OVERVIEWSSection 1

Director General’s review

Agency overview

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D IRECTOR GENERAL’S REVIEW

The year in review

2007–08 was an exciting year for Australia’s international development assistance program. The government announced that Australia would increase its official development assistance (ODA) to 0.5 per cent of gross national income by 2015 to assist our developing country partners to make progress against the Millennium Development Goals (MDGs), building on growth over the previous budget period. Australia’s pledge came against a backdrop of renewed international commitment to accelerate MDG attainment globally. New partnerships were initiated with some of our closest neighbours in the Pacific, and with a broad range of domestic and international stakeholders, to help implement this commitment. The year also saw significant progress towards improving the effectiveness, transparency and accountability of Australian aid.

Achieving the MDGs

Through the development assistance program, Australia is part of a global effort to make faster progress towards the MDGs. Australia’s contribution to this effort focuses on the Asia-Pacific region where a majority of the world’s poor live and where substantial development challenges confront our neighbours.

Australia is working with the countries of our region to promote faster and more inclusive economic growth to make progress towards MDG 1 (eradicate extreme hunger and poverty). There are many drivers of economic growth including investment in infrastructure, rural productivity, private sector development and telecommunication utilisation. In 2008 the Government of Vanuatu, with Australian support, successfully negotiated the introduction of competition for telecommunication services that has significantly reduced costs and facilitated expanded coverage to rural areas. In October 2007, AusAID launched the Enterprise Challenge Fund for the Pacific and South East Asia. By challenging business to look for new market opportunities, the fund aims to stimulate growth and ensure that the poor are included in the resulting benefits and opportunities.

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Rapid increases in worldwide food prices over the last 12 months have threatened the achievements of many countries in reducing poverty and hunger. The global food crisis has required both emergency and long-term responses. In May 2008, Australia provided an additional $30 million to the World Food Programme through its Extraordinary Emergency Appeal. AusAID is leading the development of the Australian Government’s long-term response to the impact of the global food crisis in developing countries.

The aid program is promoting progress towards MDG 2 (achieve universal primary education), MDG 4 (reduce child mortality) and MDG 5 (improve maternal health) by expanding investments in education and health. Key achievements in education include training over 9000 teachers and officials in Asia and the Pacific, constructing over 380 junior secondary schools in Indonesia and providing clean water and sanitation to over 500 schools in Laos. Australia’s investments in health include increased support for child and maternal health programs, such as increased access to vaccinations for children in Papua New Guinea, where children this year will receive for the first time immunisation against Haemophilus influenzae type b which causes meningitis and pneumonia, two of the most common causes of death in children in PNG. Results are also starting to be seen from investments in broader health workforce development, including better skilled midwives, pediatricians and other health workers in the region.

In our region and beyond, Australia is making a significant contribution to MDG 6 (combating HIV/AIDS, malaria and other diseases). Malaria is one of the biggest killers of children in Melanesia. The past year saw the start of the $25 million Pacific Malaria Initiative which aims to not only control malaria and reduce it greatly in Vanuatu and Solomon Islands, but also in the longer-term to eradicate it progressively island by island. An early achievement includes the completion of the largest entomological and parasitological malaria survey conducted in Melanesia which will guide elimination action plans. In May 2008, AusAID released a consultation paper on a new HIV strategy which will incorporate the latest international analysis on the epidemic. The strategy will be released later in 2008.

Australia is taking a comprehensive approach to achieving MDG 3 (promoting gender equality and empowering women). Significant progress has been made in terms of integrating gender equality into the development assistance program including by strengthening gender analysis and reporting on gender results, and through enhanced staff training. Achievements on gender equality include improvements to women’s access to justice and employment in roads projects in Papua New Guinea, strengthening women’s voices in their communities and local governments through community development initiatives in Indonesia and Philippines, and the start of a new program on women’s leadership in the Pacific. There is much more to do if MDG 3 is to be achieved.

