Fragile States and Agile Aid

I spoke at the Lowy Institute today, suggesting a few ideas for improving Australia's aid program.

Fragile States and Agile Aid: Some Ideas for the Future of Australia’s Development Assistance Program

Andrew Leigh
Federal Member for Fraser

Lowy Institute

18 May 2011

I acknowledge the traditional Indigenous owners of the lands on which we meet today.

Aid Works

Dai Manju lived in a small village in central China. Because her parents were ill and couldn’t afford the cost of sending her to school, she dropped out. When journalist Nicholas Kristof visited in 1990, she was hanging around the school hoping to pick up bits of knowledge.[1]

After publishing a front page article about Dai in the New York Times, Kristof was chuffed to receive a donation of $10,000 from a reader. He promptly sent it on the school, which spent it on improving facilities, and provided Dai with a scholarship to stay in education so long as she passed exams. After a good amount of the money had been sent, Kristof phoned the donor to thank him for the generous gift. It was only then he realised that the man had in fact only sent $100, and the slip of a bank teller’s fingers had multiplied it one-hundredfold. Informed of their error, the bank agreed to provide the difference as a donation.

After graduating as an accountant, Dai now runs her own business employing many others, and is able to send money back to improve the lives of her parents. Because many of the other girls in her class also received ‘bank error in your favour’ scholarships, the village now has a road.

Spent wisely, foreign aid can transform lives for the better. This year, Australia’s foreign aid program will build 2000 schools in Indonesia, fund a Women’s Crisis Centre in Fiji, prevent 8000 cases of blindness in East Asia, and provide clean water to 1.2 million people in Southern Africa. World Vision CEO Tim Costello claims that this year’s aid budget will save 200,000 lives.

Yet too often, aid debates become removed from the people that they are intended to help. When aid advocates ask the public for donations, they typically ask for help to solve an immediate and practical problem – feeding a child, building a well, providing schoolbooks. To the best of my knowledge, no aid campaigner ever knocked on a door and said to the resident: ‘we’d like you to consider increasing your aid contribution to 0.5 percent of your income in 2015-16, with the ambition of going to 0.7 percent in the future’.

Don’t get me wrong: the quantum of aid is important. I recognise that Australia’s aid contribution as a share of national income still places us in the bottom third of donor countries. Scaling up our aid to half a cent in the dollar will put us at the developed-country average.[2] This is eminently sensible given that 18 of our 20 nearest neighbours are developing nations, and we sell over $90 billion worth of goods to developing countries each year. Few developed nations have as much self-interest in running a good aid program as Australia. But we should never forget that the purpose of foreign aid is to alleviate disadvantage. More aid creates the potential for reducing poverty – but it will not happen automatically.

Although the input-wallahs would occasionally have us believe otherwise, the most interesting debates in foreign aid are not about the quantum of assistance.[3] So today, I want to suggest a few ideas about how to increase the effectiveness of the Australian aid program. This is particularly important in the context of the scaling up of Australia’s aid program. Over the next four years, the Australian aid budget will almost double in nominal terms. This represents a unique opportunity to ensure that our aid is spent in a way that does as much good as possible.

For an economist like me, that means identifying Australia’s comparative advantages in foreign aid, and rigorously evaluating our aid programs. Let me deal with each in turn.

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Discussing foreign aid on ABC News Breakfast

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Indigenous Education

I spoke in parliament last week about some great things happening in Indigenous education.
Adjournment Speech - Indigenous Affairs
12 May 2011

Where kangaroos graze on an oval overlooking the Pacific Ocean lies the most picturesque school in my electorate. Founded in 1914, Jervis Bay Primary School serves children of Defence Force personnel serving at HMAS Creswell as well as children from the Wreck Bay community. Although it has the lowest ICSEA score of any school in my electorate, a like-schools comparison makes Jervis Bay Primary one of the top-performing schools in the ACT system.

