Tag Archive for: foreign aid

It’s time to rethink foreign aid

Foreign aid is being slashed across the Global North, nowhere more so than in the United States. Within his first month back in the White House, President Donald Trump dismantled the US Agency for International Development (USAID) and froze foreign aid, calling it wasteful and fraudulent. Britain recently followed suit, trading off its international-aid budget for higher defence spending.

Advocates of official development assistance (ODA) rightly argue that it saves lives and serves national interests. But that does not change the fact that the system has been haemorrhaging credibility and resources for years and lacks a convincing narrative.

The upcoming United Nations Conference on Financing for Development, set for mid-2025 in Seville, Spain, will likely reiterate the long-held but rarely met target for high-income countries to spend 0.7 percent of their gross national income on ODA. What is really needed, however, is an independent commission on the future of the international aid system that can forge a new political consensus on the rationales for foreign aid, while also articulating a vision for the post-aid world many are now demanding.

Without an effort to recalibrate and reset foreign aid, the system will face death by a thousand cuts. Its ambition of catalysing sustainable development will be left unrealised, and an eighty-year international cooperation regime will likely collapse with no robust alternative in its place.

The modern global aid regime has looked brittle since the 2008 financial crisis. But the US’s withdrawal is a massive blow to a system whose purpose is laid out in Article 55 of the UN Charter: ‘the creation of conditions of stability and well-being which are necessary for peaceful and friendly relations among nations.’ The US was the foremost champion of these goals: in his 1949 inaugural address, President Harry Truman called for a ‘bold new program’ for sending technology and capital to help nations afflicted by poverty, disease and misery.

By the 1950s, the US was actively promoting foreign aid as a universal obligation, both to avoid shouldering the financial burden alone and to find common cause with anti-communist allies. That led, in 1961, to then-US President John F Kennedy creating USAID. A decade later, nearly all European countries had some kind of aid program, and being a donor had become synonymous with being a modern, developed country.

Even so, spending flagged almost immediately. To reboot donor support, in 1968, the World Bank invited former Canadian Prime Minister Lester B Pearson to lead an independent commission tasked with finding a new rationale for foreign aid. In other words, the Pearson Commission sought a persuasive argument for why affluent countries beset by domestic challenges should be concerned about the plight of low-income countries.

The question remains relevant today. Even before Trump set his sights on US foreign aid, the rationale for such assistance had become increasingly tenuous. In recent years, Global North countries have directed their aid budgets toward a range of foreign-policy priorities, many of which follow the letter but not the spirit of ODA, as defined by the OECD’s Development Assistance Committee.

This includes directing development assistance to Ukraine, a middle-income country which in 2023 became the largest-ever recipient of foreign aid, while the share of aid reaching the poorest countries had declined, and hosting refugees at home, which now consumes at least one-quarter of the aid budget in seven countries.

With other public-policy priorities gobbling up resources earmarked for development assistance, the OECD’s claim that a record amount of foreign aid was spent by donors in 2023 rings hollow.

Meanwhile, foreign aid has become an easy target in high-income countries that face growing fiscal deficits, cost-of-living crises and new security concerns. Right-leaning governments, in particular, often portray this foreign assistance as inefficient and ineffective.

In 2024, seven national governments and the European Union announced $17.2 billion in cuts to ODA to be implemented sometime between 2025 and 2029. Now, the Trump administration has slashed some $60 billion in foreign assistance, while Britain will shrink its aid budget by roughly $7.6 billion per year.

Given that the world’s second-largest donor, Germany, spent $27 billion less than the US on foreign aid last year, it will be difficult for any country to fill such a large gap. And Britain’s decision suggests that there is little interest in picking up the pieces left by Trump’s wrecking ball, likely leaving us at the tipping point of peak aid.

Many have suggested using this foreign-aid crisis as an opportunity to reduce African dependency on politicised external finance through changes to global trading rules and by lowering the cost of capital, or by building a new cooperation paradigm focused on global public investment.

Yet in his drive to ‘Make America Great Again’, Trump has shown no desire to advance such alternative visions and little understanding of the value of the soft power that USAID spent decades trying to cultivate. This is why the elimination of USAID cannot be described as a normal merger between the diplomatic and development branches of government, as in Canada or Britain, but only as an attack on the US’s role as global benefactor. This offensive comes with few domestic political consequences but with a high immediate human cost for those reliant on aid-funded goods and services.

