Interview with Roland Rajah, Lowy Institute - 'Development futures' podcast

Subjects: The Voice referendum, rebuilding Australia’s international development budget, restoring indexation, OECD comparisons, development expertise in the Department of Foreign Affairs and Trade, geopolitics and development outcomes, Southeast Asia development, Development Finance Review, Pacific advocacy on the world stage.

Roland Rajah: Hello, and welcome to Development Futures, a podcast brought to you by the Indo-Pacific Development Centre here at the Lowy Institute. My name is Roland Rajah, and I am the Director of the Centre and your host for this episode.

The Development Futures podcast aims to bring fresh policy insights and ideas on the most pressing development issues in the world today, bringing together our own researchers with leading international experts and prominent thinkers. This episode focuses on Australia's recently released new international development policy.

After a decade of cuts to foreign aid, general deprioritisation and then securitisation under the previous government, Australia finally has a long-awaited new international development policy that aims to put development back at the heart of how Australia practises its international statecraft.

Leading that charge is Australia's Minister for International Development and the Pacific, the Honourable Pat Conroy, who I'm happy to say joins me today to discuss the new policy and what it means.

Minister Conroy, welcome to the podcast.

Minister for International Development and the Pacific, Pat Conroy: Thanks for having me.

Roland Rajah: So, before we, you know, really dig into the new policy, I wanted to sort of just start with a short sort of tangent, if I may, into a related and important issue.

As we record this, Australians are about to vote this weekend on a referendum on whether to alter the Constitution to recognise the First Peoples of Australia, specifically by establishing a body called the Aboriginal and Torres Strait Islander Voice, which will provide an independent advice to Parliament and the Government.

Minister, we know this is a very important moment for Australia and how we are seen around the world. So, can I just ask you to share, you know, your own views about how important this is to Australia itself, but also to our international relationships and, you know, the character of Australia as a development partner in the Pacific in particular?

Minister Conroy: Well, I think it is important for Australia itself. It's about listening and acting on the priorities of First Nations people because what we're doing now isn't working.

As I've said before, we've got a life expectancy, on average, 10 years less than other Australians; we've got more First Nations males in prison than we have in university. So, what is happening now isn't working, and we have to change it, and the Uluru Statement from the Heart was very clear that a Voice to Parliament was a critical way of changing things.

And so, I think it's critical for Australia. I also think it's consistent with what we're trying ‑ doing around the region, which we'll talk about later, which is about respect and listening to the priorities of our partners. And when I get asked about the sort of international dimensions of this, I say, really, this is a choice for Australians, but how First Nations people in our country are treated affects our standing internationally. So, a Voice to Parliament will improve conditions for our First Nations Australians, and that will improve our international standing.

Roland Rajah: I think it's a very important moment for Australia. It is an element of the new development policy, so let's turn to that more specifically.

So, you know, the new policy, it's been, you know, long-awaited, and it's part of the promise to rebuild the Australian development program, and it addressing the major development challenges that face the region, you know, traditional development challenges like health, education, poverty, social inclusion, but also, very importantly, the escalating challenges posed by climate change. There's a lot of, you know, really excellent, I think, content in the new policy.

But one way of thinking about it is that, you know, one of the big issues looming over the policy is really that there isn't necessarily any, you know, additional money being put on the table.

Now, you know, I know and acknowledge that the amount you are planning is higher than what the previous government was planning to put towards aid and development, and so relative to that counterfactual, there is an increase. But conversely - compared to, you know, the aid targets Labor had previously when it was in power 10 years ago in terms of the share of Australia's national income being devoted to overseas development assistance, you know, there's no sort of intention to go back, it seems, to before at about 0.3 per cent, aiming to go higher; the share of national income now - we're basically at 0.2 per cent, and it's probably going to trend lower.

So, there's an issue about just the volume of Australia's aid program. And the other big thing, I think, is that there aren't any major sort of structural changes planned to how it's managed by DFAT, the Department of Foreign Affairs and Trade, and so, you know, many outside observers like myself may have been looking for, you know, would there be an Office of Development Effectiveness return, or something similar to that, or maybe a bilateral development finance institution, or something similar to that, or any sort of major shake-up to how DFAT sort of structures itself around development.

