Governance and Uncertainty: The Public Policy of Australia’s Official Development Assistance to Papua New Guinea Thomas William d’Arcy Davis Thesis submitted in total fulfilment of the requirements of the degree of Doctor of Philosophy December 2002 Department of Political Science University of Melbourne Abstract Against the backdrop of the historical failure of official development assistance to alleviate poverty in the Third World, this thesis examines the current approach of Western aid donors toward development. The thesis asks whether aid policy processes indicate a willingness, or capacity, on the part of official donors to more fully engage with the causal complexity of development, and so potentially improve development outcomes. Considering the case study of the Australian bilateral aid program to Papua New Guinea from both top-down and bottom-up policy perspectives, the thesis concludes that, in relation to Australia, there are significant structural and institutional impediments to change. The Australian Department of Foreign Affairs and Trade, and its interpretation of national interest, dominate high-level aid policy-making, even though the objectives of foreign policy and those of foreign aid differ. Australia's official development agency, AusAID, is limited in its capacity to legitimately challenge this dominance, not least because its use of contracted-out projects restrict its corporate knowledge and its ability to influence policy agendas and networks. Overcoming this impasse requires creative management on the part of senior public servants and non-governmental members of the aid policy community alike. This is to certify that: 1) the thesis comprises only my original work; 2) due acknowledgment has been made in the text to all other material used 3) the thesis is less than 100,000 words in length, exclusive of tables, maps, bibliographies and appendices. ................................................................... Thomas W. D. Davis Acknowledgments Many people supported and assisted me in the researching and writing of this thesis. My primary supervisor, Derek McDougall, guided me around the pitfalls of thesis preparation, displaying endless reserves of patience and good grace. Brian Galligan, my associate supervisor, was likewise extremely helpful and a fountain of clear, canny advice. Members of the Centre for Public Policy, University of Melbourne, whose stores of knowledge I ransacked included Bob Smith, David Corbett, Anthony O’Donnell, Marion Frere, Linda Hancock, Cathy Lowy, Cathy Woodward, Penny Wilson, Steve Perryman, Bruce Headey and Denis Muller. Special thanks to my office colleagues and friends, Gabby Trifiletti and Andrew Harvey, who kept me going when I felt like doing the opposite. Thanks also to all those from AusAID, Australian aid contractor firms, the Government of PNG, the University of PNG (especially Dorke Gedare) and the other PNG agencies and institutions who I interviewed or contacted during the course of researching this thesis. Finally, I’d like to thank my family and my friends for their never-flagging support, without which I could not have completed this work. Contents List of Acronyms and Abbreviations Introduction . 1 The research question . 1 The research method . 5 The case study . 8 The argument . 12 The thesis structure . 18 Part A Policy and Rational Hypothesis . 23 Ch 1. Good governance and development . 29 Modernisation theory and dependency . 31 Neo-classical economics v. the developmental state . 39 Participatory development . 43 Good governance . 49 Conclusion . 58 Ch 2. The Papua New Guinea-Australia development relationship . 63 Colonialism and development . 65 PNG-Australia aid relationship . 81 Governance policy in the bilateral aid program . 90 Conclusion . 97 Ch 3. National interest and Australian aid policy . 101 High-level aid policy formulation . 103 Australian aid and post-war reconstruction . 109 The Colombo Plan . 112 The Australian Development Assistance Agency . 118 The Auditor-General's report, the Jackson Report, the Simons Report 122 Conclusion . 128 Part B Implementation through Projects . 131 Ch 4. Projects . 138 Comprehensively planned projects and the project cycle . 140 Critiquing the project . 144 Aid policy implementation "state of the art" . 153 Conclusion . 161 Ch 5. Activity initiation: The Australia-PNG bilateral aid program . 164 AusAID's activity initiation procedures . 165 Stakeholder perceptions of activity initiation . 170 Conclusion . 181 Ch 6. Activity design: The Australia-PNG bilateral aid program . 183 AusAID's activity design procedures . 184 Activity design in the bilateral aid program . 189 Conclusion . 201 Part C Management through Contracts . 204 Ch 7. Contracting . 209 Competitive tendering and contracting . 