Addressing the global challenge of climate change is essential to the achievements of the MDGs, particularly MDG 7 on environmental sustainability. As part of Australia’s response to climate change, AusAID is managing significant investments in climate change mitigation and adaptation. In 2008, the government launched the International Forest Carbon Initiative and the Prime Minister agreed on high–level partnerships with the leaders of Indonesia and Papua New Guinea. The 2008–09 budget includes a $150 million commitment to meet high priority climate change adaptation needs in vulnerable countries in our region.

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In April 2008 the Prime Minister announced that Australia had joined the MDG Call to Action. The Call to Action is a UK initiative that aims to galvanise widespread support, momentum and concrete action for the MDGs.

In May 2008, the government announced a 2008–09 aid budget commitment of $3.7 billion, an important step towards the continuing increase of Australian international development assistance. The budget targeted practical development outcomes, with major new initiatives promoting progress towards the MDGs and greater attention to alleviating the needs of the most vulnerable. These initiatives include investments in clean water and sanitation, fighting avoidable blindness, infrastructure, public sector capacity and land management in the Pacific. Through the budget, the government has committed to a United Nations Partnership for the MDGs. Australia will provide an additional $200 million over four years to six United Nations agencies and the Joint United Nations Program on HIV/AIDS to boost their capacity to lead global efforts to realise the MDGs. The budget also provides additional funding for humanitarian, emergency and refugee programs, Iraq humanitarian and reconstruction assistance, and non-government organisations, volunteer and community programs.

While the focus of the aid program is on making a long-term contribution to poverty reduction and sustainable development, natural disasters and other humanitarian situations continue to pose an immediate threat to achieving the MDGs and require appropriate Australian responses. During 2007–08, AusAID played a central role in Australia’s efforts to minimise the impact on the poor and vulnerable of emergencies and humanitarian crises around our region and the world. The largest emergency response was the $25 million package of assistance that Australia provided to the people of Burma following Cyclone Nargis. Other emergencies that received a significant Australian response included Cyclone Guba in Papua New Guinea, Cyclone Sidr in Bangladesh and the Sichuan earthquake in China. Australia also continued to support humanitarian activities through global contributions and in specific countries including Afghanistan and Sudan.

Building partnerships

In March 2008, the Prime Minister committed Australia to new development partnerships with the island states of the Pacific. These Pacific Partnerships for Development will provide a new framework for Australia and the Pacific island nations to commit jointly to achieving shared goals. The first partnerships with Papua New Guinea and Samoa were signed at the Pacific Islands Forum in August 2008. Partnerships will be negotiated progressively with other Pacific island countries over the coming years.

The government also entered into a strengthened five-year development partnership with Indonesia, marked by the launch of the Australia-Indonesia Partnership Country Strategy 2008–2013 in June 2008. Guided by the strategy, Australia will provide up to $2.5 billion in development assistance to help tackle poverty and promote regional peace, stability and prosperity. Australia will help Indonesia make faster progress towards achieving the MDGs, particularly to improve the health of mothers and children and increase access to clean water and sanitation.

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As Australia scales up its international development assistance, partnerships with other donor countries are increasingly important for sharing lessons and delivering effective aid. In May 2008, I signed a partnership agreement between AusAID and the UK’s Department for International Development. The agreement helps give effect to a commitment by Australia’s Prime Minister and his UK counterpart to work closely together to address a range of urgent global challenges including international development. The partnership is a valuable addition to existing partnerships and collaborations with other bilateral donors including New Zealand, Germany and Japan.

Australia has strong and growing partnerships with the World Bank and the Asian Development Bank (ADB). During 2007–08, Australia participated in the replenishment negotiations for the concessional financing arms of both the World Bank and the ADB. Australia committed $583 million to the replenishment of the World Bank’s International Development Association, and is now the 12th largest donor. Australia committed $333 million to the replenishment of the ADB’s Asian Development Fund, maintaining our position as third largest donor. The outcomes of the replenishments include measures to strengthen effectiveness and enhance the focus on small and fragile states.