So, the policy is about rebuilding the Australian development program, but it's not necessarily about a big increase in funding or major sort of restructuring of DFAT. So then in your view, you know, what is it about? What's the new policy focusing on?

Minister Conroy: Well, I think it's important for me to disagree slightly with your characterisation, which is that we are rebuilding the development budget, and we didn't wait for the development policy to do that. Last year's budget contained the biggest increase in development assistance in more than a decade. And then we added on top of it at this year's budget, so that we've increased the development budget by $1.7 billion.

And importantly, we've returned indexation, which is vital. If you don't have indexation, each year the budget falls in real terms because of inflation. So returning indexation was a critical announcement of this budget, and that means over the medium-term we will rebuild and restore that $11 billion worth of cuts that the last government subjected to the development budget. So, I think it's really important to be very upfront, that we are ‑ the number of dollars going to development is increasing.

Secondly, some of these measures around percentage of GNI, I think are counterproductive, certainly when you compare it to overseas countries, because we take a very purist form of what we count in that percentage. So, for example, basically, every other OECD nation includes domestic refugee resettlement services as part of their development budget, and in some countries that have quite high percentages of GNI - of development of the GNI ratio, more than half of their budget that they're claiming is domestic refugee resettlement services. We don't include that, and so I think we need to be clear about apples-for-apples comparisons on the development budget.

Secondly, on the actual Department, I think we are changing very significantly, and we're doing that in a couple of ways. We did look at whether we wanted to return to an Office of Development Effectiveness, and what we've chosen to do is, I think, a better approach of both evaluating development spending and programs, making it more real-time, not just doing it in silos of individual projects but across themes, and across countries, increasing real-time evaluation so that they can feed into the programs while they are still going.

So, one of the problems with the ODE was it was very much after the fact, rather we want real-time evaluation to tweak programs, and much more transparency and accountability. So, you'll see a lot more information on the website for practitioners and policy makers and policy analysts to analyse.

So, I think it's more transparent. We're using ‑ we're looking at things like randomised control evaluation survey, I'm talking to Andrew Leigh about it quite regularly, he's very passionate about it. And I think there's good opportunities there, and we're working on the culture of the Department.

I did another podcast earlier this year, or late last year, where I caused a bit of a stir by saying we won't be re-establishing AusAID, but I wanted AusAID to take over DFAT, and it was slightly tongue-in-cheek, but I do think it's very serious. And the development policy announced significant capacity-building within the Department, I think $32 million to build capacity in the department, and also emphasised that not just for graduates entering the Department, but at the senior executive level, we expect them to have significant development expertise, even if they're in different parts of the Department.

And the other critical part of the development policy on this topic is that our commitment to using all tools of statecraft means I expect DFAT officials in the trade section, or in the orthodox diplomacy section to be think about development outcomes when they're generating their policy, and the Cabinet owns this policy, and we're very keen to measure and understand and encourage other parts of government to do development as well.

So, what you're seeing is a whole‑of‑government, and in fact, a whole‑of‑nation push on development that's never been attempted before.

Roland Rajah: No, I think those are, you know, very interesting nuances, absolutely. I mean, you know, what about some of the new sort of priorities that you're bringing under the policy in terms of things, like I know like localisation, responsiveness and listening, these kinds of things; is that ‑ do you see that as a central sort of thrust then of how you're looking to modernise and rebuild the development program, aside from issues of funding and structure, it's somehow in a sense about the style of how Australia is doing it?

Minister Conroy: Well, it's the beating heart of the policy. When I launched the policy with Foreign Minister Wong, I finished my contribution by saying this policy is grounded in three things: one, it reflects the values of our country; secondly, it reflects and acts on the priorities of our partner nations; and thirdly, its overarching goal is lifting people out of extreme poverty.

And so that second one of reflecting the priorities of our partner nations and the people of our partner nations is critical. And I held a Teams hook-up with all the HOMs, Heads of Mission, for all our countries where we do development, and my key message to all those High Commissioners and Ambassadors is: in working on the development partnership plans, the DPPs, you need to reflect the priorities of the governments we're partnering with, and the people we're partnering with, and that's critical, and it differentiates our policy from other countries.

