SPEECH
Speech by Peter Baxter at the National dialogue on
the role of the private sector in development and aid for trade
Panel session 1
Introduction
Good morning and thank you for the opportunity to speak about AusAID's business engagement agenda.
I would like to acknowledge the traditional owners of this land where we meet and pay my respects to their elders past and present.
Last night during dinner, I delivered a speech that focused on private sector led growth being fundamental to people overcoming poverty.
Development assistance therefore can play an important role in supporting this growth.
I also spoke about the strong intersection of interests with the private sector, and that we should find better ways to work together.
This morning, I would like to expand on this aspect and discuss in more detail the things we are doing to work with the private sector to help people overcome poverty.
The Australian Government's aid policy framework, An Effective Aid Program for Australia–making a real difference–delivering real results, makes a strong commitment to placing greater emphasis on working with the private sector in our aid program.
Effective Aid highlights the value of partnerships and encourages AusAID to 'harness the power of business' in seeking to achieve aid priorities.
Now it is important for me to mention from the outset that the fundamental reason for AusAID wanting to engage with business is to help overcome poverty.
I acknowledge that the private sector is motivated by different incentives, such as commercial success through profits – and that is okay and as it should be.
Governments are responsible for creating social value and businesses are responsible for creating shareholder value.
But while we have different motivations, I have the strong view that we can work together for mutual benefit where our interests intersect.
Last night I outlined three distinct ways that we can work with the private sector:
- To improve the business enabling environment
- To ensure the poor benefit from economic growth
- To find ways we can work with business to deliver our aid more effectively.
Today I would like to highlight some practical examples in these areas.
Before I go into details, however, I should mention that I have been pleasantly surprised by the very positive reaction from the business community in response to AusAID's efforts to strengthen linkages.
Businesses want to work with us for a number of reasons.
Our strong links with partner governments means we are well-placed to pass on valuable information to business about social, political and economic issues.
By providing business with visibility on our aid investments–such as planned infrastructure, government reforms and economic capacity building initiatives–we can help companies assess the viability of new ventures.
AusAID's role is different to Austrade–in that we are motivated by alleviating poverty and not the promotion of trade or Australian business interests.
However, this does not mean we cannot work with business where there is the potential to achieve sustainable development outcomes.
Working with business on the enabling environment
One area where AusAID is working with the private sector is in helping to promote a positive business enabling environment.
This is important to the aid program, as people ultimately exit poverty when they find a job.
And in developing countries, 90 per cent of all jobs are created by the private sector.
The critical role of the private sector in creating jobs was acknowledged in AusAID's Private Sector Development Strategy, launched by the Minister for Foreign Affairs, Senator Bob Carr, in August 2012.
The strategy reaffirms that the private sector, the engine of economic growth, is fundamental to moving people out of poverty.
It also sets out the ways AusAID works to support private sector-led growth.
For example, AusAID's economic capacity building activities–such as improvements to infrastructure, trade facilitation measures, health and education programs, initiatives that promotes women's economic empowerment–all help to create an environment in which the private sector can flourish.
They create the pre-conditions for the survival of business and long-term economic development, and ultimately poverty reduction.
AusAID funds a range of economic governance and growth programs in partner countries to support reform of the enabling environment.
Our governance and public financial management programs in Indonesia and the Philippines help those countries to use their own resources more effectively.
In Timor-Leste we continue to support improved financial management and budget planning across government.
This helps provide the certainty and confidence the private sector needs for sustainable, long-term expansion.
To help inform our aid investments we can also learn from private sector views on constraints to economic development.
This is why AusAID has convened a number of geographically focused roundtables with business to seek views on obstacles to growth.
At last month's roundtable with business, which focused on Myanmar, there was discussion about how private sector investment can support a sustainable economy and social development in an environment that:
- supports the participation of women
- offers greater access to jobs and stable incomes
- is underpinned by a regulatory environment that supports shared prosperity.
AusAID is now considering how it can continue to work with business in Myanmar on:
- critical law reform priorities and legislative transparency
- building human capital through vocational education
- current development priorities such as education.
In addition to Myanmar, we have convened roundtables with the private sector in partnership with bilateral business councils focusing on Indonesia, the Pacific, Papua New Guinea, and later this month, on Africa.
In this way, AusAID's roundtables with business are feeding directly into our program design and decision-making on aid investments.
But the potential for collaboration does not end here.
Ensuring the poor benefit from economic growth
Working with business can also help to ensure the poor benefit from economic growth.
As we all know, the benefits of economic growth do not always reach those who need it most.
For one thing, poor people are much more likely to be employed in the informal sector, missing out on the rapid changes to income and consumption that occur in the formal economy.
