British Prime Minister Boris Johnson has invited Australia, along with India and South Korea, to attend this year’s prestigious Group of Seven Leaders’ Summit in June. This is a rare opportunity for Australia to contribute to policy discussions with the largest advanced economies in the world (United States, United Kingdom, Canada, France, Germany, Italy and Japan). So what will Australia bring to the G7 table?
Australia would be expected to be a prominent contributor to G7 talks on China, especially in regard to trade flows, disputes and China’s increasing influence in the Asia-Pacific. Australia’s management of COVID-19 – both in health and economic terms – is generally well regarded internationally, so Australia would also be expected to share views on the roadmap for recovery, and specifically how advanced economies can transition from a period of heavy stimulus to private sector-led growth.
But I would like to see Australia bring something different – and perhaps unexpected – to the G7 table: a focus not on advanced economies but on those developing and least developed economies that are least able to absorb the economic shocks from COVID-19.
Developing countries are expected to lose more than US$220 billion in income because of COVID-19. This is especially devastating for the one in two people worldwide who have no access to welfare or social protection.
The World Bank projects that the knock-on effects of COVID-19 will plunge 150 million into extreme poverty by the end of 2021 – increasing global poverty for the first time in 22 years. According to the World Investment Report, foreign direct investment to developing economies was estimated to have declined by 15-45% in 2020.
It is a similar story for remittance flows. The World Bank predicts that remittances, a lifeline for many living in extreme poverty, will shrink by 14% in 2021. In Australia’s immediate region – the Pacific – the Lowy Institute forecasts that average incomes will not recover until 2028, warning of a ‘Pacific lost decade’.
The G7 is primarily an economic grouping, not a development one, so why should G7 governments care about supporting the poorest through this crisis? Because it is smart economics, and the right thing to do.
The global economy cannot recover if developing economies are left behind. One study by the US National Bureau of Economic Research found that a failure to distribute the COVID-19 vaccine to developing countries will lead to substantial losses for advanced economies.
In the most likely scenario, where people in advanced economies are fully vaccinated this year and only half of those in developing countries are vaccinated, the global economy would suffer losses of between US$1.8 trillion and US$3.8 trillion. More than half of these costs would be borne by advanced economies due to the interconnectedness of trade.
In a worst-case scenario where vaccines do not reach developing countries at all, the global economy would suffer losses exceeding US$9 trillion. This is more than the economies of the UK, Germany and India combined.
So, to revisit our original question, Australia should bring two issues to the G7 table.
First, Australia should advocate for vaccine equity.
Widespread distribution and take-up of the COVID-19 vaccine – in rich and poor countries alike – is a prerequisite for economic recovery. As of mid-January, high-income countries held 60% of the available vaccines despite only being home to 16% of the world’s population.
It is estimated that about 85 countries will not have widespread COVID-19 vaccine coverage until 2023. This is too little, too late. Australia can advocate for vaccine equity from a place of authenticity having contributed $80 million to the COVAX Facility, $500 million for the vaccine rollout in South-East Asia and the Pacific, and most recently diverting 1.8 million of its own vaccine doses to address the outbreak in Papua New Guinea.
Just as the Quad (an alliance comprised of Australia, India, Japan and the US) recently made commitments to expand vaccine access in the Indo-Pacific region, G7 governments should work together to scale-up global vaccine production and fund ‘last mile’ distribution across developing economies so no country is left behind.
Secondly, Australia should advocate for G7 governments to support an inclusive economic recovery, especially through development aid and debt relief.
Official Development Assistance can be a catalytic resource for economic recovery in poor nations – increasing access to finance, supporting micro, small and medium-sized businesses to rebuild, revitalising dormant markets and supporting job creation, especially for women. World Vision knows the tremendous impact of inclusive economic development first hand.
The OECD calculates that if donor governments were to maintain their 2019 ODA-GNI ratios, then total ODA could decline by US$11-14 billion due to the collapse in national incomes across the world. Some G7 governments, such as the UK, have not even maintained their ODA ratios, opting to cut aid in the face of domestic economic pressures despite a resurgence in global poverty.