Roland Rajah: Yeah. No, it's a really good point, and it's where I wanted to go to, you know, with the next question. You know, I think certainly when people like myself that have been involved in Australian development policy for a long time read the policy, there's a lot there to like. But one other sort of big issue looming over all these things, no surprise to you, of course, is China, what you might call the issue of security versus development. Throughout the policy, there's, you know, repeated use and emphasis on the idea of statecraft as the development program is an element of Australia's statecraft, and that can be interpreted in different ways. And there's repeated reference to, there's a challenging strategic environment for Australia and the region, which basically – I know you and the Government don't want to talk in those terms – but in a sense means China's growing influence in the region and some of Australia's concerns about that.

So if you just focused on those sorts of elements, it seems like it's all about geopolitics, in a sense, but like I said, if you focus on the substance of what's in the policy, you know, these are much more traditional development concerns, you know, being responsive, country ownership, localisation, gender, social inclusion, these sorts of things results in performance. And so, if you look at that, it's hard to detect the outright geopolitics in that element of the policy.

So, I just want to ask you, can you clarify, how do you see the relationship between the Development Program and security and geopolitics? Is the role of the Development Program predominantly or largely just to do good development work, or is there something more to it?

Minister Conroy: Well, it's ‑ I think you've set up a binary that I don't think is completely automatic. For me, the development program is about doing a couple of things: advancing Australia's standing in the world, particularly in our region, and expressing our values as a country. And we do that by doing good development work.

That's the key thing, like you can do both at the same time. We're facing intense geostrategic competition, there's no argument about that, and we want to be the partner of choice for the Pacific in particular. How do we do that? One way we do that is by being a good development partner. We're proud to be the biggest development partner in the region. Lifting people out of poverty, saving kids' lives improves our relationship with our region. Like, there's no other way of putting it. Being a responsive partner improves our standing.

I've been to PNG, for example, six times in slightly over a year. I visited child immunisation clinics where we're immunising kids, we're vaccinating kids, we're helping them survive and prosper, and that not only is it morally important to do – when I talk about morality, like, which is dangerous for politicians – not only is it morally important, it improves our relationship with PNG.

And that's why the five overarching principles I talk about that drive our policy around responding to local priorities, being transparent, being ‑ long-term relationships not being transactional, focusing on local content, local procurement, local participation,  and offering the highest quality projects, and I joke that I'd like to get it tattooed on the chest of every DFAT official, it's that important. That's the recipe for good development, and that's the recipe for good relations with the countries around the world.

Roland Rajah: Yeah. I think you've spoken several times about not wanting to see so much transactional sort of proposes to development, which I think is, you know, a really important statement there.

But I suppose at the end of the day geopolitics exists, it's always going to be there, and indeed, you know, even for the development purists, geopolitics has always been there. Australia's national interest in a raw sense has always been there. It's always been the way in which the development program has been shaped and coloured.

But there's no doubt that there are more of these instances where there's a much more intense interaction between a short-term security geopolitical type-issue and a longer-term development perspective. I know it's a difficult one, so I'm not going to ask you to engage in sort of, hypotheticals, but just how do you approach those sorts of questions? Like what are the factors that you're going to be thinking about when there could be tensions and trade-offs with what you might want to do from a long-term development perspective and what you might feel you need to do from a purer national interest perspective? Or geopolitics perspective, sorry, I should say.

Minister Conroy: I absolutely acknowledge there's a balancing act. It would be naive to pretend otherwise, and what I encourage our Heads of Mission and sort of our policymakers to do is always think about the long term.

Yes, we have to respond to the short-term needs of our partners, that is really important but do it in a way that assists in the long term as well, and it's about balancing that way, and having honest and open and deep relationships with our partners.

You can sometimes disagree with other development partners, and say, "I hear what you're saying, have we perhaps considered doing it a slightly different way to hit your short-term requirement but in a way that might be more sustainable long‑term that goes to broader issues around sustainability, for example?”

But the other part is that we shouldn't see the development program in isolation from the other tools of statecraft. So, one policy that I'm evangelical about is the Pacific Australia Labour Mobility scheme, PALM. That is an essential development tool, and it's an essential development tool that helps the short-term needs of our partner countries.

