MCCULLY CLEANS UP AID

We have been watching this with interest. NZ has worked out that hand outs and hand ups dont work here at home so why should our aid be based on the same premise. Murray McCully has signalled a pragmatic change and we like it - a lot.

Prior to the election, the National Party made clear its concerns over the structure and policy settings of the government's aid agency, NZAID.

Given that a key objective of our aid should be to reverse the negative trends we see in the Pacific, those policies have failed by any objective measure.

Our aid dollars have generally done little to build sustainable economies providing employment prospects and the promise of a brighter future.

Air and shipping services - the arteries for trade and tourism - are under threat and in decline. Substantial sums of aid monies are fed into unproductive bureaucracies - a classic example of mistaking action for achievement.

NZAID's mandate currently focuses on the rather nebulous concept of poverty alleviation. Poverty alleviation is important, but it is only a starting point.

With limited resources to work with, we need to make hard choices about where our aid dollars will go. Poverty alleviation is too incoherent a guide for that purpose.

So the Government has set a new mandate by which it and NZAID can be judged in relation to the effectiveness of our aid. That mandate requires a clear focus on sustainable economic growth as the means by which we seek to improve the lives of our poorest neighbours.

It specifies a clearer focus on the Pacific, with a greater percentage of the aid budget going to the region, although not to the exclusion of activities further afield.

Rather than just ticking boxes, we will track the performance of our aid against objective measures such as trade and tourism statistics; income growth, and improvements in health and education services.

The idea that poverty alleviation and sustainable economic development are opposing concepts is nonsense.

Lifting people out of poverty depends directly on increasing economic growth and strengthening trade. No country in the world has achieved one without the other.

Rather than simply rehearsing the mantra of "poverty alleviation" as our goal, we need to decide how we are going to alleviate poverty. We need to make choices resulting in sustained economic growth for our aid recipients - a hand up, not a hand out.

We will prioritise the building blocks for sustainable development. The notion that we should keep throwing money at a variety of bureaucracies for no apparent reward, while airline and shipping services dwindle to the point of constraining trade and tourism in the Pacific is absurd.

We also need to ensure that every available dollar gets to the intended recipient. Too much gets sucked up by the overheads of non-government organisations and bureaucracies. These include the inevitable costs of monitoring and auditing processes, or money simply flowing back into the pockets of New Zealand individuals, companies, and organisations.

The other important change in mindset is recognising that aid is a key component of the Foreign Affairs portfolio, and thus needs to align, as much as possible, with our wider foreign policy interests.

That is not to suggest, as some would have it, that aid should be dispensed by a series of random, politically-motivated handouts. On the contrary. What we seek to achieve is a logical framework by which we can make difficult decisions regarding spending priorities in a manner broadly compatible with our identified national interests.

The idea that we, as a small nation with a limited budget, might have separate and potentially conflicting strategies for our diplomacy and aid functions is ridiculous.

In the interests of transparency around this issue, at the same time as the structural changes are made, we will make public the new mandate as agreed by Cabinet so there is clarity around exactly what the mandate is.

We will also be removing NZAID's semi-autonomous status - largely a technical change that will quite rightly bring it into line with standard public service accountability mechanisms.

For those who wish to characterise the changes as "political", I simply remind them that NZAID's current structure is entirely a creature of politics. It was the price of a coalition deal in 2002 between Labour and the Alliance, and any claim to greater purity than that is simply not supported by the facts.

I am confident that in coming years New Zealand's reputation as an innovative and constructive aid donor will be enhanced, not diminished.

Prior to the onset of the global economic crisis, an aid budget figure of $600 million was regarded as a laudable target to aim over the next few years. I regard that as an important goal, and will be working hard to achieve it.

If we can do that, and significantly increase the quality of our current spending, then we will have made a very real commitment to changing the lives of some of the world's poorest people, who also happen to be our neighbours.