Australia, on the other hand, has increased aid spending, albeit slightly, for the first time since 2013. Economic recovery is now one of three pillars of Australia’s new development policy, Partnerships for Recovery.
Building on these achievements, it would be great to see Australia secure a commitment from G7 governments to (1) at least maintain current levels of ODA and (2) to intentionally deploy ODA to support an inclusive economic recovery that reduces inequality rather than worsening it. Debt relief or cancellation is another way that G7 governments can support the recovery, enabling developing economies to invest more of their scarce financial resources in important services like health, education and economic recovery instead of servicing loans.
If the pandemic has taught us anything, it is that our economic, social and health systems are deeply interconnected, and so too is our recovery. We cannot afford to leave developing and least developing economies behind.
The G7 has played an important development role in the past: the 1996 summit helped launch the world’s signature debt relief initiative; the 2000 summit led to the establishment of the multi-billion-dollar Global Fund to Fight AIDS, Tuberculosis and Malaria; and in 2019 G7 governments committed to combatting inequality through a renewed partnership with Africa.
Australia and the G7 have an opportunity build on this track record and adopt a global perspective in this year’s summit to lead an inclusive economic recovery not only for their own nations, but for the world.
This article appeared first on Devpolicy Blog (devpolicy.org), from the Development Policy Centre at The Australian National University.
Dane Moores is the Policy Manager at World Vision Australia where he oversees policy analysis and influencing on child rights, livelihoods and food security, conflict and fragility, and First Nations policy.
February 2021 marks the first anniversary of the endorsement of the Pacific Aid for Trade Strategy (PAfTS 2020-2025). It was not the first strategy of its type for Pacific regionalism. Clearly, it is too early to make any meaningful assessment of its implementation. I will leave that for later. The occasion, however, should not go to waste. Any anniversary is propitious for strategic reflection. I propose, therefore, to cast an evaluative eye on two aspects of the Strategy – its long and eventful gestation period, and design: and draw out useful learnings that can be incorporated into the 2050 Strategy for Pacific regionalism.
The Strategy was endorsed by Forum Trade Ministers at their meeting (FTMM) in Suva on 3 February 2020. The idea for the formulation of the Strategy was conceived on 11 July 2018 at a Senior Trade Officials meeting during the Pacific ACP (PACP) Trade Officials meeting in Apia. The Strategy had been two years in the making.
The conception of the idea of an Aid for Trade (AfT) strategy during a PACP Trade officials meeting is instructive. The same officials were engaged in the formulation of a first AfT strategy during the time of the negotiations with the EU for an Economic Partnership Agreement (EPA). The EPA negotiations were suspended, and regional geopolitics may have intervened. This led to the rejection of the first strategy, 12 years ago in 2009.
The EU resources earmarked for that were mothballed. Some, if not all, will be recycled to fund the newly endorsed Strategy. The Regional Authorising Officers (RAO) for the PACP states met representatives of the EU in the margins of the 2020 FTMM to sign €94 million AfT financing agreements.
The rejection of the first AfT strategy in 2009 also marked the launching of the PACER Plus negotiations and by the time the Free Trade Agreement (FTA) was signed in 2017, Australia and New Zealand had committed themselves to earmarking millions of dollars for AfT under that agreement. These AfT resources under PACER Plus are currently being disbursed under the extended Pacific Horticultural and Agricultural Market Access (PHAMA Plus) launched on 11 April 2019.
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The Australian Federal Budget delivered last night has increased aid to the Pacific.
An extra A$211 million has been allocated to COVID-19 response in the form of grants, agreed in negotiations with recipient countries, in addition to the $4 billion previously earmarked for international assistance. Further, a small increase in aid due to cuts in assistance in other regions has also been made.
Devex reports that PNG will remain the largest recipient, receiving A$491.1 million, although this is less than the previous budget allocation. Climate partnership programs have also see their funding reduced by A$5.7 million.