We've got over 40,000 Pacific Islanders working in our economy right now. They're filling labour shortages in this country. As importantly, if not more importantly, they're developing skills to set up businesses when they return home, and they're sending home huge remittance flows. On average they send home $15,000 a year in a region where between a third and one-half of all Pacific Islanders live on $1,000 a year, which is the UN definition of absolute poverty. That is a development outcome.

Some of the Pacific Island economies, up to 44 per cent of their economy is remittances from countries like Australia. So, we should look at our development program but then look at the other things we're doing to complement it, to deal with the - not just the geopolitical competition, but the long-term aspirations of our neighbours.

Roland Rajah: Yeah. There's no doubt that the labour mobility progress that's been made has been a huge win for development in the Pacific. So, I'm glad you brought that up.

One of the things that the new policy seems to emphasise is governance in a sense, and state capacity, right, which in a sense this is where, you know, Australia's interests are also, you know, very important, because we deal with the governments in the region, and you know, we want to see strong and resilient states.

And so, the new policy, you know, does seem to put a very strong emphasis on, you know, and to use the words in the policy, "building effective, accountable and resilient states." But the challenge I want to sort of put to you is that, you know, I'm sure you're aware, you know, there's been a long time trying to work on these issues of governance in the development, sort of, policy circles and it's notoriously difficult.

It's also notoriously difficult in terms of demonstrating performance results and impact, and so, you know, this does seem to create a bit of a tension with the policy; it's, on the one hand, saying we're going to work on State capacity in a sense, and governance, which is hard, but we want, you know, we want a program that has stronger results focus and it can demonstrate those results. So, there's a bit of a tension there.

And the other thing is, I guess, you know, to me, putting governance front and centre also, I suppose, does ‑ it's not inevitable, but it does create a risk of taking some of the focus away from what you might call the hard development outcomes, like poverty reduction, health and education. I suppose to be cynical; the fear would be it can just descend into a lot of, you know, work strengthening governments and capacity-building, which then means, you know, loss of workshops and expensive international advisers. That's, you know, a sort of a caricature, but the point is, you know, there seems to be a tension with development effectiveness at a certain level.

So, my question is, can you just explain, you know, why there is a focus on governance and states in the policy, and how do you expect that to be done differently to ensure it's effective?

Minister Conroy: Well, I think governance is a critical enabler to those other tasks. You need you need governance with certain levels of capacity to be able to deliver healthcare to their population, to have vibrant democracies, to deliver infrastructure investments.

So, I don't see it as an either/or, I see them as complementary. You can't just put money into delivering health programs if you don't have doctors and nurses able to deliver them, or health public servants who are able to allocate the funding based on need rather than any other factors. So governance is a critical enabler to those other programs.

The other one is, I consider governance and capacity-building are a critical multiplier, and I can give you a practical example. We're supporting improving the capacity of Pacific governments to put together grant and loan applications for multilateral development banks. So that's an investment in governance and capacity-building. But then that allows those governments, that empowers those governments to win more grant funding and loans from those other development institutions that can then go into health or infrastructure.

So, for me, they go hand‑in‑hand, and you need to have focus on both of them. I acknowledge that measuring outcomes from governance is a lot harder than measuring them from other parts of the development. Like if you're funding a road to be built or a bridge to be built, is there a bridge at the end of the process? If you're funding a health outcome, are you vaccinating x number of kids each year?

Governance is a challenge to measure it, but you can do it. And one of my conversations with the implementation unit of DFAT is really getting into the weeds of how do you measure this so that we get good feedback, 'cause there's a lot of scepticism out there about it, and I acknowledge that.

Roland Rajah: No, that's fair enough. I mean, as you say, it is central, it can't be either/or. I think, you know, working with governments is always ‑ can create tensions and difficulties as well. There are important priorities in the new policy, like, for example, gender equality, for example, which may potentially have, you know - not be something that can be so easily worked with certain partner governments.

So, I think it's interesting that you've also got to focus on civil society now also, which is another way of tackling the governance question in many ways. Can you say anything about where that sort of came about, because by my sort of recollection it used to be a lot more important within the Australian development program say 10 years ago, and it's sort of atrophied and gotten less attention of late. So, it's a good thing to see it there, but where does that come from, from your perspective?