211 Critiquing CTC . 217 Donor agencies and the use of contracting . 224 Conclusion . 232 Ch 8. Efficiency and effectiveness: Contracting in the bilateral aid program 234 AusAID's contracting process . 235 Stakeholder perceptions of AusAID practice . 243 Conclusion . 254 Ch 9. Control and participation: Contracting in the bilateral aid program 258 AusAID principles and procedures . 260 Reviews and evaluations . 268 The Australia-PNG bilateral aid program . 274 Conclusion . 283 Conclusion . 286 Bibliography . 293 Appendix - Stakeholder Interviews . 332 List of Acronyms and Abbreviations ACFOA Australian Council for Overseas Aid ADB Asian Development Bank AM Activity Manager AMC Australian Managing Contractor AMS Activity Monitoring System ANCP AusAID-NGO Cooperation Program APS Australian Public Service AUD Australian dollars AusAID Australian Agency for International Development BMZ Bundesministerium für wirtschaftliche Zusammenarbeit und Entwicklung (German official development agency) CDF Comprehensive Development Framework CDS Community Development Scheme CIDA Canadian International Development Agency CSG Contract Services Group (AusAID) CTC Competitive Tendering and Contracting DAC Development Assistance Committee (of the OECD) Desk Canberra-based AusAID Activity Manager DFAT Department of Foreign Affairs and Trade DFID Department for International Development (UK) FMIP Financial Management Improvement Program GNP Gross National Product GOPNG Government of Papua New Guinea HIID Harvard Institute for International Development HSIP Health Sector Improvement Program ICCPR International Covenant on Civil and Political Rights ICESCR International Covenant on Economic, Social and Cultural Rights IMF International Monetary Fund Logframes Logical Frameworks Analysis MOU Memorandum of Understanding MTDS Medium Term Development Strategy NGO Non-governmental organisation NIE New Institutional Economics NIEO New International Economic Order NMA National Monitoring Authority (PNG) NORAD Norwegian Agency for Development Cooperation NPI New Partnerships Initiative (USA) NPM New Public Management ODA Official development assistance OECD Organisation for Economic Co-operation and Development OLPLLG Organic Law on Provincial and Local Level Government (PNG) ONP/DNPM Office of Nation Planning/Department of National Planning and Monitoring (PNG) OPRE Office of Program Review and Evaluation (AusAID) PCC Project Coordinating Committee PDD Project Design Document PFMIP Provincial Financial Management Improvement Project PIA Performance Information and Assessment Section (AusAID) PME Participatory Monitoring and Evaluation PNG Papua New Guinea PNGDF Papua New Guinea Defence Force Post AusAID office attached to the Australian Embassy/High Commission in an aid-recipient country PRA Participatory Rural Appraisal PRS Poverty Reduction Strategy QAG Quality Assurance Group RRA Rapid Rural Appraisal SAP Structural Adjustment Program SEP Sectoral Expenditure Program SIDA Swedish International Development Agency SNDPS Strengthening National and Decentralised Planning Systems project TAG Technical Advisory Group TAP Technical Assessment Panel TOR Terms of Reference UNDHR United Nations Declaration on Human Rights UNCTAD United Nations Committee on Trade and Development UNDP United Nations Development Programme UNDRD United Nations Declaration on the Right to Development UNOPS United Nations Office for Project Services USAID United States Agency for International Development WHO World Health Organisation Introduction Decisions on Western foreign aid to the developing world are made within Western policy environments, public sector structures and institutions. The long-running failure of official development assistance to alleviate poverty can only be clearly understood if the impact of these environments, structures and institutions on aid policy is also known. In pursuit of this knowledge, this thesis brings together work from the fields of public policy, development studies and international relations in analysing the case of the Australian aid program to Papua New Guinea. The research question Western governments have a moral obligation to help alleviate global poverty. This obligation is more than simply a contemporary manifestation of Kipling’s “white man’s burden”. Irrespective of whether poverty is indigenous in origin or the result of Western exploitation, it severely reduces human dignity and restricts the freedom of a person to “lead the kind of life he or she values” (Sen 1999: 87). People have a right to this freedom. The Universal Declaration of Human Rights acknowledges this where it states: Everyone, as a member of society ... is entitled to realization, through national effort and international co-operation and in