Last week I visited the school and I was struck by the sense of community among the students and staff. With only 84 students, 63 per cent of whom are Indigenous, the school is quite small and everyone knows everyone else. As I walked through the K-2 room with two women who were active in the P&C, one of the boys said, 'What are you doing here, Mum?' My visit coincided with a meeting with Principal Bob Pastor, who had coordinated a Learning 4 Life meeting with representatives from Vincentia High School, the University of Wollongong, Noah's Ark, Booderee National Park, local preschools and childcare centres. The Learning 4 Life group promotes the value of education to Indigenous parents and students, with involvement right through the education spectrum from early childhood learning right up to TAFE and university.

Education's place in helping overcome inequality and disadvantage was also reinforced when I visited Cape York last year and earlier this year. Travelling with the House Economics Committee our task was, in part, to consider Indigenous economic development, so I used the chance to ask some of the witnesses about local schools. Phyllis Yunkaporta, a witness appearing before the committee, told me:

'The education system, as I knew it before, has been of low standard. The curriculum in the past, as it is in all cape Aboriginal communities, has been of very low standard. By the time our children go out to mainstream schools they are hardly there—a child in grade 8 still has the understanding of a child in grade 1. Speaking for Aurukun, I was one of the persons who were invited to the States last October; I went to New York and Los Angeles visiting African-American schools. What we have brought back to Aurukun is a new kind of teaching method and we are having that implemented in the school. Of course it took time. At the beginning it pretty much had been, in my words, chaos before that. Since having this new program come in, if you come to the classrooms in Aurukun the kids are fully focused. This new method of teaching has got them going. The teacher is full-on with the tasks given and you cannot believe it when you enter those classrooms—it is as if some of those kids are play-acting. They are not; they are just full-on, focused. I guess in time we have to have expectations for our children to be educated in a way where they have to balance both worlds—the Western world and the traditional way. Of course we want them to hang onto the traditional way because that is where they are going to be identifying themselves for the future. And with them having to venture out into mainstream, we want them to compete. It is a competitive world out there. We want our black little kids to start taking on the world. That is the aim of all this.'

Ms Yunkaporta was talking about Noel Pearson's Cape York Aboriginal Australian Academy, championed by the Minister for Families, Housing, Communities and Indigenous Affairs, Jenny Macklin. The program offered by the academy has four components focusing on Class, Club, Culture and Community.

Noel Pearson recently wrote that the Class program immerses students in numeracy and literacy using the Direct Instructions, DI, programs. Students need to achieve a mastery of 90 per cent at their level before they can move on. Tests are done every five to 10 lessons and both the students' and teachers' performances are carefully monitored.

Club ensures that kids do not miss out on those future opportunities, providing extracurricular activities that many children in my own electorate enjoy; including the hope to one day include foreign languages and Shakespeare classes.

Culture helps children learn the local Aboriginal languages and their culture and traditions.

In-school activities are supported by the Community program. School attendance and readiness for school are carefully monitored. A food program provides meals during the day and families are helped to manage funds to cover educational expenses. It is clear that there is something in the different models used by Aurukun and Jervis Bay schools that is working well, and I commend the hard work of all those involved—the principals, the teachers, the parents, the children and the whole school community for making something really special happen in these parts of Australia.
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Turning the Resource Curse into a Blessing

My AFR article today is on the Natural Resource Charter.
Break the Resource Curse, Australian Financial Review, 17 May 2011

One of the most robust results in development economics is the fact that developing nations who have more natural resources are more likely to be poverty-stricken dictatorships. This ‘resource curse’ arises because mineral endowments tempt despots into fighting their way into power and filching the wealth.  It’s difficult for an autocrat to steal incomes from farming, industry or services. But diamonds are a dictator’s best friend.

The curse can be seen today in the Democratic Republic of Congo, where conflict over the country’s minerals has grown particularly fierce since the mid-1990s, with bands of thugs murdering five million people, raping half a million women, and impoverishing a nation. The vast majority of Congo’s population would be better off if their country had no natural resources.

In The Plundered Planet, Oxford economist Paul Collier points out that if we can help developing nations to make better use of their natural resources, the resulting fiscal flows could help societies to transform themselves for the better. In developed nations, oil and mineral assets generally benefit the entire population (though we’re currently working to get all Australians an even better deal though the Minerals Resource Rent Tax). But in most low-income countries, the opposite is true.