The US’s abrupt inward turn underscores the need to reimagine a global aid system built for a world order that no longer exists. One way to do this is to commission an independent, high-level review of the global aid regime that can articulate a new paradigm that does not rely on the benevolence of any single donor. A Pearson Commission 2.0 could outline several new rationales for international transfers, present alternative financial and policy frameworks, and explore new global institutional arrangements to minimise aid dependency and reduce fragmentation, while still providing for the most vulnerable and helping future generations prosper.

As these massive aid cuts take effect, the risk of contagion is real. Unless the international community undertakes a systematic effort to understand the root causes of the current crisis and explore plausible solutions, countries still investing in ODA may start to worry that they are just rearranging the deck chairs on a sinking aid ship.

What Donald Trump can learn from allies on foreign aid

There are smarter and more effective ways to streamline and re-strategise US foreign aid.

The Trump administration is not the first Western government to envision a stronger, safer, and more prosperous country by integrating foreign aid with strategic objectives. The experiences of the United States’ Five Eyes partners, particularly Australia and Britain, offer encouraging evidence for reform, having achieved tightly targeted development programs supporting diplomatic and strategic priorities. They also offer sobering lessons about implementation pitfalls, including the abrupt disruption of established programs, especially those already aligned with strategic policy, loss of critical skills among government personnel and heightened unease among international partners.

The logic driving aid integration is compelling. In an era of great power competition, maintaining separate tracks for diplomacy and development is an unaffordable luxury. China has harnessed development, along with trade and financial investment, as an instrument of strategic influence through both soft and hard means. Both Australia and Britain recognised this reality, merging their aid agencies into their foreign ministries to create more strategically coherent development policies. Having made clear its intent to fundamentally reshape USAID, the Trump administration has the opportunity to learn from its allies in the pursuit of the American national interest.

A unified strategy: Australia 

The Australian government integrated the Australian Aid Agency (AusAID) with the Department of Foreign Affairs and Trade (DFAT) in 2013 with the stated goal of better aligning Australia’s development, foreign policy, trade priorities, strategies and objectives while bringing an enhanced focus on the Indo-Pacific. The integration accompanied a reduction of Australia’s development funding. After reaching a peak of more than $5 billion in 2013–14, or 0.33 percent of gross national income, Australia’s development budget has progressively declined. In 2023-24, the budget was $4.8 billion, or 0.19 percent of gross national income. This change is also stark in terms of the slice of the Australian budget spent on foreign aid compared to defence expenditures.

An independent review of the integration in 2019 found that 90 percent of the Australian government’s strategic targets for the integration had been met, driving development allocations towards infrastructure and the Pacific. The review also found ‘examples of development goals being more strongly advanced through joined-up, whole-of-department efforts.’

These initial efforts—such as the Pacific Seasonal Worker Scheme and the Australian Infrastructure Financing Facility for the Pacific—have since grown to enable more ambitious and innovative integrated development and strategic initiatives. Key among these are the Falepili Union with Tuvalu (which provides Australia with strategic denial rights and Tuvalu with climate resilience monies and opportunities for migration), the agreement between Australia and Papua New Guinea (which encompasses development and security elements) and Telstra’s acquisition of Digicel Pacific, the largest mobile provider in the Pacific, with the Australian government’s support amid rumors of interest from China Mobile. While the review stepped carefully around the issue, it found integration had increased Australia’s ability to counter efforts to overshadow Australia’s influence, like China’s Belt and Road and Digital Silk Road initiatives.

However, the review also found several areas of concern. Early morale problems among staff arising from the abrupt way the integration was implemented had largely dissipated by 2019, but a ‘pronounced deterioration in skills and systems’ remained. The review found that ‘almost 1000 years of experience left [government service] shortly after integration.’ Additionally, ‘estimates suggest another 1000 years of experience’ left the department in the five years before 2019 due to the department underestimating the capability needed to design and deliver development programming.

This loss of know-how continues to hamper effectiveness over a decade later. While development is now firmly accepted as a tool of statecraft, best wielded as part of a whole-of-government strategy, an article by the review’s author 15 months ago suggested DFAT still had room to improve in terms of fully harnessing its development delivery.