Minister Conroy: It's been driven by, I think, the vision of the Labor Government, by the values of people like myself and Senator Wong. Like, we think, and I've said this publicly, that our development program should reflect the core Australian values, and a core Australian value is a commitment to democracy and equality. And that's why the Civil Society Program is all about growing that civic space in our partner countries.

That will improve governance, it will improve democratic outcomes in those countries, so that's a good thing. It also reflects Australia and who we are as a people, and it's a great way of connecting with people.

One program – you're right that it's been run down by the last government, and I think they became obsessed by other things like Aid for Trade and other things that I don't think were the right pathways – but one program they did have that I do support is the Pacific Churches Fellowship Program, which is one part of the civil space.

There's other parts that we're looking at supporting, but that was great. So, I've been meeting with Confederations of Pacific Churches to hear their views. I know they've been more active in their own countries, and that civic space opening to argue for action on climate change, gender equality, First Nations people, has been really great throughout the dialogue.

Roland Rajah: No, it sounds really interesting and valuable. I wanted to draw you in though, I mean a lot of the time when we talk about Australian development policy, implicitly we're talking about the Pacific, and we do want to think about the Pacific and what this policy means for them, but also for Australia. I mean the policy says that the focus is going to be really on our region, which means, first and foremost, the Pacific, but also quite significantly Southeast Asia.

There's a question about global and multilateralism which you've touched on, which I'd like to come back to, but just in terms of the two big regions for Australia, the Pacific and Southeast Asia, very different regions, one's a set of largely small island developing states, the other a set of, you know, emerging market economies, much larger and more dynamic.

How are you seeing the key differences in terms of what the policy has to say and what you as the Minister have to say about how you expect Australia's role as a development partner to be in these two contexts?

Minister Conroy: Yeah. Well, I think there are key differences. One is just the basic economic and social structures of the different countries. Another is our partnerships. So many of the nations in Southeast Asia we've had longer development partnerships with, just 'cause of its history, and so we're further down the pathway of development there.

I think one of the critical differences is the size and nature of the economies we're dealing with. So, in some Pacific countries, 80 per cent of the economy is government. Like, literally government is really the only economic actor, so you're much more focused on working with the government, providing grants‑based funding for projects, budget support where that crops up as well, and it's really focused on the government space.

In Southeast Asia, you've got an incredibly vibrant private sector that's exploding in many countries. So, part of our focus in development is empowering the private sector, working with the private sector and leveraging their skills and expertise. That's where things like impact investing is so powerful. Part of our announcement was the $250 million Australian Development Investments impact the investment fund, the ADI fund, and that will target both the Pacific and Southeast Asia. But I think its early wins will be in Southeast Asia, because impact investing obviously needs a strong private sector to partner with, and so I think working in that space is a great opportunity, and that's the key differentiation between how we do development in the Pacific and how we do development in Southeast Asia.

Roland Rajah: Yeah, no, that's a great point. It's actually where I wanted to take you to next.

So thinking about Southeast Asia, there is the expansion and impact investment financing that Australia is doing. Also, I note when President Widodo from Indonesia visited Australia, they announced – I think it was announced in that visit that the Export Finance Australia, our export credit agency, was going to have a $200 million facility with Indonesia's state‑owned energy company around the clean energy transition. That seemed like a fairly significant announcement that otherwise sort of flew under the radar.

Even in the Development Finance Review that DFAT published alongside the policy, there's a mention also of, you know, thinking about the future, what will happen to all these types of approaches, maybe even it left the door open to considerations of more substantial changes like a DFI one day, or something more substantial.

So, my question is, where is this sort of going, where do see things? Do you see an upwards trajectory in these kinds of non-grant, more innovative financing mechanisms in Southeast Asia, or is it largely what we've already seen, and it's going to be slower than that?

Minister Conroy: I think there's huge opportunities, and I'm really excited by it. It's an area where I think Australia has been underdone in the past compared to other countries. The Development Finance Review looked at whether we wanted a stand-alone development finance institution, and it concluded that now was not the right time for that. But the impact investing fund, the $250 million, is a really good start, and the pilot project for that has been really powerful.

