Aid groups fear money will be diverted from the aid budget, risking doors ‘closing to us in Asia’

This article is more than 1 year old

This article is more than 1 year old

Aid groups fear the federal government is on the verge of taking more money from the strained aid budget to fund a $2bn infrastructure bank for Pacific island nations.

Prime minister Scott Morrison announced the Australian infrastructure financing facility last year as part of Australia’s “Pacific step up”, which is aimed at combatting rising Chinese influence in the region.

The Department of Foreign Affairs and Trade on Thursday confirmed the bank would be made up of $500m in grants and $1.5bn to be funded from the federal budget. But Dfat isn’t going to receive extra money to make up for the $500m, so money will potentially be diverted from the aid budget. A decision is expected on budget night, 2 April.

Aid groups maintain there is no fat left to trim in the aid budget.

Care Australia chief executive Sally Moyle said a Pacific step up shouldn’t stem from an Asia step down.

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“Australia cannot be seen as a development partner to be running hot and cold, we’ve got to be a consistent true friend and that doesn’t come from saying ‘oh well sorry Cambodia you’re fine now we’re taking the money away’,” she told Guardian Australia.

Moyle said it was vital the infrastructure scheme has safeguards that considered issues such as displacement of communities, gender equality and environmental impacts.

“If you don’t there’s a real risk we might be building white elephants in the Pacific,” she said.

Moyle noted a long history of infrastructure projects across the region that have made things worse for locals.

“Fabulous new highways built that don’t connect to villages, where people are trying to get their goods to the markets, but it does nothing for them, all it does … is allows elites to drive around. It doesn’t help poor people,” Moyle said.

The Australian Council for International Development chief executive Marc Purcell said Australia was being foolhardy by “cannabilising the aid budget” and putting at risk relations with key Asian countries.

“We’ve left a trail of damaged relationships. We said we’re helping to alleviate poverty but then we’ve pulled out. What that means is doors are closing to us in Asia,” Purcell said.

Purcell said there was no point building hospitals if there was no consideration for ongoing building maintenance, the availability of skilled medical staff and the cost of wages and petrol generators.

The aid program has been hit with more than $11bn in funding cuts since 2013 when the Coalition came to power. Australian aid has fallen to a historic low level to just 22 cents of every $100 of gross national income.

Last year, the government skimmed money from the aid program to Indonesia and put it towards building an undersea cable for Papua New Guinea and the Solomon Islands.

World Vision chief executive Claire Rogers, who has a background in banking, is worried the government is rushing the bank without proper consultation and involving Pacific communities.

“Any infrastructure projects funded by the new loan facility should be pro-poor, climate resilient, and be bundled with other community development projects to maximise their poverty reduction impact,” she said.

Australian National University professional Stephen Howes is critical of the involvement of Australia’s Export Finance and Insurance Corporation in the new infrastructure bank.

Efic stands to have its callable capital of $200m boosted to $1.2bn under the government’s plan.

Howes is worried that Efic could give a green light to Australian businesses to push projects in neighbouring countries by recruiting local political champions to their cause.

“The risks are obvious. They are that the better-connected rather than the better infrastructure projects will be approved, that good governance will be undermined, and competitive tendering sidelined,” he said.

Former minister for the Pacific, Concetta Fierravanti-Wells, was critical of the infrastructure bank in an interview with the Guardian last year, saying she doesn’t want to see “one debtor swapped for another”.