Is development aid still serving the Australian national interest?

Australia is the most generous provider of development assistance - aid - in our region. The recent federal budget increased aid to PNG and our island neighbours.

As far as I can ascertain none of our neighbours thanked us for our increased assistance. It seems to be taken for granted.

On the other hand China has significantly cut aid to the region. The only exceptions are the Solomon Islands and Kiribati - both being closely aligned with China.

Not one country has complained about this significant change.

China no longer uses aid to win friends. It does it through trade and secret investment deals. That makes it more influential than ever.

China continues to tie countries like to PNG to loans they can't raise on their own, let alone repay.

As secret deals with Sri Lanka and Kenya have confirmed, if a country or SOE default on loan repayments it takes control of the asset.

The China experience is working. It's presence in PNG is rising, but with limited negative coverage.

The latest example occurred only this week. Australia, Japan, New Zealand and the United States in the aftermath of APEC 2018 in PNG committed to helping fund "powering PNG" to counter China's influence, including in the electricity sector.

Most PNG cities are experiencing frequent power blackouts. The industrial city of Lae is no exception.

This week, out of the blue, the PNG Government chose two Chinese firms to repair the problem in Lae.

No mention of our contribution nationwide. Accompanying the announcement was a less than subtle commitment to the Ramu 2 hydro power scheme, which will deliver some of the dearest power in the world, and a suggestion that the scheme can power the Wafi mine. Just what Newcrest make of that is not hard to guess!

A key to Wafi going ahead is affordable and reliable power. Ramu 2 cannot deliver that!!

The way China is exercising a greater presence despite reducing aid surely requires Canberra to take notice.

Let me use PNG as an example. We currently give PNG about $600 million a year in development assistance. It is spread between 50 and 100 projects, diminishing its effectiveness. And much of the aid is delivered by contractors resulting in upwards of 50 per cent of our aid being "boomerang aid" meaning it never even gets to Papua New Guinea!!

The Albanese Government needs to urgently review our whole approach to engaging with our neighbours. By any measure it is just ineffective. It has, in my view, outlived its effectiveness.

That review needs to look at what China is doing.... because it is working.

First it needs to engage the private sector more fully in its engagement. It can do so effectively by helping fund joint ventures between Australian and PNG companies.

I would allocate half the existing aid budget to joint ventures that promote the PNG private sector and boost trade.

It might also include Australia buying more of PNG's produce, notably coffee and cocoa, and seafood. The package could also subsidise freight to Australia and assistance with plantation rehabilitation and other measures to improve productivity.

China is talking about taking more of PNGs coffee production. But it would be at China's price. We should get in first.

Secondly, half the aid budget should be made available to the NGO sector and Christian churches. That will reduce the number of DFAT bureaucrats!

The NGOs and churches are well placed to partner with PNG counterparts to deliver programs that cut out red tape and really benefit the 10 million people of PNG.

I well recall the visit to PNG by Prime Minister Rudd over a decade ago, The Grand Chief asked his office to seek my view on where PM Rudd should be taken when in PNG. I suggested he be taken to Goroka where the late Kela Smith was Governor.

After a tumultuous reception, PM Rudd was told by Kela Smith there was zero to show him that Australia had funded in his province since independence!!

It's got worse since then.

Readers may know I have the privilege of being a patron of the Townsville based YWAM medical ships program in PNG. It has most recently been expanded to provide support for communities away from the coast.

Its support from the Australian Government amounts to a six-figure allocation each year. That is welcome, but inadequate.

The government should entrust YWAM, churches and NGOs with delivering programs that promote the Australian national interest AND benefit the good people of PNG.

The current aid system does neither.

The sooner it is jettisoned the better. The bi-lateral relationship is vital. But it needs revitalisation.

Canberra should review the whole program as a priority. Consult widely in doing so. And if it succeeds expand it to other island nations we generously support.