Author: Satish Chand

The recent Australian generosity to Nauru has the potential to reduce poverty and save the need for further transfers down the track. This would be the preferred outcome, but one likely to be achieved only if aid was effective in inducing development. There is no guarantee of that outcome. Worse still, large sums of unencumbered aid can undermine development by creating an expectation of ongoing support and the basis for a welfare state. As a taxpayer, I will be appalled by such an outcome.

What could be done to maximise the chances of aid being effective in inducing development? This is a question that has occupied the minds of many. Unfortunately there are no as yet known recipes for development. What we do know is that a few ingredients such as law and order, secure property rights, and widespread access to basic services such as primary education and basic healthcare are necessary for development. Targeting the above-mentioned could enhance the contribution of aid to development.

Over a series of posts in the next 2 weeks I will elaborate on arguments for three specific Australian interventions to enhance prospects for economic growth in PNG and the island Pacific.

First, freer and deepened trade modelled on the Closer Economic Relations Agreement within the region, including freer flow of workers and investors is likely to improve economic outcomes both in Australia and the region more generally. This argument for a single economic market for the Pacific rests on the basic economic premise of gains from free trade. It is good for Australia and for the region as a whole.

The second contribution that Australia can make, in PNG particularly, is to improvements in access to primary education and basic healthcare. Given the poor access to these services now and the critical contribution such services make to improvements in human welfare, such support is likely to yield large developmental benefits. Some experimentation on the best means of achieving the above may be necessary, however. I have suggested a ‘payment-for-progress’ on access to quality primary education in PNG to be funded with aid as a pilot to break new ground on this front.

Third, Australia, given its size and geographic location, must become more proactive in preventing conflicts that have retarded development. Most of the responses to date have been reactive; sending troops into troubled island nations being an example of the above. I have put forward a challenging and ambitious proposal to use the South Pacific Forum as a grouping, where each member agrees in advance to allow foreign intervention should power be usurped within their country. Australian leadership will be critical for such a commitment to be credible. But if such an arrangement were in place, it would seriously challenge the calculus of would-be usurpers. Thus, the commitment in itself may never need to be demonstrated, but still deliver on its intentions. Furthermore, the Biketawa Declaration provides the foundations on which the proposed agreement could be built on. Finally, security or the lack thereof is only a symptom of the underlying economic malaise. If the cause of conflict is not addressed, then there is little hope that enforcing security with external force will deliver long-term and sustained peace and long-term security.