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Phantom aid and worse

May 28th, 2007

The SMH has a story showing how the government has used tricky accounting devices to claim an increase in foreign aid, when genuine aid is nowhere near meeting the government’s announced targets. The biggest spurious claim was a write-off of $600 million debt owed by Iraq as a result of wheat deals made in 1990. I actually worked on an assessment of these deals shortly after this, and it was obvious that the whole thing was just a disguised subsidy to Australian wheatgrowers, who were effectively getting free insurance to cover the well-known risk that Saddam wouldn’t pay. The idea that this constituted development assistance is just silly. Equally bad are payments to Nauru for its part in the ‘Pacific Solution’. Effectively this affair should count as a reduction in foreign aid, since we have exploited the dependent position of Nauru and other neighbours to force them to provide prison camp services to us.

An even larger negative is the $300 million paid to Saddam Hussein by AWB, with (at least) the tacit encouragement of the Australian government. This wasn’t Australian money paid as a bribe. It was Iraqi money, stolen by Saddam and AWB acting in collaboration. It should count as negative aid.

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  1. Hermit
    May 28th, 2007 at 14:48 | #1

    This website and others have analysed the numerical jiggery pokery that went into claims like ‘lowest unemployment for 30 years’ and ‘on track to meet Kyoto’. If Howard claims that annualised CPI is less than 5% I think the game will be up; some essential food prices are up 20% this year. If the truth is inconvenient it seems to be massaged with copout clauses ie data becomes ‘non core’. Since denial and fudging are part of the government’s standard approach I would be surprised if the imminent carbon trading announcement even grasped the problem.

  2. May 28th, 2007 at 16:56 | #2

    Taking a step back it is not at all clear to me that the government (as opposed to aussie citizens in a private capacity) should be funding charitable work in foreign lands unless there is some direct national interest involved. If they have kept such aid to a minimum then they should be commended (although there is nothing commendable about falsifying the books).

    Perhaps we should abolish foreign aid entirely and instead make donations to foreign charities tax deductable at more than 100%. That should clean up the process considerably.

  3. melanie
    May 28th, 2007 at 21:17 | #3

    A bit more than a decade ago I happened to read Budget Paper no. 12 (I think it was) on foreign aid. The goal, during the Keating years, was to spend as much foreign aid as possible in Australia (i.e. providing contracts to Australian firms, education providers, etc). At that time the achievement was 80%.

    Insofar as the foreigners gained some benefit from, e.g., building bridges in Vietnam, I suppose it counted as foreign aid. But mainly it was intended as a subsidy to globalization of Australian economic interests.

  4. May 31st, 2007 at 23:12 | #4

    My recollection of the $600 million write-off is that it was the wheat growers who individually had to write it off.

    I do not ever recall a subsidy of any sort.

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