The OECD Development Assistance Committee commenced a peer review of Australia’s development cooperation in 2008, the first such review since 2004. The review team visited Canberra and AusAID offices in Indonesia and Vanuatu in June 2008. The review provided an important opportunity to share Australia’s knowledge and experience with the international donor community. The team found lessons for other donors in Australia’s whole-of-government approach and noted the quality of our in-country partnerships and achievements in integrating gender across the program. The final review examination will be held in December 2008.

AusAID continues to explore new opportunities to engage the Australian community in the international development program including through public awareness activities such as the Relief in sight exhibition and through partnerships with non-government organisations and the private sector such as Business for Millennium Development (B4MD). B4MD was formed in 2007 and encourages Australian businesses to address poverty in developing countries in the Asia-Pacific region. AusAID is supporting a B4MD summit that will be held in October 2008.

AusAID continues to work closely with other Australian Government agencies in policy development and program delivery. The Development Effectiveness Steering Committee continues to play a valuable role in ensuring policy coherence on priority budget and strategic issues by engaging key central agencies, namely, the departments of the Prime Minster and Cabinet, Foreign Affairs and Trade, Finance and Deregulation, and Treasury. AusAID also maintains strategic partnership agreements with key whole-of-government partners. During 2007–08, senior-level review meetings were held on the partnerships with the Attorney-General’s Department, Australian Federal Police, Australian Public Service Commission, Treasury and the departments of Finance and Deregulation, and Environment, Water, Heritage and the Arts.

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Under its Reconciliation Action Plan launched in May 2008, AusAID is looking to develop new partnerships on the linkages between international development and Indigenous development in Australia. The plan outlines the measurable steps AusAID will take to share expertise in approaches to poverty alleviation with Indigenous organisations and Australian agencies working in the field of Indigenous development. It will also encourage the recruitment and retention of Indigenous Australians and promote the principles of diversity and cultural awareness in the workplace.

Improving effectiveness

The first Annual Review of Development Effectiveness, a product of the Office of Development Effectiveness, was tabled in Parliament in March 2008. The review found that Australia managed its aid activities well and was achieving good results. It also found that Australian aid was increasingly consistent with partner government policies and aligned with the efforts of other donors. The review identified opportunities to increase aid effectiveness including by strengthening the performance orientation of the program, getting more from technical assistance, and meeting gender equality commitments. In 2007–08, the Office of Development Effectiveness also published an evaluation of approaches to anti-corruption and commenced a number of new evaluations, including examining efforts to address violence against women in Melanesia and East Timor and improving basic services for the poor in fragile environments.

As part of making continued improvements in program performance, AusAID instituted a new Performance Assessment and Evaluation Policy in December 2007. Its implementation has strengthened AusAID’s own assessment of program quality and contributed to more effective and results-oriented program delivery.

AusAID is increasing its investment in priority research and analysis to build the evidence base on development and contribute to more effective aid. In January 2008, the Parliamentary Secretary for International Development Assistance launched AusAID’s first Development Research Strategy. The Australian Development Research Awards commenced during the year with funds awarded to 27 projects on a competitive basis. AusAID also completed two significant reports on development in the Pacific, the first Pacific economic survey and the Making land work report on reconciling customary land and development.

AusAID continued its ongoing process of corporate reform during 2007–08, following the direction set by the AusAID 2010 Director-General’s blueprint in early 2007. Implementation of the blueprint has brought about significant changes to the way AusAID does business, both in Canberra and overseas, to ensure it has the capacity to deliver an effective, expanded program. Significant progress has been made in terms of the devolution of program and financial management functions to country offices. Regional hub offices under senior executive leadership were established in Bangkok for the Mekong region and Suva for the Pacific. These regional hubs have facilitated the devolution of regional programs and provided increased support to smaller country offices. Corporate service managers have been placed in larger country offices to provide dedicated support across all corporate functions. To support devolved operations, AusAID has continued to strengthen its corporate services and systems covering financial and human resource management and information technology.