If developing countries can benefit from their minerals, the payoff could dwarf anything that aid might hope to deliver. Collier points out that in rich nations (where geologists have carefully surveyed the land), the typical square kilometre has subsoil assets worth US$114,000. In all probability, the same is true for the developing world. On those figures, Africa’s natural resources would be worth $3.5 trillion, more than 70 times the amount of foreign aid it receives each year.

To help developing nations make better use of their natural resources, a group of ex-politicians and entrepreneurs (working with academics like Collier) have proposed a Natural Resource Charter, which they hope will be adopted by governments, businesses and NGOs. The Charter aims to go beyond the ideological slanging match that has characterised natural resource use in developing nations, and offer practical ways in which governments can ensure the people get a better deal.

First, the Charter proposes that financial flows be fully transparent. Mining generates relatively few jobs, so what happens to the royalties is critical. Through the Publish What You Pay campaign and the Extractive Industry Transparency Initiative, mining companies are encouraged to release information about the payments that they make to governments. This makes it harder for corrupt officials and politicians to siphon it off into private bank accounts, and enables citizens to pressure governments into spending the money on much-needed infrastructure, such as hospitals, schools and roads.

Second, the Charter argues that extraction rights should be sold by auction. Once a handful of bidders participate, it becomes difficult for them to collude, and the final price is likely to reflect what the rights are actually worth. Collier uses the example of the UK, which was on the verge of negotiating a £2 billion deal to sell mobile phone spectrum when it was persuaded to try an auction instead. The auction raised £22.5 billion.

Third, the Charter suggests that developing country governments should maximise the amount of information about the country’s subsoil assets. If governments or aid donors conduct geological surveys and make them publicly available, then the people of that nation are more likely to get a fair share of their natural resources. Another way to increase information is to require that auction winners begin prospecting within a fixed period of time. If one miner strikes it lucky, this will raise the sale price when nearby parcels are auctioned off.

Fourth, the Charter requires that local peoples should be made better off by mining. Before lending to extraction projects, the World Bank requires ‘free, prior and informed consent’: a principle that the Charter argues should also extend to the way that national governments manage local consultations. Provocatively, it also suggests that where mining companies promise to conduct environmental reclamation, they might be kept to their word via the use of an escrow account.

Since the Eureka uprising, Australians have been debating the best way of managing our natural resources. Both sides of politics won’t always agree on the specifics, but our position as a developed nation with bountiful mineral wealth means that we have much to teach low-income countries about how to handle underground assets. With the right policies, developing nations can turn the resource curse into a resource blessing.

Andrew Leigh is the federal member for Fraser. The Charter may be found at
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Congratulations to Chief Minister Katy Gallagher

Congratulations to Chief Minister Katy Gallagher on becoming the Australian Capital Territory’s 6th head of government and the 3rd woman to lead our nation’s capital.

In her time as Deputy Chief Minister and Treasurer, Ms Gallagher strengthened social equality through economic growth. With the nation’s best-performing economy Ms Gallagher delivered funding for vital social and community programs, giving assistance and support to many in the ACT.

As Chief Minister, Ms Gallagher will bring an understanding of the economic and social needs of our city, driven by a spirit of optimism and a determination to make Canberra the envy of the nation’s other capitals.

Thanks to the efforts of Katy Gallagher and her deputy Andrew Barr, we enjoy a first rate school system and record investment in health care ensuring quality care for all Canberrans. 

The pride Katy and Andrew have in Canberra makes them the perfect choice for a new generation of leaders that symbolise our diverse, modern and vibrant city.

I believe Canberra is the best city in Australia. I look forward to working with Katy, Andrew and their team to grow our city and ensure equality, opportunity and services for all Canberrans. 

Andrew Leigh

Federal Member for Fraser
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I gave a short speech to parliament on Thursday about the challenge of loneliness, an issue that gets less policy attention than it probably deserves.
Loneliness, 12 May 2011

A recent article in the Australian noted that one in four Australians suffer from loneliness as a serious problem. In fact, loneliness is one of the fastest-growing contemporary issues in modern Australia. Many of us here know Professor Adrian Franklin as a panel member on the ABC's Collectors program. But he is also one of the country's leading sociologists and has recently conducted extensive research on housing, loneliness and health. Loneliness is a grim reality that I know the member for Wakefield has also written about.