As Stephen Howes at the Australian National University writes, the COVID-19 response is being communicated separately to the main aid allocation, perhaps because “the government does not want to be seen to be providing a permanent boost to aid.”
Australia has made big cuts to its aid to South and West Asia, sub-Saharan Africa, the Middle East and North Africa. These cuts continue a trend that has been evident for some time.
Tim Costello, who heads Christian international NGO Micah Australia, says “This increased one-off support of AU$305 million for the COVID-19 response and recovery in the Pacific and Timor-Leste is good news for our closest neighbours whose economies and livelihoods are reeling from the pandemic.”
Oxfam Australia CEO Lyn Morgain has also welcomed the increased allocation, while saying it should be a permanent commitment: “It is heartening to see the Government’s recognition that this is not over for Australians until it is over for everyone. But this change of heart must be permanent.
The Australian government is forecasting a budget deficit of $213.7bn, or 11% of GDP, for 2020/21.
Australia’s Assistant Treasurer says in the post-COVID environment Canberra is willing to re-examine its policies including loan concessionality, debt consolidation and aid allocations to Pacific Islands nations but is not giving any promises or firm commitments.
Michael Sukkar is attending the Forum Economic Minister Meeting which kicks off this morning. Australia has already reallocated well over A$100 million to assist Pacific Islands respond to the health, social and economic impacts of COVID-19. But those funds have been reallocated from the existing aid budget.
The next federal budget is due for delivery on October 6, and Sukkar says: “if we do seek to supplement aid or humanitarian assistance to our region, that will be done with the broad principles of the Pacific Step up and will be focussed primarily on our immediate Pacific region and neighbours.”
Sukkar expects discussion of the A$2 billion Australian Infrastructure Financing Facility at today’s meeting. He says eight projects have been approved, utilising a mix of grants and non-concessional loans, and has not ruled out revisiting the nature of those loans, as there is “great value to moving to concessional loans”.
“Whilst I don’t want to necessarily announce any change of policy, I think the broad view is that we have to be nimble as we possibly can and that means re-examining all pre-existing COVID programmes,” Sukkar told Pacific journalists yesterday.
“I think it’s safe to say that in a post-COVID environment the Australian government is willing to re-examine everything with fresh eyes… and the view is that with the infrastructure facility, more concessional loan rates or loan terms would be likely to unlock particular projects.”
The Minister said discussions about consolidating debt in multilateral forums is “certainly gathering steam.” He also said the demand for Pacific island seasonal workers is likely to continue and the Australian government has done “some fairly important work in ensuring that appropriate quarantining arrangements and protocols are established to ensure they can continue to come.”
“With the Pacific yet to experience COVID-19, we need to err on the side of caution to ensure that the COVID-19 doesn't get a foothold.
“I think it would be a disaster with fragile health systems and other infrastructure for Australia to effectively be sending COVID into the Pacific through the Pacific island workforce,” Sukkar says.
Preparations are currently underway to send 120 ni-Vanuatu workers to the Northern Territory to help with the mango harvest and there are hopes in other Pacific nations that they will also be able to supply workers for upcoming harvests.
On tourism, Sukkar believes in the longer-term, travel bubbles are “an absolutely worthy way to go” but there is still a lot of work to do on protocols, and that no country in the world could say they have yet “perfected the art of contact tracing and ring-fencing before COVID-19 has the opportunity to spread like wildfire.”
“Until you really have perfected that, I think it is very hard to put in place a 'bubble'.
“But the concept of a bubble is really the only long-term solution and the only sense of certainty that we can all have in getting back to what is an economic engine room for the Pacific.”
Building quality infrastructure in the Pacific means going beyond a narrow focus on hard assets, to thinking about the ways that new infrastructure, and accompanying services, will contribute to lasting development outcomes. This requires sustained engagement with island governments, and with Pacific civil society and the local private sector, in the design, construction and management of infrastructure. Ultimately, there is no shortcut for quality.
