most successful international innovations of the past decade has been the Global Fund to fight AIDS, Tuberculosis and Malaria. Created in 2002 as a public/private partnership, it emerged from an environment of mounting concern about the effects of HIV/AIDS, TB and malaria in developing countries.

As a financing mechanism, it has been particularly effective at attracting and channeling large amounts into country-owned programs to fight these diseases. Thanks to that funding, 3.2 million people are now receiving antiretroviral treatment for HIV, 8.2 million new cases of TB have been detected and are being treated and 190 million insecticide-treated bed nets have been distributed to reduce malaria infection.

Example 3: The GAVI Alliance was started in 2000 as a global health partnership bringing together private and public sectors, government, pharmaceutical companies, researchers, civil society organisations and relevant multilateral organisations. Its role was and still is to fund immunisation programs in the world's poorest countries. Its uniqueness lies in the way it applies donor funding to adopt market-based solutions to public health funding.

A particularly smart innovation is providing incentives to pharmaceutical companies to undertake the needed research and development of vaccines for diseases affecting developing countries. Left to market forces, these diseases would not attract the attention of the pharmaceuticals because of the very limited promise of eventual returns on their research investments.

Close to home, in PNG and the Pacific, it's evident that there are still major development challenges confronting this region. The reality is that some of the small Pacific states simply do not have the physical resources and human numbers to be ever completely economically self-reliant. It is a reality which has been acknowledged for some time.

With regard to PNG, it is not just a developing country with major challenges. Last time I looked, you could still walk to PNG from Australia at low tide. It is a country where the national interest objective intersects with the humanitarian objective for Australia's aid program. PNG is lagging behind on achieving the MDGs, and there are real governance issues that the government of PNG has to take responsibility for. But it is less reliant on aid, and the proportion of Australia's aid is now equivalent to less than 5% of PNG's gross domestic product, down from 20% at the time of Independence in 1975.

That's economic growth for you.

Photo by Flickr user Chiot's Run.