Effective governance: policies, institutions and functioning economies

Effective governance: policies, institutions and functioning economies

Figure 30: Effective governance areas of expenditure, 2015-16

Australia’s investments aim to strengthen the effectiveness of governments and civil society, identify and support measures that promote gender equality and empower women and girls, strengthen the rule of law, enhance anti-corruption measures, foster peace and address the causes of conflict, and improve the effectiveness and transparency of government expenditure and public financial management. These are all key factors that contribute to sustainable economic growth and poverty reduction. 

Of Australia’s largest fifteen bilateral aid partners, ten are fragile or affected by conflict. As a result, much of Australia’s aid is delivered in contexts where governance challenges are acute and where there is potential for development gains to be reversed by conflict, uncertain politics and weak institutions. Australia’s approach in such areas is to be sensitive to the underlying drivers of fragility in the specific political and economic contexts of the countries where Australia provides assistance. 

DFAT’s strategy for the sector, Effective Governance: Strategy for Australia’s aid investments, guides Australia’s approach to building institutions that promote stability, support inclusive economic growth and poverty reduction, and strengthen gender equality and women’s empowerment (which is also the subject of a dedicated DFAT strategy). As the strategy highlights, partnerships between Australian organisations and their counterparts in developing countries are a very effective way of building relationships and strengthening partner government capacity.

Working with partner countries to achieve effective governance will help them to achieve a wide range of development objectives, including in relation to the SDGs and securing additional financing for development. Australian assistance will have a direct impact on the SDGs of Reduced Inequalities (SDG10) and Peace, Justice and Strong Institutions (SDG16).

In 2015-16, Australia supported improvements in the performance of the public sector in Pacific Island countries, including through training for public servants and broader technical assistance. As part of the Pacific Leadership and Governance Precinct in Papua New Guinea, Australia helped train over 6,600 public servants in core public service skills. In Timor-Leste, Australian support contributed to better budget planning across 23 ministries, commitments to increase the number of women leaders and persons with a disability across the public service, and new systems to develop and implement economic policy. 

Several major anti-corruption investments in 2015-16 also achieved very strong results against this strategic priority. The Australian Government supported the PNG Government to deliver a suite of laws to criminalise corrupt conduct, better manage public assets and establish a functional Financial Intelligence Unit. As a result of these reforms, in June 2016 the Paris-based Financial Action Task Force removed PNG from its ‘grey list’ of countries considered to have weak measures to combat money laundering and terrorism financing. In addition, the Australian Transaction Reports and Analysis Centre’s support for its Indonesian counterpart contributed to Indonesia’s removal from the Financial Action Task Force ‘black list’. 

In Indonesia, the Australian National Audit Office helped the Indonesian Audit Board to transition from cash to accrual accounting and the Australian Treasury supported the creation of a tax oversight authority to increase Indonesia’s low current rate of tax collection. In Timor-Leste, the Australian Bureau of Statistics helped support the national statistics office run the 2015 census by itself for the first time. 

Australia supported the delivery of law and justice services by improving professional skills and deepening institutional relationships between organisations in the region and relevant Australian public sector organisations. In 2015-16, Australian support delivered training to over 15,000 police and law and justice officials (3,950 women). In Solomon Islands, Australian support for the justice sector continued to result in improved public perceptions of the quality of justice services, with 73 per cent of people surveyed reporting an improvement over the previous two years.

The DFAT Effective Governance strategy recognises the importance of supporting more responsive and accountable government, and access to justice and economic opportunities for marginalised groups, including women and people with a disability. In Indonesia, Australia supported a network of disabled peoples’ organisations to advocate for a new disability law, passed in March 2016, which moves Indonesia away from thinking about disability as a medical or ‘charity’ issue and towards it being a rights issue. In both Solomon Islands and Indonesia, Australian assistance continues to address the impact of violence against women, providing trauma counselling, legal assistance and referral services for 12,799 woman survivors of violence across Indonesia, and assisting the passage of a Family Protection Act in Solomon Islands that explicitly criminalises domestic violence for the first time.

In South-East and East Asia, Australia’s governance investments are focused on providing technical assistance and expertise where it aligns with partner government efforts to promote inclusive economic growth, deliver more accountable governance and improve the investment climate. In Indonesia, Australia funded analysis that underpinned 13 economic policy packages announced by the Indonesian Government, as well as advice resulting in the expansion of the number of business sectors open to foreign investment. In the Philippines, Australian assistance supported the creation of the Philippine Competition Commission to ensure efficient and fair market competition.

Overall, Australia’s investments in effective governance performed well in 2015-16, although results against monitoring and evaluation, sustainability and gender equality criteria were lower than the aid program average (Figure 31). Australia’s governance work is inherently complex in nature, and involves support to often highly contested reform processes in challenging contexts. The governance portfolio is also particularly diverse in terms of investment scale and scope, reflecting the fact that Australia’s activities are carefully tailored and adapted to local, in many cases fragile and conflict-affected contexts. These factors help to explain why, as in previous years, monitoring and evaluation, addressing gender equality objectives and sustainability remain a challenge across DFAT’s governance portfolio.

Increasingly, international evidence and learning on aid effectiveness points towards the need for more flexible, adaptive and politically-informed approaches to aid investment design and implementation. While the Effective Governance Strategy, operational guidance and training currently reflect best practice in terms of incorporating these approaches, much work still needs to be done to ensure major aid investments translate these principles into practice. To that end, DFAT will continue to invest in governance-related capabilities and further strengthen operational collaboration between governance and gender equality expertise and programming.

These efforts will also help to ensure that Australia’s strategic approach remains aligned with emerging priorities, including DFAT’s approach to SDG 16. Concurrently, DFAT will produce new guidance on development approaches to countering violent extremism, conducting conflict analysis, and programming in fragile and conflict-affected contexts

Figure 31: Effective governance investment performance, 2015-16