Donors want performance — or do they?
Majuro — Australian Foreign Minister Julie Bishop laid down the new law on her government’s aid program in a major policy shift earlier this month. ‘The government will introduce a rigorous system of performance benchmarks and mutual obligations tailored to each country’s circumstances,’ said Bishop in her mid-June policy announcement. ‘When projects don’t deliver the results we expect, they will be put on a rigorous path to improvement or be terminated.’ She repeatedly emphasized ‘performance’ as the guiding goal of Australia’s new foreign aid policy, and emphasized support for private sector initiatives to address poverty problems.
Three months before Bishop’s announcement, the U.S. government announced its new Pacific American Climate Fund, a US$24 million fund to support climate initiatives over five years. Like the new Australian aid model Bishop announced, the U.S. climate fund is similarly focused on innovation and performance. Unlike the Australians, however, the U.S. climate fund simply removed government involvement entirely: grants are available only to the private sector and non-government organizations.
Even the Republic of China (Taiwan) government is ratcheting up basic aid requirements. Long accused of checkbook diplomacy, Taiwan today—at least with some of its six Pacific diplomatic partners—is requiring detailed reports before it will release next quarter funding. This change in the Marshall Islands has led to major delays in government receiving the quarterly draw-downs of aid in late 2013 and 2014 because of difficulties the government has had in producing the required reports.
The U.S. government’s climate fund initiative appears to have taken some lessons from U.S. Compact of Free Association relationships with the Marshall Islands and Federated States of Micronesia where, despite the injection of large sums of funding principally to health and education, improvements in these areas has been slow and in some cases non-existent. Indeed, this is understandable in the Marshalls, which is now seeing its second round of major criminal prosecutions for theft of funds at the Ministry of Health, the first being in the 2011-12 period. People involved in manipulating the government system for private gain are not focused on achieving ‘performance benchmarks’. In the meantime, the U.S. government continues to press both FSM and Marshall Islands to improve development planning to address the annual decline in U.S. grants leading to the 2023 end of financial assistance under the Compact. This has led to accusations by leaders in both countries of colonial style interference, and ongoing disputes at high levels of government over management of the U.S. aid program. Still, the FSM last year embarked on a state and national budget consultation process for the first time, while leadership in the Marshalls has been largely uninterested in the planning process, simply hiring consultants to produce reports.
Then there is the World Bank, which has been dangling multi-million dollar grants without any conditions attached to get countries such as the Federated States of Micronesia and the Marshall Islands to pass legislation to open their telecommunications sectors to competition. The FSM government was offered $43 million, while the Marshall Islands was offered $13 million to pass legislation to this effect. The money is not tied to the telecom sector and can be spent in any manner by the national governments, which suggests why they have pushed the legislation. The FSM passed the legislation in May, but then in June delayed its implementation until next year, while the Marshall Islands parliament is still debating a telecom bill.
Though it is extreme in the north Pacific nations of the FSM and Marshall Islands, where donor aid accounts for around 70 percent of government budgets, Pacific governments have become complacent and dependent on aid flow from donor countries, traditionally the U.S., Australia, Japan and New Zealand, but in recent years, Taiwan, China and the European Union have joined the mix along with donor agencies including the Asian Development Bank, World Bank and International Monetary Fund.
As times change in the world, donors are increasingly demanding results. This was not the case 40 years ago when arrangements such as the Compacts in the FSM, Marshall Islands and Palau were political vehicles to establish these three nations in close association with the U.S. and leap trusteeship termination hurdles at the United Nations. But with the political success of the Compacts and UN membership issues long since resolved, the U.S. has focused heavily on performance. Yet this has hardly been a success, something that the Australians in their new performance program should pay attention to.
Simply put, governments and aid agencies that have injected tens of millions of aid dollars into government should not expect a private sector to blossom or education standards to rise as a result of government strategic plans or new policies. Why? Because these donors are waiting and hoping for governments to initiate programs they are incapable of handling or unmotivated to maintain.
The private sector and NGOs are not, in all cases, an aid panacea. There will always be some level of corruption and poor management in these sectors as well as in government. But businesses and NGOs tend to bring vision, innovation and motivation to whatever they are doing, three elements largely missing from government programs—a fact that the new Pacific American Climate Fund is recognizing. In addition, with corruption undermining development goals and preventing benefits of aid from reaching the community, donors should consider providing resources to government audit and ombudsman offices in the region. In the Marshall Islands, for example, Auditor General Junior Patrick has attempted for going on three years to expand his office to move from a focus only on financial audits to include fraud prevention and performance audits. The fact that the Marshall Islands government and parliament continue to under-fund the Auditor General’s Office, despite serious corruption in government, is another reason that performance in government isn’t improving.
‘We will build on what works so that funding will increasingly flow to the best performing organisations’, said Minister Bishop last week. If Australia, other governments and aid agencies take an in-depth look at the region, they will see an under-funded but over-achieving NGO sector and under-capitalized private sector searching for ways to expand initiatives that produce jobs.