And for another, economic growth is often accompanied by rising levels of inequality, a risk to social cohesion and stability.
We are seeing this phenomenon in Indonesia, where despite many years of continued GDP growth, there are still over 120 million people living on less than two dollars a day.
So where economic activity takes off in our partner countries, AusAID is working to ensure the benefits are felt by the greatest number of poor people.
For example, AusAID's $65 million Cambodia Agricultural Value Chain Program aims to improve how farming systems work for poor small holder farmers.
This program:
- helps suppliers to provide advice to farmers
- facilitates local management of irrigation schemes
- enables the sharing of 'best practice' approaches between farmers, companies and associations
- works with media and IT providers to extend coverage into rural areas.
CAVAC interventions are expected to result in an additional 200,000 tonnes of rice worth over $25 million per year. It is also expected to benefit 230,000 farmers.
Australia's Mining for Development initiative is another good example of where AusAID is seeking to use its experience and competitive advantage to translate the wealth created by the extraction of resources to sustainable development outcomes.
This initiative focuses on working with governments in our partner countries to improve their legal and regulatory frameworks, and to give better skills to the local people working in the mining sector.
The main aim is to help our partner countries to develop their own resource endowment and convert it into significant and sustainable development.
As a world leader in the extractives industry, it makes sense for Australia to lend the expertise of our scientists, regulators and our major mining companies, to assist developing countries.
We appreciate the cooperation of mining companies such as Rio Tinto, BHP Billiton and Santos Ltd. in hosting AusAID study tours for visiting officials from foreign governments to witness first-hand how Australian companies engage in sustainable mining, in consultation with local communities and indigenous people.
AusAID is also now looking to work with mining companies to explore options for co-investment in vocational education institutions in PNG.
Another example of where AusAID is working with the private sector to achieve benefits for the poor includes our recent Memorandum of Understanding with Carnival Cruises, one of the largest cruise-ship operators in the Pacific.
This agreement will capitalise on the local employment generated by Carnival's operations, to build additional development benefits.
AusAID and Carnival Cruises will work jointly to improve workforce education; upgraded ancillary infrastructure at Pacific ports; and expand credit services and financial literacy training for small-scale shore-based vendors.
Working with the private sector as a delivery partner
There are also opportunities to work with the private sector as a delivery partner to make our aid program more effective.
AusAID is managing an expanding aid program: in 2013–14 we will administer Australia's largest ever aid budget, totalling $5.7 billion.
And this is projected to rise to 0.5 per cent of Gross National Income by 2017–18, some $8–9 billion.
With this additional funding, comes the responsibility to ensure we spend these investments in the best possible way.
And we can certainly learn from efficiencies and innovation that takes place within the private sector as a result of competition within the market place.
AusAID will increasingly be looking to form partnerships with business to draw on the strengths of business and we are already moving in this direction.
In 2012, AusAID entered into partnership with Oil Search to establish a Reproductive Health Training Unit.
AusAID's partnership with Oil Search will leverage their logistics and financial skills in remote areas of PNG to run the Health Training Unit.
We are contributing $10 million over five years to this program, with Oil Search contributing $2 million.
As a result of this partnership, up to 550 new front-line PNG health workers will be trained across 10 provinces of PNG specialising in obstetric care and family planning, vital for reducing maternal mortality.
And AusAID is working hard to establish more of these strategic partnerships with the business community.
Some may say we're not moving fast enough. But like business, we make no apologies for carefully selecting the companies and sectors we partner with.
We need to ensure that there is a clear mutual interest and we need to get to know each other–just as you do, whenever you forge new ties with another business.
To provide some context, we were speaking with Carnival for several months (since October 2012) before we signed the MOU.
So we are moving forward in a very considered way, but as I mentioned earlier, we already have some partnerships in place.
Conclusion
In concluding, I again reinforce the point I made last night during dinner–and again this morning–that there is a strong intersection of interests between the private sector and the Australian aid program.
And this is something that we can all capitalise on.
Following our Consultative Forum in 2012, AusAID has made a concerted effort to engage with business on roundtables and bilateral discussions.
And this is helping us to 'learn each other's language' and to identify the practical ways that we can work together.
To help frame our engagement AusAID has also established a high-level Business Engagement Steering Committee.
This committee has representatives from key peak business bodies including the Business Council of Australia, Australian Industry Group and the Australian Chamber of Commerce and Industry.
No doubt there will be challenges for us all as we move forward.
But there are also some tremendous opportunities.
Opportunities to achieve great things together that simply would not be possible should we choose to operate in isolation of one another.
I would like to thank Jim Redden for the opportunity to present today.
This is an important event that seeks to build a national discourse on how we can do more together and I look forward to the discussion.
Thank you.