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Bad Aid: How Murray McCully is Breaking Your Aid Programme

by Terence Wood

About one dollar out of every hundred you pay in tax ends up going to the New Zealand Government aid programme. It’s not a lot of money but, given well, it can make a real difference to the lives of people living in poverty.

Globally, aid has played a role in the elimination (or near elimination) of illnesses like Small Pox and Polio, and has almost certainly contributed to more general improvements in health in developing countries. Aid has helped with access to education. And in some countries at least, it has probably made a modest but discernible contribution to economic growth.

Aid’s success isn’t guaranteed though. Development is a difficult business, and the impact of aid depends on how it’s given. The history of aid is festooned with examples of aid given for all the wrong reasons producing all the wrong results.

To help, aid needs to be given well.

Up until 2008 New Zealand had a decent government aid programme. It was small but the aid we gave was pretty good. Aid agency staff were skilled at building relationships with counterparts in recipient countries and their considered approach was appreciated in the Pacific where it compared favourably to that of other donors. The programme wasn’t perfect but, had you inquired in 2008, you’d have struggled to find anyone who knew anything about aid who though it needed a drastic overhaul.

Unfortunately, as the last two and a half years have shown, Murray McCully clearly doesn’t know anything about aid.

Right from the moment he inherited it as part of the Foreign Affairs portfolio he’s set about pulling the old aid programme apart, intent, it seems, on rebuilding it in his own image.

The first two changes to the aid programme – reintegrating NZAID, the semi-autonomous agency formerly in charge of the programme, back into MFAT and shifting the core focus of our aid to economic development – received a reasonable amount of attention but other less-visible changes have been equally concerning.

Minister McCully has made it clear he has little respect for people who work in development, decrying them as “so-called development experts” and “desk jockeys”. And rather than listen to their advice he has increasingly opted to follow his own gut instinct or the counsel of a select group of associates.

Following his gut presumably explains his current grand tour of the New Zealand countryside in search of agricultural solutions for Afghanistan. A tour which, according to the Herald, he’s bypassed his own aid staff to undertake.

It’s a nice thought that, somewhere amongst our farmer groups and agricultural institutes, there’s someone with a bright idea capable of transforming the lives of Afghan farmers, and maybe there is. But, when one considers the climatic, geological, cultural, political, technological and military differences between farming in New Zealand and farming in Bamyan, the odds of this aren’t high. Talking with aid programme staff might not be as exciting as meeting the public, but when you’re dealing with a context as complicated as Afghanistan, aid workers really do have something to offer.

Then there’s his mates: John Hayes – infamous among the development community for once having sent a warehouse worth of left-footed gumboots to aid flood-stricken Bangladesh – is now on a board overseeing NGO funding, Allan Peachy is being sent to the Pacific on education fact-finding missions, and Mark Blumsky was awarded a $78,500 contract (paid from aid money) to provide tourism advice on Niue. Hayes, Peachy and Blumsky may all be good at their day jobs in New Zealand, but their advice is still no substitute for that of people with actual aid expertise.

The Blumsky case (which preceded his appointment as High Commissioner to Niue) is particularly egregious when one considers that the contract was awarded to him in the absence of anything resembling competitive tendering. This isn’t how aid money is normally disbursed. Indeed, it sounds an awful lot like advice from the mates spilling over into nepotism

Sometime during the last couple of decades a quick-witted Australian coined the term Boomerang Aid to describe the less than optimal delivery of parts of their government aid programme. With Boomerang Aid the main benefits aren’t felt overseas at all, but instead come right back to the donor country. Boomerang Aid is a perennial problem – the classic case being the United States buying surplus grain off its farmers and then ‘gifting’ it to developing countries, in the process swamping their markets. It’s also a problem that New Zealand has largely avoided over the last decade. As far as possible, New Zealand aid related goods and services have been sourced globally, or from recipient countries. Which helps with value for money and in avoiding unintended consequences.

This is starting to change. When the governments of several Polynesian countries requested that aid money be used to subsidise air services between their capitals and the United States, the subsidy was, on the say-so of the Minister, awarded to Air New Zealand. It could have been tendered out to ensure value but it wasn’t. Rather, our aid money was given to our national airline. Analysis wasn’t even undertaken to see whether it was actually an effective spend of aid money.

Increasingly, aid programme documents are speaking of directing aid to areas of New Zealand’s “comparative advantage”, meaning focusing our aid in areas where New Zealand CRIs, SOEs, and private firms are thought to be world-class and then paying them to do work in developing countries. This ethos underpins McCully’s tour of the countryside mentioned above, and even if it sounds appealing at first, it is mistaken. To give aid well, you need to be guided by two things above all others: what’s needed; and what aid might realistically achieve. Anything else – including what your own industries are good at – is a distraction. Find out what’s needed and then pay for it, sourcing the good or service from wherever in the world it can be obtained reliably and cost effectively. Comparative advantage really isn’t an advantage at all, except for those New Zealand entities that might benefit from the return voyage of the boomerang.

If things are looking up for New Zealand firms and crown entities, they’re less cheery for New Zealand development NGOs. In 2010 McCully dismantled KOHA-PICD, a fund through which government aid augmented money raised from donations for work undertaken by NZ NGOs’ partners in developing countries. There was an efficient and transparent selection system, good quality control, and the fund had just been reviewed favourably by an independent reviewer. Yet none of this stopped McCully from dismantling it on the flimsiest of pretexts and replacing it with a fund (the SDF), which has presided over baffling decisions and which has struggled to allocate the money available to it. McCully’s solution to these new problems has been to set up an ‘external selection panel’ to oversee who SDF money is given to. Sitting on the panel are: John Hayes, Peter Kiely (a National Party lawyer) and Therese Walshe (currently Chief Operating Officer for Rugby New Zealand 2011 Ltd.)

With a panel like this it’s hard to shake the fear that the new fund will end up being a tool for rewarding NGOs which keep quiet and don’t criticise the government.

Amongst the changes there is still some good news: education funding to Pacific governments has continued unabated and a new business mentoring scheme looks promising. But there are also a range of other concerns I’ve not had time to touch on: quality Pacific NGOs defunded without reason; the Minister’s aversion to gender related aid; his counterproductive fixation on low overheads

The New Zealand government aid programme – your aid programme – is being broken. This may be good news for McCully and his mates but it’s bad news for the poor.

Terence Wood is a former employee of the New Zealand government aid programme, and is currently a PhD student. He is on the Steering Committee of New Zealand Aid and Development Dialogues (NZADDs) an organisation set up to foster critical comment on development issues. The opinions here are his personal opinions, not necessarily those of NZADDs.

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