It's, I think, driven a five-to-one leverage ratio of private sector funding, I think it's led to employment of thousands of women in some of the pilot projects; and just think about that for a moment, a $250 million investment by the Australian Government is leading to $1.25 billion or a bit over $1 billion of impact investing, targeting – whether it was gender equality, climate change, assisting people with disabilities, is enormously powerful, and I'd love to see more of that in Southeast Asia. And we're also looking at how do we mobilise philanthropic funds more that are floating around, and I think that's an area where the entire Indo-Pacific doesn't get its fair share of that.

But one of my ears is also listening to what our partners want. So I had a great conversation with my Indonesian counterpart around the G20 Development Ministers Meeting in Varanasi in India, and he was making the point – and I'm being very careful that I don't disclose private conversations, but we've already seen the practical manifestation of it, which came out of the recent announcements you alluded to – which is often for countries like Indonesia, and particularly in the clean energy transition, grants are good to get, but having Australia be the first‑off type lender or being a participant in it gives confidence to other institutions, whether it's international banks, other governments, other private sectors, to lend money or invest money.

If you see the Australian crest, people think, well, the Australian Government's done their due diligence, they think this project's worthwhile, they think it's been well‑managed. That stamp of approval is often more powerful than a small amount of grants funding. And that's where I think there's huge opportunities for us to do more in Southeast Asia, and the Indonesian example is the first one of those.

Roland Rajah: So, we could see more things along those lines, with maybe Export Finance Australia or something else, but there could be more subject to ‑‑

Minister Conroy: Well, I'm really open to exploring it. I don't want to get ahead of my colleagues, but I think if it works out, I think it's a great template for other countries in Southeast Asia.

Roland Rajah: But what about the Pacific then, as we mentioned, it's a more difficult environment in many ways, given its sort of extreme economic geography. But nonetheless, as you know, Australia is doing a lot more of this non-grant financing to the Pacific, which mostly means loans infrastructure and finance budgets, and it's mostly going to PNG for the most part. That's actually the lion's share of Australia sort of non-grant financing, which to me is a little bit odd because it would work a lot better in Southeast Asia for the reasons you've just sort of mentioned. But nonetheless, you know, Australia's focused on the Pacific and using these loans as a method of financing to meet the Pacific's needs.

So the question is, you know, what's the thinking here in terms of the role of Australia's lending into the region, the work that we've done in the Institute, for example, shows that Australia is now the largest source of bilateral loans to the Pacific overtaking China, which is regularly otherwise criticised, for, you know, engaging in unsustainable or irresponsible lending practices, including in the Pacific.

But now Australia's kind of the leader in providing these loans, on very different terms, and so on, different ways of doing things, but nonetheless Australia's the biggest source of these loans. And that does sit oddly for many people when juxtaposed against the fact that the International Monetary Fund, for example, will say that many of these countries are at high risk of debt distress, so it raises that question: is this a, you know, is this a good thing for those countries, and indeed, are there risks for Australia? I have my own views on that, but I'd very much like to hear yours.

Minister Conroy: Yeah. Well, I think the two critical words in that question were "unsustainable" and "irresponsible". That is the critical differentiator. All our lending in the Pacific, as it is around the world, is done in accordance with the guidelines set out by the IMF and other international organisations about the nature of issuing debt. And that's a really important point.

For example, where we've been doing non-grants for infrastructure through AIFFP, we've been really focused on, are these good projects that will improve the economic resilience of countries, so that you actually do grow the economies of those countries, which allows them to pay back the loans. And that's important, because one of the main criticisms I see out there of projects funded by other countries is often the white elephants, with no long-lasting benefit for their partner nations.

We're not doing that; we're investing in projects that have a strong economic payback for those countries. We're also using grants to make lots of the loans concessional so that they're on more attractive terms. So, we'll, often with the AIFFP, will partner loans with a grants component to make them very concessional, so that they're a lot more affordable. So, I think that's really critical.