Strategic prioritisation: Britain

The merger between Britain’s Department for International Development and its Foreign and Commonwealth Office occurred in 2021. The principal intention behind the merger was to better align Britain’s development activities with its wider diplomatic, trade and geopolitical interests, both in strategic terms and in terms of in-country representation. The merger coincided with a decision to reduce the Britain’s development funding commitment from the 0.7 percent of GDP enshrined in law to 0.5 percent of GDP. Notably, the integration occurred while Britain was experiencing the economic slowdown of the Covid-19 pandemic, which resulted in a double blow to funding in absolute terms, constituting a 30 percent reduction overall.

Alongside the budget reductions, a strategic prioritisation of development initiatives was pursued, in which Britain focused on bilateral funding to a smaller group of countries where measurement of effect is often easier to determine, but at the expense of some wider bilateral and multilateral commitments which were deemed to deliver less tangible value to Britain.

In addition, Britain identified a select set of issues for its development focus, namely climate investments, girls’ education, and global health, where it had demonstrated expertise and where funding would have constructive spillover effects. For example, improving girls’ education is found to reap positive dividends for local security, prosperity and governance. These initiatives, concentrated in Africa, the Indo-Pacific and South Asia, are all areas in which Britain’s adversaries were harnessing development as an instrument of influence, dependence and coercion.

Britain’s National Audit Office (NAO) review of the progress of the merger in 2024 found positive evidence ‘of where a more integrated approach has improved the organisation’s ability to respond to international crises and events, which has led to a better result.’

Two such examples were Britain’s coherent humanitarian, diplomatic, and military response as the leading European power supporting Ukraine after Russia’s invasion, and the joint humanitarian and political response to the Ebola crisis in Uganda. The findings supported the rationale for the merger and the modernisation of the department as fit-for-purpose in sharpening the Britain’s geopolitical interests. However, the NAO also noted that ‘the indirect costs’ of the merger ‘in terms of disruption, diverted effort and the impact on staff morale should not be underestimated.’

The NAO also reviewed the effect of the overseas development aid reduction and found that while the prioritisation compelled in the government’s activities had some positive dividends, ‘the speed and scale of the budget reduction, and the lack of long-term planning certainty, increased some risks to value for money.’

What can the US learn?

These cautionary tales suggest some considerations for the Trump administration:

First, pace matters more than may be immediately apparent. While decisive action has its advantages, too rapid a transformation risks institutional damage that could take years to repair. Recipient partners need to be assured about the value of the relationship, as reputation matters when development partners have the luxury of choice. A phased integration that maintains critical expertise while gradually aligning strategic direction would likely prove more effective in the long term.

Second, capability preservation requires active management. Both Australia and Britain learned the hard way that development expertise isn’t quickly or easily replaced. The technical knowledge required for effective commissioning, procuring, financing and managing of development programs, while not unique to the aid world, is distinct from traditional diplomatic and geostrategic policy skills. Any US reforms must include concrete plans for retaining and developing each of these specialised capabilities and empowering them to work together to deliver coherent whole-of-government priorities.

Third, funding stability enables strategic coherence and builds influence with partners. Britain’s experience shows that simultaneous organisational and budgetary upheaval can undermine even well-conceived reforms. While efficiency gains are desirable, treating integration primarily as a cost-cutting exercise risks strategic self-harm. With strategic competitors snapping at our heels, such interruptions cannot always be remedied.

Fourth, clear metrics for success must encompass traditional development indicators and strategic effects. Australia’s focus on its immediate neighbourhood and Indo-Pacific infrastructure and Britain’s emphasis on areas of demonstrated expertise and reputational value offer useful models for linking foreign aid and development assistance to broader national interests.

The stakes for getting this change right are immense. China has outflanked the West in harnessing foreign aid as a strategic tool of statecraft, having learned from the experiences of Western development agencies. The US cannot afford to unilaterally disarm in this arena and sacrifice its many areas of retained advantage through poorly executed reforms.

Secretary of State Marco Rubio’s framework of strength, safety and prosperity provides useful guideposts. Development programs should demonstrably enhance US security partnerships, expand trade relationships that benefit US workers, or strengthen allies facing authoritarian pressure. Programs that cannot do this should be reconsidered.

