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Can Australian foreign aid be better allocated?

By Vince Hooper - posted Friday, 17 June 2016


The issue of Australian Government Foreign Aid is contentious amongst voters because of the lack of democratic frameworks in place to disburse tax-payers money. This is often extenuated by the fact that a small proportion of funds often ends in good hands or where it was originally destined and can end up propping up illegitimate ‘crony’ regimes in far flung emerging economies. Thus, alongside important issues like Australia’s security in the South China Sea , the Australian government needs to readdress the question of How can Foreign Aid be better allocated? The idea of this article is thus to propose some directions on how this may be achieved. The current budget is close to $4 billion [http://dfat.gov.au/about-us/corporate/portfolio-budget-statements/Documents/2016-17-australian-aid-budget-summary.pdf]

First, greater co-ordination needs to be acted upon so that the various aid agencies, NGOs Non-government and public sector organisations, charities and local participants need to come together so that they do not duplicate each other’s roles. An internet framework based on social media would be beneficial so knowledge can be shared accordingly about specific project aims, outcomes and monitoring. This could be tendered to the private sector as they have reduced conflict of interest and are more efficient than the public sector.

Second, greater accountability and transparency needs to be adopted at every stage of funds disbursement so that corruption is minimised, whilst simultaneously reducing bureaucracy.  The Foreign Aid budget is currently viewed rightly or wrongly by many as the nation’s Bribery Account. This tarnished image needs to be redefined. As the World’s 12th largest economy, Australia should not be supporting repressive and corrupt regimes, though they currently do.

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Third, we should only give foreign aid if it benefits Australian companies or entities. Thus, a condition of Foreign Aid should be that a foreign recipient should engage an Australian individual, SME Small to Medium Sized Enterprise (limited company), Professional Body, College or University in the running of the project with clear guidelines on how funds are to be used. Indeed, the Australian government could allocate funds to say every Australian University and College to be allocated for foreign aid purposes up to $1 billion of the $4 billion we spend on foreign aid per annum. Virtually every college and university in the land has projects that would benefit the third world.

Fourth, the Australian Government could use Foreign Aid in conjunction with debt relief through the usage of debt for equity swaps. We should convert emerging economy/third world debt into Australian Government held equity in specific overseas projects that is then ‘loaned’ to Australian private equity firms (and possibly the overseas emerging economy stakeholders) that help bring much needed skills, technological know-how, managerial expertise and so on to emerging economies. Everyone is a winner. The recipient country gets debt relief, foreign aid has the potential to be better allocated, private equity firms have a guaranteed source of funds and much needed technological updating in the emerging economy can occur. In addition, when the private equity firm/venture capitalist decides to exit from the project, perhaps in the form of an initial public offering, the shareholders i.e. the Australian Government, emerging economy local participants and private equity firm are returned their original capital that can then be recycled in new projects. We could tender up to $2 billion for this purpose.

Fifth, we should not underestimate the great contribution that we can all make ‘in-kind’ to overseas countries without involving the exchange of money. This can involve donating unwanted but potentially very useful items direct to emerging economies instead of putting them in charity shops.. Video-link and online learning could be used to educate children in third world countries. For example, a HSC student could tutor standard courses as part of their assessment. As this is ‘in kind’, it is cost neutral.

Finally, given the current down turn in the global shipping industry where transport costs are minimal, we could help solve the homeless situation in the third world (and this country for that matter) by manufacturing steel based containerized homes and shipping them overseas [http://www.containerhomes.net.au/]. This would help the struggling Australian Steel enormously, because they could receive a proportion of the current foreign aid budget in the prefabricated manufacture of homes. This could be extended to help build schools, surgeries and other essential services. $1 billion could be allocated for this.

Thus an important issue that should be considered is that of how better to allocate the current $4 billion budget more efficiently and effectively that benefits Australia economically and ensures a high rate of return on our grant aid which should be viewed more as a commercial investment, rather than a bribe.

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About the Author

Vince Hooper is a British/Australian citizen and an expert and consultant in international finance to major multinational enterprises. He publishes in top journals like the International Journal of Forecasting, on volatility. He has served on the faculty at the Australian National University and the Australian School of Business. He has organized two major symposiums on the global financial crisis in Australia [2008] and Britain [2012] appropriately titled the “Time Varying Correlation and Volatility Symposium” which has enjoyed participation and input by world leading financial economists with coverage by the BBC. He has been a contributor to the AFR, SMH and ABC amongst other leading media on the Euro, the GFC, as well as financial market regulation. As Managing Director of Plymouth Videoconferencing Services he is establishing educational programmes in Brunei, China, Kazakhstan and the Middle East for Australian and UK Institutions.

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