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The structure and staffing profile of AusAID’s headquarters have evolved to increase policy development capacity, support policy implementation, and improve knowledge management. Thematic groups, consisting of public servants and technical advisers, now sit alongside program areas to develop sector and cross-cutting policies and to support policy implementation through technical expertise, guidance, and quality review. Thematic groups are contributing to knowledge sharing and professional development by convening thematic networks that connect all staff working on a particular sector or theme in Canberra and overseas.

The year ahead

2008–09 will bring significant opportunities and challenges for AusAID in delivering an increased aid program while maintaining an emphasis on program quality and achieving measurable development outcomes. In this International Year of Sanitation, AusAID will begin implementing the government’s commitment to invest significant additional resources in addressing the critical challenge to health and wellbeing posed by inadequate access to water and sanitation. In addition to implementing the government’s commitment on avoidable blindness, AusAID will finalise consultations in Australia and the Asia-Pacific region on a disability strategy that will be launched in late 2008 to improve the lives of people with disability in developing countries.

In addition to implementing these new commitments, the aid program will continue to make significant investments in strengthening the delivery of health and education services and the provision of key economic infrastructure. Developing a comprehensive response to the global food crisis, with an appropriate balance between short-term humanitarian assistance and long-term measures to boost food security, will be another key priority in 2008–09.

Australia will draw on and contribute to international best practice in development assistance, including by participating in the High Level Forum on Aid Effectiveness in September 2008. The forum is expected to generate an action agenda of key measures that donors and developing countries can implement to refine approaches to capacity building, increase the use of partner government systems and ensure mutual accountability for development results. AusAID will make ongoing improvements to its operating procedures to increase aid effectiveness and to implement new approaches such as the Pacific Partnerships for Development.

AusAID will continue to refine its business model to support effective aid delivery through largely devolved programs while responding to new policy priorities and a changing global and regional operating environment.

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AGENCY OVERVIEW

Role and functions

Australia’s international development assistance helps developing countries reduce poverty and achieve sustainable development in-line with Australia’s national interest. AusAID advises the government on international development policy and manages Australia’s international development assistance programs. Australia’s aid program is focused on achieving sustained improvements in people’s lives by working with our partners—domestically, internationally and multilaterally—to achieve the Millennium Development Goals.

In carrying out this role, AusAID draws upon its experience in aid and development over more than six decades, particularly in the Asia-Pacific region. In working with our whole-of-government partners, AusAID facilitates an understanding of the factors that contribute to aid effectiveness and sustainability, especially in fragile states. The agency’s practical experience with humanitarian crises and disasters enables it to lead and coordinate quick, flexible and effective responses. Strong relationships with bilateral, multilateral and civil society bodies provide critical insights into the development challenges of the region, both long and short-term, and support Australia’s broader foreign policy agenda.

AusAID and enhanced whole-of-government engagement

Whole-of-government engagement in the delivery of the aid program has evolved to become a way of working for AusAID. At a strategic level, the Development Effectiveness Steering Committee, with deputy secretary representation from central agencies, provides a key whole-of-government coordination mechanism to oversee the effectiveness of the aid program. Most aid delivered to specific developing countries by AusAID is covered by country program strategies. This ensures a coherent policy approach.

At an operational level, the aid program benefits from the expertise of other government departments in aspects of economic policy, public financial management, and law and justice, helping to address the development challenges in our region. Other departments are directly involved in the day-to-day delivery of the aid program. The Regional Assistance Mission to the Solomon Islands and the Strongim Gavman Program (formerly the Enhanced Cooperation Program) in Papua New Guinea are just two examples of this approach. Development assistance issues have also become increasingly interlinked with broader Australian regional and international policy priorities. These include regional security, trade, economic integration, the transboundary threats posed by HIV/AIDS and other communicable diseases, counter-terrorism, illicit drugs and organised crime.

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Organisational structure

AusAID is an administratively autonomous agency within the Foreign Affairs and Trade portfolio. The Director General reports directly to the Minister for Foreign Affairs on all aspects of aid policy and operations. The Director General is responsible for the agency’s financial and personnel management.

Figure 1 shows AusAID’s organisational structure at 30 June 2008.