Achieving these goals requires maintaining the US’s development capabilities even as they are more tightly aligned with strategic objectives. The experiences of Australia and Britain suggest this balance is achievable but demands careful attention to ensure areas of national strength and influence are strengthened, not squandered.

Australian ambition and aspiration for a South Pacific community

Australia’s aspiration for the South Pacific must be for the creation of an economic, political and security community. Australia and New Zealand will be central to such a community—and will carry the cost—but much of the head, heart and soul will come from Papua New Guinea and the other members of the Pacific Islands Forum. And in this rendering of the ‘islands’, Timor-Leste has to belong.

At its most ambitious, the community would have a common currency based on the Oz dollar, a common labour market, and common budgetary and fiscal standards. Integration of that magnitude will take decades, given the huge challenges the islands face. This community model is discussed in detail by the Senate Foreign Affairs, Defence and Trade References Committee in its 2003 report A Pacific engaged with its vision of a ‘Pacific economic and political community’.  Here’s the committee’s first recommendation:

That the idea of a Pacific economic and political community which recognises and values the cultural diversity in the region, and the independent nations within it, and takes into account differing levels of growth and development, is worthy of further research, analysis and debate. Such a community should be based on the objectives of:

  • sustainable economic growth for the region;
  • a democratic and ethical governance;
  • shared and balanced defence and security arrangements;
  • common legal provisions and commitment to fight crime;
  • priority health, welfare and educational goals;
  • recognition of and action for improved environmental standards; and
  • recognition of mutual responsibility and obligations between member countries of the community.

Over time, such a community would involve establishing a common currency, preferably based on the Australian dollar. It would also involve a common labour market and common budgetary and fiscal standards.

I’m proud to have a copy of that report, signed by the committee chairman, Senator Peter Cook, with his dedication saying that I had a lot to do with its recommendations. My submission certainly called for a grand vision of community. But it also argued that community creation isn’t merely Australia offering favours—it’s a core expression of Australia’s interests and history and strategic needs. There’s always lot in it for us.

In the earlier era of empire, the Oz ambition was to rule a region called Australasia. These days, the community is a much easier sell wearing the Oceania moniker. The geography endures as our understanding shifts.

Both sides of Oz politics are promoting community ideas: ‘integration’ from the Coalition government and a Pacific ‘pledge’ from Labor. The Turnbull government’s foreign policy white paper offers the South Pacific economic and security integration. The policy states that integration is ‘vital’ to the Pacific.

Labor’s shadow defence minister, Richard Marles, calls for Australia to make a ‘pledge’ to the islands based on a deeper defence relationship and the offer to ‘assist the functions of government in the Pacific’.

The argy-bargy about China’s aid to the South Pacific saw two sets of interests collide—Australia’s view of itself as the South Pacific leader versus the inevitable arrival of China. Canberra’s snarkiness has plenty of downsides, yet there’s some upside if it pushes Australia to lift its game. The Oz strategic denial instinct is a constant with a 150-year history. The frisson of fear from the foreign bogey always forces us to focus.

Australia has a role in talking about the best use of aid. We’re the region’s biggest donor, and we’ve got the scars from quietly burying our share of white elephants; we know how hard it is to do good aid, because we’ve delivered much that didn’t work.

Oz bitching at Beijing, though, is poor tactics because we’re also blaming the islands. Much better to let island governments lead the discussion, and then weigh in via regional organisations. The Pacific Islands Forum has an important role in promoting understanding about the good and bad of aid. And the Pacific Community (the old South Pacific Commission) offers valuable technical expertise, plus it draws in other important players such as the European Union.

Accepting that China is in the South Pacific to stay—and it is—then it has plenty to offer. China can listen and can be persuaded. The best geopolitical news for the region last decade was the ceasefire between China and Taiwan in their fight over diplomatic recognition in the South Pacific. The destabilising impact of that chequebook diplomacy was dramatically displayed in Solomon Islands in the riot and razing in the heart of Honiara after the 2006 election.

The freeze on diplomatic competition was all about the China–Taiwan relationship, but in agreeing to diplomatic detente they responded to sustained protests from Australia and the South Pacific about the appalling cost of their contest. China can throw its weight around and do damage; that calls for lots more talking by the region and better regionalism.