Between 1986 and 2006, the share of people living on their own rose from 9 per cent to 13 per cent. People who report being lonely are twice as likely to experience poor health as those who do not. As our population ages, more elderly people will be living alone. Loneliness exacerbates anxiety and depression, already the leading cause of disability in young Australians. If we are not careful, we may be caught in a classic pincer movement where  loneliness and its physical, mental and social implications will affect more and more Australians, both young and old.

So I would encourage us to continue our efforts to engage with marginalised and vulnerable members of our communities. It is something I do in my own electorate of Fraser. As I wrote in Disconnected, 'A smiley face emoticon isn't much of a substitute for a smile.'
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Mind the Gap

I've written a guest post for 'Insider' (the blog at current affairs website Inside Story) on the topic of inequality.
Mind the Gap

In a new report on inequality, the OECD has tracked income changes in several developed nations including Australia. It finds that from the mid 1980s to the late 2000s, the average rate of real household income growth among developed nations was 1.7 per cent per year. But while incomes grew at an average rate of 1.4 per cent for the bottom 10 per cent of households, they grew at 2.0 per cent for the top 10 per cent.

In Australia, real household incomes grew faster than the OECD average. Average incomes grew at 3.6 per cent per year over the period. But, as in most other developed nations, these decades were a better time for the rich than the poor. For the top-earning 10 per cent of Australians, incomes grew at 4.5 per cent. For the bottom tenth, they grew at 3.0 per cent.

These results accord with my own work, co-authored with Oxford’s Tony Atkinson, while I was an economics professor at the Australian National University. Our research looked at how the income share of top income groups in Australia had changed, going right back to the 1920s. One way of looking at this is to look at the income share of the richest 1 per cent of Australians – people who in 2007 had earnings of $197,000 a year or more (see chart). In 1921 that top 1 per cent of Australians had 12 per cent of all household income. Then we saw a compression: the top earners’ income share steadily dropped until 1980, by which time that group had about 5 per cent of all national income. Then we saw a rise again, and by 2007 the top 1 per cent had 10 per cent of household income, double the share in 1980.

We see an even starker pattern if we look at the top 0.1 per cent – the richest 1/1000th of Australian adults. In 2007, members of this group were earning at least $693,000, and their income share of the Australian pie followed a similar trajectory. In 1921, they had 4 per cent of all household income. That fell by 1980 to 1 per cent, and then rose again so that, by 2007, the richest 1/1000th of all Australians again had 4 per cent of household income.

There will always be considerable debate about whether policy should try to reduce inequality, and if so, how. Yet work by the OECD reinforces the finding that the gap between rich and poor has widened in Australia over recent decades. True, the incomes of the poorest tenth of Australians have improved. But top incomes have increased faster still.

Andrew Leigh is the Federal Member for Fraser.
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McMullan -> EBRD

Congratulations to my predecessor Bob McMullan, who will shortly be off to the London-based European Bank for Reconstruction and Development, continuing his long-running interest in foreign affairs and international development.


Nomination of Australian executive director to the european bank for reconstruction and development

Australia has nominated Bob McMullan to the role of Executive Director to the European Bank for Reconstruction and Development (EBRD).

Mr McMullan would represent a constituency comprising Australia, the Republic of Korea, New Zealand and Egypt. Pending a vote by constituency members, Mr McMullan will be appointed by the EBRD for a term ending in July 2012.

Australia has been a member of the EBRD since it was established in 1991. The EBRD is an international financial institution that supports projects in 30 countries from central Europe to central Asia. It is owned by 61 countries and two intergovernmental institutions.

The Government considers that the continued uncertainty surrounding the global outlook, including concerns about the economic situation in Europe, warrant continued involvement in the EBRD.

