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The Australia-China Chamber of Commerce and Industry of New South Wales |
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AUSTRALIA’S
TRADE AND AID POLICIES WITH CHINA 24 November 2000 Afternoon Session:
Australia’s Aid Policy with China
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The initial discussion focused
on the allocation of Australia’s development assistance to China according to
various categories, as presented in AusAID’s publication, Australia and China: Supporting reform and development –
Aid program strategy 2000-2001.
Copies of the publication are available from AusAID’s Public Affairs
Office in Canberra, or from their Internet site: http://www.ausaid.gov.au. In the early part of next year,
AusAID will formulate the China aid program strategy for the 2001-2002 period
and welcomes input from the private sector.
This could include comments about the effectiveness of the current
program as well as suggestions for new directions that could be considered
for the forthcoming program. Accordingly,
this summary is divided into two parts.
The first includes comments relating to the current program. The second part summarises comments
relating to new directions. Follow-up
communications are stated at the end. |
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Several questions were raised
about the pie chart giving the breakdown of Australia’s development
assistance to China for the current period.
The percentages shown in the chart (page 9) of the publication
mentioned above are as follows: Rural development, environment
and natural resources – 25% The last category “other” is the
largest in terms of percentages and is somewhat ambiguous. For example, humanitarian elements exist
with some of the other categories.
The “other” category also includes official development assistance
that arises from separate (non-AusAID) budgets. Food aid consists mainly of contributions to international
agencies such as the World Food Program.
Additionally, the Australian Centre for International Agricultural
Research (ACIAR) is a government agency that supports international
agricultural research to reduce poverty, improve food security and protect
the natural resource base for agriculture in developing countries. Although this activity is classified as official
development assistance, it is carried out under a separate budget. The estimated value of the China bilateral program for the current
financial year was reported to be $A39.8 million, while the addition of the
"other" category (amounting to about $A17.7 million) results in an
overall estimate of total aid flows to China of $A57.5 million. Additional questions arose as to
how the allocations are determined. A
summary of the discussion arising from these questions is given in the
following subsections. |
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AusAID works closely with
China’s Ministry of Foreign Trade and Economic Cooperation (MOFTEC) in
determining the projects that are supported by AusAID funds. Most of these projects arise at the suggestion
of the Chinese. For example, a
project that was open for tenders at the time of the roundtable discussion is
the Datong Cleaner Environment Project.
According to the design
document, the project was initiated in 1996 by the Shanxi Environmental
Protection Bureaux and the Datong Coke and Gas Corporation. A proposal was submitted through MOFTEC in
September 1997 by the Foreign Economic Relations and Trade Commission of
Shanxi Province and the Datong Municipality.
During the visit of the AusAID
Environmental Strategy Mission, the proposal was redrafted to seek Australian
assistance to enable the Datong Coke and Gas Corporation’s demonstration
plant, using best practice technology, to serve as a model for 1000 other
coking plants in Datong and elsewhere in Shanxi Province. The project was approved after a
feasibility design study. Other development assistance
projects have proceeded in similar way.
With many years of close cooperation between AusAID and MOFTEC, the
projects that are proposed by the Chinese are generally those for which
MOFTEC has determined that Australian assistance is likely to make a
substantial contribution to China’s development progress. |
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AusAID’s current objectives are
to advance Australia's national interest by assisting developing countries to
reduce poverty and achieve sustainable development. “National interest” includes a number of considerations that
are linked to the reduction of poverty and achieving sustainable
development. These include benefits
to Australia from increased security within the Asian region (mainly but not
exclusively), as well as longer-term benefits from stronger regional
economies. It is generally hoped that
participation in AusAID projects by Australian companies adds to the level of
expertise and experience of these companies and that economic development of
the recipient nations enhances their international trading capacity. However, AusAID projects are not chosen
specifically for their contribution to Australian companies or for the trade
enhancement benefit. It was pointed out that some
confusion exists about the extent to which humanitarianism and altruism are
key attributes for development assistance projects. The response of public sector participants suggested that most
projects make a humanitarian contribution, but they are expected to make
other contributions as well. For
example, the Datong Cleaner Environment Project is assessed to contribute
substantially to the reduction in the amount of air pollution in Shanxi
Province and therefore contributes to an overall environmental
improvement. It is also expected to
reduce the incidence of respiratory illness in the province. AusAID projects are also
directed toward assisting China in its transition to a market-based economy
and this is expected to have an indirect effect on the alleviation of
poverty. Thus, a range of projects
exists, some of which have a direct effect on poverty, while others have a
more indirect effect. All projects
must make some contribution to China’s economic and social development and
all must meet the “national interest” objectives mentioned above. Comments from the private sector
participants were supportive in relation to the range of areas covered by
AusAID projects. This specifically
included: Ø
governance, Ø
rural development, environment and natural
resources, Ø
promoting dialogue on human rights, and Ø
education and training |
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It was noted that the
implementation of all AusAID projects is done by companies that are
registered in Australia or New Zealand.
Specifically, all tendering companies must carry on business in
Australia or New Zealand, have headquarters and associated facilities in
Australia or New Zealand and the majority of the team proposed in the tender
must be Australian or New Zealand citizens or permanent residents who have
qualifications recognised in Australia or New Zealand. The team leader must be an Australian or
New Zealand citizen or permanent resident and have relevant qualifications
recognised in Australia or New Zealand.
