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Introduction

Australian aid agencies have achieved many of their goals in Indonesia with their provision of social services and security reinforcement. However, the results of these goals are often not what they intend and social justice and equity problems still occur. Such issues include discrimination in the distribution of aid, forced relocations, government-assisted land grabs and arbitrary arrests and sexual and gender-based violence, as well as claims of a lack of transparency in the way aid agencies operate. Despite economic growth in Indonesia, highly unequal income distribution has remained consistent. This chapter discusses the negative implications of this as it applies to economic growth versus social consequences and the role of governance and social reform.

Equity implications of aid

A recent Australian Agency for International Development white paper states that Australia's security depends on the success of poverty-reduction programs such as the one current in Indonesia. Success is shown in Indonesia's increased economic growth, regional stability and cooperation with Australia. However, negative outcomes are argued to result from overly political or unrealistic aid policies which increase the vulnerability of the poor they seek to target. Discrimination by the Indonesian army and government in distributing aid sent to afflicted areas is also a problem, highlighting the need for not just financial aid but recognition of human rights standards. Below are examples of argued economic and social inequity linked to policies and practices of aid to Indonesia.

Economic growth versus social consequences

Equity issues have arisen from the emphasis put by aid agencies on aggregate economic growth over economic disparity and its social consequences. The assumption that increases in GDP will increase social benefits is shown to be debatable, with decades of economic growth in Indonesia still leaving highly unequal levels of income distribution and, as aid agencies state, more than half the population of Indonesia still living on less than $2 a day. Concerns over the effectiveness of aid policies have also arisen over the majority of 2004 tsunami aid being left out. Less than an eighth of the Australian aid money promised to Indonesia has gone to the region as at mid 2006, with many survivors still living in substandard shelters and without adequate health care and other basic services.

Governance issues

Aid agencies have attempted to resolve social problems with an emphasis put on the role of government and institution-building in development. Aid is given to the government enforcement of property rights, conflict resolution, social benefits and law to encourage equity and democratic reform. For example, AusAID's work in East Timor focuses on building 'appropriate institutions and policies', especially in the use of oil revenue. However, some argue this ignores the reality of political and economic inequality in the growth of such institutions as it occurred in industrialised countries. The view that building institutions in a particular image will reduce poverty may therefore be simplistic as it ignores the role of history and politics in development. Further, the construction of such institutions is arguably being treated in too abstract or technical a way to reflect the reality of needs in underdeveloped areas. This is evident in Australia's aid to other countries like the Solomon Islands, in which Australia was argued to have propped up institutions being manipulated by unscrupulous local political figures. Similar outcomes are argued to have occurred in East Timor with the newly independent country falling back into strife.


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Question 1/5

1. Overly political or unrealistic aid policies have been criticised for which of the following?

Propping up institutions being manipulated by unscrupulous local political figures

C. and D.

Not contributing to aid development

Being too abstract to meet the reality of needs in underdeveloped areas

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