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Economic development a powerful aid

By Julie Bishop - posted Thursday, 11 October 2012


The Australian government will spend $4.8 billion this financial year on foreign aid, with the aim of reducing poverty and lifting living standards in developing countries.

In recent years the foreign aid budget has been subject to some controversy, with examples of questionable spending, highly-paid consultants and what appears to be outright waste.

This problem has been exacerbated by the Government’s campaign for a non-permanent seat on the United Nations Security Council, with blatant redirection of funds to Africa, the Caribbean and Latin America where there are a significant number of votes.

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There is great need for development assistance in Africa but it should not be the major focus of Australia’s foreign aid program as the wealthy nations of Europe have an historical responsibility and a direct strategic interest in directing their considerable foreign aid programs to that continent.

It much more difficult to justify expenditure of Australian taxpayer funds in the Caribbean and Latin America, regions which are higher on the development index than the Pacific and much of Asia.

Australia has a clear strategic interest in focussing our aid program on our region, where our funds can be most effective and where we can make a significant difference.

The ongoing debates about foreign aid focus on how best to lift living standards and what form of aid delivery can have the greatest impact.

There have been two major events in recent history that have seen large numbers of people lifted out of poverty.

The first was the decision of the United States to support the reconstruction of Germany and Japan after the ravages of World War II, and other nations devastated by that conflict.

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The Marshall Plan was a visionary and short-term investment to kick start economic development as a means of avoiding the economic depression that had led to World War II.

The Plan saw Germany, other parts of Europe and Japan attain some of the highest living standards in the world within a few decades, an extraordinary outcome that few in 1945 could have predicted would arise from the devastation of the War.

More recently, the greatest achievement in human history in terms of lifting people out of poverty has occurred in China, where hundreds of millions of people have found prosperity after reforms that underpinned economic growth and fostered development.

The unleashing of human potential by the liberalisation of China’s economy has been the force that has driven this miracle of development.

That dynamism is founded in the human spirit and can often be sparked by relatively small levels of support.

This was brought home to me recently during a briefing by a non-government organisation that specialises in micro-finance and financial services such bank accounts in developing countries.

The approach was described as providing people with a boat and fishing line, rather than providing them with fish.

Loans can be as little as $100, although this can be transformational for some people.

The vast majority of their loans were to women, who often worked cooperatively in groups to guarantee loans for each other as they do not have any other means of securing their loans.

One group of women used their funds to buy bicycles to collect produce from farmers to sell to villagers.

They repaid the original loan and had applied for larger loans to establish a produce market, then another loan for business expansion. One woman was on her fourth cycle of loans.

She was illiterate but her involvement in small business had opened her eyes to the possibilities of the world, and she made enough money to send her daughter to medical school.

It is transformational for one generation to go from poverty-stricken illiteracy to the next with children striving to become doctors.

There are many complex challenges in supporting development of other countries, but there must be a firm focus on providing economic opportunities so that people are given the opportunity to lift themselves out of povertyand achieve economic independence.

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About the Author

Julie Bishop is the Federal Member for Curtin, Deputy Leader of the Opposition and Shadow Minister for Foreign Affairs.

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