Our new report, Building Together: seven principles for engaging civil society to deliver resilient, inclusive and sustainable infrastructure in the Pacific islands, argues competition to finance infrastructure projects in the Pacific islands should lead to lasting development outcomes, driven by local priorities. It also suggests civil society should be considered a key partner in the design and delivery of Pacific infrastructure.
Released last week at the Australasian AID Conference in Canberra the report is based on extensive research and consultations in Australia and the Pacific. It sets out seven key principles for policymakers to follow when designing new infrastructure. It is hoped that by adopting these principles, new infrastructure investments in the Pacific will grow local employment, support skills development, promote gender equality, and create more accessible infrastructure for people with disabilities.
The key driver of renewed investment in Pacific infrastructure is growing geostrategic competition in the region. However, there is also no doubt that Pacific states do have significant infrastructure needs. The Asian Development Bank estimates, for example, the Pacific will require US$3.1 billion in infrastructure investment each year until 2030. Pacific island countries also have unique infrastructure needs. Being among the most isolated states in the world, and especially vulnerable to the impacts of climate change, investments in resilient infrastructure can help mitigate intractable constraints on growth in the Pacific.
In recent times, major infrastructure initiatives have been announced. The United States, Australia, Japan and New Zealand have, for example, initiated a major investment in rural electrification in Papua New Guinea. The Australian government is financing new telecommunications infrastructure for Papua New Guinea and the Solomon Islands, and has committed to a ten-year $250 million bilateral infrastructure program in the Solomon Islands. Australia, long the region’s largest provider of development finance, has also established a multi-billion-dollar infrastructure bank dedicated specifically to Pacific island countries. The Australian Infrastructure Financing Facility for the Pacific, which uses a mixture of commercial loans and grant financing, represents a significant change in Australia’s aid program to the region.
Taken together, these new initiatives represent an opportunity to consider, and promote, shared standards for quality infrastructure. Our report is intended to stimulate thinking about best standards for infrastructure investment in the Pacific.
The Australian government has focused on involving the private sector in delivering new infrastructure in the Pacific. The Minister for International Development and the Pacific, Alex Hawke, has, for example, suggested it is time for Australian businesses to step up in the Pacific. In addition to the private sector, our report suggests there should also be a focus on engaging and supporting civil society groups. Working with Pacific civil society in the design and implementation of new infrastructure is critically important for ensuring transparent decision-making; including in tendering and monitoring infrastructure. New infrastructure projects are also an opportunity to stimulate economic growth in the Pacific directly, through the creation of local employment opportunities, skills transfer and capacity development, and through partnerships with local businesses and civil society groups. Given their closeness to communities, civil society organisations can facilitate the engagement of people with disabilities, and women, in infrastructure planning and delivery, helping to ensure that priorities – and design features – are based on local need, minimise risks to marginalised groups, and benefit these groups in their delivery and beyond.
Typically, it is the actions taken by island governments themselves to manage projects, and to develop robust policy frameworks governing the use and maintenance of infrastructure, that are a key determinant of positive outcomes. This means development partners should be supporting the strengthening of infrastructure governance, the ‘soft infrastructure’ that accompanies construction of hard assets. Often this also requires support for collaborative decision-making that includes Pacific civil society groups at regional, national and project levels. The Pacific Islands Association of Non-Government Organisations (PIANGO) was one of the partners consulted for this report. PIANGO executive director, Emeline Siale Ilolahia, told us it was critically important that new projects be driven by local priorities. “If we’re not careful these projects will be driven by the needs of the people proposing them, and the only beneficiaries will be the companies building them”, said Ilolahia.
“Building Together: seven principles for engaging civil society to deliver resilient, inclusive and sustainable infrastructure in the Pacific islands” was initiated by the Research for Development Impact Network (RDI Network) and co-produced by RDI Network and Pacific Connections (Australia). The report was co-authored by Wesley Morgan, Rebecca McNaught, Sally Baker, Fulori Manoa and Jope Tarai.
This article first appeared on the DevPolicy blog.