And then, the other part of it is also recognising that the pandemic has stolen 10 years of economic growth from the Pacific. The COVID pandemic had a massive impact. Just think about an economy like Fiji where 40 per cent of their economy was tourism, Cook Islands, 80 per cent. So that budget support has been critical because that budget support has meant that teachers still got paid, that their healthcare system still worked so that their citizens got healthcare. So that budget support was critical, and very importantly, it came with no strings attached, it wasn't transactional, it was supporting our neighbours as a good neighbour does.

On the PNG side, our budget support has actually opened up the process for an IMF program to come in to improve governance and financial sustainability in that country, and they're the first country in the region that's going through that IMF process, and I regularly engage with the PNG Treasurer on these issues, 'cause he's very strongly supporting the need for these sorts of reform.

Roland Rajah: No, that's very important points, I think, and for the record, I should say that I and my colleague, Alex Dayant, we did put a paper out saying the Pacific faced this lost decade of development, and we did recommend that Australia lead the way in providing loan financing at the time in order to meet that need, and despite the fact that, you know, loans can look a little bit dicey to many people.

I think one of the things that has changed and made things more difficult, of course, is the rise in interest rates since that time, it's made things much more difficult. And so, as you say, the need to blend this with grants, I think, has become much more important.

But I'd love to get into the debt issues a little bit more with you, but I'm conscious of your time, Minister. So, I'm going to keep sort of powering on, 'cause there are a couple more very important questions, I think, that will be very good to put to you.

You mentioned multilateral institutions earlier, and I mentioned that the policy is very focused on Australia's region, and it's not that we don't have interest though, globally, and also in these multilateral institutions in terms of their global role but also their role in Australia's own sort of region.

Very happily we saw that you and the Australian Government have announced to rejoin the Green Climate Fund which is something that Australia had left a number of years ago. And with that having been done, the other big question, I suppose, is the role of the World Bank and other multilateral development banks, you know, many countries led by the United States, many of the donor countries, that is pushing for those MDBs, the multilateral development banks, to play a much bigger role to scale up using their, you know, very powerful financial model to do a lot more lending for not just development, but also to address global public goods, climate change being first and foremost amongst them.

But I also know that, you know, you yourself have been quite critical of how the multilateral banks have performed in the region. So, you say a little bit about what's the approach here, what's the strategy Australia and you are taking towards multilateral institutions, and also very specifically the MDBs.

Minister Conroy: Well, our approach is to push for widespread reform, not just on our behalf, but to amplify the voice of the Pacific in particular in these MDBs, because we do need to change things.

Firstly, and I'm on the public record as saying that they need to be more aggressive and ambitious in their roles – I was at the World Bank Week in Washington last year, and I was making the point that they really needed to look at adopting the G20 paper on MDB reform and leveraging their balance sheets more effectively. They're very conservative at times, and I understand why, but they need to really hone in on what is the core roles they do and get a bit more ambitious in that area.

And we have been successful in pushing them to be more active in the Pacific, be more involved in the Pacific, but they can do more. I've been very critical about their obsession with getting the cheapest tender outcomes, and that's led to some really poor results in the Pacific that we need to change, and the Nauru Port is the classic example of it. That's a failed project, or close to a failed project, because the MDBs aren't looking closely enough at value for money and whole-of-life costs, rather than what is just the cheapest sticker price on the tender. And they need to change their approach, and I've been very vocal, and I'm engaging with them, I'm not just screaming it publicly, we're working behind closed doors to do that, and we're also trying to be pragmatic about it.

So I announced a few weeks ago the first project where we topped up an ADB project, and this is for a port redevelopment in Tonga, where, by us topping up the funding we were able to get a high-quality contractor to do that work, and that meant more local participation in the project and quality infrastructure that stands the test of time. And so that reform process is really critical.

On the Green Climate Fund, I've been very open as well, that while we're rejoining it, and it's the most prominent global climate finance institution, they need to be more active in the Pacific. There is nowhere more impacted by climate change than the Pacific, but the level of funds going from the GCF to projects in the area is unacceptable, and certainly, I'll be using, and the Government will be using our voice that we will get by rejoining to fight for our Pacific brothers and sisters.

Roland Rajah: I really noted that you used the word to "amplify" the voices from our region. I thought that was a really nice way of putting how Australia can add value to calls for reform of these institutions.