Exceptions may occur with
projects for which there is a demonstrated lack of technical capacity within
Australia or New Zealand. Additionally,
the proportion of Australian and New Zealand citizens or permanent residents
may be reduced (but may not be less than one-third), provided that the
majority of those nominated from third countries come from the developing
country or countries in which the project is being implemented. Co-financed projects that are
administered by international aid organisations, with some direct
contributions from the Australian Government, are not tied to Australian
services in the manner just described.
There is a presumption, however, that that
qualified Australians will have the opportunity to apply for expatriate staff
positions and consultancy opportunities with these organisations. Goods needed or purchased as
part of the aid funding need not be sourced in Australia, but it is generally
hoped that a substantial portion of it will be. Procurement must comply with the normal conditions for
government purchases and this is based upon achieving “value for money”. A brief discussion arose
regarding AusAID’s selection process for implementing contractors. Private sector participants made the
following comments: Ø
Examination of the short-listed companies suggests
that most of the implementation work is done by a relatively small number of
companies. Although it is clear that
AusAID seeks a wider field, there is nevertheless a perception among
potential tendering-companies that new entry is difficult. This perception acts to perpetuate the
relatively small number of implementing companies. Ø
The implementing companies sub-contract much of the
work to other companies and this sub-contracting process is less transparent
to the private sector, as compared to the contract for project
management. Ø
In the past, the evaluation procedure for projects
and for specific tenders was difficult to understand, and the “debriefing”
for unsuccessful bids was not always effective in clarifying the procedure. Public sector participants
stated that the tendering process is constantly being reviewed and improved
so that many of the difficulties experienced by prospective tenders in the
past have now been eliminated or minimised.
AusAID has consultations with new tenderers and offers guidance in the
preparation of their bids. AusAID encourages smaller
companies to form syndicates for the purpose of making bids and encourages
the implementing company to draw from a range of potential sub-contractors. The sub-contracting arrangements
are controlled in the sense that AusAID has specific compliance requirements
for subcontracts. It was pointed out,
however, that information about the sub-contracting procedure in general, and
about compliance in specific cases, is not generally available. |
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More complete information about current
AusAID projects in China would be beneficial to private sector companies that
do not seek to be part of the contracting process. This could include Australian businesses that are seeking
markets for unrelated products or services, but for which indirect benefits
could be obtained from the goodwill established by AusAID projects. For example, the Chamber could
make use of information about AusAID projects when meeting with visiting
delegations from the relevant cities.
These delegations would typically be from municipal or provincial
government departments that are not directly related to the projects, but the
link through the project is nevertheless likely to enhance the level of
cooperation in other areas. The information that is readily
available from AusAID is not is a particularly useful form. For example, the aid program strategy for
2000-2001 (cited in the first paragraph of this summary) does not list new or
current projects. Page 2 of the
document contains a list of ongoing projects, but the location associated
with each is excessively general (China wide, Beijing, various provinces in
China, flood affected provinces in China, etc.). Greater detail is available from
the project design documents that are posted on the Internet for potential
tenders. However, these are taken off
the Internet after the deadline for tenders and cannot be referred to later
unless they were downloaded during the announcement period. Public sector participants
agreed that the “business opportunities” information on the Internet was
managed by the contracts division of AusAID and was designed to facilitate
the contracting process. Other ways
of conveying and retaining relevant information could be considered. The Chamber agreed to supply
some specific suggestions in a separate document in relation to these
comments. Part Two: Aid
program strategy for 2001-2002 As noted above, most of the
private sector participants supported the range of activities that went into
the strategy for 2000-2001, but nevertheless suggested that several new
directions should be considered. These are summarised in the
sections below. |
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It was noted that most of
Australia’s development assistance projects in China focused on rural
poverty. In view of the fact that
approximately 68 per cent of Chinese live in rural areas, this emphasis is
understandable. However, the
rural-to-urban migration is rapidly increasing and this places increased
pressure on urban development. Unless
urban planning is improved substantially, this migration may be associated
with a transfer of poverty from rural areas to urban areas. It was also suggested that the
alleviation of poverty through specific aid projects might be more difficult
in urban areas. This arises from the
need to integrate these projects more completely into the overall urban
environment. Additional planning and
coordination may therefore be necessary and the process of achieving this
should be started before the need becomes urgent. |
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AusAID’s assistance relating to
governance has, in the past, concentrated on the financial sector and various
Chinese state-owned enterprises (SOEs).
Many of the smaller SOEs have now been privatised. This was achieved, in some cases, by
selling shares to the employees. Assistance in improving the
managerial and financial structure of these enterprises is needed in order to
ensure that they are able to grow in size and diversity under a more
competitive market system. |
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Recent reports indicate that
private enterprises in China contribute about 33 per cent of the gross
domestic product. If privately owned
agricultural enterprises are included, the proportion may reach 51 per
cent. Taking into account
collectively owned enterprises, the contribution of all non-state-owned
businesses account for about 62 per cent of GDP. Private sector participants
noted that the relevance to this to AusAID projects is that the close link
between MOFTEC and the provincial and municipal Foreign Economic Relations
and Trade Commissions may, in the near future, be less comprehensive in
screening development projects, compared to the situation during the past two
decades. Input from enterprises and
industry associations is correspondingly more important, but these are less
developed as effective organisations, compared to departments within the
three levels of government. These
organisations should gradually become more active participants in the AusAID
project selection process, and to be effective in that capacity it will be
necessary to undertake some project work in institutional strengthening. |
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1. Specific suggestions for
improvements in the information made available to the private sector about
current and anticipated AusAID projects in China. 2. More specific suggestions and
rationale for new directions in the development assistance program with China
for 2001-2002. |
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