Australia’s New Aid Paradigm

A peak body for Australian aid organisations has welcomed the release of a new Government strategy aimed at engaging the private sector in aid and development which it says coincides with its own research on partnering with business on “shared value” projects.

The Minister for Foreign Affairs Julie Bishop released the strategy Engaging the Private Sector: Creating Shared Value through Partnership, saying it was the Government's invitation to the private sector to collaborate with DFAT in development.

“For the first time Australia has an aid policy which clearly identified the private sector as an essential partner to achieving sustainable development outcomes in our region,” Foreign Affairs Minister Julie Bishop said.

“The Statement acknowledges that the private sector has the means and increasingly the motivation to contribute to development outcomes as part of their core business. It invites the private sector to collaborate with the aid program on implementing sustainable solutions that tackle development challenges whilst delivering commercial returns.”

Not for Profit peak body, the Australian Council for International Development (ACFID), said the strategy would support private companies to join with the Government and aid organisations to help tackle poverty and create opportunities for people in poor communities.

“In welcoming the strategy, ACFID emphasises the need to focus efforts on supporting the local private sector in developing countries,” ACFID Executive Director, Marc Purcell said.

“Small and micro businesses are the main drivers of job creation in developing countries but are often constrained by a lack of access to credit, financial services and markets.

“We call on Australian companies to partner with Australian aid organisations to help build better support for the businesses of people in poor communities.

New research released by ACFID shows that two thirds of Australian aid organisations already partner with private sector organisations and of those organisations that do not currently partner, more than half intend to do so in the future.

“ACFID’s report, Partnering for Development, also found there is greater scope for Australian companies to work with aid organisations to develop ‘shared value’ projects that generate strong development outcomes for marginalised communities and are commercially sustainable – with Australia seeming to lag behind the rest of the world in this area,” Purcell said.

“Encouraging private sector organisations to consider development impacts as part of their core business activities can be a powerful catalyst for reducing poverty and promoting sustainable development in Australia’s region and beyond, and is fertile ground for increasing private sector engagement in development.

“ACFID’s report found that the most common partnerships between Australian aid organisations and private sector organisations were for health, education and agricultural projects in developing countries, and that aid organisations of all different sizes partner with businesses.

“Australian aid organisations also reported that private sector engagements were easier to facilitate with Australian companies and for projects closer to home, with over 70 per cent of all partnerships for development projects in the Asia Pacific region.”

The US-based founders of the concept of ‘Shared Value’, Michael Porter and Mark Kramer have congratulated the Federal Government on adopting a shared value strategy to engage private corporations in global development.

“Partnering with business will enable the Australian Government to multiply the impact of its resources and places Australian aid at the forefront of global innovation,” they said.

Shared value is defined as policies and practices that enhance the competitiveness of companies while improving social and environmental conditions in the regions where they operate.

In May 2015 the Abbott Government Budget delivered the biggest single-year cut to foreign aid in Australia’s history.

Treasurer Joe Hockey revealed that $1 billion, or 20 per cent of Australia’s current foreign aid budget, would be cut, bringing the total cuts to the aid program since the Government was elected to $11.3 billion.

DFAT has also just released the findings from the written submissions and roundtable discussions into their Review of the Overseas Aid Deduction Scheme around guidelines and processes.

The Overseas Aid Gift Deduction Scheme (OAGDS) enables approved Australian organisations to issue tax deductible receipts for donations made to support their overseas aid activities.

Established in 1980, the OAGDS operates in recognition of the work performed by the many voluntary bodies involved in the provision of overseas aid.

DFAT said the primary purpose of the review was to make the OAGDS guidelines and processes clearer, simpler and more robust, while reflecting current international development practice and standards.

In May to June this year DFAT invited written submissions on the OAGDS, and how the guidelines help in meeting the objective of allowing approved organisations to offer tax deductions for gifts to extend assistance to programs and organisations in developing countries. Submissions were received from 22 organisations and individuals, including NGOs and charities, legal service organisations, and development consultants.

Key findings from the written submissions and roundtable discussions found that the OAGDS process is overly time-consuming and highly resource-intensive and there is too much red tape. It also found that there is a need for training to bring overseas aid charities up to standard, through working with peak bodies, direct delivery of training or using volunteer OAGDS mentors.

DFAT said the summary of findings would be used to inform revisions to OAGDS guidelines and processes, with the aim of launching revised guidelines in late 2015.