Monday, August 03, 2009

Pacific aid a waste of money?

The NZ Herald reports that Foreign Minister Murray McCully says that aid to Pacific Island countries is achieving little, despite millions of dollars being poured into the "Pacific Islands Forum" (formerly South Pacific Forum).

Quite right. The Forum has long been a typical intergovernmental organisation, filled with less than busy hardworking bureaucrats, more keen on earning high salaries that achieving much at all. In fact it demonstrates quite clearly what the approach to aid in the Pacific should be.

Firstly, if there is to continue to be aid, it should go to private charities and organisations that are motivated to achieve charitable good in the region.

Secondly, state aid should be phased out. New Zealanders who want to help Pacific Island states should donate their own money themselves (as they should for all states). Government aid creates appalling incentives of dependency, little interest in the recipient weaning itself off aid, and strong incentives to engage in rent seeking along the way. Rent seeking by bureaucrats, by aid distributors, by suppliers to aid agencies and ultimately recipients.

In other words, offering something for nothing will do precious little to generate a sense of independence, or to perform well. Remember. Africa has received increasing aid over 50 years, and much of it remains a basket case. By contrast, the likes of Chile and South Korea have adopted different national policies - of being oriented towards entrepreneurship, investment, governments that allow enforcement of contracts, and respect property rights (as well as having, now, vigorous open liberal democracies and independent judiciaries).

So when Murray McCully wants to "encourage Governments to adopt good fiscal practice, undertake some economic reform to become more globally competitive and encourage trade, and ensure aid is not squandered". He might want to tie aid to such reform, before phasing it out. After all, if you want the Pacific Island states to grow up, it might be about time to show them how and let them be.

2 comments:

KG said...

No argument here with what you're saying, LS--but we have to remember that China will step in very promptly to fill any vacuum left if Oz and NZ pull aid for small Pacific countries.
The problem as I see it isn't with aid per se but the form that aid takes and the enormous waste inherent in churning it through various government departments.

Alix said...

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