Australia Invented Pacific 'Boomerang Aid'


When Foreign Minister Bob Carr last week moved quickly to limit criticism of China’s aid policy in the Pacific, he inadvertently put the spotlight on the motivation behind Australia’s own foreign aid program.

With China’s Pacific aid program estimated at $US200 million a year compared to Australia’s annual $1.2 billion to the region any criticism that our northern neighbour was peddling self-interest smacked of double standards.

The Minister urged calm, calling on the region to learn to live with Beijing. While Carr was successful in deflecting public comments about China’s Pacific plans, concerns remain about the secrecy and self-interest that motivates the actions of this rising superpower in its own backyard.

Although many in the aid industry see Australia’s overseas development assistance as superior to China’s in terms of delivery and outcomes closer analysis suggests that the clean up of our annual multi-billion foreign aid program in recent years still has a long way to go.

Twenty years ago Australia’s aid program faced similar criticism to what is being levelled at China today. Foreign aid projects in the early 1990s were legally required to give preferential treatment to Australian companies and operated with a minimal level of transparency.

One of the scandals that dogged Australian aid in the 1990s illustrated the then poor standards in our overseas development assistance program. White Industries Limited received massive aid and trade handouts for the Piparwar coal mine in India’s poorest state, Bihar. This now discredited project is not that dissimilar to some of China’s owned and operated overseas coal mine projects.

At the time the Piparwar open-pit coalmine was Australia’s largest ever aid project, with $61.5 million contributed by AusAID’s predecessor AIDAB and $145.1 million from AUSTRADE. Of this, $150 million was designated for boosting the private profits of an Australian corporation.

This project reflected poorly on Australia’s aid program, not just because our aid money was going to an Australian company to operate a coalmine. The Australian government was very secretive about the Piparwar coalmine and when they refused to release the project’s environmental impact statement, the Australian group AID/WATCH released its own report that found the mine cut off fresh local water supplies, caused widespread deforestation and posed a safety risk due to the proximity of the local village to the coal pit.

Following a long campaign against such projects which were dubbed "boomerang aid", Australia’s aid program was officially untied in 2006, meaning AusAID is no longer required to award aid contracts to Australian companies. There has also been a decline in the use of Australian consultants providing technical assistance on Australian funded aid projects. Their proportion of the aid budget fell from 41 per cent in 2005-06 to 21 per cent in 2010.

Yet, despite the successes of the aid justice movement on paper, have these changes made a big difference in practice and is Australia’s aid program superior to that of China?

AusAID’s web-based transparency and implementation of most of the Aid Effectiveness Review are significant improvements. However, the government’s insistence that our overseas development program must be in line with "national interests" prevents the full realisation of an aid program that no longer exploits people and promotes environmental and social justice.

Although a Piparwar coalmine style project would never be funded under our current aid program the Australian mining industry is doing very well out of the Australia aid dollar and the "national interest" test. The $127 million Mining for Development Initiative, announced by Prime Minister Julia Gillard last year, aims to promote "sustainable mining" in Africa and other developing countries.

This new aid program provides mining scholarships to Australian universities, hosts study tours for mining executives and government officials to visit Australia, and implements a marketing strategy which links overseas mining to Australian companies.

With 230 Australian companies currently involved in over 650 mining projects worth over $50 billion across 42 African countries, AusAID’s role in promoting mining in Africa continues to blur the boundaries between community development and private profit.

It is questionable how much of an improvement the Mining for Development Initiative is compared with the Piparwar coalmine in terms of meeting poverty reduction and other aims of the Millennium Development Goals.

Maybe there is more chance of ensuring China’s aid programs meet the needs of communities and the environment is if Australia changes its ways and leads by example.

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