Building a Pacific community strengthens the islands just as it serves Australian interests. The geopolitical contest is getting ‘crowded and complex’, as Joanne Wallis outlined in her 2017 ASPI paper. Wallis also last year published a fine book, Pacific power? Australia’s strategy in the Pacific Islands, which spent a lot of time considering the question mark in the title. But she offered a succinct rundown of Oz power:

Australia is larger and has vastly more material resources than Pacific Island states: it represents 94.5 per cent of the region’s gross domestic product (GDP); 98 per cent of defence and security spending; 60 per cent of population; and contributes 60 per cent of all development assistance.

Australia has the means to build a community with its neighbours. Do we have the imagination and the will?

Tag Archive for: foreign aid

What Donald Trump Can Learn From Allies on Foreign Aid

There are smarter and more effective ways to streamline and re-strategize U.S. foreign aid.

The Trump administration is not the first Western government to envision a stronger, safer, and more prosperous country by integrating foreign aid with strategic objectives. The experiences of America’s Five Eyes partners, particularly Australia and the United Kingdom, offer encouraging evidence for reform, having achieved tightly targeted development programs supporting diplomatic and strategic priorities. They also offer sobering lessons about implementation pitfalls, including the abrupt disruption of established programs, especially those already aligned with strategic policy, loss of critical skills among government personnel, and heightened unease among international partners. 

The logic driving aid integration is compelling. In an era of great power competition, maintaining separate tracks for diplomacy and development is an unaffordable luxury. China has harnessed development, along with trade and financial investment, as an instrument of strategic influence through both soft and hard means. Both Australia and the UK recognized this reality, merging their aid agencies (AusAID and DFID, respectively) into their foreign ministries to create more strategically coherent development policies. Having made clear its intent to fundamentally reshape USAID, the Trump administration has the opportunity to learn from its allies in the pursuit of the American national interest. 

A Unified Strategy: Australia 

The Australian government integrated the Australian Aid Agency (AusAID) with the Department of Foreign Affairs and Trade in 2013 with the stated goal of better aligning Australia’s development, foreign policy, trade priorities, strategies, and objectives while bringing an enhanced focus on the Indo-Pacific. The integration accompanied a reduction of Australia’s development funding. After reaching a peak of more than AUD $5 billion in 2013–14, or .33 percent of gross national income (GNI), Australia’s development budget has progressively declined, and in 2023–2024 was AUD$4.8 billion, or .29 percent of GNI. This change is also stark in terms of the slice of the Australian budget spent on foreign aid compared to defense expenditures. 

An independent review of the integration in 2019 found that 90 percent of the Australian government’s strategic targets for the integration had been met, driving development allocations towards infrastructure and the Pacific. The review also found “examples of development goals being more strongly advanced through joined-up, whole-of-department efforts.” 

These initial efforts—such as the Pacific Seasonal Worker Scheme and the Australian Infrastructure Financing Facility for the Pacific—have since grown to enable more ambitious and innovative integrated development and strategic initiatives. Key among these are the Falepili Union with Tuvalu (which provides Australia with strategic denial rights and Tuvalu with climate resilience monies and opportunities for migration), the agreement between Australia and Papua New Guinea that encompasses development and security elements, and Telstra’s acquisition of Digicel Pacific, the largest mobile provider in the Pacific, with the Australian government’s support amid rumors of interest from China Mobile. While the review stepped carefully around the issue, it found integration had increased Australia’s ability to counter efforts to overshadow Australia’s influence, like China’s Belt and Road and Digital Silk Road initiatives.

However, the review also found several areas of concern. Early morale problems among staff arising from the abrupt way the integration was implemented had largely dissipated by 2019. However, a “pronounced deterioration in skills and systems” remained. The review found that “almost 1000 years of experience left [government service] shortly after integration.” Additionally, “estimates suggest another 1000 years of experience” left the department in the five years before 2019 due to the department underestimating the capability needed to design and deliver development programming. 

This loss of know-how continues to hamper effectiveness over a decade later. While development is now firmly accepted as a tool of statecraft, best wielded as part of a whole-of-government strategy, an article by the review’s author fifteen months ago suggests DFAT still has room to improve in terms of harnessing its development delivery to its full potential.

