G20’s increased aid funding must be accompanied by better outcomes

Media Releases, Opinion article written on the 22 Sep 2009

As Treasurer Wayne Swan attends the G20 Finance Ministers meeting in London this weekend, the Australian Government is preparing to follow through on a commitment it made at the last G 20 meeting.

This will see it provide additional funding for international financial institutions such as the IMF, and the Asian Development Bank (ADB). The question for Australia now is whether this additional money will be going to where it’s needed most.

On the face of it, the G 20’s decision to channel more money through international institutions in a bid to avert the worst of the global financial crisis makes sense. International financial institutions have a global reach which allows countries in need of resources to access them. However, it can’t be assumed that resources channelled through international financial institutions are automatically well spent.

Next week, a Bill will go to the House of Representatives which will enable the Australian Government to increase its capital contribution to the ADB by 200 per cent. This would result in additional payments of $240 million over the next ten years, plus a reserve of $ 6.8 billion which the Bank can call on if needed.

As the third largest donor member country and fifth largest shareholder, Australia has a long history of supporting the Asian Development Bank, which claims poverty reduction as its over-arching mandate. Unfortunately, the ADB is not always successful in implementing this mandate.

For years, Oxfam has supported communities that have suffered environmental, social or economic harm from poorly designed and implemented ADB projects. During the construction of a road in Cambodia, communities lost their houses, land or businesses. The ADB delayed full compensation to these families for several years, forcing them to borrow from black market lenders to finance the reconstruction of their homes, plunging them into debt and deeper poverty.

The Asian Development Bank continues to propose projects which raise alarm bells with communities. These currently include a coal-fired power plant in the Philippines and a large hydro-power project in Nepal.

It is imperative that, along with the other G20 countries, Australia ties the extra funding to international financial institutions like the ADB to increased monitoring and oversight. Otherwise, there can be no guarantees that these huge amounts of money will have the intended results.

The Australian Government has increased its monitoring of international financial institutions recently, and Oxfam has welcomed this. But this monitoring must go beyond top-level assessments to include information that looks at development outcomes on the ground. Through AusAID, the Australian Government has in-country desks which can provide the channels to gather this type of information.

This information should also be made publicly available and used to assist international financial institutions improve their operations, and to hold them to account.

Finally, AusAID should explicitly assess the effectiveness of international financial institutions’ initiatives to help developing countries fight the effects of the financial crisis.

These actions will move us one step further to ensuring that aid money facilitated through the G20 is indeed well spent.

Andrew Hewett
Executive Director
Oxfam Australia

This opinion editorial first appeared in Online Opinion on 9 September 2009.