Mr McMullan brings a strong record of reform and a wealth of experience to the position. His understanding of the international environment will lend distinction to Australia, our constituency and the EBRD. Mr McMullan is a former Minister for Trade and is currently an Adjunct Professor at the Crawford School of Economics and Government at the Australian National University.

Mr McMullan has agreed that the EBRD position be treated as if it were an ‘office of profit’ for the purposes of the Parliamentary Contributory Superannuation Scheme (PCSS). Consistent with the rules governing the PCSS, Mr McMullan will have his parliamentary pension reduced to take account of the remuneration received from the office of profit.

Mr McMullan will replace Dr John Eyers who is not seeking re-election at this year’s EBRD Annual Meeting.

On behalf of the Government, I would like to thank Dr Eyers for the significant and valued contribution he has made during his term as Executive Director.
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Canberra and the Federal Budget

Federal ACT Labor Representatives, Kate Lundy, Gai Brodtmann, and Andrew Leigh, have welcomed 2011-12 Budget investment in Canberra.

To mark the capital’s Centenary celebrations, the Budget delivers over $68 million to partner with the ACT Government to deliver a program of Canberra Centenary celebration for all Australians.

Labor’s responsible Budget will strengthen Australia’s economy, create more jobs, and generate training opportunities in Canberra and the region.

The 2011-12 Budget delivers for Canberrans, key highlights include:

  • $82.2 million for road infrastructure this financial year

  • $30.6 million for the Australian Security Intelligence Organisation building

  • $6.1 million increase in base funding for the High Court

  • $33.9 million increase over four years for the Australian War Memorial

  • $1.7 million seed funding for the Australian War Memorial to commence planning for a new permanent exhibition on the first World War to commemorate the Centenary of ANZAC

  • Additional $2 million this financial year for the completion of the National Gallery of Australia building refurbishments and enhancement project

  • $2.3 million dollars to improve critical outreach and training in health

  • 6700 local families eligible for an extra $4200 per child between 16-19 years old to assist with the cost of living

  • 7397 apprentices will be eligible for the Trade Apprentice bonus scheme

The Budget builds on Labor’s strong economic record and will ensure we are back in black by 2012-13.

There is a renewed focus on creating opportunities for all Australians, focusing on jobs and skills for Canberrans.

Labor also continues to support families and young people in the ACT by investing in training, education and job creation.

This budget builds on Labor’s core values, particularly our commitment to strong employment.
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Welcoming the Babies 2011

I spoke in parliament yesterday about my 'Welcoming the Babies' event, held last March.
Welcoming the Babies
11 May 2011

On 27 March this year I held Canberra's inaugural 'Welcoming the Babies' event at Stage 88 in Commonwealth Park. Over 150 mums, dads, bubs, brothers and sisters enjoyed a perfect Canberra autumn morning while taking the time to engage with local services and other families. As a parent of two young boys myself, I know the challenging moments that one has in raising a family: endless nappy changes, throwing food at dinner time and early wake-ups. For example, my one-year-old arose at 4.15 this morning. That is why I believe it is important to celebrate being a parent and to share survival tips.

I want to thank ACT Playgroups, ACT Health and the breastfeeding initiative, senior child health policy and immunisation officers, Anglicare, the Breastfeeding Association, Bundle Baby Ultrasound, Cafe 2U, DJ Dennis, Gymbaroo, Kidsafe, Kings Swim School, Junior Entertainment, Monkey Mania, Players Football Club, Post and Ante Natal Depression Support and Information, Soul Yoga, MC Laurie McDonald and guest speaker Pam Cahir, and my staff and volunteers from the ACT Labor Party for cooking sausages, staffing our tent and helping other stallholders. I would also like to thank Treasurer Wayne Swan, who pioneered this kind of event, making him 'the father of Welcoming the Babies'. As first-time dad Tito Hasan told me, 'It's been great to see kids having fun. My wife and I see the range of things out there for first-time parents. I'm looking forward to coming back next year.'
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Cnr Gungahlin Pl and Efkarpidis Street, Gungahlin ACT 2912 | 02 6247 4396 | | Authorised by A. Leigh MP, Australian Labor Party (ACT Branch), Canberra.