AusAID has continued to restructure to better meet government priorities and to respond to ongoing changes in its operational environment. AusAID 2010—Director General’s blueprint (February 2007) established a model of AusAID with a strengthened central core to provide strategic direction for Australia’s program of overseas aid delivery and to coordinate the joint aid activities of other government departments. AusAID’s overseas presence, primarily in the Asia-Pacific region, has grown to meet the increased need for effective management and implementation of an expanding and diversifying program. The thematic networks (best practice networks for staff working on similar development topics in different program areas) and the Office of Development Effectiveness were established to enhance AusAID’s analytical capacity, and the quality and performance of its programs. These are further supported by a responsive and connected management framework comprised of stronger business systems, processes and controls.

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Outcomes and outputs framework

AusAID’s outcomes and outputs framework is shown in figure 2. Appendix B provides the resources summary for the agency’s outcomes.

The agency’s two outcomes were:

Outcome 1—To assist developing countries to reduce poverty and achieve sustainable development, in-line with Australia’s national interest.

Outcome 2—Australia’s national interest advanced by implementing a partnership between Australia and Indonesia for reconstruction and development.

AusAID’s administered items contribute to these outcomes, as do the three agency outputs: policy, program management, and the Australia-Indonesia Partnership for Reconstruction and Development management.

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FIGURE 2: AUSAID OUTCOMES AND OUTPUTS FRAMEWORK 2007–08

AusAID

Total price of outputs: $109.326 millionTotal departmental outcomes appropriation: $108.506 million

Total administered appropriation: $2 488.4 millionTotal administered expenses: $2 809.954 million

OUTCOME 1To assist developing countries to

reduce poverty and achieve sustainable development, in-line with Australia’s

national interest

Total price: $106.164 millionDepartmental outcome appropriation:

$102.018 millionTotal administered appropriation:

$2 483.918 millionAdministered expenses: $2 615.173 million

OUTPUT 1.1Policy

Total price: $20.491 millionDepartmental output appropriation:

$19.689 million

OUTPUT 1.2Program management

Total price: $85.673 millionDepartmental output appropriation:

$82.329 millionCapital injection (cash): $2.093 million

OUTCOME 2Australia’s national interest advanced

by implementing a partnership between Australian and Indonesia for

reconstruction and development

Total price: $3.162 millionDepartmental outcome appropriation:

$6.488 millionTotal administered appropriation:

$4.482 millionAdministered expenses: $194.781 million

OUTPUT 2.1Australia-Indonesia partnership for

reconstruction and development management

Total price: $3.162 millionDepartmental output appropriation:

$6.488 million

ADMINISTERED ITEMSAustralia’s development

cooperation program

Expenses: $2 615.173 millionAppropriation: $2 483.918 million

Capital injection (cash): $480.640 million

ADMINISTERED ITEMSAustralia-Indonesia partnership program

Appropriation: $4.482 millionExpenses: $194.781 million

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AUSAID ANNUAL REPORT 2007—2008

Catherine Walker, AusAID’s Deputy Director General, at the launch of The shack and dialogues—understanding tuberculosis, an exhibition at Parliament House, Canberra, sponsored by AusAID and Results Australia in March 2008 Photo: Eddison Photographics

Opposite »Murray Proctor, Australia’s Ambassador for

HIV/AIDS, delivered the Australian statement at the high-level meeting on AIDS at the United Nations

headquarters in New York on 11 June 2008. The meeting reviewed progress made in implementing the 2001 Declaration of Commitment on HIV/AIDS

and the 2006 Political Declaration on HIV/AIDSPhoto: Kay Hull

AusAID Director General, Bruce Davis greets Dr Catherine Hamlin AC, founder and CEO of the Addis Ababa Hamlin Fistula Hospital in March 2008. The occasion marked Australia’s agreement to provide $2 million in 2007–08 to fund the work of the hospital in treating women with obstetric fistula. This will bring to more than $5.7 million Australia’s support for the hospital since 1993Photo: Kim Biedrzycki