Strategic Prioritization: The UK

The merger between the UK’s Foreign and Commonwealth Office and the Department for International Development occurred in 2021. The principal intention behind the merger was to better align the UK’s development activities with its wider diplomatic, trade, and geopolitical interests, both in strategic terms and in terms of in-country representation. The merger coincided with a decision to reduce the UK’s development funding commitment from the .7 percent of GDP enshrined in law to .5 percent of GDP. Notably, the integration occurred while the UK was experiencing the economic slowdown of the COVID-19 Pandemic, which resulted in a double blow to funding in absolute terms, constituting a 30 percent reduction overall.

Alongside the budget reductions, a strategic prioritization of development initiatives was pursued, in which the UK focused on bilateral funding to a smaller group of countries where measurement of effect is often easier to determine, but at the expense of some wider bilateral and multilateral commitments which were deemed to deliver less tangible value to the UK. 

In addition, the UK identified a select set of issues for its development focus, namely, climate investments, girls’ education, and global health—where the UK had demonstrated expertise and where funding would have constructive spillover effects. For example, improving girls’ education is found to reap positive dividends for local security, prosperity, and governance. These initiatives, concentrated in Africa, the Indo-Pacific, and South Asia, are all areas in which the UK’s adversaries were harnessing development as an instrument of influence, dependence, and coercion. 

The UK’s National Audit Office (NAO) review of the progress of the merger in 2024 found positive evidence “of where a more integrated approach has improved the organisation’s ability to respond to international crises and events, which has led to a better result.” 

Two such examples were the UK’s coherent humanitarian, diplomatic, and military response as the leading European power supporting Ukraine after Russia’s invasion and the joint humanitarian and political response to the Ebola crisis in Uganda. The findings supported the rationale for the merger and the modernization of the department as fit-for-purpose in sharpening the UK’s geopolitical interests. However, the NAO also noted that “the indirect costs” of the merger, “in terms of disruption, diverted effort and the impact on staff morale should not be underestimated.” 

The NAO also reviewed the effect of the overseas development aid reduction and found that while the prioritization compelled in the government’s activities had some positive dividends, “the speed and scale of the budget reduction, and the lack of long-term planning certainty, increased some risks to value for money.” 

What Can The U.S. Learn?

These cautionary tales suggest some considerations for the Trump administration:

First, pace matters more than might be immediately apparent. While decisive action has its advantages, too rapid a transformation risks institutional damage that could take years to repair. Recipient partners need to be assured about the value of the relationship, as reputation matters when development partners have the luxury of choice. A phased integration that maintains critical expertise while gradually aligning strategic direction would likely prove more effective in the long term.

Second, capability preservation requires active management. Both Australia and the UK learned the hard way that development expertise isn’t quickly or easily replaced. The technical knowledge required for effective commissioning, procuring, financing, and managing of development programs, while not unique to the aid world, is distinct from traditional diplomatic and geostrategic policy skills. Any American reforms must include concrete plans for retaining and developing each of these specialized capabilities and empowering them to work together to deliver coherent whole-of-government priorities.

Third, funding stability enables strategic coherence and builds influence with partners. The UK’s experience shows that simultaneous organizational and budgetary upheaval can undermine even well-conceived reforms. While efficiency gains are desirable, treating integration primarily as a cost-cutting exercise risks strategic self-harm. With strategic competitors snapping at our heels, such interruptions cannot always be remedied.

Fourth, clear metrics for success must encompass traditional development indicators and strategic effects. Australia’s focus on its immediate neighborhood and Indo-Pacific infrastructure and the UK’s emphasis on areas of demonstrated expertise and reputational value offer useful models for linking foreign aid and development assistance to broader national interests.

The stakes for getting this change right are immense. China has outflanked the West in harnessing foreign aid as a strategic tool of statecraft, having learned from the experiences of Western development agencies. America cannot afford to unilaterally disarm in this arena and sacrifice its many areas of retained advantage through poorly executed reforms.

Secretary of State Marco Rubio’s framework of strength, safety, and prosperity provides useful guideposts. Development programs should demonstrably enhance American security partnerships, expand trade relationships that benefit American workers, or strengthen allies facing authoritarian pressure. Programs that cannot should be reconsidered.

Achieving these goals requires maintaining America’s development capabilities even as they are more tightly aligned with strategic objectives. The experiences of Australia and the UK suggest this balance is achievable but demands careful attention to ensure areas of national strength and influence are strengthened, not squandered.