Final question, which we like to, you know, put to all guests on our podcast, is to put forward, you know, one sort of big sort of aspirational idea that's related to what we've been talking about, and of course that's difficult for you, because you're a sitting Minister and a policy maker, and we just talked about a whole bunch of the policy issues.

But if there was, sort of, one big aspirational idea you wanted to put forward that you would like to see something happen, maybe something that's somewhat outside of your own control, what would that be?

Minister Conroy: Well, I'm going to be cheeky and do two 'cause I'm a politician. So, the first one is one that I've been screaming from the rooftops about, which is delivering the double dividend of local content, local prioritisation, local involvement.

I'm sick of seeing projects – and we don't do it too much, certainly compared to other countries – where I see another country might do a development project, they bring in the entire workforce, they build the project and then they leave. I want us focused on spending as much money as possible in our development partners' own economies, supporting local employment, skills transfer, having funding for maintenance on the project, and that way there's a double economic dividend. The country gets the infrastructure that's been funded, then they get the economic revenue from the local company doing the work on it. And I think something that we're pushing strongly is the key differentiator on how we do development compared to other countries, and it's something that I'm very strong with with DFAT. I want to see as much money spent in the region, and as little amount spent in Australia out of our Development Program for that reason, and I think that's critical.

The second one, which is outside my control, but it's one which I'm really strong about is, when we talk about a broader approach to development, it's a call to arms not just for the rest of government, but the rest of the nation.

The last government, for example, was so scared of the words "development assistance" that there was a hard cap on the amount of money that could be spent on it. So, they didn't measure what other government departments did on development, even though lots of other government departments do, because if they measured it and Department X spent $50 million on development, or equivalent of $50 million, DFAT would have to reduce their budget by $50 million. So, we've got rid of that cap and we're investigating and measuring what other government departments do on development, and I'm intent, and it's part of our development policy, on expanding that to the whole country.

I want economic institutions, whether it's through the PALM, whether it's universities and the higher education sector doing development, and they are partnering with universities in Southeast Asia and the Pacific, I want businesses, I want trade unions, I want churches, I want sporting organisations to think about how they can assist in this area as well, because it should be a whole‑of‑nation effort. 22 of our 26 nearest neighbours are developing nations, the closest being four kilometres away in PNG. 

I want as many people as possible focused on this, because it should be fundamental to who we are as Australians.

Roland Rajah: Very well put. We're in a region of developing countries, and particularly if we want to capture those opportunities as Australia, then people need to engage with the development aspect, because that's, after all, where even things like business opportunities are ultimately gonna lie, in health or education and so on.

Minister Conroy: Oh, absolutely. Like, there are ‑ I can't remember the exact figure ‑ but there are so many of our top economic markets now that were once development partners. And probably even more critical than that is our stability, our peace, our prosperity is linked to the stability and prosperity of our region.

And my political hero is Franklin Delano Roosevelt, and he used a different context to World War II, but the analogy about, when your neighbour's house is on fire you don't quibble about lending the water hose to him. When nations around us suffer instability, when their children are dying from preventable diseases, when 50 per cent of the children are malnourished, that affects us.

So, we have a fundamental ethical and moral compulsion to do it, but we've also got a self-interested compulsion to do the right thing and support the development aspirations of our neighbours.

Roland Rajah: It's a very important point, I think, for us to end on. Minister, you've outlined, you know, quite an ambitious set of goals and objectives and aspirations for the development program, but as you say at the end, not just the development program, but actually for the whole‑of‑nation and indeed whole‑of‑government as well.

So hopefully we'll be able to have you back some time in the not‑too‑distant future, maybe, to check on how all this is going, 'cause ultimately, it all comes down to implementation. So hopefully we can have you back to discuss all of that. But in the meantime thank you very much for joining me today, Minister.

Minister Conroy: Thank you for having me.

Roland Rajah: You've been listening to Development Futures, a podcast from the Indo-Pacific Development Centre at the Lowy Institute hosted by institute experts and produced by my colleague, Josh Goding. Development Futures is part of the Lowy Institute Podcast Network. You'll find all of our podcast series on our website, lowyinstitute.dot.org/publications.